UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

(Mark One)

|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended March 31, 2001

| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to
------------ ------------

Commission file number 1-13636

Mendocino Brewing Company, Inc.
(Exact name of small business issuer as specified in its charter)

California 68-0318293
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

13351 Highway 101 South, Hopland, California 95449
(Address of principal executive offices)

(707) 744-1015
(Issuer's telephone number)

Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes /X/ No / /

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares of the issuer's common stock outstanding as of March 31,
2001 is 5,580,498.

PART I

Item 1. Financial Statements.

MENDOCINO BREWING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 2001
(Unaudited)

ASSETS
Current Assets
Accounts receivable $ 1,247,100
Inventories 1,252,700
Prepaid expenses 71,700
Deferred income taxes 48,100
-----------
Total Current Assets: 2,619,600
-----------
Property and Equipment 13,818,000
-----------
Other Assets
Deferred Income Taxes 2,844,000
Deposits and other Assets 579,000
Intangibles net of amortization 107,600
-----------
Total Other Assets: 3,530,600
-----------
Total Assets: $19,968,200
===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Disbursements in excess of deposits $ 76,500
Accounts payable 2,352,200
Accrued liabilities 53,600
Accrued wages and related expense 168,300
Income Taxes Payable 1,000
Current maturities of obligation under capital lease 306,800
Current maturities of obligation under long-term debt 429,800
-----------
Total Current Liabilities: 3,388,200

LINE OF CREDIT 1,288,600
LONG TERM DEBT, less current maturities 3,177,200
OBLIGATIONS UNDER CAPITAL LEASE, less current maturities 1,053,800
NOTES TO RELATED PARTY 1,652,000
-----------
Total Liabilities: 10,559,800
-----------
Stockholders' Equity

Preferred stock, Series A, no par value, with aggregate
liquidation preference of $227,600; 227,600 shares
authorized, issued and outstanding 227,600

Common stock, no par value: 20,000,000 shares authorized,
5,580,498 shares issued and outstanding 13,875,900

Accumulated deficit (4,695,100)
-----------
Total Stockholders' Equity 9,408,400
-----------

Total Liabilities and Stockholders' Equity: $19,968,200
===========

The accompanying notes are an integral part of these financial statements.

MENDOCINO BREWING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

------------------------------
THREE MONTHS ENDED
March 31
------------------------------
2001 2000
---- ----
Sales $ 2,543,200 $ 2,070,200
Less excise taxes 148,200 121,600
----------- -----------
Net Sales 2,395,000 1,948,600
Cost of goods sold 1,590,600 1,418,900
----------- -----------
Gross Profit 804,400 529,700
----------- -----------
Operating expenses
Retail operating 109,400 97,900
Marketing 441,300 322,400
General and administrative 470,900 344,200
----------- -----------
1,021,600 764,500
----------- -----------
Loss from operations (217,200) (234,800)
----------- -----------
Other income (expense)
Other income (700) 13,800
Interest expense (220,900) (231,800)
---------- -----------
(221,600) (218,000)
---------- -----------
Loss before income taxes (438,800) (452,800)
BENEFIT FROM INCOME TAXES 76,000 --
---------- -----------
Net Loss $ (362,800) $ (452,800)
========== ===========
Loss per share $ (0.07) $ (0.08)
=========== ===========
Weighted average common shares outstanding 5,580,498 5,530,117
=========== ===========

The accompanying notes are an integral part of these financial statements.

MENDOCINO BREWING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

------------------------------
THREE MONTHS ENDED
March 31
------------------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (362,800) $ (452,800)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and amortization 199,800 196,400
Deferred income taxes (76,000) --
Changes in:
Accounts receivable (74,100) (183,000)
Inventories (49,400) 162,300
Prepaid expenses and taxes 44,900 6,900
Deposits and other assets (225.900) 45,400
Accounts payable 410,000 72,300
Accrued wages and related expenses 3,700 (26,800)
Accrued liabilities (139,900) 73,400
----------- -----------
Net cash from operating activities: (269,700) (105,900)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, equipment, and
leasehold improvements (16,700) (5,800)
Increase in intangibles (62,700)
----------- -----------
Net cash from investing activities: (16,700) (68,500)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from line of credit 7,000 98,700
Principal payments on long-term debt (81,900) (86,800)
Borrowings on related party debt 356,400 310,000
Payments on obligation under long term lease (69,900) (86,000)
Disbursements in excess of deposits 74,800 (9,600)
----------- -----------
Net cash from financing activities: 286,400 226,300
----------- -----------
INCREASE IN CASH -- 51,900
----------- -----------
CASH, beginning of period -- --
----------- -----------
CASH, end of period $ -- $ 51,900
=========== ===========

Supplemental cash flow information includes
the following:
Cash paid during the period for:
Interest $ 187,300 $ 196,100
----------- -----------

The accompanying notes are an integral part of these financial statements.

MENDOCINO BREWING COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the year
ended December 31, 2000. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2001, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2001.

