MAIL STOP 3651
July 22, 2005
Mr. Brian Power
President
Golden West Brewing Company, Inc.
945 West 2nd Street
Chico, CA 95928
Re: Golden West Brewing Company, Inc.
Registration Statement on Form SB-2
File No. 333-121351
Amendment No. 2 Filed June 21, 2005
Dear Mr. Power,
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. We note your disclosure that the only items remaining before
you
may close the acquisition of Butte Creek Brewing are the approvals
from the Alcohol and Tobacco Tax and Trade Bureau ("TTB") and the
California Department of Alcoholic Beverage Control ("California
ABC"). We specifically note the statement "We believe that we
have
fulfilled all of the requirements for this regulatory approval and
that it will be obtained within the next 60 days," which was also
present in your filings of February 2, 2005 and December 16, 2004.
A
review of the California ABC website appears to indicate that you
had
not even applied for the permit from that agency until April 15,
2005, approximately two and one-half months after you made the
statement for the second time that you had "fulfilled all of the
requirements." Please explain the basis for your disclosure that
you
had "fulfilled all of the requirements for this regulatory
approval"
on two separate occasions prior to filing your application with
the
California ABC.
Furthermore, please explain the basis for each time you made the
statement that regulatory approval would be "obtained within the
next
60 days" when it appears that you had not even submitted an
application to the California ABC at the time of filing your
registration statement or amendment number one thereto.
2. Please provide the staff with executed, dated copies of all
applications, including supplemental materials and proofs of
filing
and receipt, made to the TTB and California ABC.
3. Please update your prospectus to reflect the status of the
Butte
Creek Brewing acquisition. We note your disclosure that it is to
close no later than July 31, 2005.
4. We reissue comment two from our letter of March 3, 2005. Thank
you for providing red-lined versions of your amendment with the
courtesy copies sent to this office but, for each amendment,
please
file both a clean copy of the amendment and a red-lined version on
EDGAR.
5. We reissue comment four from our letter of March 3, 2005: We
generally are unclear how the escrow will operate given the
potential
delay in the acquisition of Butte Creek Brewing. In this regard,
please explain how you will be able to determine that the
conditions
for your offering are met, if the acquisition has not been
completed.
We note your counsel`s response that "the offering will not be
completed, meaning the funds released from escrow, until and
unless
the acquisition is consummated. We believe that this is clearly
and
adequately discussed throughout." However, pursuant to the terms
of
the Fund Escrow Agreement attached as exhibit 10.2, which are
unclear
in part due to section cross-references that lead to non-existent
clauses, it would appear that the acquisition may be consummated
after the offering has been completed. Please see sections four
through six of such agreement.
Prospectus Cover Page
6. Please remove the reference to the minimum being on an "all-or-
none" basis. The offering appears to be a best efforts offering
on a
minimum-maximum basis and the reference to "all-or-none" could be
confusing. Revise the disclosure on page 54 as well.
7. We note the disclosure on the cover page only states that
proceeds
from the first 400,000 shares will be deposited into the escrow
account. Please clarify what will happen to any shares sold above
the initial 400,000 shares, if as you indicated supplementally,
the
funds from the offering will remain in escrow until an acquisition
has been consummated. We may have further comment.
8. We note the statement that "we will only close the minimum
offering if we have also completed our acquisition of Butte Creek
Brewing Company." Please clarify, how this relates to the
statement
that the offering will be open until all the shares are sold or 90
days after effectiveness, whichever occurs sooner. Does this mean
that if the acquisition has not occurred within 90 days of
effectiveness (subject to the 90 day extension) the offering will
terminate and the proceeds will be promptly returned to investors?
We may have further comment.
Summary, page two
9. We reissue comment six from our letter of March 3, 2005.
Please
update your disclosure to reflect the current status of all
regulatory approvals, including the application date for each
approval. Additionally, please disclose what effect the
delinquent
fees owed to the TTB and California ABC may have on Golden West`s
applications to such entities. We note your counsel`s response:
"Revised as requested" and your disclosure with respect to
obtaining
the approval of the TTB. However, we see no changes in your
amended
registration statement, on page one or any other, addressing the
effect of delinquent fees owed to the California ABC. We may have
further comment.
