Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 13, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | MENDOCINO BREWING CO INC | |
Entity Central Index Key | 919,134 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 12,611,133 | |
Trading Symbol | MENB | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,016 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Current Assets | ||
Cash | $ 52,900 | $ 129,600 |
Accounts receivable, net | 3,291,300 | 3,835,500 |
Inventories | 1,465,000 | 1,547,000 |
Prepaid expenses | 627,300 | 759,900 |
Total Current Assets | 5,436,500 | 6,272,000 |
Property and Equipment, net | 10,368,000 | 10,588,200 |
Deposits and other assets | 295,400 | 175,800 |
Total Assets | 16,099,900 | 17,036,000 |
Current Liabilities | ||
Secured lines of credit | 1,084,800 | 1,663,400 |
Accounts payable | 4,407,800 | 4,489,000 |
Accrued liabilities | 2,072,400 | 1,908,700 |
Notes payable to related party | 2,545,300 | 2,119,600 |
Subordinated convertible notes to related party | 3,704,000 | 3,680,100 |
Current maturities of secured notes payable | 3,244,900 | 3,378,600 |
Current maturities of long-term debt to related party | 359,500 | 491,500 |
Current maturities of obligations under capital leases | 22,700 | 23,100 |
Current maturities of severance payable | 244,100 | 119,700 |
Total Current Liabilities | 17,685,500 | 17,873,700 |
Long-Term Liabilities | ||
Capital lease obligations, less current maturities | 72,400 | 79,200 |
Severance payable | 569,700 | 678,400 |
Total Long-Term Liabilities | 642,100 | 757,600 |
Total Liabilities | $ 18,327,600 | $ 18,631,300 |
Commitments and contingencies | ||
Stockholders’ Deficit | ||
Preferred stock, Series A, no par value, withliquidation preference of $1 per share; 10,000,000shares 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 | 477,100 | 472,400 |
Accumulated deficit | (18,032,700) | (17,395,600) |
Total Stockholders’ Deficit | (2,227,700) | (1,595,300) |
Total Liabilities and Stockholders’ Deficit | $ 16,099,900 | $ 17,036,000 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Preferred stock, no par value | ||
Preferred stock, Series A, liquidation preference per share | $ 1 | $ 1 |
Preferred stock, Series A, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, Series A, shares issued | 227,600 | 227,600 |
Preferred stock, Series A, shares outstanding | 227,600 | 227,600 |
Common stock, no par value | ||
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 12,611,133 | 12,611,133 |
Common stock, shares outstanding | 12,611,133 | 12,611,133 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Statement [Abstract] | ||
Sales | $ 6,911,000 | $ 6,807,300 |
Less excise taxes | 110,100 | 113,200 |
Net Sales | 6,800,900 | 6,694,100 |
Cost of Goods Sold | 4,878,800 | 4,598,500 |
Gross Profit | 1,922,100 | 2,095,600 |
Operating Expenses | ||
Marketing | 1,202,800 | 1,402,900 |
General and administrative | 1,217,000 | 1,211,600 |
Total Operating Expenses | 2,419,800 | 2,614,500 |
Loss from Operations | (497,700) | (518,900) |
Other income (expense): | ||
Other income | 3,700 | 3,100 |
Interest expense | (143,100) | (154,300) |
Total Other Expense | (139,400) | (151,200) |
Loss before income taxes | $ (637,100) | (670,100) |
Provision for Income Taxes | 3,800 | |
Net Loss | $ (637,100) | (673,900) |
Foreign currency translation gain | 4,700 | 27,100 |
Comprehensive Loss | $ (632,400) | $ (646,800) |
Net loss per common share (basic and diluted) | $ (0.05) | $ (0.05) |
Weighted average common shares outstanding | ||
Basic and diluted | 12,611,133 | 12,611,133 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (637,100) | $ (673,900) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 283,600 | 284,700 |
Allowance for doubtful accounts | (1,700) | (700) |
Changes in operating assets and liabilities: | ||
Interest accrued on notes payable to related party | 49,600 | $ 37,800 |
Accrued severance payable | 15,700 | |
Accounts receivable | 442,400 | $ 643,200 |
Inventories | 80,800 | 330,400 |
Prepaid expenses | 118,600 | (257,900) |
Deposits and other assets | (96,900) | (131,400) |
Accounts payable | (35,000) | (345,400) |
Accrued liabilities | 186,100 | (365,300) |
Net cash provided by (used in) operating activities | 406,100 | (478,500) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property, equipment, and leasehold improvements | (82,200) | (70,800) |
Net cash used in investing activities: | (82,200) | (70,800) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net borrowing (repayment) on line of credit | (547,600) | 183,000 |
Borrowing on note payable to related party | 400,000 | 500,000 |
Repayment on long-term debt | (133,700) | (133,700) |
Repayment of related party debt | (119,300) | (126,200) |
Payments on obligations under long term leases | (5,200) | (1,300) |
Net cash (used in) provided by financing activities | (405,800) | 421,800 |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 5,200 | 19,000 |
NET CHANGE IN CASH | (76,700) | (108,500) |
CASH, beginning of period | 129,600 | 145,100 |
CASH, end of period | $ 52,900 | 36,600 |
Cash paid during the period for: | ||
Income taxes | 3,800 | |
Interest | $ 93,500 | $ 116,500 |
Description of Operations and S
Description of Operations and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Description of Operations and Summary of Significant Accounting Policies | 1. Description of Operations and Summary of Significant Accounting Policies Description of Operations Mendocino Brewing Company, Inc. (the Company or MBC), was formed in 1983 in California, and has two operating subsidiaries: Releta Brewing Company, LLC (Releta), and United Breweries International (UK) Limited (UBIUK). In the United States (the US), MBC and Releta operate two breweries that produce beer and malt beverages for the specialty craft segment of the beer market. The breweries are located in Ukiah, California and Saratoga Springs, New York. The majority of sales for MBC in the US are in California. The Company brews several brands, of which Red Tail Ale is the flagship brand. In addition, the Company performs contract brewing for several other brands. Generally, product shipments are made directly from the breweries to the wholesalers or distributors in accordance with state and local laws. MBCs United Kingdom (the UK) subsidiary, UBIUK, is a holding company for Kingfisher Beer Europe Limited (KBEL). KBEL is a distributor of alcoholic beverages, mainly Kingfisher Lager Beer, in the UK and Europe. The offices of KBEL are located in Maidstone, Kent in the UK. In addition, during the period covered by this report, through UBIUK, the Company had production and distribution rights to Kingfisher Premium Lager in Canada and the United States. The Company has the right to use the Kingfisher mark and the name Kingfisher Brewing Company in connection with the brewing and distribution of assorted beers in the United States pursuant to an agreement with Kingfisher America, Inc. Generally sales are made through distributors. All of the Companys beers sold in Europe (except for beers sold in Germany) are procured under a contract with Heineken UK Limited (HUK). This contract expires in October 2018. KBEL is the distributor of Kingfisher Premium Lager to specialty restaurant trade distributors, liquor and convenience stores in the United Kingdom, Ireland, and continental Europe, but does not physically distribute the Companys products to customers. KBEL relies on HUK for distribution of the product in Europe in exchange for a fee paid to HUK, except in Germany where beers are manufactured and distributed pursuant to a separate contract with a different entity. In addition, HUK has the exclusive right to sell Kingfisher Premium Lager, for a royalty fee payable to KBEL, to certain large retail customers, including, but not limited to, Sainsburys, Asda, and Tesco. Subsequent Events The Company evaluates events that occur subsequent to the balance sheet date of periodic reports, but before financial statements are issued for periods ending on such balance sheet dates, for possible adjustment to such financial statements or other disclosure. This evaluation generally occurs through the date on which the Companys financial statements are electronically prepared for filing with the Securities and Exchange Commission (SEC). Principles of Consolidation The consolidated financial statements present the accounts of MBC and its wholly-owned subsidiaries, Releta and UBIUK. All material intracompany and inter-company balances, profits and transactions have been eliminated. Basis of Presentation and Organization The accompanying unaudited condensed consolidated financial statements for the three months ended March 31, 2016 and 2015 have been prepared in accordance with accounting principles generally accepted in the US. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Companys most recent Annual Report on Form 10-K, as filed with the SEC, which contains additional financial and operating information and information concerning significant accounting policies followed by the Company. The financial statements and notes are representations of the Companys management (Management) and its board of directors (the Board of Directors), who are responsible for their integrity and objectivity. The Companys consolidated financial statements for fiscal year 2015 were prepared on a going concern basis. The continuation of the Company as a going concern is dependent upon the continued financial support from Catamaran Services, Inc. (Catamaran) and/or United Breweries Holdings, Ltd., an Indian public limited company (UBHL), its ability to obtain other debt or equity financing, and generating profitable operations from the Companys future operations. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These factors raise substantial doubt regarding the Companys ability to continue as a going concern. Operating results from the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any future period. Reclassifications Certain items in the financial statements for the prior year have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or equity. SIGNIFICANT ACCOUNTING POLICIES There have been no significant changes in the Companys significant accounting policies during the three months ended March 31, 2016 compared to what was previously disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2015. Cash and Cash Equivalents, Short and Long-Term Investments For purposes of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Revenue Recognition The Company recognizes revenue from the brewing and distribution operations in accordance with Accounting Standards Codification 605 of the Financial Accounting Standards Board. The Company recognizes revenue from product sales, net of discounts. The Company recognizes revenue only when all of the following criteria have been met: ● Persuasive evidence of an arrangement exists; ● Delivery has occurred or services have been rendered; ● The fee for the arrangement is fixed or determinable; and ● Collectability is reasonably assured. Persuasive Evidence of an Arrangement The Company documents all terms of an arrangement in a written contract or purchase order signed by the customer prior to recognizing revenue. Delivery Has Occurred or Services Have Been Performed The Company delivers the products prior to recognizing revenue or performs services as per contractual terms. Product is considered delivered upon delivery to a customers designated location and services are considered performed upon completion of the Companys contractual obligations. The Fee for the Arrangement is Fixed or Determinable Prior to recognizing revenue, an amount is either fixed or determinable under the terms of the written contract. The price is negotiated at the outset of the arrangement and is not subject to refund or adjustment during the initial term of the arrangement. Collectability is Reasonably Assured The Company determines that collectability is reasonably assured prior to recognizing revenue. Collectability is assessed on a customer-by-customer basis based on criteria outlined by Management. The Company does not enter into arrangements unless collectability is reasonably assured at the outset. Existing customers are subject to ongoing credit evaluations based on payment history and other factors. If it is determined during the arrangement that collectability is not reasonably assured, revenue is recognized on a cash basis. The Company records certain consideration paid to customers for services or placement fees as a reduction in revenue rather than as an expense. The Company reports these items on the income statement as a reduction in revenue and as a corresponding reduction in marketing and selling expenses. Revenues from the Companys brewpub and gift store are recognized when sales have been completed. Allowance for Doubtful Accounts The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic and industry trends and changes in customer payment terms. Balances over 90 days past due and other higher risk amounts are reviewed individually for collectability. If the financial condition of the Companys customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on Managements assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Inventories Inventories are stated at the lower of average cost, which approximates the first-in, first-out method, or market (current replacement cost). The Company regularly reviews its inventories for the presence of obsolete product attributed to age, seasonality and quality. Inventories that are considered obsolete are written off or adjusted to carrying value. Deferred Financing Costs Costs relating to obtaining financing are capitalized and amortized over the term of the related debt. When a loan is paid in full, any unamortized financing costs are removed from the related accounts and charged to operations. Deferred financing costs related to a borrowing made in June 2011 were $225,000. Amortization of deferred financing costs charged to operations was $11,300 for the three months ended March 31, 2016 and 2015. Concentration of Credit Risks Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents, and accounts receivable. Substantially all of the Companys cash and cash equivalents are deposited with commercial banks in the US and the UK that have minimal credit risk. Accounts receivable are generally unsecured and customers are subject to an initial credit review and ongoing monitoring. Wholesale distributors account for substantially all accounts receivable; therefore, this risk concentration is limited due to the number of distributors and the laws regulating the financial affairs of distributors of alcoholic beverages. The Company has approximately $2,600 in cash deposits and $2,174,200 of accounts receivable due from customers located in the UK as of March 31, 2016. Income Taxes The Company accounts for income taxes in accordance with ASC 750 which requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards. The Company periodically assesses uncertain tax positions that the Company has taken or expects to take on a tax return, including a decision whether to file or not to file a return in a particular jurisdiction. The Company evaluated its tax positions and determined that there were no uncertain tax benefits as of March 31, 2016 and December 31, 2015. Basic and Diluted Earnings (Loss) per Share The basic earnings (loss) per share is computed by dividing the earnings (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Basic net earnings (loss) per share exclude the dilutive effect of stock options or warrants and convertible notes. If the Companys operations result in net loss for any period, diluted net loss per share would be the same as basic net loss per share, since the effect of any potentially dilutive securities would be anti-dilutive. Therefore, the conversion of the related party convertible notes (see Subordinated Convertible Notes Payable below) has been excluded from the Companys calculation of net loss per share. The computations of basic and dilutive net loss per share are as follows: Three months ended March 31 2016 2015 Net loss $ (637,100 ) (673,900 ) Weighted average shares of common stock outstanding 12,611,133 12,611,133 Basic net loss per share $ (0.05 ) (0.05 ) Interest expense on convertible notes $ Loss for purpose of computing diluted net earnings per share $ (637,100 ) (673,900 ) Incremental shares from assumed exercise of dilutive securities Dilutive potential of shares of common stock 12,611,133 12,611,133 Diluted net earnings per share $ (0.05 ) (0.05 ) Foreign Currency Translation The Company has subsidiaries located in the UK, where the local currency, the UK Pound Sterling, is the functional currency. Financial statements of these subsidiaries are translated into US dollars using period-end exchange rates for assets and liabilities and average exchange rates during the period for revenues and expenses. Cumulative translation adjustments associated with net assets or liabilities are reported in non-owner changes in equity. Any exchange rate gains or losses related to foreign currency transactions are recognized in the income statement as incurred, in the same financial statement caption as the underlying transaction, and are not material for any year shown. Cash flows were translated at the average exchange rates for the three months then ended. Changes in cash resulting from the translations are presented as a separate item in the statements of cash flows. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the US includes having the Company make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. The amounts estimated could differ from actual results. Significant estimates include the allowance for bad debts, depreciation and amortization periods, and the future utilization of deferred tax assets. Comprehensive Income (Loss) Comprehensive income (loss) is composed of the Companys net loss and changes in equity from non-stockholder sources. The accumulated balances of these non-stockholder sources are reflected as a separate item in the equity section of the balance sheet. Reportable Segments The Company manages its operations through two business segments: (i) brewing operations and tasting room operations in the US and distributor operations in Canada (the North American Territory) and (ii) distributor operations in Europe, including the UK (the Foreign Territory). The Company evaluates performance based on net operating profit. Where applicable, portions of the administrative function expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. In the event any materials and/or services are provided to one operating segment by the other, the transaction is valued according to the Companys transfer policy, which approximates market price. The costs of operating the manufacturing plants are captured discretely within each segment. The Companys property, plant and equipment, inventory, and accounts receivable are captured and reported discretely within each operating segment. Recent Accounting Pronouncements In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-08 on its consolidated financial statements. |
Liquidity and Management Plans
Liquidity and Management Plans | 3 Months Ended |
Mar. 31, 2016 | |
Liquidity And Management Plans | |
Liquidity and Management Plans | 2. Liquidity and Management Plans MB Financial Credit and Security Agreement 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 applicable interest rates are as follows: (a) with respect to the Revolver, the Wall Street Journal prime rate plus a margin of 1.00%, (b) with respect to the machinery and equipment term loan and the capital expenditure term loan, the Wall Street Journal prime rate plus a margin of 1.50%, and (c) with respect to the real estate term loan, the Wall Street Journal prime rate plus a margin of 2.00%. As described below, effective September 1, 2013, Lender is charging 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. As described below, the Second Amendment (among other things) reduces 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 Revolver. 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. The Credit and Security Agreement binds the Company to certain financial covenants including maintaining prescribed minimum tangible net worth and prescribed minimum fixed charges coverage. There is a prepayment penalty if we prepay all of our obligations prior to the maturity date. The credit facility is secured by a first priority interest in all of MBCs and Reletas personal property and a first mortgage on our Ukiah, California real property, among other MBC and Releta assets. 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 and, effective September 1, 2013, began charging a default interest rate equal to 2% per annum in excess of the interest rate otherwise payable under the Credit and Security Agreement. 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, to be delivered to Lender on or before April 30, 2014. MBC and Releta engaged a consultant and delivered a revised projection on April 30, 2014. As stated in the Second Default Notice, the Company continued to be in default on the fixed charge coverage ratio for each measurement period beginning March 31, 2013 through February 28, 2014. The required fixed charge coverage ratio was initially required to be at least 1.05 to 1.00, but as of July 31, 2013, the required fixed charge coverage ratio increased to 1.10 to 1.00 pursuant to the terms of the Credit and Security Agreement. The Second Default Notice also stated that the tangible net worth of MBC and Releta continued to fall short of the required amount as measured through February 28, 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 Revolver. 