Note 2 - Line of Credit

The CIT Group/Credit Finance, Inc. has provided the Company with a $3,000,000
maximum line of credit with an advance rate of 80% of the Company's qualified
accounts receivable and 60% of the company's inventory at an interest rate equal
to the prime rate as published by Chase Manhattan Bank of New York plus 2.25%
payable monthly, maturing September 23, 2002. The line of credit is secured by
all accounts, general intangibles, inventory, and equipment of the Company
except for the specific equipment and fixtures of the Company leased from FINOVA
Capital Corporation, as well as by a second deed of trust on the Company's Ukiah
land improvements. $1,484,000 of the line of credit was advanced to the Company
as an initial term loan, which is repayable in sixty consecutive monthly
installments of principal, each in the amount of $24,700. The Company commenced
repayment of the term loan in March 1999 and approximately $890,400 of the term
loan was outstanding as of March 31, 2001. On November 20, 2000, the CIT Group
had agreed to increase the maximum limit of the line of credit by $100,000,
subject to the condition that the increased limit has to be paid back in monthly
installments of $11,111 during the period from April 1, 2001 through December 1,
2001. Based on the Company's current level of accounts receivable and inventory,
the Company has drawn the maximum amount permitted under the line of credit. As
of March 31, 2001, the total amount outstanding on the line of credit was
approximately $2,278,944

Note 3 - Notes Payable

The Company has a note outstanding in the principal amount of $2,700,000, with
interest at Treasury Constant Maturity Index for five year treasuries plus
4.17%, currently 10.00%. The note requires monthly payments of principal and
interest of $24,400. The note matures in December 2012 with a balloon payment
and is secured by real property located in Ukiah, California.

The Company has issued convertible notes in favor of United Breweries of
America, Inc. ("UBA") in the amount of approximately $1,652,000 as of March 31,
2001. The notes bear interest at the prime rate plus 1.5%, subject to a maximum
of 10% per annum, and mature 18 months from the date of the advance. The
advances are unsecured and the notes mature through August 2002. The notes are
convertible at the option of UBA, to common stock at $1.50 per share upon
maturity. Interest accrued on the notes as of March 31, 2001, is approximately
$137,800.

Note 4 - Income Taxes

The benefit from income taxes is due to the expected future benefit of carrying
forward net operating losses and other timing differences. The Company's income
tax benefit for the quarter is less than the Company's expected tax rate of 40%.
The Company anticipates that the first quarter operating loss will decrease by
income earned in subsequent quarters. The Company has recorded the benefit for
income taxes based on the estimated year-end effective tax rate.

As of March 31, 2001, the Company has available for carry-forward Federal,
California and New York net operating losses. The losses will expire as follows:

Net Operating Loss
------------------------------------------------
Date of Expiration Federal California New York
------------------ ------- ---------- --------
2001 $ - $ 87,500 $ -
2002 - 761,200 -
2003 - 961,200 -
2004 - 694,700 -
2010 - 276,400 -
2012 1,802,300 - 251,500
2018 2,758,800 - 385,000
2019 2,153,100 - 290,300
2020 991,500 - 137,900
---------- ---------- ----------
$7,705,700 $2,781,000 $1,064,700
========== ========== ==========

The Company also has $35,000 of California Manufactures Investment Tax Credits
that can be carried forward to offset future taxes until they begin to expire in
2007. The benefit from these loss carry-forwards and credits has been reported
as a deferred tax asset.

The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns, including the future benefit of its carry-forwards.
Temporary differences and carry-forwards which give rise to deferred tax assets
and liabilities on March 31, 2001 are as follows:

Accounts receivables allowance $ 6,400
Benefits from net operating loss carryforwards 3,037,500
Inventory 6,000
Accruals 38,700
Depreciation and amortization (111,200)
Other (85,300)

Note 5 -- Related party Transactions

On November 3, 2000, the company entered into a Share Purchase Agreement with
Inversiones Mirabel, S.A. and Golden Eagle Trust, both of which are entities
related to the Company's Chairman of the Board and Chief Executive Officer, Dr.
Vijay Mallya, and its principal shareholder, UBA. Under the terms of the Share
Purchase Agreement, the Company will acquire all of the issued and outstanding
shares of United Breweries International (UK) Limited ("UBI") which is the
parent company of UBSN Ltd. In the transaction, the Company has offered to issue
approximately 5,500,000 shares of the Company's common stock in exchange for the
shares of UBI. Upon the closing of the transaction, UBI will become a
wholly-owned subsidiary of the Company. The closing of the transaction is
expected to occur in summer of 2001, or as soon thereafter as the various
conditions to closing have been satisfied or waived. UBI owns the distribution
rights to the "Kingfisher" brand of beer in the United States. If the
transaction is consummated, because UBI will be a wholly-owned subsidiary of the
Company, the Company will also have the ability to brew "Kingfisher" brand beer
in the United States, for distribution primarily in the United States.

The closing of the transaction and the obligation of the Company to proceed with
the acquisition of the shares of UBI are subject to the satisfaction or waiver
of certain conditions including the approval of the transaction by the
shareholders of the Company.

The closing of the acquisition of UBI was originally scheduled to occur in the
year 2000. However, the financial statements first provided to the Company by
UBI and UBSN Ltd. were prepared in accordance with accounting standards as
generally applied in the United Kingdom. It has taken longer than expected to
conduct all of the required audits of UBI and UBSN Ltd. so that their financial
statements are (i) consistent with United States accounting standards, and (ii)
as required by the U.S. Securities and Exchange Commission. The Company
anticipates that, if approved by the Company's shareholders, the closing of the
proposed acquisition will occur in the summer of 2001.

The transaction described above is a related party transaction because the
corporation that owns all of the shares of UBI, Inversiones Mirabel, is held by
Golden Eagle Trust, which is controlled by fiduciaries who may exercise
discretion in favor of Dr. Vijay Mallya, who is the Chairman and Chief Executive
Officer of the Company. Dr. Mallya is also a member of the board of directors of
UBSN Ltd. Golden Eagle Trust, through an intermediary, also owns a controlling
interest in the Company's largest shareholder, UBA.

Additional information about this transaction is contained in the Company's 2001
Proxy Statement, which was filed with the Commission on May 11, 2001, and such
information is incorporated herein by reference.

Note 6 - Loss per Common Share

Loss per common share is computed using the weighted average number of the
Company's common shares outstanding. The Company reported a loss from operations
during the first quarter, therefore, a diluted earnings per share number is not
presented because the inclusion of common stock equivalents in the computation
would be antidilutive. Common stock equivalents associated with the Company's
convertible notes and stock options currently outstanding, which are exercisable
into 1,302,691 of common stock as of March 31, 2001, could potentially dilute
earnings per share in future years.