Pro Forma Balance Sheet Data, page six
10. We note your response to comment 11 from our letter of March
3,
2005. However, we do not believe it is appropriate to reflect the
payment of liabilities in the pro forma balance sheet data.
Please
revise the "adjusted" columns of your disclosure accordingly to
reflect only the receipt of the net proceeds from the offering,
and
delete footnote 3 to this table.
Risk Factors, page 6
11. We partially reissue comment 16 from our letter of March 3,
2005.
To the extent possible, please avoid the generic conclusion you
make
in several of your risk factors that the risk discussed would have
an
adverse affect on your business or operations or that your
operations
may suffer. Instead, please replace this language with specific
disclosure of how your financial condition would be affected as
well
as putting the risk in context by making the magnitude of the risk
clear. We note your counsel`s response: "Revised as requested
throughout but do not see any changes made to the majority of the
risk factors noted in our previous comment.
12. We reissue comment 14 from our letter of March 3, 2005 as it
relates to risk factor two. Since the shares will be held in
escrow
and returned to investors no later than 180 days from the
commencement of the offering, we are unable to see the material
risk
to investors in risk factor three. The entire purpose of placing
funds in escrow is to protect the investors` interest during that
period in case the minimum is not reached and in case the
acquisition
does not occur. Please consider removing.
13. Clarify the risk to the company and/or investors in the
subheading to risk factor 5, 13, 14, 18 and 25.
14. The discussion in risk factor 13 regarding the Mt. Shasta Ale
should be highlighted in the risk factor subheading.
Use of Proceeds, page 15
15. Please disclose all debt to be paid from the proceeds of this
offering. We note the allocation of $200,000 for debt if the
maximum
is raised; yet you have only allocated $100,000.
16. We reissue comment 21 from our letter of March 3, 2005.
Please
provide more specificity concerning each of the line items within
the
category of Working Capital. Your attention is directed to Item
504
of Regulation S-B. Please break down the specific allocation of
the
working capital.
17. Please clarify whether any of the amount allocated to working
capital, such as employee salaries and benefits, will be paid to
officers and directors. Disclose the name of each officer or
director and the amount.
18. We reissue comment 23 from our letter of March 3, 2005. We
note
the third risk factor, which states that changing business
conditions
may cause management to change the use of proceeds in this
offering,
that management has broad discretion over the use of proceeds, and
that you cannot assure investors that the uses will not vary
substantially from your current intentions. We further note
similar
disclosure in this section. You may reallocate your use of
proceeds
if you clearly discuss the circumstances that would require
management to alter the use of proceeds from this offering and
discuss the alternatives to the currently stated uses. Please
refer
to Instruction 7 to Item 504 of Regulation S-K for guidance.
Pro Forma Capitalization, page 18
19. We note your response to prior comment 24. Please revise your
disclosure so that the numbers in the unadjusted column are
consistent with the amounts shown in final column in the pro forma
financial statements, which reflects the assumed acquisition of
Butte
Creek. Similarly, it appears that the 1,620,000 shares listed as
outstanding in the description of common stock should be
1,820,000,
as such amount is based on the assumption that the acquisition of
Butte Creek had occurred. Please revise your disclosure
accordingly.
Dilution, page 19
20. We note the disclosure that you had a net tangible book value
deficit of $360,689 or $.20 per share. Please explain how you
calculated the net tangible book value after the offering, based
upon
the book value deficit before the offering.
Management`s Discussion and Analysis, page 25
21. We note your response to comments 26-32 from our letter of
March
3, 2005. Please expand your disclosures regarding the increase in
operating expenses for the year ended December 31, 2004 compared
to
the prior year. In particular, we note a significant increase in
other operating expenses from $96,777 to $272,450.
22. We note the statement that you intend to increase production,
increase sales and reduce operating losses. Clearly disclose
after
this statement that investors should not place undue certainty on
projections and that there is no assurance you will be able to
achieve these goals.
23. We note the disclosure that you owe delinquent taxes to
several
Federal and State agencies. Please name the agencies and state
the
amount owed. Discuss the impact this may have on your business
and
plan of operations. Add a risk factor.