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 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 also 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. As of March 31, 2016, pursuant to the Credit and Security Agreement, the fixed charge coverage ratio was required to be 1.15 to 1. The Company calculated that the fixed charge coverage ratio as of March 31, 2016 was -0.20 to 1. The Company calculated that the required tangible net worth of MBC and Releta was $6,181,400 as of March 31, 2016 and the actual tangible net worth on such date was $3,576,900. The Company does not anticipate that it will regain compliance with the required fixed charge coverage ratio or the minimum tangible net worth, as required by the Credit and Security Agreement, in the immediate future. 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. 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. An event of default shall be deemed continuing until waived in writing by Lender. 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 Lenders option, be declared, and immediately shall become, due and payable, without notice of any kind. 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 executing 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. As noted above, effective September 1, 2013, Lender elected, and 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 Company estimates that the increased interest rate currently results in the payment by the Company to Lender of additional interest of approximately $120,000 per year. 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. The Credit and Security Agreement expires on June 23, 2016. There is no guarantee that MBC and Releta will be able to obtain alternate financing on terms favorable to the Company or on any terms. If the Company is unable to obtain alternate financing, it will have a material adverse effect on the Companys financial condition and the Companys ability to operate. RBS Facility On April 26, 2005, Royal Bank of Scotland Commercial Services Limited (RBS) provided an approximately $2.8 million (£1,750,000) invoice discounting facility to KBEL, based on 80% prepayment against qualified accounts receivable related to KBELs UK customers. The initial term of the facility was one year, after which time the facility could be terminated by either party upon six months notice. The facility carries an interest rate of 1.38% above the RBS base rate and a service charge of 0.10% of each invoice discounted. The amount outstanding on this line of credit as of March 31, 2016 was approximately $964,100. Included in the Companys balance sheet at March 31, 2016 are account balances totaling $2,174,200 of accounts receivable collateralized to RBS under this facility. 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 June 15, 2016, with any remaining amounts due 15 days later. The Company has engaged in discussions with a bank which provided an indicative offer to provide alternate financing and banking services to KBEL. If KBEL does not finalize such alternate financing and provision of banking services, and if KBEL is unable to find alternate financing and banking services before termination of the RBS facilities, it would have a material adverse effect on KBEL and the Company. Catamaran Notes On January 22, 2014, Catamaran, a related party, provided a loan to MBC in the principal amount of $500,000 evidenced by a promissory note. On April 24, 2014, Catamaran provided a second loan in the principal amount of $500,000 on terms similar to the previous note. On February 5, 2015, Catamaran provided a third loan in the principal amount of $500,000 on terms similar to the previous notes. On June 30, 2015, Catamaran provided a fourth loan in the principal amount of $500,000 on terms similar to the previous notes, and the Company received the proceeds against this note on July 6, 2015. These four Catamaran notes are payable within six months following the date of the notes, and if the Company is not able to satisfy its obligations on these 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. However, each time Catamaran provided a loan, the Company received a letter from Lender permitting the Company to obtain such 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 Credit and Security Agreement were satisfied in full, or (b) such payment was a Permitted Payment. A Permitted Payment with respect to the notes dated January 22, 2014, April 24, 2014, and February 5, 2015 means a payment made from an equity investment by the Companys majority shareholder in excess of $500,000. A Permitted Payment with respect to the note dated June 30, 2015 means a payment made from an equity investment by the Companys majority shareholder. On March 14, 2016, Catamaran provided a fifth loan in the principal amount of $325,000 on terms substantially similar to the previous notes, except that the definition of Permitted Payment was revised to mean, for purposes of this fifth note, a payment made from a bridge loan by the Companys majority shareholder in excess of $600,000. On March 30, 2016, Catamaran provided a sixth loan in the principal amount of $75,000 on terms substantially similar to the fifth note. The Catamaran loans evidenced by those promissory notes dated March 14, 2016 and March 30, 2016 are also payable within six months following the date of the notes, and if the Company is not able to satisfy its obligations on these 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. If Catamaran ceases to provide ongoing financial support to the Company, it would have a material adverse effect on the Companys financial condition and the Companys ability to continue to operate. Interest shall accrue from the date of the applicable Catamaran note on the unpaid principal at a rate equal to the lesser of (i) one and one-half percent (1.5%) per annum above the prime rate offered from time to time by the Bank of America Corporation in San Francisco, California, or (ii) ten percent (10%) per annum, until the principal is fully paid. The Catamaran notes may be prepaid without penalty at the option of the Company; however, no payments on the Catamaran notes may be made unless such payment is a Permitted Payment or certain existing obligations of the Company to Lender pursuant to the Credit and Security Agreement have been satisfied in full. The Catamaran notes may not be amended without the prior written consent of Lender. UBHL In response to the losses incurred in connection with the Companys operations, UBHL issued a letter of comfort to the Companys accountants 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 or guarantee. However, to date UBHL through its affiliated company, Catamaran, has provided loans for working capital needs as described above. 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 or otherwise 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. UBHL controls the Companys two largest shareholders, United Breweries of America, Inc. (UBA) and Inversiones Mirabel, S.A., a Panamanian corporation (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. The board of directors of UBHL during this quarter has approved debt financing to the Company in the form of $1,000,000 of bridge loans. If UBHL does not consummate such debt financing, it would have a material adverse effect on the Companys financial condition and the Companys ability to continue to operate. Gordian Group 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, if any, to repay the amount owed to Lender when it becomes due. At March 31, 2016, the Company had cash and cash equivalents of $52,900, an accumulated deficit of $18,032,700, and a working capital deficit of $12,249,000 due to losses incurred, and to debts payable to Lender and subordinated notes payable to UBA on June 23, 2016. In addition, the book value of the Companys assets was lower than the book value of its liabilities at March 31, 2016. Management has taken several actions to reduce the Companys working capital needs through March 31, 2017, 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 Company is pursuing a Financial Transaction through Gordian Group as described above. The Company has relied upon the continued loans from Catamaran to support operations. The current revenue from operations is 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 or other sources do not provide sufficient financial assistance to MBC, it will result in a material adverse effect on the Companys financial position and on its ability to continue operations and it may have to seek capital by selling some of its operating assets. In addition, the Companys lenders may seek to satisfy any outstanding obligations through recourse against the applicable pledged collateral which includes the Companys real and personal property in the United States and the United Kingdom. The loss of any material pledged asset would have a material adverse effect on the Companys financial position and results of operations. Vijay Mallya, the Companys Chairman and indirect majority shareholder is presently subject to certain legal proceedings in India, which may impair the Companys ability to obtain financing from UBHL and other potential funding sources. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories | 3. Inventories Inventories are stated at the lower of average cost or market and consist of the following: March 31,2016 December 31, 2015 Raw Materials $ 551,500 $ 628,100 Beer-in-process 339,300 312,200 Finished Goods 510,200 541,400 Merchandise 64,000 65,300 TOTAL $ 1,465,000 $ 1,547,000 |
Secured Lines of Credit
Secured Lines of Credit | 3 Months Ended |
Mar. 31, 2016 | |
Line of Credit Facility [Abstract] | |
Secured Lines of Credit | 4. Secured Lines of Credit MB Financial Credit and Security Agreement The borrowings under the Credit and Security Agreement are collateralized, with recourse, by MBCs and Reletas trade receivables and inventory located in the US. This facility currently carries interest (including default interest) at a rate of prime plus 3% and is secured by substantially all of the assets of Releta and MBC. The amount outstanding on this line of credit as of March 31, 2016 was approximately $120,700. Included in the Companys balance sheet as at March 31, 2016 are account balances totaling $1,117,100 of accounts receivable and $1,375,000 of inventory collateralized to Lender under this facility. The Credit and Security Agreement expires on June 23, 2016. RBS Facility On April 26, 2005, RBS provided an approximately $2.8 million (£1,750,000) invoice discounting facility to KBEL based on 80% prepayment against qualified accounts receivable related to KBELs UK customers. The initial term of the facility was one year, after which time the facility could be terminated by either party upon six months notice. The facility carries an interest rate of 1.38% above the RBS base rate and a service charge of 0.10% of each invoice discounted. The amount outstanding on this line of credit as of March 31, 2016 was approximately $964,100. Included in the Companys balance sheet at March 31, 2016 are account balances totaling $2,174,200 of accounts receivable collateralized to RBS under this facility. 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 June 15, 2016, with any remaining amounts due 15 days later. The Company engaged in discussions with a bank which provided an indicative offer to provide alternate financing and banking services to KBEL. If KBEL does not finalize such alternate financing and provision of banking services, and if KBEL is unable to find alternate financing and banking services before termination of the RBS facilities, it would have a material adverse effect on KBEL and the Company. |
