As filed with the Securities and Exchange Commission on June 12, 1996
Registration No. 333-3548
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
MICHIGAN BREWERY, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 5813 38-3196031
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification Number)
Organization)
1999 WALDEN DRIVE
GAYLORD, MICHIGAN 49735
(517) 731-0401
(Address, including zip code, and telephone number of registrant's principal
executive offices and principal place of business)
WILLIAM F. ROLINSKI, PRESIDENT
MICHIGAN BREWERY, INC.
1999 WALDEN DRIVE
GAYLORD, MICHIGAN 49735
(517) 731-0401
(Name, address, including zip code, and telephone number of agent for service)
COPIES TO:
Joseph T. Kinning, Esq. Jeffrey C. Robbins, Esq.
Briggs and Morgan, Parsinen Bowman
Professional Association Kaplan & Levy P.A.
2400 IDS Center 100 South Fifth Street, Suite 1100
Minneapolis, Minnesota 55402 Minneapolis, Minnesota 55402
(612) 334-8514 (612) 333-2111
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
OFFERING PRICE AGGREGATE
TITLE OF EACH CLASS OF PROPOSED AMOUNT PER OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED(1) UNIT(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Units, each consisting of one share of
Common Stock, $.01 par value, and one
Class A Warrant to purchase one share of
Common Stock 2,587,500(3) $6.00 $15,525,000 $ 5,354
Common Stock, $.01 par value per share 2,587,500(4) $8.00 $20,700,000 $ 7,138
Common Stock, $.01 par value per share 75,000(5) $6.00 $ 450,000 $ 156
Total -- -- $36,675,000 $ 12,648(6)
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act of 1933, as amended, this
registration statement also covers such additional securities as may become
issuable upon exercise of Class A Warrants and the Representative's Warrant
through operation of the antidilution provisions thereof.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
(3) Includes 337,500 Units subject to an option granted to the Underwriters to
cover over-allotments, if any.
(4) Issuable upon exercise of the Class A Warrants, including 337,500 shares
underlying Units subject to an option granted to the Underwriters to cover
over-allotments, if any.
(5) Represents shares held by a selling shareholder who invested in the
Company's Pre-Bridge Financing.
(6) The Company paid $12,492 of this registration fee via cashier's check on
April 15, 1996. The remaining balance has been wire-transferred to the
Securities and Exchange Commission's account at Mellon Bank.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
EXPLANATORY NOTE
Two forms of Prospectus are included in this Registration Statement. The first
Prospectus (the "Public Offering Prospectus") will be used in connection with an
underwritten offering of an aggregate of 2,250,000 Units of Michigan Brewery,
Inc. (the "Company"). The second Prospectus (the "Selling Shareholder
Prospectus") will be used in connection with the offering by a selling
shareholder of up to 75,000 shares of Common Stock of the Company. The Public
Offering Prospectus and the Selling Shareholder Prospectus are identical except
that the additional cover page included herein and labeled "Additional Cover
Page" and the additional pages relating solely to the selling shareholder
included herein and labeled "Additional pages to be substituted in the Selling
Shareholder Prospectus" shall be substituted in the Selling Shareholder
Prospectus for the corresponding pages in the Public Offering Prospectus.
MICHIGAN BREWERY, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN THE
PROSPECTUS OF INFORMATION REQUIRED BY
ITEMS OF FORM SB-2
<TABLE>
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ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
<S> <C> <C>
1. Front of Registration Statement and Outside
Front Cover Page Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus Outside Front Cover Page; Prospectus
Summary; Inside Front Cover Page; Risk
Factors; Outside Back Cover Page
3. Summary Information and Risk Factors Outside Front Cover Page; Prospectus
Summary; Risk Factors; Dilution;
Underwriting
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page; Risk Factors;
Underwriting
6. Dilution Dilution
7. Selling Security Holders *
8. Plan of Distribution Outside Front Cover Page; Underwriting
9. Legal Proceedings Business
10. Directors, Executive Officers, Promoters and
Control Persons Management; Principal Shareholders
11. Security Ownership of Certain Beneficial
Owners and Management Principal Shareholders
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel *
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Underwriting
15. Organization Within Last Five Years Business; Management's Discussion and
Analysis of Financial Condition and Results
of Operations
16. Description of Business Business
17. Management's Discussion and Analysis or Plan
of Operation Management's Discussion and Analysis of
Financial Condition and Results of
Operations
18. Description of Property Business
19. Certain Relationships and Related
Transactions Management; Certain Transactions
20. Market for Common Equity and Related
Shareholder Matters Outside Front Cover of Prospectus; Risk
Factors; Dividend Policy; Description of
Securities
21. Executive Compensation Management
22. Financial Statements Financial Statements
23. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure *
</TABLE>
*Omitted from Prospectus because item is inapplicable or answer is in the
negative.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 12, 1996
[LOGO]
2,250,000 UNITS
MICHIGAN BREWERY, INC.
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE REDEEMABLE CLASS A WARRANT
PROSPECTUS
Michigan Brewery, Inc. (the "Company") is offering 2,250,000 Units (the
"Offering"), each Unit consisting of one share of Common Stock and one
redeemable Class A Warrant. The Class A Warrants are immediately exercisable and
transferable separate from the Common Stock. Each Class A Warrant entitles the
holder to purchase at any time until four years following the date of this
Prospectus one share of Common Stock at an exercise price of $8.00 per share,
subject to adjustment. The Class A Warrants are subject to redemption by the
Company for $.01 per warrant at any time 90 days after the date of this
Prospectus, on 30 days written notice, provided that the closing high bid price
of the Common Stock exceeds $9.00 per share (subject to adjustment) for any 20
consecutive trading days. See "Description of Securities."
Prior to this Offering, there has been no market for the Company's securities.
It is currently anticipated that the initial public offering price per Unit (the
"Price to Public") will be between $5.00 and $6.00. See "Underwriting" for
information relating to the factors considered in determining the Price to
Public. The Company's Common Stock, Class A Warrants and Units have been
approved for designation as Nasdaq SmallCap Market securities under the symbols
"BBUC," "BBUCW" and "BBUCU," respectively, pending completion of this Offering.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON
PAGE 6 HEREIN AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
Per Unit $ $ $
Total(3) $ $ $
(1) The Company has agreed to pay R. J. Steichen & Company, as
Representative of the several Underwriters (the "Representative"), a
nonaccountable expense allowance equal to 2.5% of the total Price to
Public. The Company has also agreed to sell to the Representative, for
nominal consideration, a five-year warrant to purchase up to 225,000
shares of Common Stock at an exercise price of 120% of the Price to
Public. In addition, the Company has agreed to indemnify the
Underwriters against certain liabilities. See "Underwriting."
(2) Before deducting expenses of the Offering estimated at $300,000, which
does not include the nonaccountable expense allowance described in Note
1 above.
(3) The Underwriters have been granted an option to purchase up to 337,500
additional Units from the Company for the purpose of covering
over-allotments, if any. If the Underwriters exercise the
over-allotment option in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
The Units are offered by the several Underwriters, subject to prior sale, when,
as and if delivered to and accepted by them. The Underwriters reserve their
rights to withdraw, cancel or modify such offer and to reject orders in whole or
in part. It is expected that delivery of certificates representing the Units
will be made on or about , 1996 in Minneapolis, Minnesota.
[R.J. STEICHEN & COMPANY LOGO]
The date of this Prospectus is , 1996
[PHOTO OF THE GAYLORD BREWERY FEATURES.]
[PHOTO OF THE GAYLORD BREWERY BREWHOUSE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, COMMON
STOCK AND CLASS A WARRANTS OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NASDAQ SMALLCAP MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. ALL INFORMATION
CONCERNING THE COMPANY'S AUTHORIZED, ISSUED AND OUTSTANDING COMMON STOCK AND ALL
FINANCIAL INFORMATION PRESENTED ON A PER SHARE BASIS REFLECTS A 112.5-FOR-ONE
STOCK SPLIT EFFECTIVE JANUARY 19, 1996. UNLESS OTHERWISE INDICATED, INFORMATION
IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OPTION TO PURCHASE
FROM THE COMPANY UP TO 337,500 ADDITIONAL UNITS TO COVER OVER-ALLOTMENTS, IF
ANY.
THE COMPANY
The business of Michigan Brewery, Inc. (the "Company") is to develop, own and
operate microbrewery/restaurants known as Big Buck Brewery and Steakhouses ("Big
Buck Breweries" or "Breweries"). In May 1995, the Company opened its first Big
Buck Brewery in Gaylord, Michigan adjoining I-75 approximately 200 miles north
of Detroit (the "Gaylord Brewery"), which is currently the Company's only
Brewery. The approximately 29,000 square-foot Gaylord Brewery will serve as a
model for the three Big Buck Breweries which the Company intends to develop and
open over the next eighteen months using the proceeds of this Offering and real
estate financing.
A Big Buck Brewery offers casual dining featuring moderately priced steaks,
ribs, chicken and other food and a distinctive selection of beers which are
microbrewed on-site. The Company also sells its microbrewed beer off-site
through wholesale distributors in order to promote customer interest in the
Brewery. The Company's selection of beers ranges from a light golden ale to a
dark full-bodied stout and is designed to satisfy the tastes of a broad spectrum
of consumers. A key element of the Company's strategy is to capitalize on the
growing interest of consumers in high quality, more flavorful microbrewed beer.
The Company believes it will generate customer loyalty to its beers and its
restaurant operations through customer identification with each local Big Buck
Brewery.
The Company believes the appearance of the Gaylord Brewery has contributed to
its popularity as an eating and drinking establishment. The Gaylord Brewery
features a large, open and visually stimulating dining area which highlights the
array of stainless steel and copper brewing equipment used to brew the Company's
craftbrewed beer. The Gaylord Brewery features a 4,000 square foot dining area
and a 1,600 square foot bar area. The interior is decorated with rustic
wood-finished interiors, mounted deer racks, 36-foot high vaulted ceilings and
warm lighting. The restaurant's specially commissioned Amish hand-carved wooden
furniture and overhead genuine Tennessee whisky barrel lighting fixtures add
character to the building's decor. The friendly and attentive staff, on-site
brewing and summertime outdoor seating and live music are designed to create an
appealing atmosphere for lunch, dinner and bar customers.
Consumer interest in more flavorful beer has resulted in significant growth in
the craftbrewed beer market during the last several years, despite a decline in
per capita beer consumption. The number of microbreweries in the United States
has grown from 21 in 1985 to approximately 280 in 1995. During the same period,
the annual production of craftbrewed beer in the United States has grown from
75,000 barrels to approximately 3.7 million barrels. Despite these high levels
of growth, sales of craftbrewed beers represented less than 2% of total beer
sales in the United States in 1995.
The Company has an option until June 30, 1996 to purchase a site in Sault St.
Marie, Michigan adjacent to the international bridge connecting the upper
peninsula of Michigan with Ontario, Canada. The Company is negotiating for the
purchase of a site in suburban Detroit, Michigan which would be accessible to
the over 3.2 million Detroit metro area residents. The Company expects to locate
the third new Brewery in an Upper Great Lakes state other than Michigan.
The Company was incorporated in 1993 under the laws of the State of Michigan.