24. We note the statement that you are facing a shortage of hops
this
season. Clarify the period covered by the term "season." Discuss
the impact this could have on your business and plan of
operations.
Also, add a risk factor.
25. Explain in greater detail the lack of inventory control and
the
impact this could have on your business and operations.
26. Please provide the basis for your statement on page 25 that
"sales will increase with the increased market penetration of
existing brands and the creation of new brands and products."
27. We reissue comment 29 from our letter of March 3, 2005.
Please
disclose the cash balance as of the most recent practicable date
and
disclose how long you can currently satisfy your cash
requirements.
28. We reissue comment 30 from our letter of March 3, 2005.
Please
disclose the material terms, such as the term of the lines of
credit
and any covenants, conditions or other material provisions.
Lastly,
disclose whether you are in compliance with all covenants,
conditions
and provisions.
29. We reissue comment 31 from our letter of March 3, 2005.
Please
disclose the material terms of the notes payable and file as an
exhibit. Name the financial institutions.
Business, page 32
Background and Overview
30. We reissue comment 33 from our letter of March 3, 2005. We do
not understand your counsel`s response to comment 45 from our
letter
of January 14, 2005 that "there exists no affiliation or other
relationship between Golden West, its officers, directors or
affiliates and Butte Creek, its officers, directors, or
affiliates."
At a minimum, it would appear that relationships exist by way of
the
Mt. Shasta Ale trademark. Please include affirmative disclosure
with
respect to any affiliation or relationship between Golden West,
its
officers, directors, or affiliates and Butte Creek, its officers,
directors, or affiliates. We note your counsel`s response:
"Revised
as requested. See page 33." We can find no such disclosure on
page
33, or any other, in your revised prospectus.
31. We note you plan to rely upon section 4(2) as an exemption for
the issuance of 200,000 shares of common stock in connection with
the
acquisition of Butte Creek. Please provide us with the facts
supporting the reliance upon the exemption. Discuss the number of
shareholders to receive shares in the acquisition, the
sophistication
of the investors and their access to information. We may have
further comment.
Ingredients and Raw Materials
32. We partially reissue comment 37 from our letter of March 3,
2005.
Material agreements with principal suppliers should be discussed
in
the prospectus and filed as exhibits. If you do not have
agreements
with key suppliers, disclose and state the risk to the company.
Lastly, if any of your material suppliers are affiliated vendors,
disclose and state the affiliation.
Marketing
33. Please update your disclosure in this section with respect to
sales.
Dependence on Major Customers
34. We reissue comment 38 from our letter of March 3, 2005.
Disclose
whether you have arrangements with major customers. If so,
disclose
the major terms and file as exhibits. If not, discuss the risk to
the company.
Trademarks and Intellectual Property
35. We reissue comment 40 from our letter of March 3, 2005. We
note
your filing of the Trademark Assignment Agreement as an exhibit to
the Registration Statement. Please file a final, dated (complete
with month and day) and executed copy of the agreement. We may
have
further comment. Disclose whether any consideration was paid as
part
of the assignment. Contrary to your counsel`s response letter, a
conformed copy of the amendment was not filed. Please file
executed,
final, and dated copies of each document.
Competition
36. We note your supplemental response to prior comment 43 that
you
do not feel your current relationship with Bison Brewing is
material.
Please advise us as to the percent of revenues generated by this
contract. Also, explain why you feel this relationship is not
material. We may have further comment.
Certain Relationships and Related Transactions, page 50
37. We reissue comment 45 from our letter of March 3, 2005.
Please
disclose the exact date of the issuance of 400,000 shares to the
five
investors listed in the first paragraph of this section.
Additionally, please reconcile such disclosure with the first
paragraph of the section entitled "Recent Sales of Unregistered
Securities" which appears to contradict the disclosure in this
section. We note your counsel`s response: "Revised as requested"
but see no such revisions.
38. We reissue comment 46 from our letter of March 3, 2005.
Please
reconcile the individual who guaranteed the line of credit with
disclosure in the MD&A section.