Note 7 - Inventory

Raw Materials $436,000
Beer-in-process 183,800
Finished Goods 605,900
Merchandise 27,000
-----------
$ 1,252,700
===========

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.

The following discussion and analysis should be read in conjunction with the
Financial Statements and the Notes thereto included as Item 1 of this Report.
The discussion of results and trends does not necessarily imply that these
results or trends will continue.

Forward-Looking Information

The Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Form 10-QSB contain forward-looking
information. The forward-looking information involves risks and uncertainties
that are based on current expectations, estimates and projections about the
Company's business, management's beliefs and assumptions made by management.
Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," and variations of such words and similar expressions are intended
to identify such forward-looking information. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking information due to numerous factors, including, but not limited
to, availability of financing for operations, successful performance of internal
operations, impact of competition, changes in distributor relationships or
performance and other risks detailed below as well as those discussed elsewhere
in this Form 10-QSB and from time to time in the Company's Securities and
Exchange Commission filings and reports. In addition, such statements could be
affected by general industry and market conditions and growth rates, and general
domestic economic conditions. Readers are cautioned not to place undue reliance
on these forward-looking statements, which are valid as of the date of this
filing.

Overview

During the first quarter, the Company prepared to introduce a new product to the
marketplace during April 2001. Black Eye Ale, a blend of two of the Company's
popular brands, Black Hawk Stout and Eye of the Hawk Select Ale, is now
available in 25 oz. bottles. The Company has also undertaken significant
preparation in order to make one of its existing beers, Blue Heron Pale Ale,
available for purchase in twelve-packs during the second quarter of 2001.

The Company installed a new labeling machine in the Ukiah plant during the first
quarter. The new machine is expected to improve on the Company's former labeling
procedure, thereby improving productivity. The Company also made preparations
for operations following its proposed acquisition of UBI by making the necessary
modifications to the layout of the Saratoga Springs facility in order to
accommodate the pasteurizer which is necessary for production of Kingfisher
Premium Lager Beer.

Sales during the first three months of 2001 increased to 12,610 barrels from
10,243 barrels in the first three months of 2000. This represents an increase of
23% over the first three months of 2000 (measured in barrels). Of the total
sales of 12,610 barrels, the sales out of the Ukiah facility amounted to 10,969
barrels and the sales out of the Saratoga Springs facility amounted to 1,641
barrels. The Company attributes a portion of the increase in sales to increased
demand in the Southern California market area.

The Company ended the quarter with a net loss of $362,800. Increased fixed costs
associated with the breweries, higher general and administrative expenses and
higher selling and marketing expenses contributed to the net loss of $362,800
for the quarter ended March 31, 2001. The loss from operations as a percentage
of net sales decreased from 12% for the first quarter of 2000 to 9% for the
first quarter of 2001.

On February 12, 2001, UBA and the Company amended the line of credit agreement
between them to increase the maximum amount of the line of credit available to
the Company from $1,200,000 to 1,600,000. As of March 31, 2001, the amount
outstanding under the line of credit from UBA is approximately $1,652,000,
including accrued interest of approximately $137,800.

Results of Operations

The following discussion sets forth information for the three-month periods
ending March 31, 2001 and 2000. This information has been derived from unaudited
interim financial statements of the Company contained elsewhere herein and
reflects, in management's opinion, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations for these periods. Results of operations for any interim period are
not necessarily indicative of results to be expected for the full fiscal year.

The following table sets forth, as a percentage of sales, certain items included
in the Company's Statements of Operations, as set forth above under "Financial
Statements," for the periods indicated:

--------------------------------
Three Months Ended
March 31
--------------------------------
2001 2000
Statements of Operations Data:

Sales 106.19% 106.24%

Excise taxes 6.19 6.24
---- ----

Net Sales 100.00 100.00

Cost of Goods Sold 66.41 72.82
----- -----

Gross Profit 33.59 27.18

Retail Operating Expense 4.57 5.02

Marketing Expense 18.43 16.55

General and Administrative Expenses 19.66 17.66
----- -----

Total Operating Expenses 42.66 39.23
----- -----

Loss from Operations (9.07) (12.05)

Other Income (0.03) 0.71

Interest expense (9.22) (11.90)
------ ------

Loss before income taxes (18.32) (23.24)

Benefit from income taxes 3.17 --
---- ------

Net Loss (15.15) (23.24)

Balance Sheet Data:

Cash $ - $ 51,900

Working Capital (768,600) (1,980,400)

Property and Equipment 13,818,000 14,538,000

Deposits and Other Assets 3,530,600 2,609,300

Total Assets 19,968,200 19,522,300

Long-term Debt 3,177,200 4,055,500

Obligation under capital lease 1,053,800 1,472,400

Total Liabilities 10,559,800 9,717,700

Shareholder's equity 9,408,400 9,804,600

Net Sales. Net sales for the first three months of 2001 were $2,395,000 compared
to $1,948,600 for the first three months of 2000, representing an increase of
22.9%. The sales volume increased to 12,610 barrels during the first quarter of
2001, from 10,243 barrels during the first quarter of 2000, representing an
increase of 23.11%. Management attributes the increased sales to improved
marketing strategies, including new point of sale materials and increased sales
personnel. The increase in overall net sales during the first quarter of 2001
was achieved mainly by higher wholesale shipments during the first quarter of
2001, which represented an increase of $464,400 over the wholesale shipments
during the first quarter of 2001. In view of the Company's focus on wholesale
beer sales, retail sales for the first quarter of 2001 increased only slightly,
by $8,600.