The Company's principal executive offices are located at 1999 Walden Drive,
Gaylord, Michigan 49735 and its telephone number is (517) 731-0401.
THE OFFERING
Securities Offered 2,250,000 Units, each Unit consisting
of one share of Common Stock and one
redeemable Class A Warrant. Each
Class A Warrant is immediately
exercisable and transferable
separately from the Common Stock.
Each Class A Warrant entitles the
holder to purchase at any time until
four years following the date of this
Prospectus one share of Common Stock
at an exercise price of $8.00,
subject to adjustment. The Class A
Warrants are subject to redemption by the
Company for $.01 per warrant at any time 90
days after the date of this Prospectus, on
30 days written notice, provided that the
high closing bid price of the Common Stock
exceeds $9.00 per share (subject to
adjustment) for any 20 consecutive trading
days. Holders of Class A Warrants may
exercise their rights until the close of
business on the date fixed for redemption,
unless extended by the Company. See
"Description of Securities."
Common Stock Outstanding 2,650,000 shares prior to the Offering and
4,968,120 shares after the Offering(1).
Nasdaq SmallCap
Market Symbols:
Common Stock BBUC
Warrants BBUCW
Units BBUCU
Use of Proceeds Development and opening of three new
Big Buck Breweries and repayment of
debt. See "Use of Proceeds."
RISK FACTORS
An investment in the Units is highly speculative and involves a high degree of
risk and substantial dilution. See "Risk Factors" beginning on page 6 and
"Dilution."
(1) Includes the conversion of the Pre-Bridge Convertible Note into 68,120
shares of Common Stock at a conversion price of $3.67 per share (See
"Description of Securities -- Prior Offerings"). Does not include: (i)
2,250,000 shares issuable upon exercise of the Class A Warrants offered
hereby; (ii) 212,500 shares reserved for issuance upon exercise of the
Pre-Bridge Warrant and the Bridge Warrants (see "Description of
Securities -- Prior Offerings"); (iii) up to 225,000 shares issuable
upon exercise of the Representative's Warrant; (iv) 300,000 shares
reserved for issuance under the Company's 1996 Stock Option Plan; (v)
100,000 shares reserved for issuance under the Company's 1996 Director
Stock Option Plan and (vi) 25,000 shares issuable upon exercise of
outstanding options.
SUMMARY SELECTED FINANCIAL DATA
<TABLE>
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YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------- --------------------------
1994(1) 1995 1995(1) 1996
---------- ----------- ---------- ----------
(UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Revenue:
Restaurant sales $ -- $ 2,380,641 $ -- $ 803,327
Wholesale beer and gift shop sales -- 302,959 -- 83,118
---------- ----------- ---------- ----------
Total revenue -- 2,683,600 -- 886,445
---------- ----------- ---------- ----------
Cost of sales -- 1,298,735 -- 354,255
Operating expenses -- 1,376,854 7,040 476,585
Selling, general and administrative
expenses 12,338 823,299 33,912 318,901
Interest expense -- 288,790 6,267 124,147
---------- ----------- ---------- ----------
Net loss $ (12,338) $(1,104,078) $ (47,219) $ (387,443)
========== =========== ========== ==========
Net loss per common share(3) $ (0.01) $ (0.45) $ (0.02) $ (0.13)
========== =========== ========== ==========
Weighted average shares
outstanding 1,056,241 2,481,676 2,330,169 2,879,345
</TABLE>
MARCH 31, 1996
----------------------------
AS
ACTUAL ADJUSTED(2)
----------- -----------
BALANCE SHEET DATA:
Working capital (deficit) $(2,140,891) $ 8,884,734
Total assets 6,422,250 15,997,875
Total liabilities 4,775,002 3,325,002
Shareholders' equity 1,647,248 12,672,873
(1) The Company began development of the Gaylord Brewery on May 1, 1994 and
the Gaylord Brewery began operations on May 26, 1995. Prior thereto,
the Company had no operations or revenues.
(2) As adjusted to reflect: (i) the sale of 2,250,000 Units offered hereby
(at an assumed public offering price of $5.50 per Unit) and the
application of the estimated net proceeds therefrom and (ii) the
conversion of the Pre-Bridge Convertible Note into 68,120 shares of
Common Stock at a conversion price of $3.67 per share. See "Description
of Securities -- Prior Offerings."
(3) Supplemental loss per share data giving effect to the portion of the
net proceeds used to pay off certain indebtedness is not presented as
it is not materially different than primary loss per share.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE INVESTORS IN EVALUATING
THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE UNITS.
LACK OF PROFITABILITY; LACK OF OPERATING HISTORY; DEPENDENCE ON GAYLORD
BREWERY
The Company has been operating the Gaylord Brewery since May 26, 1995 and the
Company had a net loss of $1.1 million during the year ended December 31, 1995
and a net loss of $387,000 during the three months ended March 31, 1996. The
Company had a working capital deficit of $2.1 million and an accumulated deficit
of $387,000 at March 31, 1996. Prior to the opening of the Gaylord Brewery, the
Company had no operations or revenues. Accordingly, the Company's operations are
subject to all of the risks inherent in the establishment of a new business
enterprise, including the lack of operating history. The likelihood of success
of the Company must be considered in light of the problems, expenses,
difficulties, complications and delays frequently encountered in connection with
the establishment of a business. There can be no assurance that future
operations of the Gaylord Brewery, or any Big Buck Brewery, will be profitable.
Future revenues and profits, if any, will depend upon various factors, including
the quality of restaurant operations, the acceptance of the Company's beer and
general economic conditions. Frequently, restaurants experience a decline of
revenue growth or of actual revenues following a period of excitement which
accompanies their opening. There is no assurance that the Company can operate
profitably or that it will successfully implement its expansion plans, in which
case the Company will continue to be dependent on the revenues of the Gaylord
Brewery.
DEVELOPMENT OF FUTURE BREWERIES; EXPANSION PLAN RISKS
The total cost of developing, constructing and opening the Gaylord Brewery was
approximately $5.8 million, which included approximately $3.1 million for design
and construction; $1.3 million for equipment, furniture and fixtures relating to
the restaurant; $1.0 million for brewing and bottling equipment and $400,000 for
land. Management believes that each new Brewery will be of a building style and
size suitable to its location. Accordingly, the Company has not developed a
standardized Brewery layout nor obtained actual cost estimates for development
of new Breweries.
The Company anticipates it will develop and open three additional Big Buck
Breweries during the next eighteen months. The Company estimates that the costs
of developing and opening the three additional Big Buck Breweries will be
approximately $21.0 million depending on the locations, site conditions,
construction costs and sizes and types of Breweries built. The Company intends
to obtain real estate financing for up to 55% of the costs of developing and
opening the three Breweries. The Company has not yet received any commitments
for such real estate financing and there are no assurances that such financing
will be available on terms acceptable or favorable to the Company, or at all.
Successful expansion of the Company's operations will be largely dependent upon
a variety of factors, some of which are currently unknown or beyond the
Company's control, including customer acceptance of Big Buck Brewery restaurants
and Big Buck beer; the ability of the Company's management to identify suitable
sites and to negotiate purchases and financing of such sites; timely and
economic development and construction of Breweries; timely approval from local
governmental authorities; the hiring of skilled management and other personnel;
the ability of the Company's management to apply its policies and procedures to
a much larger number of Breweries; the availability of adequate financing; the
general ability to successfully manage growth and the general state of the
economy. Although the Company is in the process of exploring the opening of
three new Breweries, the Company has entered into only one option agreement to
acquire a site and there are presently no agreements to design, construct or
otherwise develop these new Breweries. There can be no assurance that the
Company will be able to open new Breweries.
The Company's strategy includes operating a brewhouse at each Big Buck Brewery.
Successful operation of separate brewhouses will require the Company to overcome
various organizational challenges such as increasing production to maximum
designed capacity levels and establishing and maintaining quality control over
numerous geographically separated Breweries. In attempting to expand beer
distribution, the Company will be required to establish and manage relationships
with wholesale distributors, retailers and consumers in new markets. The Company
is the sole promoter of sales of its beer in new markets. Consumer tastes and
preferences may vary from market to market. There can be no assurance that the
Company will be successful in entering new markets.
NEED FOR FINANCING
The Company's ability to execute its business strategy is dependent on its
ability to obtain substantial financing for the development of additional
Breweries. The Company intends to obtain real estate financing for up to 55% of
the costs of developing and opening the three new Breweries it intends to open
during the next eighteen months. However, no assurance can be given that the
Company will obtain this financing or that it and the proceeds of this Offering
will provide the Company with the funds required to develop and open the three
additional Breweries. In addition, the Company will require further financing to
develop and open additional Breweries. The Company anticipates that future
development and expansion will be financed through the public or private sale of
additional equity (including, potentially, Common Stock issued in connection
with the exercise of Class A Warrants offered hereby) or debt securities,
capital leases and other credit facilities. There can be no assurance that any
additional funds will be available or that such funds, if available, will be on
terms acceptable to the Company or its shareholders. New investors may seek and
obtain substantially better terms than those available to investors purchasing
in this Offering and the Company's issuance of securities in the future may
result in substantial dilution.
MICHIGAN LAW MAY LIMIT GROWTH
The Company is licensed under Michigan law as a "microbrewery." A microbrewery
in Michigan is limited to the production of not more than 20,000 barrels of beer
per year by all breweries owned or controlled by the same person, whether within
or outside Michigan. Without a change in current law, the Company will limit its
sales of beer off-site so as to reserve its brewing capacity for sales of beer
on-site which provide the Company higher margins but do not reach the same
customer base. Legislation has been introduced in Michigan (House Bill No. 4005)
which would increase the maximum production of a microbrewery to not more than
60,000 barrels of beer per year and would apply this restriction only to
breweries located within Michigan. In the event this or comparable legislation
is not passed, the Company intends to alter its expansion plans to increase its
emphasis on sales of beer on-site. There can be no assurance that such
legislation will pass, that any such legislation will pass in a form which would
facilitate the Company's expansion plans, or that if such legislation is not
passed, the Company will be able to successfully alter its expansion plans. See
"Business--Government Regulation."
COMPETITION; CERTAIN FACTORS AFFECTING THE RESTAURANT AND BREWING INDUSTRIES
The restaurant industry is highly competitive with respect to price, service,
food quality (including taste, freshness, and nutritional value) and location.
New restaurants have a high failure rate. The restaurant industry is also
generally affected by changes in consumer preferences, national, regional and
local economic conditions, and demographic trends. The performance of individual
restaurants may also be affected by factors such as traffic patterns,
demographic considerations, and the type, number and location of competing
restaurants. In addition, factors such as inflation, increased food, labor and
employee benefit costs, and the lack of availability of experienced management
and hourly employees may also adversely affect the restaurant industry in
general and the Company's restaurants in particular. Restaurant operating costs
are further affected by increases in the minimum hourly wage, unemployment tax
rates and similar matters over which the Company has no control. There are
numerous well-established competitors, including national, regional and local
restaurant chains, possessing substantially greater financial, marketing,
personnel and other resources than the Company. The Company also competes with a
large variety of locally owned restaurants, diners and other establishments that
offer moderately priced food to the public. The Company also competes with other
microbrewery restaurants in a highly competitive and developing microbrewery and
brewpub restaurant market. Other restaurants and companies could utilize the Big
Buck Brewery format or a related format. There can be no assurance that the
Company will be able to respond to various competitive factors affecting the
restaurant industry.