Notes Payable to Related Partie
Notes Payable to Related Parties | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable to Related Parties | 5. Notes Payable to Related Parties Notes payable to a related party consist of notes payable to Catamaran dated January 22, 2014, April 24, 2014, February 5, 2015, June 30, 2015, March 14, 2016, and March 30, 2016 for a total value of $2,545,300 including accrued interest of $145,300. Catamaran Holdings, 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 first four Catamaran notes are payable within six months following the date of the notes, and if the Company is not able to satisfy its obligations on these 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. However, each time Catamaran provided a loan, the Company received a letter from Lender permitting the Company to obtain such 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 Credit and Security Agreement were satisfied in full, or (b) such payment was a Permitted Payment. A Permitted Payment with respect to the notes dated January 22, 2014, April 24, 2014, and February 5, 2015 means a payment made from an equity investment by the Companys majority shareholder in excess of $500,000. A Permitted Payment with respect to the note dated June 30, 2015 means a payment made from an equity investment by the Companys majority shareholder. On March 14, 2016, Catamaran provided a fifth loan in the principal amount of $325,000 on terms substantially similar to the previous notes, except that the definition of Permitted Payment was revised to mean, for purposes of this fifth note, a payment made from a bridge loan by the Companys majority shareholder in excess of $600,000 (a Permitted Bridge Loan Payment). On March 30, 2016, Catamaran provided a sixth loan in the principal amount of $75,000 on terms substantially similar to the fifth note. The Catamaran loans evidenced by those promissory notes dated March 14, 2016 and March 30, 2016 are also payable within six months following the date of the notes, and if the Company is not able to satisfy its obligations on these 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. If Catamaran ceases to provide ongoing financial support to the Company, it would have a material adverse effect on the Companys financial condition and the Companys ability to continue to operate. Interest shall accrue from the date of the applicable Catamaran note on the unpaid principal at a rate equal to the lesser of (i) one and one-half percent (1.5%) per annum above the prime rate offered from time to time by the Bank of America Corporation in San Francisco, California, or (ii) ten percent (10%) per annum, until the principal is fully paid. The Catamaran notes may be prepaid without penalty at the option of the Company; however, no payments on the Catamaran notes may be made unless such payment is a Permitted Payment or certain existing obligations of the Company to Lender pursuant to the Credit and Security Agreement have been satisfied in full. The Catamaran notes may not be amended without the prior written consent of Lender. |
Secured Notes Payable
Secured Notes Payable | 3 Months Ended |
Mar. 31, 2016 | |
Long-term Debt, Unclassified [Abstract] | |
Secured Notes Payable | 6. Secured Notes Payable Maturities of secured notes payable for succeeding years are as follows: March 31, 2016 December 31, 2015 Loan from MB Financial, payable in monthly installments of $12,300, plus interest (including default interest) at prime plus 4% with a balloon payment of approximately $2,202,500 in June 2016; secured by substantially all assets of Releta and MBC. $ 2,239,400 $ 2,276,200 Loans from MB Financial, payable in monthly installments of $32,300 plus interest (including default interest) at prime plus 3.5% with a balloon payment of approximately $908,700 in June 2016; secured by substantially all assets of Releta and MBC. 1,005,500 1,102,400 3,244,900 3,378,600 Less current maturities 3,244,900 3,378,600 $ - $ - |
Long-Term Debt - Related Party
Long-Term Debt - Related Party | 3 Months Ended |
Mar. 31, 2016 | |
Long-term Debt - Related Party | |
Long-Term Debt - Related Party | 7. Long-Term Debt Related Party March 31, 2016 December 31, 2015 Loan from Heineken UK Limited, payable in quarterly installments of $137,900, plus interest at UK prime plus 5% maturing on October 9, 2016, secured by licensing rights pursuant to a Sub-License Agreement. $ 359,500 $ 491,500 Less current maturities 359,500 491,500 $ - $ - On April 18, 2013, KBEL entered into a loan agreement (the HUK Loan Agreement) with HUK pursuant to which HUK provided KBEL with a secured term loan of £1,000,000 on October 9, 2013 to be repaid in twelve quarterly installments of £83,333.33 each, commencing from January 9, 2014 and to be repaid in full by October 9, 2016. Interest on the HUK loan is payable quarterly in arrears on the outstanding balance of the loan at the rate of 5% above the Bank of England base rate. Prepayment is permitted. Upon an Event of Default, as defined in the HUK Loan Agreement, if HUK and KBEL fail to agree on a payment plan acceptable to HUK, HUK may, among other remedies, declare the loan immediately due and repayable or exercise its right to an exclusive license pursuant to the Sub-License Agreement as described and defined in the HUK Loan Agreement. |
Capital Lease Obligations
Capital Lease Obligations | 3 Months Ended |
Mar. 31, 2016 | |
Capital Lease Obligations [Abstract] | |
Capital Lease Obligations | 8. Capital Lease Obligations The Company leases certain brewing equipment under an agreement that is classified as a capital lease. The future minimum lease payments required under the capital lease and the present value of the net minimum lease payments as of March 31, 2016, are as follows: Nine months Ending December 31, 2016 $ 21,600 Year Ending December 31, 2017 27,600 Year Ending December 31, 2018 21,300 Year Ending December 31, 2019 21,300 Year Ending December 31, 2020 21,000 112,800 Less amounts representing interest (17,700 ) Present value of minimum lease payments 95,100 Less current maturities 22,700 Non-current leases payable $ 72,400 |
Subordinated Convertible Notes
Subordinated Convertible Notes Payable To Related Party | 3 Months Ended |
Mar. 31, 2016 | |
Subordinated Convertible Notes Payable To Related Party | |
Subordinated Convertible Notes Payable To Related Party | 9. Subordinated Convertible Notes Payable 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 $3,704,000 and $3,680,100 as of March 31, 2016 and December 31, 2015, 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 following the end of the extension period but is precluded from doing so pursuant to a subordination agreement with Lender. The loans from Lender to which the UBA notes are subordinated mature in June 2016. The Company expects the UBA notes to be continued to be subordinated to any new financing facility obtained after maturity of Lenders facility. The Company will also attempt to induce conversion of UBA notes to equity. The Company does not expect to have to use working capital to repay any of the UBA notes. The UBA notes include $1,788,600 and $1,764,700 of accrued interest at March 31, 2016 and December 31, 2015, respectively. |
Severance Payable
Severance Payable | 3 Months Ended |
Mar. 31, 2016 | |
Severance Payable | |
Severance Payable | 10. Severance Payable The Company is a party to a Separation and Severance Agreement (the Separation Agreement) with Mr. Yashpal Singh, its President and Chief Executive Officer. Pursuant to the terms of the Separation Agreement, upon Mr. Singhs (i) termination of employment for Good Reason (as defined in the Separation Agreement), (ii) termination of employment at the end of the employment term, (iii) death, (iv) disability or (v) termination by the Company without Cause (as defined in the Separation Agreement), he shall be entitled to certain severance benefits and payments. The severance payment shall equal the product of 2.5 times his average monthly base salary (calculated over the twelve (12) month period preceding the termination event), multiplied by the number of years (on a pro-rated basis) he had been employed by the Company at the Termination Date (as defined in the Separation Agreement); provided, however, that the severance payment may not exceed thirty (30) months of Mr. Singhs average monthly base salary (calculated over the twelve (12) months preceding his termination date). Payments due to Mr. Singh under the Separation Agreement shall be paid in equal monthly installments by the Company over a 20 month period. Mr. Singhs current employment contract ends on June 30, 2016. The receipt of payments is contingent on Mr. Singh executing a release of claims for the benefit of the Company. As of March 31, 2016, the Company has accrued $813,800 against this obligation. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 11. Commitments and Contingencies Purchase of raw materials Production of the Companys beverages requires quantities of various processed agricultural products, including malt and hops for beer. The Company fulfills its commodities requirements through purchases from various sources, some through contractual arrangements and others on the open market. Legal The Company is periodically involved in legal actions and claims that arise as a result of events that occur in the normal course of operations. 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. 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. The trial date is set for January 17, 2017. 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 (including 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. |
Related-Party Transactions