Cost of Goods Sold. Cost of goods sold as a percentage of net sales during the
first quarter of 2001 was 66.41%, as compared to 72.82% during the first quarter
of 2000, representing a decrease of 6.41%. As a percentage of net sales, during
the first quarter of 2001, labor costs decreased from 12.98% in 2000, to 10.83%
in 2001, depreciation decreased from 8.87% in 2000 to 7.24% in 2001, property
taxes decreased from 1.71% in 2000 to 1.38% in 2001, utilities increased from
4.30% in 2000 to 5.74% in 2001, wastewater increased from 0.25% in 2000 to 0.36%
in 2001, thereby contributing to the decrease of 2.56% of the cost of goods sold
as a percentage of net sales in the first quarter of 2001. Management attributes
the balance of the decrease to higher sales volumes thereby lowering the
combined per barrel production costs at the Ukiah and Ten Springs breweries.

Gross Profit. As a result of the higher net sales as explained above, gross
profit for the first quarter of 2001 increased to $804,400 from $529,700 for the
comparable period of 2000, representing an increase of 52%. As a percentage of
net sales, the gross profit during the first quarter of 2001 increased to 33.59%
from that of 27.18% for the corresponding period of 2000.

Operating Expenses. Operating expenses for the first quarter of 2001 were
$1,021,600, as compared to $764,500 for the first quarter of 2000, representing
an increase of 34%. Operating expenses consist of retail operating expenses,
marketing and distribution expenses, and general and administrative expenses. As
a percentage of net sales, operating expenses increased by 3.43%

Retail operating expenses for the first quarter of 2001 were $109,400,
representing an increase of $11,500 or 11.75%, from the first quarter of 2000.
As a percentage of net sales however, retail operating expenses decreased to
4.57%, as compared to 5.02% for the first three months of 2000. The increase in
retail operating expenses consisted of an increase of advertising costs by
$4,000, an increase in repair and maintenance of $1,300, an increase in kitchen
supplies of $1,900, and an increase of other net expenses of $700.

Marketing and distribution expenses for the first quarter of 2001 were $441,300,
representing an increase of $118,900 from the first quarter of 2000. As a
percentage of net sales, marketing and distribution expenses represented 18.43%
as compared to 16.55% during the first quarter of 2000. Marketing and sales
labor increased by $52,800 compared to the first quarter of 2000, because the
Company recently added sales personnel on both the east and west coasts.
Compared to the first quarter of 2000, freight increased by $9,200; license and
taxes increased by $3,000; media expenses decreased by $5,800; travel and
entertainment increased by $3,100; and a decrease in other net expenses of
$2,100. Because the Company developed new packaging and point of sale materials
for the launch of Black Eye Ale which took place in April of 2001, as compared
to the first quarter of 2000, sales promotions expenses increased by $48,700,
and point of sale expenses increased by $5,800.

General and administrative expenses were $470,900, representing an increase of
$126,700 from the first quarter of 2000. As a percentage of net sales, the
general and administrative expenses were 19.66% for the first quarter of 2001,
as compared to 17.66% for the first quarter of 2000. As compared to the first
quarter of 2000, labor increased by $66,200, travel and entertainment increased
by $5,000, auto expenses increased by $5,500, insurance expenses increased by
$2,600, license, permit and taxes increased by $8,900, utilities increased by
$5,300, telephone expenses increased by $7,000, supplies increased by $2,200,
legal and professional increased by $18,700, investor relations decreased by
$4,100, and an increase of other net expenses of $1,200.

Other Income (Expense). Other expenses for the first three months of 2001 were
$221,600, representing an increase of $3,600 when compared to the first quarter
of 2000. The increase of $3,600 is due to decrease in interest expense of
$10,900, and decrease of $14,500 in miscellaneous income.

Loss Before Income Taxes. The loss before income tax for the first three months
of 2001 was $438,800 as against $452,800 for the corresponding period of 2000.
As a percentage of net sales, the net loss before income taxes improved to
18.32% during the first quarter of 2001 as against 23.24% for the first quarter
of 2000.

Benefit From Income Taxes. The Company has recorded a benefit for income taxes
of $76,000 based on its estimated year-end tax rate. As of March 31, 2001, the
Company has approximately $7,705,700, $2,781,000, and $1,064,700 of Federal,
California and New York net operating losses, respectively, available to carry
forward. Of the Federal and New York net operating losses, approximately
$2,053,800 will expire in 2012, and the remainder will expire through 2020. The
California net operating losses expire beginning in 2001 and will continue to
expire through 2005. The Company also has $35,000 of California Manufactures
Investment Tax Credits that can be carried forward to offset future taxes until
they begin to expire in 2007. Management believes that the Company will utilize
the deferred tax assets in the ordinary course of business prior to any of the
losses or credit reaching their expiration dates based on the following factors:

o Changes implemented by the Company have resulted in the loss before income
taxes being reduced by 25% from 1998 to 1999, from $2,701,100 to $2,035,800;
and 58% from 1999 to 2000, from $2,035,800 to $856,600.

o For California income tax purposes, significant book to tax temporary
differences will result in additional taxable income of $300,000 per year
for the next four years.

o The Company has entered into an agreement to acquire UBI, a United Kingdom
company, that owns a distributorship of Kingfisher Lager in the United
Kingdom, Europe and other markets, and has the exclusive brewing and
distribution rights to Kingfisher Lager in the United States. The Company
anticipates finalizing the transaction, subject to shareholder approval, in
summer of 2001, and could then begin production and distribution of
Kingfisher Lager. The Company anticipates that the production and sales of
Kingfisher Lager could reach 10,000 barrels per year. UBI had profitable
operations in 2000 and 1999 and also generated positive cash flows for the
years then ended. The Company anticipates that after the acquisition, it
will use the excess cash flow from the operations of UBI to reduce the
Company's outstanding debt and reduce interest expense.

o The Company may undertake a private placement of preferred stock. A portion
of the proceeds of the private placement would be used to pay off debt,
thereby decreasing interest expense.