The domestic beer market is highly competitive due to: the enormous advertising
and marketing expenditures by national and major regional brewers; the
continuing proliferation of microbreweries, regional craft breweries, brewpubs
and other small craftbrewers; the more recent introduction of fuller-flavored
products by certain major national brewers and a general surplus of domestic
brewing capacity, which facilitates existing contract brewer expansion and the
entry of new contract brewers. Although domestic demand for craftbrewed beers
has increased dramatically over the past decade, there can be no assurance that
this demand will continue. The Company anticipates intensifying competition in
the craftbrewed beer market. Most of the Company's brewing competitors possess
marketing, financial, personnel and other resources substantially greater than
those of the Company, and there can be no assurance that the Company will be
able to succeed against intensified competition in the craftbrewed and
fuller-flavored beer markets. See "Business -- Competition."
BREWERY OPERATING HAZARDS
The Company's brewing operations are subject to certain hazards and liability
risks faced by all brewers, such as potential contamination of ingredients or
products by bacteria or other external agents that may be wrongfully or
accidentally introduced into products or packaging. The Company's products are
not pasteurized. While the Company has never experienced a contamination problem
in its products, the occurrence of such a problem could result in a costly
product recall and serious damage to the Company's reputation for product
quality. The Company's operations are also subject to certain injury and
liability risks normally associated with the operation and possible malfunction
of brewing and other equipment. Although the Company maintains insurance against
certain risks under various general liability and product liability insurance
policies, there can be no assurance that the Company's insurance will be
adequate.
BEER AND LIQUOR REGULATION
A significant percentage of revenues of the Gaylord Brewery is derived from beer
sales. On-site sales of beer accounted for 20% of revenues and off-site sales of
beer accounted for an additional 2% of revenues during the period from inception
through March 31, 1996. These percentages are expected to increase over the next
few years in relation to food sales. The Company must comply with federal
licensing requirements imposed by the Bureau of Alcohol, Tobacco and Firearms of
the United States Department of Treasury, as well as the licensing requirements
of states and municipalities where its restaurants are or will be located.
Failure to comply with federal, state or local regulations could cause the
Company's licenses to be revoked and force it to cease the brewing and/or sale
of its beer. Typically, licenses must be renewed annually and may be revoked or
suspended for cause at any time. Additionally, state liquor laws may prevent or
impede the expansion of the Company's Breweries into certain markets. While the
Company has not experienced and does not anticipate any significant problems in
obtaining required licenses, permits or approvals, any difficulties, delays or
failures in obtaining such required licenses, permits or approvals could delay
or prevent the opening of a Brewery in a particular area. In addition, changes
in legislation, regulations or administrative interpretation of liquor laws
after the opening of a Brewery in a jurisdiction may prevent or hinder the
Company's expansion or operations in that jurisdiction or increase operating
costs. See "Business -- Government Regulation."
RESTAURANT REGULATION
The restaurant industry is subject to numerous federal, state and local
government regulations, including those relating to the preparation and sale of
food and to building and zoning requirements. The Company is subject to
regulation by air and water pollution control divisions of the Environmental
Protection Agency of the United States and by various states and municipalities
in which its Breweries are or will be located. The Company is also subject to
laws governing its relationship with employees, including minimum wage
requirements, overtime, working and safety conditions and citizenship
requirements. Restaurant operating costs are affected by increases in the
minimum hourly wage, unemployment tax rates, sales taxes and similar matters,
such as any government mandated health insurance, over which the Company has no
control.
The Company is subject to "dram-shop" laws in Michigan and will be subject to
such statutes in certain other states into which it expands. These laws
generally provide someone injured by an intoxicated person the right to recover
damages from an establishment which wrongfully served alcoholic beverages to
such person. The Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance. However, a judgment against
the Company under a dram-shop statute in excess of the Company's liability
coverage could have a material adverse effect on the Company. See "Business --
Government Regulation."
TAXES; SMALL BREWERS EXCISE TAX CREDIT
The United States government currently imposes an excise tax of $18 on each
barrel of beer produced for domestic consumption in the United States. However,
each brewer with production under 2,000,000 barrels per year is granted a small
brewer's excise tax credit in the amount of $11 per barrel on its first 60,000
barrels produced annually. No assurance can be given that the federal government
will not reduce or eliminate this credit. To the extent Company-wide production
increases to amounts over 60,000 barrels per year, there will be an increase in
the average federal excise tax rate of the Company. Michigan currently imposes
an excise tax of $6.30 per barrel on each barrel of beer sold in Michigan.
However, each "microbrewery" under Michigan law (presently with production under
20,000 barrels per year) is granted a craftbrewer's excise tax credit in the
amount of $2 per barrel. To the extent Company-wide production increases to
amounts over 20,000 barrels per year, there will be an increase in the average
Michigan excise tax rate of the Company. Other states and municipalities into
which the Company may expand also impose excise or other taxes or special
charges on alcoholic beverages in varying amounts, which amounts are subject to
change. It is possible that in the future the rate of excise taxation could be
increased by either the federal or state governments, or both. Future increases
in excise taxes on alcoholic beverages, if enacted, could adversely affect the
Company. See "Business -- Government Regulation."
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL
The Company's future success will depend in large part upon the continued
service of its key management personnel including William F. Rolinski, Gary J.
Hewett, Anthony P. Dombrowski and Scott A. Graham. Given the Company's limited
operating history, the Company is dependent on its ability to identify, hire,
train and motivate qualified personnel necessary to enable it to continue
operations. The Company does not have key person life insurance policies on any
of its employees. The departure of key employees could have a material adverse
effect on the Company's business. The Company's success will also be dependent
upon its ability to attract and retain qualified people, including additional
management personnel. No assurance can be given that the Company's current
employees will continue to work for the Company or that the Company will be able
to obtain the services of additional personnel necessary for the Company's
growth. To date, the Company has not entered into any employment agreements with
its personnel. See "Management."
LACK OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE
Prior to this Offering, there has been no public market for the Company's
securities. Although the Company's Common Stock, Class A Warrants and Units have
been approved for designation as Nasdaq SmallCap Market securities, pending
completion of this offering, there can be no assurance that an active public
market will develop or be sustained. The offering price of the Units has been
arbitrarily determined by negotiations between the Company and the Underwriters
and bears no relationship to the Company's earnings, book value, net worth or
any other financial statement criteria of value and may not be indicative of the
market price for the Units after this Offering. The Company makes no
representation as to any objectively determinable value of the securities
offered hereby. See "Underwriting."
In addition, if the Company's securities do not continue to trade on the Nasdaq
SmallCap Market, the securities offered hereby would become subject to certain
rules of the Securities and Exchange Commission relating to "penny stocks." Such
rules require broker-dealers to make a suitability determination for purchasers
and to receive the purchaser's prior written consent for a purchase transaction,
thus restricting the ability to purchase or sell the securities in the open
market.
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS;
POSSIBLE REDEMPTION OF WARRANTS
Purchasers of Units will be able to exercise the Class A Warrants, and the
Company will be able to issue the shares of Common Stock underlying such
Warrants, only if a current prospectus relating to the Common Stock underlying
the Class A Warrants is then in effect and only if the Common Stock is qualified
for sale or exempt from qualification under the applicable securities laws of
the states in which the holders of Class A Warrants reside. Although the Company
will use its best efforts to (i) maintain the effectiveness of a current
prospectus covering the shares of Common Stock underlying the Class A Warrants
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and
(ii) maintain the exemptions or qualifications of such Common Stock under the
securities laws of the states in which the Company initially qualifies the Units
for sale in the Offering, there can be no assurance that the Company will be
able to do so. The Company will not be able to issue shares of Common Stock to
those persons desiring to exercise the Class A Warrants if a prospectus is not
kept effective under the Securities Act or if the Common Stock underlying the
Class A Warrants is not qualified or exempt from qualification in the state
where the holders of the Class A Warrants reside. In such a case, the holders of
the Class A Warrants could lose the benefit of owning the Class A Warrants
unless they could resell the Class A Warrants. The Class A Warrants are subject
to redemption at any time by the Company at $.01 per warrant at any time 90 days
after the date of this Prospectus, on 30 days prior written notice, if the high
closing bid price of the Common Stock exceeds $9.00 per share (subject to
adjustment) for 20 consecutive trading days. If the Class A Warrants are
redeemed, Warrantholders will lose their right to exercise the Class A Warrants
except during such 30 day redemption period. Redemption of the Class A Warrants
could force the holders to exercise the Class A Warrants at a time when it may
be disadvantageous for the holders to do so or to sell the Class A Warrants at
the then market price or accept the redemption price of $.01 per warrant. See
"Description of Securities -- Class A Warrants."
CONTROL BY MANAGEMENT
The current officers and directors of the Company will beneficially own
approximately 46% of the outstanding Common Stock after completion of this
Offering. After completion of this Offering, assuming the exercise of all Class
A Warrants, the current officers and directors of the Company will beneficially
own approximately 33% of the outstanding Common Stock. Accordingly, such persons
would be able to exert substantial influence over the composition of the
Company's Board of Directors and generally direct the affairs of the Company and
may have the power to control the outcome of shareholder approvals of business
acquisitions, mergers and combinations and other actions. See "Principal
Shareholders" and "Description of Securities."
DILUTION
Purchasers of the Units offered hereby will experience immediate and
substantial dilution of 55% or $3.02 per share in the net tangible book value
per share of Common Stock (assuming the entire offering price of the Units is
allocated to Common Stock). Additional dilution could result from future
financings or the issuance of stock options. See "Dilution."
SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS
The Company's sales and earnings are expected to fluctuate based on seasonal
patterns. The Company anticipates that its highest earnings will occur in the
second and third calendar quarters. In addition, quarterly results in the future
are likely to be substantially affected by the timing of new Brewery openings.
Because of the seasonality of the Company's business and the impact of new
Brewery openings, results for any quarter are not necessarily indicative of the
results for a full fiscal year.
UNCERTAIN TRADEMARK PROTECTION; PROPRIETARY MARKS
The Company's ability to successfully operate will depend in part upon its
ability to register and protect its trademarks. The Company has applied for
registration of a number of trademarks and service marks with the United States
Patent and Trademark Office, including BIG BUCK BREWERY AND STEAKHOUSE and BIG
BUCK BEER. The United States Patent and Trademark Office has made no preliminary
determinations on the Company's applications. In the event the Company is denied
registration, the Company may incur significant expense in creating and
developing new marks or in operating under its existing marks, and may be
restricted in where it can locate future Breweries using the Company's marks.
There is no assurance that the Company's marks will be granted trademark
registration for all or any of the uses proposed in the Company's applications.