Related-Party Transactions | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | 12. Related-Party Transactions The Company conducts business with United Breweries of America, Inc. (UBA), which owns approximately 25% of the Companys common stock. Until October 2013, KBEL had significant transactions with Shepherd Neame, Ltd., which is a related party with respect to a former Board member. KBEL also has had significant transactions with HUK, a related party with respect to one of MBCs Board members, beginning in October 2013. The following table reflects the value of such transactions during the quarters ended March 31, 2016 and 2015 and the balances outstanding as of March 31, 2016 and December 31, 2015. March 31, 2016 March 31, 2015 TRANSACTIONS Purchases from HUK $ 2,600,400 $ 2,404,600 Expense reimbursement to HUK $ 216,200 $ 208,500 Interest expense related to UBA & Catamaran notes $ 49,600 $ 37,700 Borrowing from Catamaran $ 400,000 $ 500,000 Mar 31, 2016 Dec 31, 2015 ACCOUNT BALANCES Accounts payable and accrued liability to HUK $ 1,661,500 $ 1,669,400 Notes payable to Catamaran $ 2,545,300 $ 2,119,600 Notes payable to UBA $ 3,704,000 $ 3,680,100 |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | 13. Segment Information The Companys business presently consists of two segments the North American Territory and the Foreign Territory. The Companys operations in the North American Territory consist primarily of brewing and marketing proprietary craft beers. For distribution in the North American Territory, the Company brews its brands in its own facilities, which are located in Ukiah, California and Saratoga Springs, New York. The Companys operations in the Foreign Territory, which are conducted through its wholly-owned subsidiary UBIUK and UBIUKs wholly-owned subsidiary KBEL, consist primarily of the marketing and distribution of Kingfisher Premium Lager in the Foreign Territory. A summary of each segment is as follows: Three Months Ended March 31, 2016 North American Territory Foreign Territory Total Net Sales $ 2,702,400 $ 4,208,600 $ 6,911,000 Operating Loss $ (482,100 ) $ (15,600 ) $ (497,700 ) Identifiable Assets $ 12,162,800 $ 3,937,100 $ 16,099,900 Depreciation & Amortization $ 169,700 $ 113,900 $ 283,600 Capital Expenditures $ - $ 82,200 $ 82,200 Three Months Ended March 31, 2015 North American Territory Foreign Territory Total Net Sales $ 2,373,700 $ 4,320,400 $ 6,694,100 Operating Income (Loss) $ (581,000 ) $ 62,100 $ (518,900 ) Identifiable Assets $ 13,398,300 $ 4,159,700 $ 17,558,000 Depreciation & Amortization $ 168,700 $ 116,000 $ 284,700 Capital Expenditures $ - $ 70,800 $ 70,800 |
Unrestricted Net Assets
Unrestricted Net Assets | 3 Months Ended |
Mar. 31, 2016 | |
Unrestricted Net Assets | |
Unrestricted Net Assets | 14. Unrestricted Net Assets The Companys wholly-owned subsidiary, UBIUK, had undistributed losses of $361,800 as of March 31, 2016. Under KBELs line of credit agreement with RBS, distributions and other payments to MBC from KBEL are not permitted if retained earnings drop below $1,431,000. Condensed financial information of MBC, together with its other subsidiary, Releta is as follows: Balance Sheets March 31, 2016 December 31, 2015 (unaudited) Balance Sheets Assets Cash and cash equivalents $ 50,300 $ 61,300 Accounts receivable, net 1,117,100 1,121,300 Inventories 1,375,000 1,490,100 Other current assets 104,900 199,800 Total current assets 2,647,300 2,872,500 Investment in subsidiary 1,225,000 1,225,000 Property and equipment 9,220,100 9,378,500 Intercompany receivable 272,600 284,000 Other assets 295,400 175,800 Total assets $ 13,660,400 $ 13,935,800 Liabilities Line of credit $ 120,700 $ 453,100 Accounts payable 2,692,200 2,640,400 Accrued liabilities 1,293,800 1,021,000 Note payable to related party 2,545,300 2,119,600 Subordinated convertible notes to related party 3,704,000 3,680,100 Current maturities of debt, leases and severance 3,496,600 3,505,900 Total current liabilities 13,852,600 13,420,100 Long-term capital leases 12,600 14,000 Severance payable 569,700 678,400 Total liabilities 14,434,900 14,112,500 Stockholders deficit Common stock 15,100,300 15,100,300 Preferred stock 227,600 227,600 Accumulated deficit (16,102,400 ) (15,504,600 ) Total stockholders deficit (774,500 ) (176,700 ) Total liabilities and stockholders deficit $ 13,660,400 $ 13,935,800 Statements of Operations Quarter ended March 31 2016 2015 (unaudited) (unaudited) Net sales $ 2,592,300 $ 2,373,700 Cost of goods sold 2,225,100 2,122,600 Selling, marketing, and retail expenses 291,500 353,400 General and administrative expenses 559,500 480,100 Loss from operations (483,800 ) (582,400 ) Other (income) (3,700 ) (3,100 ) Interest expense 117,700 123,000 Provision for taxes - 3,800 Net loss $ (597,800 ) $ (706,100 ) Statements of Cash Flows Quarter ended March 31 2016 2015 (unaudited) (unaudited) Cash flows from operating activities $ 45,100 $ (269,200 ) Purchase of property and equipment - - Net borrowing (repayment) on line of credit (332,400 ) (90,200 ) Borrowing on note payable 400,000 500,000 Repayment on long term debt (133,700 ) (133,700 ) Payment on obligation under capital lease (1,400 ) (1,300 ) Net change in payable to UBIUK 11,400 (30,800 ) Decrease in cash (11,000 ) (25,200 ) Cash, beginning of period 61,300 61,500 Cash, end of period $ 50,300 $ 36,300 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 15. Income Taxes In the three months ended March 31, 2016 and 2015, the Company recorded tax expenses related to state franchise taxes only, and did not record income tax expenses due to the availability of deferred tax assets to offset any taxable income in the US (at the federal and state level to the extent applicable) and the UK. The Company has established a full valuation allowance against the Companys deferred tax assets based on an assessment that the criteria that deferred tax assets will more likely than not be realized has not yet been met. During the three months ended March 31, 2016 and March 31, 2015, the Companys effective tax rates were de minimis The Companys major tax jurisdictions are (i) US (federal), (ii) California (state), (iii) New York (state) and (iv) UK. Tax returns remain open to examination by the applicable governmental authorities for tax years 2012 through 2015. The federal and state taxing authorities may choose to audit tax returns for prior years due to significant tax attribute carryforwards for those prior years. However, such audits will be limited to adjustments to such carryforward tax attributes. The Company is not currently being audited in any tax jurisdiction. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | 16. Subsequent Events Pursuant to a resolution adopted on September 10, 2013 by the Companys Board of Directors, the Company entered into a Separation and Severance Agreement with Mr. Mahadevan Narayanan, the 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). If Mr. Narayanans employment is terminated without Cause, in addition to the severance payment described above, he shall also receive either (i) 365 days prior written notice or (ii) a lump sum payment equal to twelve (12) months of his base salary at the rate in place at the Termination Date (the Notice Payment). 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 and22
Description of Operations and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Description of Operations | Description of Operations Mendocino Brewing Company, Inc. (the Company or MBC), was formed in 1983 in California, and has two operating subsidiaries: Releta Brewing Company, LLC (Releta), and United Breweries International (UK) Limited (UBIUK). In the United States (the US), MBC and Releta operate two breweries that produce beer and malt beverages for the specialty craft segment of the beer market. The breweries are located in Ukiah, California and Saratoga Springs, New York. The majority of sales for MBC in the US are in California. The Company brews several brands, of which Red Tail Ale is the flagship brand. In addition, the Company performs contract brewing for several other brands. Generally, product shipments are made directly from the breweries to the wholesalers or distributors in accordance with state and local laws. MBCs United Kingdom (the UK) subsidiary, UBIUK, is a holding company for Kingfisher Beer Europe Limited (KBEL). KBEL is a distributor of alcoholic beverages, mainly Kingfisher Lager Beer, in the UK and Europe. The offices of KBEL are located in Maidstone, Kent in the UK. In addition, during the period covered by this report, through UBIUK, the Company had production and distribution rights to Kingfisher Premium Lager in Canada and the United States. The Company has the right to use the Kingfisher mark and the name Kingfisher Brewing Company in connection with the brewing and distribution of assorted beers in the United States pursuant to an agreement with Kingfisher America, Inc. Generally sales are made through distributors. All of the Companys beers sold in Europe (except for beers sold in Germany) are procured under a contract with Heineken UK Limited (HUK). This contract expires in October 2018. KBEL is the distributor of Kingfisher Premium Lager to specialty restaurant trade distributors, liquor and convenience stores in the United Kingdom, Ireland, and continental Europe, but does not physically distribute the Companys products to customers. KBEL relies on HUK for distribution of the product in Europe in exchange for a fee paid to HUK, except in Germany where beers are manufactured and distributed pursuant to a separate contract with a different entity. In addition, HUK has the exclusive right to sell Kingfisher Premium Lager, for a royalty fee payable to KBEL, to certain large retail customers, including, but not limited to, Sainsburys, Asda, and Tesco. |
Subsequent Events | Subsequent Events The Company evaluates events that occur subsequent to the balance sheet date of periodic reports, but before financial statements are issued for periods ending on such balance sheet dates, for possible adjustment to such financial statements or other disclosure. This evaluation generally occurs through the date on which the Companys financial statements are electronically prepared for filing with the Securities and Exchange Commission (SEC). |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements present the accounts of MBC and its wholly-owned subsidiaries, Releta and UBIUK. All material intracompany and inter-company balances, profits and transactions have been eliminated. |
Basis of Presentation and Organization | Basis of Presentation and Organization The accompanying unaudited condensed consolidated financial statements for the three months ended March 31, 2016 and 2015 have been prepared in accordance with accounting principles generally accepted in the US. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Companys most recent Annual Report on Form 10-K, as filed with the SEC, which contains additional financial and operating information and information concerning significant accounting policies followed by the Company. The financial statements and notes are representations of the Companys management (Management) and its board of directors (the Board of Directors), who are responsible for their integrity and objectivity. The Companys consolidated financial statements for fiscal year 2015 were prepared on a going concern basis. The continuation of the Company as a going concern is dependent upon the continued financial support from Catamaran Services, Inc. (Catamaran) and/or United Breweries Holdings, Ltd., an Indian public limited company (UBHL), its ability to obtain other debt or equity financing, and generating profitable operations from the Companys future operations. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These factors raise substantial doubt regarding the Companys ability to continue as a going concern. Operating results from the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any future period. |