Net Loss. The net loss for the first three months of 2001 was $362,800, as
compared to $452,800 for the first three months of 2000. As a percentage of net
sales, the net loss for the first quarter of 2001 decreased to 15.15%, as
compared to 23.24% for the first quarter of 2000.

Segment Information

Mendocino Brewing Company, Inc.'s business presently consists of two segments.
The first is brewing for wholesale to distributors and other retailers. This
segment accounted for 96% of the Company's gross sales for the first quarter of
2001. The second segment consists of brewing beer for sale along with food and
merchandise at the Company's brewpub and retail merchandise store located at the
Hopland Brewery. This segment accounted for 4% of the Company's total gross
sales during the first quarter of 2001.

With combined expanded wholesale beer production in Ukiah and Saratoga Springs,
management expects that retail sales, as a percentage of total sales, will
decrease proportionally to the expected increase in the Company's wholesale
sales.

The Company's business segments are brewing operations and a retail
establishment known as the Hopland Brewery. A summary of each segment is as
follows:

Three Months Ended March 31, 2001
----------------------------------------------------------------------------
Brewing Hopland Corporate
Operations Brewery And Other Total
---------------------- ----------------- ----------------- -----------------

Sales $ 2,433,200 $ 110,000 $ -- $ 2,543,200
Operating Profit/(Loss) (191,200) (26,000) -- (217,200)
Identifiable Assets 14,993,600 77,100 4,821,500 19,892,200
Depreciation and amortization 173,400 1,800 20,900 196,100
Capital Expenditures 2,200 -- 14,500 16,700

Three Months Ended March 31, 2000
-----------------------------------------------------------------------------
Brewing Hopland Corporate
Operations Brewery and Other Total
---------------------- ------------------ ----------------- -----------------

Sales $ 1,965,600 $ 104,600 $ -- $ 2,070,200
Operating Loss 140,000 (30,600) -- 109,400
Identifiable Assets 15,467,700 77,400 3,977,900 19,522,300
Depreciation and amortization 172,900 1,600 21,900 196,400
Capital Expenditures 5,800 -- -- 5,800

Seasonality

Beer consumption nationwide has historically been approximately 20% higher
during the summer months as compared to the other months of the year. It is not
clear to what extent seasonality will affect the Company as it expands its
capacity and its geographic markets.

Capital Demands

The Releta Brewing Company, LLC facility in Saratoga Springs, New York commenced
brewing operations in February 1998. The Company expects both the Ukiah and
Releta facilities to operate at significantly less than full capacity during all
or part of 2001. Both breweries have placed demands upon the Company's assets
and liquidity. Failure to adequately meet those demands may have a material
adverse affect on the Company's business, financial condition, and results of
operations.

The Company's gross profit has improved considerably (from 25% in 1998 to 32% in
1999 to 35% in 2000) and its operating results have shown significant
improvement compared to earlier years. The Company's working capital
requirements have been met from time to time by its largest shareholder, UBA.
In addition, the impending acquisition of UBI will, if consummated, add positive
cash flow and financial strength to the Company.

The Ukiah brewery is presently operating under a temporary certificate of
occupancy from the City of Ukiah. The Company has yet to complete the build-out
of its administrative space and the exterior landscaping of the Ukiah facility.
In the interim, the Company approached the authorities with plans to construct
offices in a different part of the building at a much lesser cost to the
Company. Those plans were approved by the city and accordingly the offices were
completed at the end of 1999 at a cost of approximately $23,000. Management
believes that if the offices had been built according to the original plan, it
would have cost the Company approximately $300,000. Management believes that it
is not necessary at this point in time to build the offices according to
original plans and has therefore decided to shelve the plan indefinitely.

With regard to the exterior landscaping of the Ukiah facility, the Company has
been using its own in-house resources to complete the bulk of the work, and has
employed outside firms from time to time for limited purposes. The work was
completed at a cost of approximately $23,000. The work related to Ukiah Brewery
building pending completion and the estimated cost thereof are as follows:

1. Covering the parking lot with asphalt, approximately $30,000
2. Building concrete sidewalk to one of the entrances of the brewery building,
approximately $10,000
3. If required, creating additional office/record room space for future
development, approximately $60,000

It is estimated that the above construction cost would be approximately
$100,000, which includes the cost of modifying the original plan submitted to
the City of Ukiah. The management is planning to approach the City authorities
for their approval of modifications to the original plan and complete the
pending jobs during the year 2001 and obtain the final certificate of occupancy
from the City authorities by the end of the year 2001.

Completion of construction is a condition to the issuance of a final certificate
of occupancy. Failure to complete construction and obtain a final certificate of
occupancy could have a material adverse effect on the Company's business,
financial condition, and results of operations, because of, among other reasons,
increased administrative burdens and costs.

Liquidity and Capital Resources

Long Term Debt. Mendocino Brewing has obtained a $2.7 million long-term loan
secured by a first priority deed of trust on the Ukiah land and improvements.
The loan is payable in monthly installments of $24,443 including interest at the
Treasury Constant Maturity Index plus 4.17%, currently 5.83%, maturing December
2012 with a balloon payment in the amount of $1,872,300. This loan is secured by
some of the assets of the Company (other than the Releta facility), including,
without limitation, a first priority deed of trust on the Ukiah land and
improvements, fixtures and most of the equipment of the Company.