In the event that the Company's marks are granted registration, there is no
assurance that such marks will be enforceable against prior users in the areas
where the Company conducts or will conduct operations or against infringers of
such marks.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of Units, Common Stock and Class A Warrants in the public market following
this Offering could adversely affect prevailing market prices. The holders of
2,281,011 shares of Common Stock outstanding prior to this Offering have agreed
with the Representative not to sell or otherwise dispose of any shares of Common
Stock beneficially held by them for a period of 180 days after the date of this
Prospectus without the prior written consent of the Representative. The Company
has agreed to use its best efforts to register for the benefit of certain
investors an aggregate of 212,500 shares of Common Stock under the Securities
Act and state securities laws at such time as it becomes eligible to use Form
S-3 under the Securities Act. Approximately 125,000 and 144,000 shares of
currently outstanding Common Stock held by non-affiliates will be eligible for
sale in the public market pursuant to Rule 144 under the Securities Act
beginning in August 1998 and January 1999, respectively. Beginning in January
1998, 6,000 shares of currently outstanding Common Stock held by an affiliate
will be eligible for sale in the public market, subject to compliance with Rule
144. Between September 1996 and November 1997, 2,375,011 shares of currently
outstanding Common Stock held by affiliates will become eligible for sale in the
public market, subject to compliance with Rule 144. In connection with this
Offering, however, the directors of the Company have agreed to escrow their
shares for three years or earlier if (i) the Company meets certain earnings
requirements established by the State of Minnesota, or (ii) the State of
Minnesota determines that the escrow agreement is no longer necessary. A total
of 2,287,011 shares of Common Stock (including a warrant to purchase 6,000
shares of Common Stock) will be subject to escrow. Concurrent with this
Offering, the Company is registering for resale under the Securities Act the
68,120 shares of Common Stock purchasable upon conversion of the Pre-Bridge
Convertible Note. Additional shares of Common Stock may become eligible for sale
in the public market from time to time upon exercise of warrants, stock options
and convertible promissory notes. See "Registration of Other Securities,"
"Shares Eligible for Future Sale" and "Underwriting."
MICHIGAN ANTI-TAKEOVER LAWS
Upon completion of this Offering, the Company will be subject to Michigan
statutes regulating business combinations and restricting voting rights of
certain persons acquiring shares of Common Stock which may hinder or delay a
change in control of the Company. See "Description of Securities."
USE OF PROCEEDS
The net proceeds to the Company from this Offering (at an assumed initial public
offering price of $5.50 per Unit), after deducting estimated costs and expenses
of this Offering, are expected to be approximately $10.8 million (or $12.4
million if the Underwriters' over-allotment option is exercised in full). The
Company intends to use the net proceeds as follows:
DOLLAR PERCENTAGE OF
USE OF PROCEEDS AMOUNT USE OF PROCEEDS
- --------------- ------ ---------------
Development and opening of new
breweries $ 9,600,000 89%
Repayment of notes 1,200,000 11
----------- ---
Total $10,800,000 100%
=========== ===
The Company plans to use approximately $9.6 million of the proceeds of this
Offering for the development and opening of three new Big Buck Breweries. The
Company intends to obtain real estate financing for up to 55% of the costs of
developing and opening the three new Breweries. The Company currently estimates
that the cost of developing and opening the three new Breweries, including
equipment, furniture, fixtures and pre-opening expenses, will aggregate
approximately $21.0 million, depending upon the locations, site conditions,
construction costs and sizes and types of Breweries built. There can be no
assurance that the Company will be able to develop and open the three new Big
Buck Breweries at such costs or obtain the necessary financing on terms
favorable to the Company. In addition, the Company's expansion plans will be
altered absent the enactment of an amendment to current Michigan law.
See "Risk Factors -- Michigan Law May Limit Growth."
In February 1996, the Company obtained for $25,000 an option to purchase for
$375,000 a seven acre site in Sault St. Marie, Michigan. This option expires on
June 30, 1996.
Approximately $1.2 million of the net proceeds will be used to repay the
Pre-Bridge Non- Convertible Note, the Bridge Notes, and the April 10, 1996
promissory note to Casimer I. Zaremba. See "Certain Transactions" and
"Description of Securities -- Prior Offerings."
Pending use of the net proceeds for the above purposes, the Company intends to
invest such funds in short-term bank deposits, United States government
securities and other short-term investment-grade securities.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on its Common Stock
and does not intend to pay dividends on its Common Stock in the foreseeable
future. The Company presently expects to retain its earnings to finance the
development and expansion of its business. The payment by the Company of
dividends, if any, on its Common Stock in the future is subject to the
discretion of the Board of Directors and will depend on the Company's earnings,
financial condition, capital requirements and other relevant factors. In
addition, the Company's ability to pay dividends is prohibited by the terms of
its credit facility with its bank. Investors who anticipate a need for immediate
income from their investment should not purchase the Units offered hereby.
PRIOR S CORPORATION STATUS
Since inception, the Company had elected to be treated for federal income tax
purposes as an S corporation under Subchapter S of the Internal Revenue Code of
1986, as amended, and had been treated as an S corporation for state income tax
purposes under comparable tax laws. As a result, the Company's losses through
February 5, 1996, the date of termination of the Company's S corporation status
(the "Termination Date") and the effective date of the Bridge Financing, were
for federal and state income tax purposes included in the personal tax returns
of the Company's shareholders. See "Description of Securities -- Prior
Offerings." On the Termination Date, the Company became responsible for payment
of state and federal income taxes on earnings, if any, subsequent to the
Termination Date. On such date, the Company's cumulative undistributed losses
were reclassified from accumulated deficit to additional paid-in capital.
CAPITALIZATION
The following table sets forth as of March 31, 1996: (i) the actual
capitalization of the Company and (ii) the capitalization of the Company as
adjusted to give effect to the sale by the Company of the 2,250,000 Units
offered hereby (at an assumed initial public offering price of $5.50 per Unit)
and the application of the estimated net proceeds therefrom (see "Use of
Proceeds"). This table should be read in conjunction with the Financial
Statements and notes thereto appearing elsewhere in this Prospectus.
MARCH 31, 1996
----------------------------
ACTUAL AS ADJUSTED (1)(2)
---------- -----------
Short-term Debt:
Bridge notes, net of debt discount $1,236,050 $ --
Line of credit 110,000 110,000
Current maturities of long-term debt
and notes payable 445,018 245,018
---------- -----------
Total short-term debt $1,791,068 $ 355,018
========== ===========
Long-term Debt, net of current maturities $2,402,229 $ 2,402,229
---------- -----------
Shareholders' Equity:
Common stock, $.01 par value, 10,000,000
shares authorized, 2,650,000 shares
issued and outstanding; 4,968,120 shares
issued and outstanding as adjusted(2) 26,500 49,681
Warrants(3) 26,100 26,100
Class A warrants -- 112,500
Additional paid-in capital(4) 1,982,091 12,872,035
Accumulated deficit(4) (387,443) (387,443)
---------- -----------
Total shareholders' equity 1,647,248 12,672,873
---------- -----------
Total capitalization $4,049,477 $15,075,102
========== ===========
(1) Reflects the conversion of the Pre-Bridge Convertible Note into 68,120
shares of Common Stock at a conversion price of $3.67 per share. See
"Description of Securities -- Prior Offerings."
(2) Does not include: (i) 2,250,000 shares issuable upon exercise of the
Class A Warrants offered hereby; (ii) 212,500 shares reserved for
issuance upon exercise of the Pre-Bridge Warrant and the Bridge
Warrants (see "Description of Securities -- Prior Offerings"); (iii) up
to 225,000 shares issuable upon exercise of the Representative's
Warrant; (iv) 300,000 shares reserved for issuance under the Company's
1996 Stock Option Plan; (v) 100,000 shares reserved for issuance under
the Company's 1996 Director Stock Option Plan and (vi) 25,000 shares
issuable upon exercise of outstanding options.
(3) Represents at March 31, 1996 the actual fair value of the Pre-Bridge
Warrants and Bridge Warrants. See "Description of Securities -- Prior
Offerings."
(4) Reflects the February 5, 1996 conversion from S corporation to C
corporation status and the reclassification of $1.1 million in
cumulative undistributed losses from accumulated deficit to additional
paid-in capital.
DILUTION
At March 31, 1996, the net tangible book value of the Company was $1.3 million
or $0.48 per share. Net tangible book value per share represents the Company's
tangible assets less total liabilities. Net tangible book value dilution per
share represents the difference between the amount per share paid by the
purchasers of Units in the Offering (assuming the entire offering price of the
Units is allocated to Common Stock) and the pro forma net tangible book value
per share of Common Stock immediately after completion of this Offering. After
giving effect to: (i) the sale by the Company of the 2,250,000 Units offered
hereby and (ii) the conversion of the Pre-Bridge Convertible Note into 68,120
shares of Common Stock at a conversion price of $3.67 per share (see
"Description of Securities -- Prior Offerings"), the pro forma net tangible book
value of the Company at March 31, 1996, would have been approximately $12.3
million, or $2.48 per share. This represents an immediate increase in net
tangible book value of approximately $2.00 per share to existing investors and
an immediate dilution of approximately $3.02 per share to purchasers of Units in
this Offering, as illustrated by the following:
Assumed initial public offering price $5.50
Net tangible book value at March 31, 1996 $0.48
Increase in net tangible book value attributable
to new investors 2.00
-----
Net tangible book value after the Offering and the
conversion of the Pre-Bridge Convertible Note 2.48
-----
Dilution in net tangible book value to new investors $3.02
=====
The following table summarizes on a pro forma basis the differences between the
existing shareholders and new investors with respect to the number of shares of
Common Stock purchased from the Company, the total consideration
paid to the Company and the average consideration paid per share (assuming the
entire offering price of the Units is allocated to Common Stock).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION(2)
--------------------- ------------------------ AVERAGE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders 2,650,000 53% $ 3,257,470 21% $1.23
New investors(1) 2,318,120 47% 12,625,000 79% 5.45
--------- --- ----------- --- -----
Total 4,968,120 100% $15,882,470 100% $3.20
========= === =========== === =====
</TABLE>
(1) Represents purchases of Common Stock in this Offering as part of the
Units and the conversion of the Pre-Bridge Convertible Note (See
"Description of Securities -- Prior Offerings").
(2) The foregoing table does not take into consideration (i) 2,250,000
shares issuable upon exercise of the Class A Warrants offered hereby;
(ii) the exercise of the Pre-Bridge Warrants and the Bridge Warrants to
purchase an aggregate of 212,500 shares of Common Stock (See
"Description of Securities -- Prior Offerings"); (iii) up to 225,000
shares issuable upon exercise of the Representative's Warrant; (iv)
300,000 shares reserved for issuance under the Company's 1996 Stock
Option Plan; (v) 100,000 shares reserved for issuance under the
Company's 1996 Director Stock Option Plan and (vi) 25,000 shares
issuable upon exercise of outstanding options.