Reclassifications | Reclassifications Certain items in the financial statements for the prior year have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or equity. |
Cash and Cash Equivalents, Short and Long-Term Investments | Cash and Cash Equivalents, Short and Long-Term Investments For purposes of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue from the brewing and distribution operations in accordance with Accounting Standards Codification 605 of the Financial Accounting Standards Board. The Company recognizes revenue from product sales, net of discounts. The Company recognizes revenue only when all of the following criteria have been met: ● Persuasive evidence of an arrangement exists; ● Delivery has occurred or services have been rendered; ● The fee for the arrangement is fixed or determinable; and ● Collectability is reasonably assured. Persuasive Evidence of an Arrangement The Company documents all terms of an arrangement in a written contract or purchase order signed by the customer prior to recognizing revenue. Delivery Has Occurred or Services Have Been Performed The Company delivers the products prior to recognizing revenue or performs services as per contractual terms. Product is considered delivered upon delivery to a customers designated location and services are considered performed upon completion of the Companys contractual obligations. The Fee for the Arrangement is Fixed or Determinable Prior to recognizing revenue, an amount is either fixed or determinable under the terms of the written contract. The price is negotiated at the outset of the arrangement and is not subject to refund or adjustment during the initial term of the arrangement. Collectability is Reasonably Assured The Company determines that collectability is reasonably assured prior to recognizing revenue. Collectability is assessed on a customer-by-customer basis based on criteria outlined by Management. The Company does not enter into arrangements unless collectability is reasonably assured at the outset. Existing customers are subject to ongoing credit evaluations based on payment history and other factors. If it is determined during the arrangement that collectability is not reasonably assured, revenue is recognized on a cash basis. The Company records certain consideration paid to customers for services or placement fees as a reduction in revenue rather than as an expense. The Company reports these items on the income statement as a reduction in revenue and as a corresponding reduction in marketing and selling expenses. Revenues from the Companys brewpub and gift store are recognized when sales have been completed. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic and industry trends and changes in customer payment terms. Balances over 90 days past due and other higher risk amounts are reviewed individually for collectability. If the financial condition of the Companys customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on Managements assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. |
Inventories | Inventories Inventories are stated at the lower of average cost, which approximates the first-in, first-out method, or market (current replacement cost). The Company regularly reviews its inventories for the presence of obsolete product attributed to age, seasonality and quality. Inventories that are considered obsolete are written off or adjusted to carrying value. |
Deferred Financing Costs | Deferred Financing Costs Costs relating to obtaining financing are capitalized and amortized over the term of the related debt. When a loan is paid in full, any unamortized financing costs are removed from the related accounts and charged to operations. Deferred financing costs related to a borrowing made in June 2011 were $225,000. Amortization of deferred financing costs charged to operations was $11,300 for the three months ended March 31, 2016 and 2015. |
Concentration of Credit Risks | Concentration of Credit Risks Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents, and accounts receivable. Substantially all of the Companys cash and cash equivalents are deposited with commercial banks in the US and the UK that have minimal credit risk. Accounts receivable are generally unsecured and customers are subject to an initial credit review and ongoing monitoring. Wholesale distributors account for substantially all accounts receivable; therefore, this risk concentration is limited due to the number of distributors and the laws regulating the financial affairs of distributors of alcoholic beverages. The Company has approximately $2,600 in cash deposits and $2,174,200 of accounts receivable due from customers located in the UK as of March 31, 2016. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC 750 which requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards. The Company periodically assesses uncertain tax positions that the Company has taken or expects to take on a tax return, including a decision whether to file or not to file a return in a particular jurisdiction. The Company evaluated its tax positions and determined that there were no uncertain tax benefits as of March 31, 2016 and December 31, 2015. |
Basic and Diluted Earnings (Loss) per Share | Basic and Diluted Earnings (Loss) per Share The basic earnings (loss) per share is computed by dividing the earnings (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Basic net earnings (loss) per share exclude the dilutive effect of stock options or warrants and convertible notes. If the Companys operations result in net loss for any period, diluted net loss per share would be the same as basic net loss per share, since the effect of any potentially dilutive securities would be anti-dilutive. Therefore, the conversion of the related party convertible notes (see Subordinated Convertible Notes Payable below) has been excluded from the Companys calculation of net loss per share. The computations of basic and dilutive net loss per share are as follows: Three months ended March 31 2016 2015 Net loss $ (637,100 ) (673,900 ) Weighted average shares of common stock outstanding 12,611,133 12,611,133 Basic net loss per share $ (0.05 ) (0.05 ) Interest expense on convertible notes $ Loss for purpose of computing diluted net earnings per share $ (637,100 ) (673,900 ) Incremental shares from assumed exercise of dilutive securities Dilutive potential of shares of common stock 12,611,133 12,611,133 Diluted net earnings per share $ (0.05 ) (0.05 ) |
Foreign Currency Translation | Foreign Currency Translation The Company has subsidiaries located in the UK, where the local currency, the UK Pound Sterling, is the functional currency. Financial statements of these subsidiaries are translated into US dollars using period-end exchange rates for assets and liabilities and average exchange rates during the period for revenues and expenses. Cumulative translation adjustments associated with net assets or liabilities are reported in non-owner changes in equity. Any exchange rate gains or losses related to foreign currency transactions are recognized in the income statement as incurred, in the same financial statement caption as the underlying transaction, and are not material for any year shown. Cash flows were translated at the average exchange rates for the three months then ended. Changes in cash resulting from the translations are presented as a separate item in the statements of cash flows. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the US includes having the Company make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. The amounts estimated could differ from actual results. Significant estimates include the allowance for bad debts, depreciation and amortization periods, and the future utilization of deferred tax assets. |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income (loss) is composed of the Companys net loss and changes in equity from non-stockholder sources. The accumulated balances of these non-stockholder sources are reflected as a separate item in the equity section of the balance sheet. |
Reportable Segments | Reportable Segments The Company manages its operations through two business segments: (i) brewing operations and tasting room operations in the US and distributor operations in Canada (the North American Territory) and (ii) distributor operations in Europe, including the UK (the Foreign Territory). The Company evaluates performance based on net operating profit. Where applicable, portions of the administrative function expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. In the event any materials and/or services are provided to one operating segment by the other, the transaction is valued according to the Companys transfer policy, which approximates market price. The costs of operating the manufacturing plants are captured discretely within each segment. The Companys property, plant and equipment, inventory, and accounts receivable are captured and reported discretely within each operating segment. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-08 on its consolidated financial statements. |
Description of Operations and23
Description of Operations and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Schedule of Basic and Dilutive Net Loss Per Share | The computations of basic and dilutive net loss per share are as follows: Three months ended March 31 2016 2015 Net loss $ (637,100 ) (673,900 ) Weighted average shares of common stock outstanding 12,611,133 12,611,133 Basic net loss per share $ (0.05 ) (0.05 ) Interest expense on convertible notes $ Loss for purpose of computing diluted net earnings per share $ (637,100 ) (673,900 ) Incremental shares from assumed exercise of dilutive securities Dilutive potential of shares of common stock 12,611,133 12,611,133 Diluted net earnings per share $ (0.05 ) (0.05 ) |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories are stated at the lower of average cost or market and consist of the following: March 31,2016 December 31, 2015 Raw Materials $ 551,500 $ 628,100 Beer-in-process 339,300 312,200 Finished Goods 510,200 541,400 Merchandise 64,000 65,300 TOTAL $ 1,465,000 $ 1,547,000 |
Secured Notes Payable (Tables)