Shareholder Commitment. During 1998, UBA, the Company's largest shareholder,
agreed to provide the Company with a credit facility of up to $2 million (the
"1998 Facility"). In mid-1999, the 1998 Facility was terminated, and a new
credit facility (the "1999 Facility") in the maximum amount of $800,000 was
offered to the Company on substantially the same terms as the 1998 Facility
pursuant to a Master Line of Credit Agreement. Pursuant to the terms of the
Master Line of Credit Agreement, advances on the credit facility bear interest
at the prime rate of the Bank of America in San Francisco plus 1.5%, up to a
maximum of 10%, and is due and payable quarterly. The principal amount of each
advance, together with any accrued but unpaid interest on such advance, is due
18 months after the date of such advance. Each advance made on the line of
credit is evidenced by a convertible note. Each convertible note includes a
conversion feature whereby UBA could, at its option, convert the principal and
any accrued but unpaid interest into unregistered shares of the Company's common
stock on or after the maturity date, at a rate of one share of common stock for
each $1.50 of principal and unpaid interest. The arrangement was approved by the
independent directors (Robert Neame, Kent Price and Sury Rao Palamand) on August
30, 1999.

The terms of the 1999 Facility were amended during 2000 to increase the maximum
amount available to the Company to $1,200,000. The terms of the 1999 Facility
were amended again in early 2001 to increase the maximum amount available to the
Company to $1,600,000. The Company made an additional draw on the credit
facility in 2001, bringing the outstanding principal and interest accrued
thereon to $1,652,000 as of March 31, 2001, which corresponds to UBA's right to
acquire approximately up to 1,101,303 shares of the Company's common stock at a
conversion price of $1.50 per share.

Equipment Lease. FINOVA Capital Corporation ("FINOVA") leased new brewing
equipment with a total cost of approximately $1.78 million to Mendocino Brewing
for a term of 7 years (beginning December 1996) with monthly rental payments of
approximately $27,100 each. At expiration of the initial term of the lease, the
Company may purchase the equipment at its then current fair market value but not
less than 25% nor more than 30% of the original cost of the equipment, or at the
Company's option, may extend the term of the lease for an additional year at
approximately $39,000 per month with an option to purchase the equipment at the
end of the year at then current fair market value. The lease is not pre-payable.
The Company recently received notice that FINOVA has filed a voluntary petition
for reorganization under Chapter 11 of the Bankruptcy Code. The Company does not
have any indication at this time of how the filing will affect the relationship
between the Company and FINOVA, if at all.

Credit Facility. The CIT Group/Credit Finance, Inc. has provided the Company
with a $3,000,000 maximum line of credit with an advance rate of 80% of the
qualified accounts receivable and 60% of the inventory at an interest rate of
the prime rate of Chase Manhattan Bank of New York plus 2.25% payable monthly,
maturing September 23, 2002. The line of credit is secured by all accounts,
general intangibles, inventory, and equipment of the Company except for the
specific equipment and fixtures of the Company leased from FINOVA, as well as by
a second deed of trust on the Company's Ukiah land improvements. $1,484,000 of
the line of credit was advanced to the Company as an initial term loan, which is
repayable in sixty consecutive monthly installments of principal, each in the
amount of $24,700. The Company commenced repayment of the term loan in March
1999 and approximately $890,400 of the term loan was outstanding as of March 31,
2001. On November 20, 2000, the CIT Group had agreed to increase the borrowing
limit by $100,000, subject to the condition that the increased limit has to be
paid back in monthly installments of $11,111 during the period from April 1,
2001 through December 1, 2001. Based on the Company's current level of accounts
receivable and inventory, the Company has drawn the maximum amount permitted
under the line of credit. As of March 31, 2001, the total amount outstanding on
the line of credit was approximately $2,278,944

Interest. The weighted average interest rates paid on the Company's debts
(including the long term capital lease of equipment by FINOVA Capital
Corporation Inc.) was 10.35% for the first quarter of the year 2001 and 10.80%
for the corresponding period of the year 2000.

Keg Management Arrangement. The Company has entered into a keg management
agreement with MicroStar Keg Management LLC. Under this arrangement, MicroStar
provides the Company with half-barrel kegs for which the Company pays a filling
and use fee. Distributors return the kegs to MicroStar instead of the Company.
MicroStar then supplies the Company with additional kegs. If the agreement
terminates, the Company is required to purchase a certain number of kegs from
MicroStar. The Company would probably finance the purchase through debt or lease
financing, if available. However, there can be no assurances that the Company
will be able to finance the purchase of kegs and the failure to purchase the
necessary kegs from MicroStar is likely to have a material adverse effect on the
Company.

Current Ratio. The Company's ratio of current assets to current liabilities on
March 31, 2001 was 0.78 to 1.0 and its ratio of total assets to total
liabilities was 1.89 to 1.0. On March 31, 2000, the Company's ratio of current
assets to current liabilities was 0.55 to 1.0 and its ratio of total assets to
total liabilities was 2.01 to 1.0

Impact of Expansion on Cash Flow. Mendocino Brewing must make timely payment of
its debt and lease commitments to continue in operation. Unused capacity at the
Ukiah and Saratoga Springs facilities has placed additional demands on the
Company's working capital. Beginning approximately with the second quarter of
1997, the time at which the Ukiah brewery commenced operations, proceeds from
operations have not been able to provide sufficient working capital for day to
day operations. UBA agreed to provide a loan of up to $2 million for working
capital purposes. In addition, pursuant to the Investment Agreement dated
October 24, 1997, between the Company and UBA, UBA has agreed to provide,
directly or indirectly, funding for the working capital requirements of the
Releta facility in the amount of $1 million until October 24, 1999 or until the
brewery's operations are profitable, whichever comes first. UBA, through its
affiliated entities, has fulfilled this obligation by facilitating the CIT
Group/Credit Finance $3 million loan transaction. To fund its operating
deficits, the Company has relied upon lines of credit and other credit
facilities. However, there can be no assurances that the Company will have
access to any such sources of funds in the future, and the inability to secure
sufficient funds will have a material adverse effect on the Company.