SELECTED FINANCIAL DATA
The following selected financial data of the Company for the years ended
December 31, 1994 and 1995, are derived from the financial statements, included
elsewhere in this Prospectus which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report included elsewhere
herein. The selected financial data as of March 31, 1996 and for the three
months ended March 31, 1995 and 1996 have been derived from the Company's
unaudited financial statements, which, in the opinion of the Company's
management, contain all adjustments, consisting of normal adjustments necessary
for a fair presentation of the financial position and results of operations. The
operating results for the three months ended March 31, 1996 are not necessarily
indicative of the results for the full year of operations. The Selected
Financial Data should be read in conjunction with the financial statements and
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------- -------------------------
1994(1) 1995 1995 1996
---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Restaurant sales $ -- $ 2,380,641 $ -- $ 803,327
Wholesale beer and gift shop
sales -- 302,959 -- 83,118
---------- ----------- ---------- ----------
Total revenue -- 2,683,600 -- 886,445
---------- ----------- ---------- ----------
Costs and expenses:
Cost of sales -- 1,298,735 -- 354,255
Operating expenses -- 1,376,854 7,040 476,585
Selling, general and
administrative expenses 12,338 823,299 33,912 318,901
---------- ----------- ---------- ----------
Total costs and expenses 12,338 3,498,888 40,952 1,149,741
---------- ----------- ---------- ----------
Loss from operations (12,338) (815,288) (40,952) (263,296)
Interest expense -- 288,790 6,267 124,147
---------- ----------- ---------- ----------
Net loss $ (12,338) $(1,104,078) $ (47,219) $ (387,443)
========== =========== ========== ==========
Net loss per common share(3) $ (0.01) $ (0.45) $ (0.02) $ (0.13)
========== =========== ========== ==========
Weighted average shares outstanding 1,056,241 2,481,676 2,330,169 2,879,345
</TABLE>
MARCH 31, 1996
----------------------------
ACTUAL AS ADJUSTED(2)
----------- -----------
Balance Sheet Data:
Working capital
(deficit) $(2,140,891) $ 8,884,734
Total assets 6,422,250 15,997,875
Total liabilities 4,775,002 3,325,002
Shareholders' equity 1,647,248 12,672,873
(1) The Company began development of the Gaylord Brewery on May 1, 1994 and
the Gaylord Brewery began operations on May 26, 1995. Prior thereto,
the Company had no operations or revenues.
(2) As adjusted to reflect: (i) the sale of 2,250,000 Units offered hereby
(at an assumed initial public offering price of $5.50 per Unit) and the
application of the estimated net proceeds therefrom and (ii) the
conversion of the Pre-Bridge Convertible Note into 68,120 shares of
Common Stock at a conversion price of $3.67 per share. See "Description
of Securities -- Prior Offerings."
(3) Supplemental loss per share data giving effect to the portion of the
net proceeds used to pay off certain indebtedness is not presented as
it is not materially different than primary loss per share.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was capitalized in 1994 to develop, own and operate microbrewery/
restaurants with the name Big Buck Brewery and Steakhouses. Until May 1995 when
the Gaylord Brewery opened, the Company had no operations or revenues and its
activities were devoted solely to development.
Future revenues and profits will depend upon various factors, including market
acceptance of Big Buck Breweries and general economic conditions. The Company's
present sole source of revenue is the Gaylord Brewery. There can be no
assurances that the Company will successfully implement its expansion plans, in
which case the Company will continue to be dependent on the revenues from the
Gaylord Brewery. The Company also faces all of the risks, expenses and
difficulties frequently encountered in connection with the expansion and
development of a new business. Furthermore, to the extent that the Company's
expansion strategy is successful, it must manage the transition to multiple
site, higher volume operations, the control of overhead expenses and the
addition of necessary personnel.
The Company's sales and earnings are expected to fluctuate based on seasonal
patterns. The Company anticipates that its highest earnings will occur in the
second and third quarters. Quarterly results in the future are likely to be
substantially affected by the timing of new Brewery openings. Because of the
seasonality of the Company's business and the impact of new Brewery openings,
results for any quarter are not necessarily indicative of the results that may
be achieved for a full fiscal year and cannot be used to indicate financial
performance for the entire year.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
The Company had no revenues for the three months ended March 31, 1995 and had a
net loss of $47,000 for this period. The loss was primarily attributable to
costs and expenses related to the development of the Big Buck Brewery format.
For the three months ended March 31, 1996, the Company had a net loss of
$387,000. For this period, the Company had total revenue of $886,000, $803,000
or 91% of which was derived from restaurant operations. Cost of sales, which
consists of food, beverage and supply costs, was $354,000 or 40% of total
revenue. Cost of sales decreased as a percentage of total revenues during this
period primarily as a result of operating efficiences and improvements in food
preparation and purchasing systems. Operating expenses, which include restaurant
wages and benefits, payroll taxes, occupancy costs, utilities, repairs and
maintenance, were $477,000 or 54% of total revenue. Operating expenses increased
as a percentage of total revenues during this period primarily due to fixed
costs being spread over lower sales volume. Selling, general and administrative
expenses which include additional corporate overhead costs associated with the
addition of senior corporate management whom the Brewery hired to position
itself to execute its development plan of opening three additional Big Buck
Breweries during the next eighteen months, were $319,000 or 36% of total
revenue. As the Company opens additional Breweries, selling, general and
administrative expenses as a percentage of total revenues are expected to
decrease. The net loss for the three months ended March 31, 1996 is primarily
attributable to the Company's corporate overhead structure and reduced sales due
to expected reduced seasonal demand.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
The Company had no revenues for the period from January 1, 1994 through May 25,
1995. During that period, the Company developed the Big Buck Brewery format and
completed construction of the Gaylord Brewery. The Company charged to operations
all costs associated with pre-opening expenses during the two year period ended
December 31, 1995. For future Breweries, the Company anticipates that such
expenses will be capitalized and charged to operations over the period from when
the Brewery opens until substantially all of the initial workforce is no longer
employed (not to exceed 12 months) if it is determined that such costs are
recoverable. The Gaylord Brewery opened on May 26, 1995. During the approximate
seven months ended December 31, 1995, the Company had total revenue of $2.7
million.
For the year ended December 31, 1994, the Company had a net loss of $12,000 and
for the period from May 1, 1994 through May 25, 1995, the Company had a net loss
of $218,000. These losses can be attributed primarily to the costs and expenses
related to the development of the Big Buck Brewery format, the construction of
the Gaylord Brewery and the development of the Company's operating structure.
For the year ended December 31, 1995, the Company had a net loss of $1.1
million. During this period, the Company had total revenue of $2.7 million, $2.4
million or 89% of which was derived from restaurant operations and on-site sales
of beer and $303,000 or 11% of which was derived from wholesale beer and gift
shop sales operations. The Company did not begin selling its beer on a wholesale
basis until November 1995. Cost of sales was $1.3 million or 48% of revenue.
Total operating expenses and selling, general and administrative expenses were
$2.2 million or 82% of revenue. Although there is no assurance the cost and
expense percentages will show improvement, management believes that costs
incurred during the year ended December 31, 1995, reflect certain inefficiencies
and expenses associated with opening the Gaylord Brewery and that the loss for
this period is primarily attributable to the Company's corporate overhead
structure and costs and expenses incurred in the completion of the development
and start-up of operations at the Gaylord Brewery.
LIQUIDITY AND CAPITAL RESOURCES
Prior to this Offering, the Company has met its capital requirements through
capital contributions, loans from its principal shareholders and officers, bank
borrowings and certain private placement offerings. During the years ended
December 31, 1994 and 1995, the Company sold 2,500,000 shares of Common Stock
which generated $2.4 million in net proceeds.
In July 1995, the Company secured a $1.9 million mortgage on the Gaylord
Brewery's land and building and a $800,000 equipment loan. These notes are
subject to monthly payments of principal and interest at 10.2% per annum and are
payable in full by October 1, 2000. These notes are collateralized by all assets
of the Company and are guaranteed by certain shareholders.
In August 1995, the Company obtained a line of credit with a bank with a maximum
borrowing limit of $325,000, with monthly interest payable at the bank's prime
rate plus 1%. The line is collateralized by all of the assets of the Company,
guaranteed by certain shareholders and is due on demand. The Company had
borrowed up to the maximum limit of $325,000 as of December 31, 1995 with the
balance being paid down to $110,000 as of March 31, 1996.
In December 1995, the Company entered into a financing agreement with Pyramid
Partners, L.P. ("Pyramid") for the issuance of (i) a $250,000 non-interest
bearing promissory note (the "Pre-Bridge Convertible Note") which, upon the
earlier of the completion of this Offering or January 1997, is convertible into
a number of shares of Common Stock equal to $250,000 divided by the lesser of
(x) $4.00 or (y) two-thirds of the Price to Public of the Units in this Offering
(the "Pre-Bridge Shares"), (ii) a $250,000 non-convertible promissory note
bearing interest at 10% per annum which will become due upon the earlier of the
completion of this Offering or July 1996 (the "Pre-Bridge Non-Convertible Note")
and (iii) warrants (the "Pre-Bridge Warrants") to purchase 62,500 shares of
Common Stock at the lesser of (x) $4.00 or (y) two-thirds of the Price to Public
of the Units in this Offering, (collectively the "Pre-Bridge Financing").
In February 1996, the Company sold, for $25,000 each, 60 bridge units (the
"Bridge Units"), each Bridge Unit consisting of (i) 2,500 shares of Common Stock
(the "Bridge Common Stock"), (ii) a $12,500 principal amount promissory note
bearing interest at 10% per annum due upon the earlier of 20 days after the
completion of this Offering or August 1996 (the "Bridge Notes") and (iii)
warrants to purchase 2,500 shares of Common Stock at $5.00 per share expiring in
February 2001 (the "Bridge Warrants"), (collectively the "Bridge Financing").
The Pre-Bridge Financing and the Bridge Financing are collectively referred to
as the "Pre-Offering Financings."
The proceeds of the Pre-Offering Financings were used to retire certain debt,
purchase additional brewing and bottling equipment, purchase the option to
acquire a site in Sault St. Marie, Michigan for a future Brewery and for
working capital. See "Description of Securities -- Prior Offerings."
The Company used $262,000 and $549,000 in cash for operating activities for the
year ended December 31, 1995 and the three months ended March 31, 1996. At March
31, 1996, the Company had a working capital deficit of $2.1 million. Since
inception, the Company's principal capital requirements have been the funding of
(i) the development of the Company and the Big Buck Brewery format and (ii) the
construction of the Gaylord Brewery and the acquisition of its furniture,
fixtures and equipment. Total capital expenditures for the Gaylord Brewery were
approximately $5.8 million.
The Company anticipates it will develop and open three additional Big Buck
Breweries during the next eighteen months. The Company intends to obtain real
estate financing for up to 55% of the costs of developing and opening the three
new Breweries. The proceeds of this Offering together with such financing are
expected to be sufficient to finance these expansion plans depending on the
definitive locations, site conditions, construction costs and sizes and types of
Breweries built. The Company believes that the proceeds of the Offering together
with the real estate financing will satisfy the financial needs of the Company
during the next eighteen months. There are no assurances that such real estate
financing will be available on terms acceptable or favorable to the Company, or
at all. Without such additional financing, the Company's development plans will
be slower than planned or even unachievable.
BUSINESS
OVERVIEW
The business of Michigan Brewery, Inc. is to develop, own and operate
microbrewery/restaurants known as Big Buck Brewery and Steakhouses. In May 1995,
the Company opened its first Big Buck Brewery in Gaylord, Michigan adjoining
I-75 approximately 200 miles north of Detroit, which is currently the Company's
only Brewery. The approximately 29,000 square-foot Gaylord Brewery will serve as
a model for the three Big Buck Breweries which the Company intends to develop
and open over the next eighteen months using the proceeds of this Offering and
real estate financing.