Secured Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Long-term Debt, Unclassified [Abstract] | |
Summary of Long-term Debt | Maturities of secured notes payable for succeeding years are as follows: March 31, 2016 December 31, 2015 Loan from MB Financial, payable in monthly installments of $12,300, plus interest (including default interest) at prime plus 4% with a balloon payment of approximately $2,202,500 in June 2016; secured by substantially all assets of Releta and MBC. $ 2,239,400 $ 2,276,200 Loans from MB Financial, payable in monthly installments of $32,300 plus interest (including default interest) at prime plus 3.5% with a balloon payment of approximately $908,700 in June 2016; secured by substantially all assets of Releta and MBC. 1,005,500 1,102,400 3,244,900 3,378,600 Less current maturities 3,244,900 3,378,600 $ - $ - |
Long-Term Debt - Related Party
Long-Term Debt - Related Party (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Long-term Debt - Related Party | |
Schedule of Related Party Debt | March 31, 2016 December 31, 2015 Loan from Heineken UK Limited, payable in quarterly installments of $137,900, plus interest at UK prime plus 5% maturing on October 9, 2016, secured by licensing rights pursuant to a Sub-License Agreement. $ 359,500 $ 491,500 Less current maturities 359,500 491,500 $ - $ - |
Capital Lease Obligations (Tabl
Capital Lease Obligations (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
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 March 31, 2016, are as follows: Nine months Ending December 31, 2016 $ 21,600 Year Ending December 31, 2017 27,600 Year Ending December 31, 2018 21,300 Year Ending December 31, 2019 21,300 Year Ending December 31, 2020 21,000 112,800 Less amounts representing interest (17,700 ) Present value of minimum lease payments 95,100 Less current maturities 22,700 Non-current leases payable $ 72,400 |
Related-Party Transactions (Tab
Related-Party Transactions (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Schedule of Related-Party Transactions | The following table reflects the value of such transactions during the quarters ended March 31, 2016 and 2015 and the balances outstanding as of March 31, 2016 and December 31, 2015. March 31, 2016 March 31, 2015 TRANSACTIONS Purchases from HUK $ 2,600,400 $ 2,404,600 Expense reimbursement to HUK $ 216,200 $ 208,500 Interest expense related to UBA & Catamaran notes $ 49,600 $ 37,700 Borrowing from Catamaran $ 400,000 $ 500,000 Mar 31, 2016 Dec 31, 2015 ACCOUNT BALANCES Accounts payable and accrued liability to HUK $ 1,661,500 $ 1,669,400 Notes payable to Catamaran $ 2,545,300 $ 2,119,600 Notes payable to UBA $ 3,704,000 $ 3,680,100 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Schedule of Segment Information | A summary of each segment is as follows: Three Months Ended March 31, 2016 North American Territory Foreign Territory Total Net Sales $ 2,702,400 $ 4,208,600 $ 6,911,000 Operating Loss $ (482,100 ) $ (15,600 ) $ (497,700 ) Identifiable Assets $ 12,162,800 $ 3,937,100 $ 16,099,900 Depreciation & Amortization $ 169,700 $ 113,900 $ 283,600 Capital Expenditures $ - $ 82,200 $ 82,200 Three Months Ended March 31, 2015 North American Territory Foreign Territory Total Net Sales $ 2,373,700 $ 4,320,400 $ 6,694,100 Operating Income (Loss) $ (581,000 ) $ 62,100 $ (518,900 ) Identifiable Assets $ 13,398,300 $ 4,159,700 $ 17,558,000 Depreciation & Amortization $ 168,700 $ 116,000 $ 284,700 Capital Expenditures $ - $ 70,800 $ 70,800 |
Unrestricted Net Assets (Tables
Unrestricted Net Assets (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Unrestricted Net Assets | |
Condensed Balance Sheets | Balance Sheets March 31, 2016 December 31, 2015 (unaudited) Balance Sheets Assets Cash and cash equivalents $ 50,300 $ 61,300 Accounts receivable, net 1,117,100 1,121,300 Inventories 1,375,000 1,490,100 Other current assets 104,900 199,800 Total current assets 2,647,300 2,872,500 Investment in subsidiary 1,225,000 1,225,000 Property and equipment 9,220,100 9,378,500 Intercompany receivable 272,600 284,000 Other assets 295,400 175,800 Total assets $ 13,660,400 $ 13,935,800 Liabilities Line of credit $ 120,700 $ 453,100 Accounts payable 2,692,200 2,640,400 Accrued liabilities 1,293,800 1,021,000 Note payable to related party 2,545,300 2,119,600 Subordinated convertible notes to related party 3,704,000 3,680,100 Current maturities of debt, leases and severance 3,496,600 3,505,900 Total current liabilities 13,852,600 13,420,100 Long-term capital leases 12,600 14,000 Severance payable 569,700 678,400 Total liabilities 14,434,900 14,112,500 Stockholders deficit Common stock 15,100,300 15,100,300 Preferred stock 227,600 227,600 Accumulated deficit (16,102,400 ) (15,504,600 ) Total stockholders deficit (774,500 ) (176,700 ) Total liabilities and stockholders deficit $ 13,660,400 $ 13,935,800 |
Condensed Statement of Operations | Statements of Operations Quarter ended March 31 2016 2015 (unaudited) (unaudited) Net sales $ 2,592,300 $ 2,373,700 Cost of goods sold 2,225,100 2,122,600 Selling, marketing, and retail expenses 291,500 353,400 General and administrative expenses 559,500 480,100 Loss from operations (483,800 ) (582,400 ) Other (income) (3,700 ) (3,100 ) Interest expense 117,700 123,000 Provision for taxes - 3,800 Net loss $ (597,800 ) $ (706,100 ) |
Condensed Statement of Cash Flows | Statements of Cash Flows Quarter ended March 31 2016 2015 (unaudited) (unaudited) Cash flows from operating activities $ 45,100 $ (269,200 ) Purchase of property and equipment - - Net borrowing (repayment) on line of credit (332,400 ) (90,200 ) Borrowing on note payable 400,000 500,000 Repayment on long term debt (133,700 ) (133,700 ) Payment on obligation under capital lease (1,400 ) (1,300 ) Net change in payable to UBIUK 11,400 (30,800 ) Decrease in cash (11,000 ) (25,200 ) Cash, beginning of period 61,300 61,500 Cash, end of period $ 50,300 $ 36,300 |
Description of Operations and31
Description of Operations and Summary of Significant Accounting Policies (Details Narrative) | 3 Months Ended | |||
Mar. 31, 2016USD ($)Segment | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($) | Jun. 30, 2011USD ($) | |
Deferred financing costs on borrowings | $ 225,000 | |||
Amortization of deferred financing costs charged to operations | $ 11,300 | $ 11,300 | ||
Uncertain tax benfits | ||||
Number of business segments | Segment | 2 | |||
UK [Member] | ||||
Cash deposits | $ 2,600 | |||
Accounts receivable due from customers | $ 2,174,200 |
Description of Operations and32
Description of Operations and Summary of Significant Accounting Policies - Schedule of Basic and Dilutive Net Loss Per Share (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Accounting Policies [Abstract] | ||
Net loss | $ (637,100) | $ (673,900) |
Weighted average shares of common stock outstanding | 12,611,133 | 12,611,133 |
Basic net loss per share | $ (0.05) | $ (0.05) |
Interest expense on convertible notes | ||
Loss for purpose of computing diluted net earnings per share | $ (637,100) | $ (673,900) |
Incremental shares from assumed exercise of dilutive securities | ||
Dilutive potential of shares of common stock | 12,611,133 | 12,611,133 |
Diluted net earnings per share | $ (0.05) | $ (0.05) |
Liquidity and Management Plans
Liquidity and Management Plans (Details Narrative) | Mar. 30, 2016USD ($) | Mar. 14, 2016USD ($) | Jun. 30, 2015USD ($) | Feb. 05, 2015USD ($) | Jan. 21, 2015USD ($) | Aug. 20, 2014 | Apr. 24, 2014USD ($) | Jan. 22, 2014USD ($) | Sep. 01, 2013USD ($) | Jun. 23, 2011USD ($) | Jun. 23, 2011USD ($) | Apr. 26, 2005USD ($) | Mar. 31, 2016USD ($)Segment | Dec. 31, 2015USD ($) | Mar. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Apr. 18, 2014Segment | Apr. 26, 2005GBP (£) |
Credit facility, maturity date | Jun. 23, 2016 | |||||||||||||||||
Credit facility, agreement amount, prior to amendment | $ 10,000,000 | $ 10,000,000 | ||||||||||||||||
Tangible net worth - Actual | $ 3,576,900 | |||||||||||||||||
Tangible net worth - Required | $ 6,181,400 | |||||||||||||||||
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 | Segment | 1.15 | 1.05 | ||||||||||||||||
Fixed charges coverage ratio - Increased | Segment | 1.10 | |||||||||||||||||
Fixed charges coverage ratio - Calculated | Segment | (0.20) | |||||||||||||||||
Default interest per year | $ 120,000 | |||||||||||||||||
Maximum amount of facility | 10,000,000 | 10,000,000 | ||||||||||||||||
Line of credit, outstanding amount | $ 120,700 | |||||||||||||||||
Account receivables | 1,117,100 | |||||||||||||||||
Proceeds from related party loan | 1,000,000 | |||||||||||||||||
Cash and cash equivalents | 52,900 | $ 129,600 | $ 36,600 | $ 145,100 | ||||||||||||||
Accumulated deficit | 18,032,700 | $ 17,395,600 | ||||||||||||||||
Working capital deficit | $ 12,249,000 | |||||||||||||||||
Catamaran Services, Inc. [Member] | ||||||||||||||||||
Proceeds from related party loan | $ 75,000 | $ 325,000 | $ 500,000 | $ 500,000 | $ 500,000 | $ 500,000 | ||||||||||||
Minimum [Member] | Catamaran Services, Inc. [Member] | ||||||||||||||||||
Additional interest rate above prime rate | 1.50% | |||||||||||||||||
Maximum [Member] | Catamaran Services, Inc. [Member] | ||||||||||||||||||
Maximum interest rate | 10.00% | |||||||||||||||||
Revolving Credit Facility [Member] | ||||||||||||||||||
Revolver facility, agreement amount, prior to amendment | 4,119,000 | $ 4,119,000 | ||||||||||||||||
Facility interest rate above prime lending rate | 1.00% | |||||||||||||||||
Revolving Credit Facility [Member] | After Amendment [Member] | ||||||||||||||||||
Revolver facility, agreement amount, as per second amendment | $ 2,500,000 | |||||||||||||||||
Machinery And Equipment Term Loan [Member] | ||||||||||||||||||
Tangible net worth - Actual | 1,934,000 | $ 1,934,000 | ||||||||||||||||
Facility interest rate above prime lending rate | 1.50% | |||||||||||||||||
Real Estate Term Loan [Member] | ||||||||||||||||||
Real estate, agreement amount | 2,947,000 | $ 2,947,000 | ||||||||||||||||
Facility interest rate above prime lending rate | 2.00% | |||||||||||||||||
Capital Expenditure Line Of Credit [Member] | ||||||||||||||||||
Capital expenditure, agreement amount | $ 1,000,000 | $ 1,000,000 | ||||||||||||||||
Facility interest rate above prime lending rate | 1.50% | |||||||||||||||||
RBS [Member] | ||||||||||||||||||
Credit facility, agreement amount, prior to amendment | $ 2,800,000 | |||||||||||||||||
Facility interest rate above prime lending rate | 1.38% | |||||||||||||||||
Maximum amount of facility | $ 2,800,000 | |||||||||||||||||
Percentage of prepayment against qualified accounts receivable | 80.00% | 80.00% | ||||||||||||||||
Percentage of service charge on each invoice discounted | 0.10% | 0.10% | ||||||||||||||||
Initial term of facility | 1 year | |||||||||||||||||
Line of credit, outstanding amount | $ 964,100 | |||||||||||||||||
Account receivables | $ 2,174,200 | |||||||||||||||||