Acquisition of UBSN

On November 3, 2000, the company entered into a Share Purchase Agreement with
Inversiones Mirabel, S.A. and Golden Eagle Trust, both of which are entities
related to the Company's Chairman of the Board and Chief Executive Officer, Dr.
Vijay Mallya, and its principal shareholder, UBA. Under the terms of the Share
Purchase Agreement, the Company will acquire all of the issued and outstanding
shares of UBI which is the parent company of UBSN Ltd. In the transaction, the
Company has offered to issue approximately 5,500,000 shares of the Company's
common stock in exchange for the shares of UBI. Upon the closing of the
transaction, UBI will become a wholly-owned subsidiary of the Company. UBI owns
the distribution rights to the "Kingfisher" brand of beer in the United States.
If the transaction is consummated, because UBI will be a wholly-owned subsidiary
of the Company, the Company will also have the ability to brew "Kingfisher"
brand beer in the United States.

The closing of the acquisition of UBI was originally scheduled to occur in the
year 2000. However, the financial statements first provided to the Company by
UBI and UBSN Ltd. were prepared in accordance with accounting standards as
generally applied in the United Kingdom. It has taken longer than expected to
conduct all of the required audits of UBI and UBSN Ltd. so that their financial
statements are (i) consistent with United States accounting standards, and (ii)
as required by the U.S. Securities and Exchange Commission. The closing of the
transaction is expected to occur during the summer of 2001, or as soon
thereafter as the various conditions to closing have been satisfied or waived.

The transaction described above is a related party transaction because the
corporation that owns all of the shares of UBI is held by Golden Eagle Trust,
which is controlled by fiduciaries who may exercise discretion in favor of Dr.
Vijay Mallya, who is the Chairman and Chief Executive Officer of the Company.
Dr. Mallya is also a member of the board of directors of UBSN Ltd. Golden Eagle
Trust also owns a controlling interest in the Company's largest shareholder,
UBA, through an intermediary.

Additional information about this transaction is contained in the 2001 Proxy
Statement which was filed with the Commission on May 11, 2001, and such
information is incorporated herein by reference.

PART II

Item 1. Legal Proceedings.

The Company is engaged in ordinary and routine litigation incidental to its
business. Management does not anticipate that any amounts, which it may be
required to pay by reason thereof, will have a material effect on the Company's
financial position.

Item 2. Changes in Securities.

None.

Item 3. Default Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Items.

None.

Item 6. Exhibits and Reports on Form 8-K.

Exhibit
Number Description of Document
- ------- -----------------------

3.1 (A) Articles of Incorporation, as amended, of the Company.
3.2 (B) Bylaws of the Company
4.1 Articles 5 and 6 of the Articles of Incorporation, as amended, of the Company (Reference is made to
Exhibit 3.1).
4.2 Article 10 of the Restated Articles of Incorporation, as amended, of the Company (Reference is made
to Exhibit 3.2).
10.1 (A) Mendocino Brewing Company Profit Sharing Plan.
10.2 (A) 1994 Stock Option Plan (previously filed as Exhibit 99.6).
10.4 (A) Wholesale Distribution Agreement between the Company and Bay Area Distributing.
10.5 (A) Wholesale Distribution Agreement between the Company and Golden Gate Distributing.
10.6 (A) Sales Contract between the Company and John I. Hass, Inc.
10.7 (F) Liquid Sediment Removal Services Agreement with Cold Creek Compost, Inc.
10.8 (A) Lease Agreement between the Company and Kohn Properties.
10.9 (C) Commercial Real Estate Purchase Contract and Receipt for Deposit (previously filed as Exhibit 19.2).
10.15 (N) Commercial Lease between Stewart's Ice Cream Company, Inc. and Releta Brewing Company, LLC.
10.16 (M) Agreement between United Breweries of America, Inc. and Releta Brewing Company, LLC regarding
payment of certain liens.
10.17 (K)+ Keg Management Agreement with MicroStar Keg Management LLC.
10.18 (E) Agreement to Implement Condition of Approval No. 37 of
the Site Development Permit 95-19 with the City of Ukiah,
California (previously filed as Exhibit 19.6).