A Big Buck Brewery offers casual dining featuring moderately priced steaks,
ribs, chicken and other food and a distinctive selection of beers which are
microbrewed on-site. The Company also sells its microbrewed beer off-site
through wholesale distributors in order to promote customer interest in the
Brewery. The Company's selection of beers ranges from a light golden ale to a
dark full-bodied stout and is designed to satisfy the tastes of a broad spectrum
of consumers. A key element of the Company's strategy is to capitalize on the
growing interest of consumers in high quality, more flavorful microbrewed beer.
The Company believes it will generate customer loyalty to its beers and its
restaurant operations through customer identification with each local Big Buck
Brewery.
The Company believes the appearance of the Gaylord Brewery has contributed to
its popularity as an eating and drinking establishment. The Gaylord Brewery
features a large, open and visually stimulating dining area which highlights the
array of stainless steel and copper brewing equipment used to brew the Company's
craftbrewed beer. The Gaylord Brewery features a 4,000 square foot dining area
and a 1,600 square foot bar area. The interior is decorated with rustic
wood-finished interiors, mounted deer racks, 36-foot high vaulted ceilings and
warm lighting. The restaurant's specially commissioned Amish hand-carved wooden
furniture and overhead genuine Tennessee whisky barrel lighting fixtures add
character to the buildings decor. The friendly and attentive staff, on-site
brewing and summertime outdoor seating and live music are designed to create an
appealing atmosphere for lunch, dinner and bar customers.
Consumer interest in more flavorful beer has resulted in significant growth in
the craftbrewed beer market during the last several years, despite a decline in
per capita beer consumption. The number of microbreweries in the United States
has grown from 21 in 1985 to approximately 280 in 1995. During the same period,
the annual production of craftbrewed beer in the United States has grown from
75,000 barrels to approximately 3.7 million barrels. Despite these high levels
of growth, sales of craftbrewed beers represented less than 2% of total beer
sales in the United States in 1995.
The Company has an option until June 30, 1996 to purchase a site in Sault St.
Marie, Michigan adjacent to the international bridge connecting the upper
peninsula of Michigan with Ontario, Canada. The Company is negotiating for the
purchase of a site in suburban Detroit, Michigan which would be accessible to
the over 3.2 million Detroit metro area residents. The Company expects to locate
the third new Brewery in an Upper Great Lakes state other than Michigan.
THE CRAFTBREWED AND SPECIALTY BEER MARKET
The Company's brewing operations are in the relatively small but rapidly growing
craftbrewing segment of the United States brewing industry, which includes
microbreweries such as the Company, contract brewers, regional specialty brewers
and brewpubs. Craftbrewed beers are distinguishable from other domestically
produced beers by their flavor and brewing styles. Consumer interest in higher
quality, more flavorful beer has resulted in significant growth in the
craftbrewed beer market during the last several years. Over the five-year period
ended December 31, 1994, according to industry sources, shipments in the United
States craftbrewed beer segment increased at a compound annual growth rate of
approximately 39% while shipments in the United States beer industry experienced
no meaningful growth.
BUSINESS STRATEGY -- EXPANSION PLANS
Upon completion of the three Big Buck Breweries which the Company intends to
develop and open with the proceeds of this Offering and other financing, the
Company intends to develop and open additional Big Buck Breweries throughout the
upper midwest and eventually across the United States.
The Company believes that one of the primary factors for the popularity to date
of the Gaylord Brewery is the development of customer loyalty to its craftbrewed
beers. The Company believes patrons of the Gaylord Brewery, who may order a Big
Buck beer with a meal or merely sample a Big Buck beer at the bar, have
developed a loyalty to one of the distinctive Big Buck beers for a variety of
reasons including (i) the opportunity to identify their favorite Big Buck beer
with the Brewery, (ii) the opportunity to sample any of the nine handcrafted
beers available at the Brewery and to select a favorite beer, (iii) the quality
of Big Buck beer and (iv) the desire to support the local Brewery. Increased
customer loyalty to Big Buck beers results in repeat business at Big Buck
Brewery, thereby increasing revenues from restaurant operations and off-site
retail sales.
While craftbrewed beers currently have less than a 2% share of the national beer
market, there are numerous cities wherein craftbrewed beers have a significantly
higher share of the local market including San Francisco (17%), Boston (9%) and
Denver (10%). The Company believes that these higher market shares for
craftbrewed beer result from the same customer preferences that it has
experienced at its Gaylord Brewery. The Company will seek to develop customer
loyalty to its Big Buck beers at each new Brewery.
Future Big Buck Brewery sites will be selected by management after consideration
of various strategic, regulatory, physical and demographic attributes.
Management believes that locations like that of the Gaylord Brewery adjacent to
major expressways significantly increase restaurant patronage. Management also
reviews the demographic attributes of potential communities in which it may
expand. These attributes include traffic counts, population, sales tax revenues,
alcohol consumption and hotel capacity and occupancy rates. In addition,
management will consider the laws of each state applicable to the Company before
expanding into any new state. It is expected that Big Buck Breweries located in
metropolitan areas will be larger than those located outside of metropolitan
areas and are expected to achieve higher revenues.
RESTAURANT OPERATIONS
GENERAL. A Big Buck Brewery restaurant offers craftbrewed beer brewed on-site
along with a menu featuring steaks, ribs and chicken in a unique,
architecturally spacious setting. The Brewery offers nine different types of
beers ranging from a light golden ale to a full-bodied stout. The Company
attempts to create an exciting yet casual restaurant where patrons can have fun
and feel comfortable.
DESIGN AND LAYOUT. The Gaylord Brewery features a restaurant with a 4,000
square-foot dining area which is designed to create a dramatic visual impact on
customers. The Gaylord Brewery restaurant features warm lighting, 36-foot high
vaulted ceilings, mounted deer racks and a rustic wood-finished interior which
highlights the array of stainless steel and copper brewing tanks and equipment.
The on-site brewing equipment, which consists of strategically placed rows of
stainless steel and copper tanks and pipes, is an integral aspect of the design
and enhances the visual impact of the restaurant. The restaurant's dining and
bar areas seat approximately 400 and the layout is flexible, permitting tables
to be rearranged to accommodate customer demand. A wall of television sets,
including a ten foot screen television set, adjacent to the bar area provides
customers the opportunity to watch sporting and other special events. During
summer months, the Gaylord Brewery features an adjacent approximately 7,000
square-foot tent covered area with live music and outdoor seating. The Gaylord
Brewery will serve as a model for future Breweries.
MENU AND PRICING. The menu at a Big Buck Brewery restaurant consists of
appetizers, soups, meal-sized salads, and entrees, including steaks, ribs,
hamburgers, chicken, fish, pastas as well as a variety of desserts. Management
analyzes menu items for popularity, profitability and ease of preparation. The
menu items are selected to complement the Company's craftbrewed beers. The
restaurant menu is designed to offer a broad range of prices that convey value
to the customer. Entrees range in price from $4.45 to $27.95 with most entrees
priced around $12.00. From inception through December 31, 1995, the sale of beer
accounted for 22.8% of the Gaylord Brewery's restaurant sales.
CUSTOMERS. The Company believes its Big Buck Brewery restaurant appeals to a
wide range of customers and will draw its clientele from throughout the
region in which it is located. The Gaylord Brewery is located approximately
200 miles north of Detroit at exit 282 on I-75, allowing passersby to
conveniently visit the Brewery. The Gaylord Brewery opens at 11:30 a.m. daily
(noon on Sundays).
BREWING OPERATIONS
GENERAL. The brewhouse at the Gaylord Brewery presently has the capacity to brew
10,000 barrels of beer per year, and is designed to produce 20,000 barrels per
year with the installation of additional fermentation tanks. Future Breweries
will be built with initial brewing capacities of 3,000 to 5,000 barrels per year
and are also expected to have production capacities of 20,000 barrels per year
with the installation of additional fermentation tanks. The Company intends to
purchase and install additional fermentation tanks as demand for its beers
requires increased production. Each brewhouse will be custom designed to be
integrated into the restaurant layout in the most efficient and aesthetic
manner.
OFF-SITE DISTRIBUTION. The Company sells its microbrewed beer off-site through
wholesale distributors in order to promote customer interest in the Brewery. The
Company transports its beer to each distributor for redistribution to retailers
which include bars, pubs, restaurants and supermarkets. The beer is available by
the keg to be served on draft at restaurants, bars and pubs and is available in
bottles for retail sales. Currently, off-site sales of the Company's beer are
generally limited to within 120 miles of the Gaylord Brewery. Off-site sales of
beer accounted for approximately 2% of revenues during the period from inception
through March 31, 1996. The Gaylord Brewery currently has the capacity to meet
additional demand for off-site sales of beer.
PROMOTION OF PRODUCTS WITHIN LOCAL MARKETS. The Company markets its beer
locally with the use of point of sale materials as well as several forms of
other promotional materials including coasters, tap handles and color brochures.
These items are, for the most part, used by retailers to promote Big Buck beer
within their establishment. In addition, the Company offers guided tours of the
Gaylord Brewery to further increase consumer awareness of Big Buck beer. The
Company believes that its educational and promotional methods are more effective
in communicating with consumers than broad-based, less flexible national beer
advertising campaigns.
BREWING EQUIPMENT. The Company's brewing equipment was designed and built by
J.V. Northwest, Inc. of Wilsonville, Oregon and is automated wherever possible.
The system begins with a 47 foot tall, stainless steel grain silo fabricated to
replicate a giant beer bottle. The silo is painted "beer bottle brown" and the
label was hand painted by a commissioned artist. The Gaylord Brewery houses a
20-barrel mash tun; lauter tun; a brew kettle; 50-barrel hot liquor tank;
50-barrel cold liquor tank; six- 40 barrel fermenters; two-40 barrel
conditioning tanks and seven-10 barrel bright beer serving tanks. Filtering is
done through a diatonaceous earth filtering system which removes yeast and other
naturally occurring material resulting in a clear final product. The brewhouse
permits the production of a wide range of beer styles which can be adapted to
market demand for various beer styles today and into the future. It is
contemplated that the Company will use similar equipment at all brewhouses built
in additional Big Buck Breweries.
BOTTLING, KEGGING AND PACKAGING. The Company uses a technologically advanced
bottling line to bottle its beer for off-site retail sales. The bottle filler
utilizes a carbon dioxide environment during the bottling process to extend
shelf life. Kegs are filled by a keg rack system and the kegs are stored pending
shipment to wholesale distributors in a specially designed cooler. The Company's
kegs have the Big Buck Brewery and Steakhouse name and logo stamped into the top
rail for easy identification and a handsome appearance. The Company also sells
its beer in a container called a "party pig," a plastic pressurized unit holding
2.25 gallons (one case) of beer. The pressurization allows beer to be served
from the customer's refrigerator, boat or golf cart. Party pigs are sold through
the Company's gift shop.
QUALITY CONTROL. As the Company opens future Breweries, quality control of
each brewhouse will be under the supervision of the Company's Brewmaster. As
with the Gaylord Brewery, each brewhouse will contain a laboratory to monitor
and maintain quality assurance in the brewing and packaging processes.