RBS [Member] | GBP [Member] | ||||||||||||||||||
Credit facility, agreement amount, prior to amendment | £ | £ 1,750,000 | |||||||||||||||||
Maximum amount of facility | £ | £ 1,750,000 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 551,500 | $ 628,100 |
Beer-in-process | 339,300 | 312,200 |
Finished goods | 510,200 | 541,400 |
Merchandise | 64,000 | 65,300 |
Total | $ 1,465,000 | $ 1,547,000 |
Secured Lines of Credit (Detail
Secured Lines of Credit (Details Narrative) | Apr. 26, 2005USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Jun. 23, 2011USD ($) | Apr. 26, 2005GBP (£) |
Line of credit, outstanding amount | $ 120,700 | ||||
Account receivables | 1,117,100 | ||||
Inventories | $ 1,465,000 | $ 1,547,000 | |||
Maximum amount of facility | $ 10,000,000 | ||||
MB Financial Bank [Member] | |||||
Facility interest rate above prime lending rate | 3.00% | ||||
Line of credit, outstanding amount | $ 120,700 | ||||
Account receivables | 1,117,100 | ||||
Inventories | $ 1,375,000 | ||||
Facility expiration date | Jun. 23, 2016 | ||||
RBS [Member] | |||||
Facility interest rate above prime lending rate | 1.38% | ||||
Line of credit, outstanding amount | $ 964,100 | ||||
Account receivables | $ 2,174,200 | ||||
Maximum amount of facility | $ 2,800,000 | ||||
Initial term of facility | 1 year | ||||
Percentage of prepayment against qualified accounts receivable | 80.00% | 80.00% | |||
Percentage of service charge on each invoice discounted | 0.10% | 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] - USD ($) | Mar. 30, 2016 | Mar. 14, 2016 | Jan. 30, 2016 | Feb. 05, 2015 | Apr. 24, 2014 | Jan. 22, 2014 | Mar. 31, 2016 |
Note payable to related party | $ 2,545,300 | ||||||
Interest accrued | 145,300 | ||||||
Proceeds from related party loan | $ 75,000 | $ 325,000 | $ 500,000 | $ 500,000 | $ 500,000 | $ 500,000 | |
Minimum [Member] | |||||||
Additional interest rate above prime rate | 1.50% | ||||||
Maximum [Member] | |||||||
Maximum interest rate | 10.00% |
Secured Notes Payable - Summary
Secured Notes Payable - Summary of Long-Term Debt (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Long term debt, total | $ 3,244,900 | $ 3,378,600 |
Less current maturities | $ 3,244,900 | $ 3,378,600 |
Long-term debt non-current | ||
MBFinancialBankNotes With 4% Prime Plus Interest Rate [Member] | ||
Long term debt, total | $ 2,239,400 | $ 2,276,200 |
MBFinancialBankNotes With 3.5% Prime Plus Interest Rate [Member] | ||
Long term debt, total | $ 1,005,500 | $ 1,102,400 |
Secured Notes Payable - Summa38
Secured Notes Payable - Summary of Long-Term Debt (Details) (Parenthetical) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
MBFinancialBankNotes With 4% Prime Plus Interest Rate [Member] | ||
Loans payable in monthly installments | $ 12,300 | $ 12,300 |
Loans payable, interest rate above prime rate | 4.00% | 4.00% |
Balloon payment of loans | $ 2,202,500 | $ 2,202,500 |
Debt instrument maturity date | Jun. 30, 2016 | Jun. 30, 2016 |
MBFinancialBankNotes With 3.5% Prime Plus Interest Rate [Member] | ||
Loans payable in monthly installments | $ 32,300 | $ 32,300 |
Loans payable, interest rate above prime rate | 3.50% | 3.50% |
Balloon payment of loans | $ 908,700 | $ 908,700 |
Debt instrument maturity date | Jun. 30, 2016 | Jun. 30, 2016 |
Long-Term Debt - Related Part39
Long-Term Debt - Related Party (Details Narrative) - HUK [Member] - GBP [Member] | Oct. 09, 2013GBP (£) |
Secured debt | £ 1,000,000 |
Repayment of secured loan by twelve equal quarterly installments | £ 83,333 |
Interest rate above Prime Rate | 5.00% |
Long-Term Debt - Related Part40
Long-Term Debt - Related Party - Schedule of Related Party Debt (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Less current maturities | $ 359,500 | $ 491,500 |
Loan from Heineken UK Limited Notes With 5% Prime Plus Interest Rate [Member] | ||
Long term debt, total | 359,500 | 491,500 |
Less current maturities | $ 359,500 | $ 491,500 |
Non-current loan payable |
Long-Term Debt - Related Part41
Long-Term Debt - Related Party - Schedule of Related Party Debt (Details) (Parenthetical) - Loan from Heineken UK Limited Notes With 5% Prime Plus Interest Rate [Member] - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Loans payable in quarterly installments | $ 137,900 | $ 137,900 |
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 ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Capital Lease Obligations [Abstract] | ||
Year Ending December 31, 2016 | $ 21,600 | |
Year Ending December 31, 2017 | 27,600 | |
Year Ending December 31, 2018 | 21,300 | |
Year Ending December 31, 2019 | 21,300 | |
Year Ending December 31, 2020 | 21,000 | |
Capital lease future minimum payment due, total | 112,800 | |
Less amounts representing interest | (17,700) | |
Present value of minimum lease payments | 95,100 | |
Less current maturities | 22,700 | $ 23,100 |
Non-current leases payable | $ 72,400 | $ 79,200 |
Subordinated Convertible Note43
Subordinated Convertible Notes Payable to Related Party (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Unsecured convertible notes | $ 3,704,000 | $ 3,680,100 |
Accrued interest | $ 1,788,600 | $ 1,764,700 |
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 following the end of the extension period but is precluded from doing so pursuant to a subordination agreement with Lender. The loans from Lender to which the UBA notes are subordinated mature in June 2016. |
Severance Payable (Details Narr
Severance Payable (Details Narrative) | 3 Months Ended |
Mar. 31, 2016USD ($)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 | $ | $ 813,800 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Demanded payment in legal dispute | $ 500,000 |
Related-Party Transactions (Det
Related-Party Transactions (Details Narrative) | Mar. 31, 2016 |
Related Party Transactions [Abstract] | |
Percentage of ownership interest | 25.00% |
Related-Party Transactions - Sc
Related-Party Transactions - Schedule of Related-Party Transactions (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
HUK [Member] | ||
Purchases from related party | $ 2,600,400 | $ 2,404,600 |
Expenses reimbursement to related party | 216,200 | 208,500 |
Accounts payable and accrued liability | 1,661,500 | 1,669,400 |
UBA & Catamaran Notes [Member] | ||
Interest expenses associated with related party notes | 49,600 | 37,700 |
Notes payable including accrued interest | 3,704,000 | 3,680,100 |
Borrowing From Catamaran [Member] | ||
Borrowing from Catamaran | 400,000 | 500,000 |
Catamaran Notes [Member] | ||
Notes payable including accrued interest | $ 2,545,300 | $ 2,119,600 |
Segment Information (Details Na
Segment Information (Details Narrative) | 3 Months Ended |
Mar. 31, 2016Segment | |
Segment Reporting [Abstract] | |
Number of segments | 2 |
Segment Information - Schedule
Segment Information - Schedule of Segment Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Net Sales | $ 6,911,000 | $ 6,694,100 |
Operating Income (Loss) | (497,700) | (518,900) |
Identifiable Assets | 16,099,900 | 17,558,000 |
Depreciation & Amortization | 283,600 | 284,700 |
Capital Expenditures | 82,200 | 70,800 |
North American Territory [Member] | ||
Net Sales | 2,702,400 | 2,373,700 |
Operating Income (Loss) | (482,100) | (581,000) |
Identifiable Assets | 12,162,800 | 13,398,300 |
Depreciation & Amortization | $ 169,700 | $ 168,700 |
Capital Expenditures | ||
Foreign Territory [Member] | ||
Net Sales | $ 4,208,600 | $ 4,320,400 |
Operating Income (Loss) | (15,600) | 62,100 |
Identifiable Assets | 3,937,100 | 4,159,700 |
Depreciation & Amortization | 113,900 | 116,000 |
Capital Expenditures | $ 82,200 | $ 70,800 |
Unrestricted Net Assets (Detail
Unrestricted Net Assets (Details Narrative) | Mar. 31, 2016USD ($) |
Unrestricted Net Assets Details Narrative | |
Undistributed losses of UBIUK | $ 361,800 |
Minimum Retained Earning required for distributions and other payments to MBC from KBEL | $ 1,431,000 |
Unrestricted Net Assets - Conde
Unrestricted Net Assets - Condensed Balance Sheets of US Operations (Details) - MBC and Releta [Member] - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Cash and cash equivalents | $ 50,300 | $ 61,300 |
Accounts receivable, net | 1,117,100 | 1,121,300 |
Inventories | 1,375,000 | 1,490,100 |
Other current assets | 104,900 | 199,800 |
Total current assets | 2,647,300 | 2,872,500 |
Investment in subsidiary | 1,225,000 | 1,225,000 |
Property and equipment | 9,220,100 | 9,378,500 |
Intercompany receivable | 272,600 | 284,000 |
Other assets | 295,400 | 175,800 |
Total assets | 13,660,400 | 13,935,800 |
Line of credit | 120,700 | 453,100 |
Accounts payable | 2,692,200 | 2,640,400 |
Accrued liabilities | 1,293,800 | 1,021,000 |
Note payable to related party | 2,545,300 | 2,119,600 |
Subordinated convertible notes to related party | 3,704,000 | 3,680,100 |
Current maturities of debt, leases and severance | 3,496,600 | 3,505,900 |
Total current liabilities | 13,852,600 | 13,420,100 |
Long-term capital leases | 12,600 | 14,000 |
Severance payable | 569,700 | 678,400 |
Total liabilities | 14,434,900 | 14,112,500 |
Common stock | 15,100,300 | 15,100,300 |
Preferred stock | 227,600 | 227,600 |
Accumulated deficit | (16,102,400) | (15,504,600) |
Total stockholders' deficit | (774,500) | (176,700) |
Total liabilities and stockholders' deficit | $ 13,660,400 | $ 13,935,800 |
Unrestricted Net Assets - Con52
Unrestricted Net Assets - Condensed Statement of Operations of US Operations (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Unrestricted Net Assets - Condensed Statement Of Operations Of Us Operations Details | ||
Net sales | $ 2,592,300 | $ 2,373,700 |
Cost of goods sold | 2,225,100 | 2,122,600 |
Selling, marketing, and retail expenses | 291,500 | 353,400 |
General and administrative expenses | 559,500 | 480,100 |
Loss from operations | (483,800) | (582,400) |
Other (income) | (3,700) | (3,100) |
Interest expense | $ 117,700 | 123,000 |
Provision for taxes | 3,800 | |
Net loss | $ (597,800) | $ (706,100) |
Unrestricted Net Assets - Con53
Unrestricted Net Assets - Condensed Statement of Cash Flows of US Operations (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Unrestricted Net Assets - Condensed Statement Of Operations Of Us Operations Details | ||
Cash flows from operating activities | $ 45,100 | $ (269,200) |
Purchase of property and equipment | ||
Net borrowing (repayment) on line of credit | $ (332,400) | $ (90,200) |
Borrowing on note payable | 400,000 | 500,000 |
Repayment of long term debt | (133,700) | (133,700) |
Payment on obligations under capital leases | (1,400) | (1,300) |
Net change in payable to UBIUK | 11,400 | (30,800) |
Decrease in cash | (11,000) | (25,200) |
Cash, beginning of period | 61,300 | 61,500 |
Cash, end of period | $ 50,300 | $ 36,300 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | Apr. 12, 2016NumberSegment | Mar. 31, 2016NumberSegment |
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 |