Exhibit
Number Description of Document
- ------- -----------------------

10.19 (G) Manufacturing Business Expansion and Relocation Agreement with the City of Ukiah.
10.20 (G) Manufacturing Business Expansion and Relocation Agreement with the Ukiah Redevelopment Agency.
10.21 (O) $2,700,000 Note in favor of the Savings Bank of Mendocino County.
10.22 (O) Hazardous Substances Certificate and Indemnity with the Savings Bank of Mendocino County.
10.23 (J) Equipment Lease with FINOVA Capital Corporation.
10.24 (J) Tri-Election Rider to Equipment Lease with FINOVA Capital Corporation.
10.25 (J) Master Lease Schedule with FINOVA Capital Corporation.
10.26 (L) Investment Agreement with United Breweries of America, Inc.
10.27 (L) Shareholders' Agreement Among the Company, United Breweries of America, Inc., H. Michael Laybourn,
Norman Franks, Michael Lovett, John Scahill, and Don Barkley.
10.28 (L) Registration Rights Agreement Among the Company, United Breweries of America, Inc.,
H. Michael Laybourn, Norman Franks, Michael Lovett, John Scahill, and Don Barkley.
10.29 (Q) Indemnification Agreement with Vijay Mallya.
10.30 (Q) Indemnification Agreement with Michael Laybourn.
10.31 (Q) Indemnification Agreement with Jerome Merchant.
10.32 (Q) Indemnification Agreement with Yashpal Singh.
10.33 (Q) Indemnification Agreement with P.A. Murali.
10.34 (Q) Indemnification Agreement with Robert Neame.
10.35 (Q) Indemnification Agreement with Sury Rao Palamand.
10.36 (Q) Indemnification Agreement with Kent Price.
10.37 (R) Loan and Security Agreement between the Company, Releta Brewing Company LLC and The CIT
Group/Credit Finance, Inc. regarding a $3,000,000 maximum line of credit.
10.38 (R) Patent, Trademark and License Mortgage by the Company in favor of The CIT Group/Credit Finance, Inc.
10.39 (R) Patent, Trademark and License Mortgage by Releta Brewing Company LLC in favor of The CIT
Group/Credit Finance, Inc.
10.41 (U) Employment Agreement with Yashpal Singh.
10.42 (U) Employment Agreement with P.A. Murali.
10.43 (V) Master Loan Agreement between the Company and the United Breweries of America, Inc.
10.44 (V) Convertible Note in favor of the United Breweries of America, Inc dated September 7, 1999.
10.45 (W) First Amendment to Master Loan Agreement between the Company and the United Breweries of America
Inc.
10.46 (W) Convertible Note in favor of the United Breweries of America Inc. dated November 12, 1999.
10.47 (W) Convertible Note in favor of the United Breweries of America Inc. dated December 17, 1999.
10.48 (w) Convertible Note in favor of the United Breweries of America Inc. dated December 31, 1999.
10.49 (W) Convertible Note in favor of the United Breweries of America Inc. dated February 16, 2000.
10.50 (W) Convertible Note in favor of the United Breweries of America Inc. dated February 17, 2000.
10.51 (W) Convertible Note in favor of the United Breweries of America Inc. dated April 28, 2000.
10.52 (W) First Amendment to Master Loan Agreement between the Company and United Breweries of America, Inc.,
dated April 28, 2000.
10.53 (Y) Convertible Note in favor of the United Breweries of America, Inc. dated September 11, 2000.
10.54 (Y) Convertible Note in favor of the United Breweries of America, Inc. dated September 30, 2000.
10.55 (Y) Convertible Note in favor of the United Breweries of America, Inc. dated December 31, 2000.
10.56 (Y) Convertible Note in favor of the United Breweries of America, Inc. dated February 12, 2001.

(Footnotes begin on next page)

(Footnotes from pervious page)

(A) Incorporated by reference from the Company's
Registration Statement dated June 15, 1994, as amended,
previously filed with the Commission, Registration No.
33-78390-LA.
(C) Incorporated by reference from the Company's Report on
Form 10-QSB for the quarterly period ended March 31,
1995, previously filed with the Commission.
(E) Incorporated by reference from the Company's Report on
Form 10-QSB for the quarterly period ended September 30,
1995, previously filed with the Commission.
(F) Incorporated by reference from the Company's Report on
Form 10-KSB for the annual period ended December 31,
1995, previously filed with the Commission.
(G) Incorporated by reference from the Company's Report on
Form 10-QSB for the quarterly period ended June 30,
1996, previously filed with the Commission.
(J) Incorporated by reference from the Company's
Registration Statement dated February 6, 1997, as
amended, previously filed with the Commission,
Registration No. 33-15673.
(K) Incorporated by reference from the Company's Report on
Form 10-KSB for the annual period ended December 31,
1996, previously filed with the Commission.
(L) Incorporated by reference from the Schedule 13D filed with
the Commission on November 3, 1997, by
United Breweries of America, Inc. and Vijay Mallya.
(M) Incorporated by reference from the Company's Report on Form
10-QSB for the quarterly period ended September 30, 1997.
(N) Incorporated by reference from the Company's Report on Form
10-QSB/A No. 1 for the quarterly period ended September 30,
1997.
(O) Incorporated by reference from the Company's Report on
Form 10-KSB for the annual period ended December 31,
1997, previously filed with the Commission.
(Q) Incorporated by reference from the Company's Report on
Form 10-QSB for the quarterly period ended June 30,
1998.
(R) Incorporated by reference from the Company's Report on
Form 10-QSB for the quarterly period ended September 30,
1998.
(T) Incorporated by reference from the Company's Report on
Form 10-KSB for the annual period ended December 31,
1998, previously filed with the Commission.
(U) Incorporated by reference from the Company's Report on
Form 10-QSB for the quarterly period ended June 30,
1999.
(V) Incorporated by reference from the Amendment No. 5 to
Schedule 13D filed with the Commission on September 15,
1999, by United Breweries of America, Inc. and Vijay
Mallya.
(W) Incorporated by reference from the Amendment No. 6 to
Schedule 13D filed with the Commission on May 12, 2000,
by United Breweries of America, Inc. and Vijay Mallya.
(X) Incorporated by reference from the Company's Report on
Form 10-KSB for the annual period ended December 31,
1999, previously filed with the Commission.
(Y) Incorporated by reference from the Amendment No. 7 to
Schedule 13D filed with the Commission on February 22, 2001
by United Breweries of America, Inc. and Vijay Mallya.
+ Portions of this Exhibit were omitted pursuant to an
application for an order declaring confidential
treatment filed with the Securities and Exchange
Commission.

No reports on Form 8-K were filed during the quarter for which this report is
filed, however, because the Company received the audited consolidated financial
statements of UBI, the Company filed an amended report on Form 8-K/A on April
11, 2001, describing more fully the Company's proposed acquisition of UBI,
responsive to Item 2 of Form 8-K/A. The Company attached the audited
consolidated financial statements of UBI for the years ended December 31, 1999
and 2000, and pro forma financial statements for the years ended December 31,
1999 and 2000.

SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

REGISTRANT:

MENDOCINO BREWING COMPANY, INC.

Dated: May 11, 2001 By: /s/Yashpal Singh
------------------------------------------
Yashpal Singh
President

Dated: May 11, 2001 By: /s/N. Mahadevan
------------------------------------------
N. Mahadevan
Chief Financial Officer and Secretary