INGREDIENTS AND RAW MATERIALS. The Company currently purchases its malted barley
from market sources on a competitive bid basis. Raw materials such as hops are
available from multiple sources at competitive prices. The Company also uses
competitive sources for its supply of packaging materials such as bottles,
labels, six pack carriers and shipping cases.
BREWING PROCESS
Beer is made primarily from four natural ingredients: malted barley, hops, yeast
and water. The Company uses only the finest barley, primarily two row, in its
production. The universal spice of beer is hops. Hops, like the grapes used in
wine, are varietal. Brewers select hops based on specific varieties grown in
select areas around the world. Some hop varieties are selected for their
bittering qualities, while others are chosen for their ability to impart
distinctive aromas to the beer. Yeast is a uni-cellular organism whose
metabolism converts sugar into alcohol and carbon dioxide. The Company uses only
specially selected yeast. The entire brewing process from mashing through
filtration typically is completed in 14 to 21 days, depending on the formulation
and style of the beer being brewed.
FROM GRAIN TO GLASS . . .
HOW BIG BUCK BEER IS MADE
Malted barley is cracked in a roller mill (1). Milled barley is called grist.
Hot water (2) (called "liquor") and grist are mixed in the mash tun (3),
producing the mash. A sweet, clear liquid called wort is filtered out of the
mash in the lauter tun (4) and transferred to the kettle (5). The wort is
brought to a rolling boil in the kettle. Some hops are added early to provide a
mild bitterness. Other hops (finishing hops) are put in later to give an aroma.
The hot wort is cooled to fermentation temperature through a heat exchanger (6).
A cold liquor tank (7) is occasionally added in warm climates when producing
lagers which require lower fermentation temperatures. Yeast is added to the cold
wort in the uni-tank (8) and fermentation begins. Fermentation is the process by
which brewers yeast transforms the sweet wort into a flavorful solution
containing alcohol and carbon dioxide. After fermentation, the green beer is
aged to develop its final smooth taste. Filtration (9) removes yeast to clarify
the beer. After filtration, the finished beer is stored in a bright beer tank
(10) (serving tank) until it is ready to be served. A Brewery will keg (11)
and/or bottle and distribute the beer as well as serve it on the premise
directly out of the bright beer tank. At this point, the beer (12) is at the
height of its freshness and flavor.
[GRAPHIC OF ABOVE PROCESS]
BEER VARIETIES
The Company believes that its diverse and high quality beer varieties encourage
the trial of new beer and, over time, help to create more knowledgeable and
sophisticated beer drinkers. The Company's beers cover a full range of flavors
from very light, to medium, to very dark and heavy.
BILL'S PRIVATE STOCK: American-style low calorie or "light" beer. This beer
is formulated to appeal to those who prefer a low-calorie brew. Private Stock
is an all malt brew with a touch of Czechoslovakian Saaz hops.
WOLVERINE WHEAT: This American wheat beer is made from a blend of malted barley
and malted wheat. The wheat imparts a unique, refreshing flavor to the beer.
Wolverine Wheat is straw in color, lightly hopped, crisp and refreshing.
BIG BUCK BEER: Big Buck is the Company's flagship brand and its top seller. This
is a standard American-style beer with a small amount of corn added to the grist
to give the brew a smooth, easy-drinking character that most American consumers
have come to expect in a beer. Big Buck beer has a rich golden color and a light
malt character balanced with a mild dose of hops.
RASPBERRY WHEAT: A version of Wolverine Wheat, this beer is flavored with pure
fruit to impart a subtle raspberry nose, a delicate fruit flavor and a slight
pink hue.
ANTLER ALE: An amber ale formulated as a transitional flavor between lighter and
darker beers. Antler Ale has a light amber color while maintaining a mild, clean
flavor and a low hopping rate.
REDBIRD ALE: Similar to a traditional pale ale, Redbird Ale has a reddish copper
appearance and medium body and well hopped. This is a heartier beer with a
medium body and a pleasant hop bitterness.
BILLY BOCK: A full bodied bock beer which gets its distinctive character from a
blend of four different grains and three hop varieties. Billy Bock has a deep
reddish brown color and is generously hopped to balance the full body and
complex character.
BLACK RIVER STOUT: A cream stout which is slightly sweet with a moderate hop
bitterness. The rich flavor and black color of this brew comes from six
different grains. Deep flavors of coffee and caramel are present in this brew.
BLACK'N BERRY: A Black'n Tan is generally a stout mixed with pale or amber
ale. Black'n Berry is a new twist, Black River Stout and Raspberry Wheat. The
delicate fruit qualities are accented by the heavy stout flavor.
SALES AND MARKETING
The Company's primary sources of advertising include television, outdoor
billboards, radio and newspapers, which generally cover the local market, with
the exception of billboards in more distant geographical areas of Michigan. In
addition to these sources, the Company uses local travel publications including
golf and vacation planners which are distributed at no additional fee to
previous visitors of the area as well as inquiries via the local travel
information center and tourism bureau. The Company also distributes four-color
brochures promoting the Gaylord Brewery to major corporations and various travel
welcome centers throughout Michigan as well as local hotels and resorts. During
the year ended December 31, 1995, the Company incurred approximately $200,000 in
advertising expenses.
The Company strives to provide its customers with a dining experience that will
encourage repeat business and promote "word of mouth" advertising. To supplement
its service-oriented marketing efforts, the Company sells merchandise including
hats, t-shirts, sweatshirts and other items bearing the Big Buck Brewery name
and logo.
COMPETITION
The restaurant and brewing industries are highly competitive. The restaurant
industry is highly competitive with respect to price, service, food quality
(including taste, freshness and nutritional value) and location. New restaurants
have a high failure rate. The restaurant industry is also generally affected by
changes in consumer preferences, national, regional and local economic
conditions, and demographic trends. The performance of individual restaurants
may also be affected by factors such as traffic patterns, demographic
considerations, and the type, number and location of competing restaurants. In
addition, factors such as inflation, increased food, labor and employee benefit
costs, and the lack of availability of experienced management and hourly
employees may also adversely affect the restaurant industry in general and the
Company's restaurants in particular. Restaurant operating costs are further
affected by increases in the minimum hourly wage, unemployment tax rates and
similar matters over which the Company has no control. There are numerous
well-established competitors, including national, regional and local restaurant
chains, possessing substantially greater financial, marketing, personnel and
other resources than the Company. The Company also competes with a large variety
of locally owned restaurants, diners, and other establishments that offer
moderately priced food to the public. The Company also competes with other
microbrewery restaurants in a highly competitive and developing microbrewery and
brewpub restaurant market.
The domestic beer market is highly competitive due to: the enormous advertising
and marketing expenditures by national and major regional brewers; the
continuing proliferation of microbreweries, regional craft breweries, brewpubs,
and other small craftbrewers; the more recent introduction of fuller-flavored
products by certain major national brewers and a general surplus of domestic
brewing capacity, which facilitates existing contract brewer expansion and the
entry of new contract brewers. Although domestic demand for craftbrewed beers
has increased dramatically over the past decade, there can be no assurance that
this demand will continue. The Company anticipates intensifying competition in
the craftbrewed and fuller-flavored beer markets.
GOVERNMENT REGULATION
BEER AND LIQUOR REGULATION. A significant percentage of revenues of Big Buck
Breweries is derived from beer sales. On-site sales of beer sales of beer
accounted for 20% of revenues and off-site sales of beer accounted for an
additional 2% of revenues during the period from inception through March 31,
1996. These percentages are expected to increase over the next few years in
relation to food sales. The Company must comply with federal licensing
requirements imposed by the Bureau of Alcohol, Tobacco and Firearms of the
United States Department of Treasury, as well as the licensing requirements of
states and municipalities where its Breweries are or will be located. Failure to
comply with federal, state or local regulations could cause the Company's
licenses to be revoked and force it to cease the brewing and/or sale of its
beer. Typically, licenses must be renewed annually and may be revoked or
suspended for cause at any time. Management believes the Company is operating in
substantial compliance with applicable laws and regulations governing its
operations.
RESTAURANT REGULATION. The restaurant industry is subject to numerous federal,
state and local government regulations, including those relating to the
preparation and sale of food and to building and zoning requirements. The
Company is subject to regulation by air and water pollution control divisions of
the Environmental Protection Agency of the United States and by various states
and municipalities in which its Breweries are or will be located. The Company is
also subject to laws governing its relationship with employees, including
minimum wage requirements, overtime, working and safety conditions and
citizenship requirements. Restaurant operating costs are affected by increases
in the minimum hourly wage, unemployment tax rates, sales taxes and similar
matters, such as any government mandated health insurance, over which the
Company has no control. Management believes the Company is operating in
substantial compliance with applicable laws and regulations governing its
operations.
The federal government currently imposes an excise tax of $18 on each barrel of
beer produced for domestic consumption in the United States. However, each
brewer with production under 2,000,000 barrels per year is granted a small
brewer's excise tax credit in the amount of $11 per barrel on its first 60,000
barrels produced annually. To the extent Company-wide production increases to
amounts over 60,000 barrels per year, there will be an increase in the average
federal excise tax rate of the Company. The Company is not aware of any plans by
the federal government to reduce or eliminate the small brewer's credit.
Michigan currently imposes an excise tax of $6.30 per barrel on each barrel of
beer sold in Michigan. However, each brewer which is a "microbrewery" under
Michigan law (presently with production under 20,000 barrels per year) is
granted a microbrewer's excise tax credit in the amount of $2 per barrel. To the
extent Company-wide production increases to amounts over 20,000 barrels per
year, there will be an increase in the average Michigan excise tax rate of the
Company. Increased excise taxes on alcoholic beverages have been considered by
the United States Congress as an additional source of tax revenue in connection
with various proposals and could be included in future legislation.
The Company is licensed under Michigan law as a "microbrewery." A microbrewery
in Michigan is limited to the production of not more than 20,000 barrels of beer
per year by all breweries owned or controlled by the same person, whether within
or outside Michigan. Without a change in current law, the Company will limit its
sales of beer off-site so as to reserve its brewing capacity for sales of beer
on-site which provides the Company higher margins but do not reach the same
customer base. Legislation has been introduced in Michigan (House Bill No. 4005)
which would increase the maximum production of a microbrewery to not more than
60,000 barrels of beer per year and would apply this restriction only to
breweries located within Michigan. In the event this or comparable legislation
is not passed, the Company intends to alter its expansion plans to increase its
emphasis on sales of beer on-site.
The Company is subject to "dram-shop" laws in Michigan and will be subject to
such statutes in certain other states into which it expands. These laws
generally provide someone injured by an intoxicated person the right to recover
damages from an establishment which wrongfully served alcoholic beverages to
such person. The Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance.
EMPLOYEES
At March 15, 1996, the Company employed approximately 120 persons, four of whom
served in executive and administrative capacities, seven of whom served as
restaurant management personnel, and the remainder of whom were hourly
personnel. No employee is covered by a collective bargaining agreement, and the
Company has never experienced an organized work stoppage, strike or labor
dispute. The Company considers relations with its employees to be satisfactory.