39. Please disclose each beneficial owner of each entity listed in
the first paragraph of this section. We may have further comment.
The Offering, page 54
40. We reissue comment 50 from our letter of March 3, 2005.
Please
provide an analysis as to how each officer and director who will
be
participating in this offering, other than John C. Power, meets
the
requirements of Rule 3a4-1. Supplementally please provide the
staff
with your detailed analysis as to why Brian Power or J. Andrew
Moorer
should not be considered associated persons of broker-dealers due
to
their disclosed business activities. We may have further comment.
41. Additionally, we note your disclosure that John C. Power is
not
eligible to rely upon Rule 3a4-1 safe harbor from registration as
a
broker-dealer. We also note your disclosure that Golden West will
rely primarily on the efforts of John C. Power in offering its
securities to the public as well as your counsel`s responses on
February 2, 2005 and June 21, 2005. As your counsel correctly
points
out in his letter of February 2, the Exchange Act defines a broker
as
a person engaged in the business of effecting securities
transactions
for the account of others. Finally, based on your counsel`s
letter
of June 21, 2005, it would appear that John C. Power`s statutory
disqualification prevents his satisfaction of all the requirements
of
Rule 3a4-1.
Please disclose the exemption from registration as a broker-dealer
that Mr. Power is to rely upon as we note that it does not appear
that he is currently registered as a broker-dealer.
42. We note the statement that if you are unable to reach the
minimum, all funds will be returned to subscribers within 10
business
days after the end of the offering. This does not appear
consistent
with Rule 10b-9 under the Exchange Act, which requires the
"prompt"
return of subscriptions upon termination of the offering.
43. We reissue comment 48 from our letter of March 3, 2005.
Clarify
in the third bulleted point that all funds will be "promptly"
returned to investors.
Golden West Brewing Company, Inc. Financial Statements, page F-3
44. With regards to the restatement of the financial statements
for
the treatment of the investment in Butte Creek, please describe
the
correction of the error in a note to the financial statements as
required by paragraph 37 of APB 20. Quantify the effects on the
financial statements presented, including the restatement of the
income statement for the period ending December 31, 2003.
45. The audit report of Schumacher & Associates on page F-3 only
refers to the financial statements for the period from inception
to
December 31, 2004. Please provide an audit report that includes
in
its scope all financial statements required by Item 310 of
Regulation
S-B. Also, please direct your independent accountant to consider
referencing the restatement of the 2003 financial statements in
the
auditor`s report, as indicated by AICPA Auditing Standards Section
561.06.a.
Note 5 - Deferred Offering Costs, page F-14
46. We note that deferred offering costs of $90,013 are reflected
on
the balance sheet at March 31, 2005, while the registration
statement
assumes estimated offering expenses of $50,000. Please revise the
registration statement as necessary to ensure that the estimated
offering expenses are consistent with the amount that is projected
to
be incurred.
Note 9 - Agreements, page F-16
47. We note the last paragraph of your disclosure, in particular
the
second to last sentence regarding the closing of the transaction.
Please tell us how you intend to account for the transaction such
that it would have a retroactive impact on the financial
statements,
and your basis in the accounting literature for the proposed
treatment.
Part II
Exhibits
48. We reissue comment 55 from our letter of March 3, 2005.
Please
file executed and dated copies of the initial Asset Purchase and
Sale
Agreement, the Amendment thereto, the Fund Escrow Agreement, and
the
Assignment Agreement with your next amendment.
49. We reissue comment 56 from our letter of March 3, 2005.
Please
file as an exhibit the agreement with certain officers and
directors
who have agreed not to sell or otherwise dispose of their shares
for
a period of six months from the date of the registration
statement.
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Carlton Tartar at (202) 551-3387 if you have
questions regarding comments on the financial statements and
related
matters. Questions on other disclosure issues may be directed to
John Zitko at (202) 551-3399, or Pamela Howell, who supervised the
review of your filing, at (202) 551-3357.
Sincerely,
John Reynolds
Assistant Director
cc: Clifford L. Neuman
Fax: (303) 449-1045
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Brian Power
Golden West Brewing Company, Inc.
July 22, 2005
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