TRADEMARKS AND SERVICE MARKS
The Company applied for registration of a number of trademarks and service marks
with the United States Patent and Trademark Office on February 1, 1996,
including BIG BUCK BREWERY AND STEAKHOUSE and BIG BUCK BEER. The United States
Patent and Trademark Office has made no preliminarily determinations on the
Company's applications. In the event the Company is denied registration, the
Company may incur significant expense in creating and developing new marks or in
operating under its existing marks, and may be restricted in where it can locate
future Breweries using the Company's marks. There is no assurance that the
Company's marks will be granted trademark registration for all or any of the
uses proposed in the Company's application. In the event that the Company's
marks are granted registration, there is no assurance that such marks will be
enforceable against prior users in areas where the Company conducts operations.
The Company regards its marks as having substantial value and as being an
important factor in the marketing of its BIG BUCK BREWERY restaurants and beer.
The Company's policy is to pursue registration of its marks whenever possible
and to oppose vigorously any infringement of its marks.
PROPERTIES
The Company's executive offices are located in Gaylord, Michigan. The Company
leases approximately 1,000 square feet of office space for $1,250 per month. The
lease on this office space will expire in August 1996, but may be extended by
the Company for one additional year for $1,310 per month.
The Company owns the Gaylord Brewery, including the real property on which it is
located. See "-- Restaurant Operations" for a description of the Gaylord
Brewery. In the opinion of management, the Company's properties are adequately
covered by insurance.
LITIGATION
The Company is involved in legal actions in the ordinary course of its business.
Although the outcomes of any such legal actions cannot be predicted, in the
opinion of management there is no legal proceeding pending against or involving
the Company for which the outcome is likely to have a material adverse effect
upon the financial position or results of operations of the Company.
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of the Company are as
follows:
NAME AGE POSITION(S)
- ---- --- -----------
William F. Rolinski 48 Chief Executive Officer, President and Director
Gary J. Hewett 34 Chief Operating Officer and Executive Vice
President
Anthony P. Dombrowski 35 Chief Financial Officer
Scott A. Graham 30 Brewmaster
Blair A. Murphy, M.D. 42 Director
Henry T. Siwecki 52 Director
Casimer I. Zaremba 75 Director
William F. Rolinski is a founder of the Company and has been the Chief Executive
Officer, President and a Director since its formation in 1993. From 1987 to
1994, Mr. Rolinski was the founder, secretary and Corporate Counsel of Ward Lake
Energy, Inc., an independent producer of natural gas in Michigan. While Mr.
Rolinski was at Ward Lake, the company drilled and produced over 500 natural gas
wells with combined reserves of over $200 million.
Gary J. Hewett became the Chief Operating Officer and Executive Vice President
of the Company in April 1996. From 1989 to March 1996, he served in various
capacities at Hooters of America, Inc., a national restaurant chain, including
Vice President of Franchise Operations in which Mr. Hewett was responsible for
the operational support of 84 franchised restaurants and Vice President of
Company Operations where he was responsible for the operation of 28
company-owned restaurants. Mr. Hewett's responsibilities at Hooters included
supervision of site selection, restaurant design and layout, training and new
restaurant openings. From 1986 to 1989, Mr. Hewett was employed by the Marriott
Corporation as a restaurant general manager.
Anthony P. Dombrowski is a consultant to the Company acting in the capacity
of Chief Financial Officer since January 1996. For the past two years, Mr.
Dombrowski has operated his own financial and consulting business. Mr.
Dombrowski began his career with Price Waterhouse LLP in 1982. From 1989 to
1995, Mr. Dombrowski was the Chief Financial Officer of Ward Lake Energy,
Inc. Mr. Dombrowski devotes approximately 90% of his time to the Company.
Scott A. Graham has been the Company's Brewmaster since March 1995. For the five
years prior to joining the Company, Mr. Graham was employed by Bayside Beverage
Corp., a beer and wine wholesaler, in various positions including brand manager
and purchasing agent. Mr. Graham holds a diploma in Brewing Technology from the
Siebel Institute of Technology. Upon earning his diploma, Mr. Graham served a
nine month apprenticeship at the Frankenmuth Brewery under the supervision of
German Master Brewer Fred Scheer.
Blair A. Murphy, M.D. is a founder of the Company and has been a Director
since its formation in 1993. Dr. Murphy has been a urological surgeon since
1990 and is presently a self-employed medical practitioner.
Henry T. Siwecki has been a Director since August 1995. For more than the last
five years, Mr. Siwecki has been the sole owner and president of Siwecki
Construction, Inc., a commercial and residential construction contractor.
Casimer I. Zaremba is a founder of the Company and has been a Director since
its formation in 1993. Mr. Zaremba has been a private investor for more than
the past five years.
Messrs. Murphy, Siwecki and Zaremba (the Company's non-employee Directors)
receive options pursuant to the 1996 Director Stock Option Plan described under
"-- Director Stock Option Plan." Management members of the Board receive no
compensation as Board members. Board members are paid their expenses, if any,
which are incurred solely to participate in meetings of the Board or Board
committees.
COMMITTEES
The Board of Directors has a Compensation Committee and an Audit Committee, both
of which consist of only non-management Board members. The Audit Committee,
which is comprised of Messrs. Murphy, Siwecki and Zaremba, is responsible for
recommending independent public accountants, reviewing with the independent
public accountants the scope and results of the audit engagement, establishing
and monitoring the Company's financial policies and control procedures,
reviewing and monitoring the provision of non-audit services by the Company's
public accountants and reviewing all potential conflict of interest situations.
The Compensation Committee, consisting of Messrs. Murphy, Siwecki and Zaremba,
determines and establishes the salaries, bonuses and other compensation of the
executive officers of the Company.
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the Company for the
period May 26, 1995 through December 31, 1995 to the Company's Chief Executive
Officer. Prior to May 26, 1995, Mr. Rolinski was not paid for his services. No
other executive officer received compensation in excess of $100,000 during
either of the last two fiscal years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------
OTHER ANNUAL
NAME OF INDIVIDUAL POSITION SALARY(1) COMPENSATION(2)
- ------------------ -------- --------- ---------------
William F. Rolinski Chief Executive Officer $32,000 $7,300
(1) The current annual salary of Mr. Rolinski is $150,000.
(2) Represents an automobile allowance.
STOCK OPTION PLAN
In January 1996, the Board of Directors and shareholders of the Company adopted
the Michigan Brewery, Inc. 1996 Stock Option Plan (the "Plan"). The Plan
provides for the granting of options to designated employees and consultants of
the Company, to purchase up to an aggregate of 300,000 shares of Common Stock.
Options that qualify as "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986 and options that do not qualify as such
"incentive stock options" ("nonstatutory stock options") may be granted under
the Plan. The Plan is administered by the Board of Directors, or a committee
designated by the Board, which determines the employees, officers, directors and
others who are to receive options, the type of option to be granted and the
number of shares subject to each option and the exercise price of each option.
Options may not be granted under the Plan after January 2006. Stock options must
be granted at an exercise price not less than the fair market value of the
Common Stock on the dates the options are granted (or, for persons who own more
than 10% of the Company's outstanding voting stock, not less than 110% of such
fair market value). Aside from the maximum number of shares of Common Stock
reserved for issuance under the Plan, there is no minimum or maximum number of
shares which may be subject to options granted under the Plan. However, the
aggregate fair market value (determined as of the time the option is granted) of
shares of Common Stock with respect to which incentive stock options become
exercisable for the first time by an optionee under Plan during any calendar
year may not exceed $100,000. Options may not be transferred other than by will
or the laws of descent and distribution and during the lifetime of an optionee
may be exercised only by the optionee. The term of each option, which is fixed
by the Board of Directors, may not exceed ten years from the date the option is
granted (except that the term may not exceed five years for incentive stock
options granted to persons who own more than 10% of the Company's outstanding
voting stock). Gary J. Hewett, Anthony P. Dombrowski and Scott A. Graham,
executive officers of the Company, have been granted options to purchase 50,000,
30,000 and 30,000 shares respectively, at the Price to Public of the Units sold
pursuant to this Prospectus, subject to the completion of this Offering. Such
options will become exercisable in equal amounts over a four year period.
Executive officers of the Company as a group (four persons) have been granted an
aggregate of 110,000 options. Options for an additional 56,000 shares at the
Price to Public of the Units sold pursuant to this Prospectus have been granted
to employees who are not officers of the Company, subject to the completion of
this Offering.
DIRECTOR STOCK OPTION PLAN
In January 1996, the Company adopted the 1996 Director Stock Option Plan (the
"DSOP"), pursuant to which 100,000 shares of Common Stock have been reserved for
the grant of non-incentive stock options to the Company's outside directors.
Under the DSOP, upon registration of the Units under the Securities Act, the
Company automatically grants an initial option for the purchase of 5,000 shares
of Common Stock to each outside director and thereafter grants stock options
annually for each year of continued service on the Board for the purchase of an
additional 5,000 shares of Common Stock. Each option is granted at fair market
value on the date of grant and is exercisable for a period of ten years
commencing one year after the date of grant. No options have been granted under
the DSOP to date.
INDEMNIFICATION
The Bylaws generally provide that the Company will indemnify its directors and
officers to the fullest extent authorized or permitted under the Michigan
Business Corporation Act and that the Company will advance expenses at the
request of a director or officer. In addition, the Articles of Incorporation
generally limit the personal liability of directors for monetary damages for
breaches of fiduciary duty.
CERTAIN TRANSACTIONS
Siwecki Construction, Inc. served as the general contractor of the Gaylord
Brewery. Siwecki Construction, Inc. is wholly-owned by Henry T. Siwecki. The
Company purchased $3.4 million of general contractor services from Siwecki
Construction, Inc. for the Gaylord Brewery. Upon completion of the
construction of the Gaylord Brewery, the Company and Siwecki Construction,
Inc. agreed that $250,000 of the amounts which the Company owed Siwecki
Construction Inc. would be satisfied by the issuance of 125,000 shares of
Common Stock. This reflected a valuation of $2.00 per share which was greater
than two times the book value of the Common Stock at that time. Subsequent to
both the completion of the construction of the Gaylord Brewery and the
negotiation and issuance of the 125,000 shares of Common Stock, Mr. Siwecki
became a director of the Company. The Company may employ Siwecki
Construction, Inc. as general contractor for construction of future
Breweries. The Company believes the terms of its transactions with Siwecki
Construction, Inc. with respect to the Gaylord Brewery were no less favorable
to the Company than those that could be obtained from unaffiliated third
parties.
Zaremba Equipment, Inc. provided certain equipment to the Company for use at
the Gaylord Brewery. Zaremba Equipment, Inc. is owned by Walter Zaremba, a
founding shareholder and former director of the Company. The Company
purchased an aggregate of $71,780 of equipment, including a dump truck, five
trailers, and maintenance equipment, from Zaremba Equipment, Inc. for the
Gaylord Brewery between August and September 1995. The Company believes the
terms of its transactions with Zaremba Equipment, Inc. with respect to the
Gaylord Brewery were no less favorable to the Company than those that could
be obtained from unaffiliated third parties.
The Company issued a promissory note for $250,000, with annual interest thereon
at nine percent (9%), to Casimer I. Zaremba on March 17, 1995 which was due and
payable on May 17, 1995. A portion of the proceeds of the Pre-Bridge Financing
was used to repay $50,000 borrowed thereunder. On April 10, 1996, the Company
and Casimer I. Zaremba agreed to replace such promissory note with a new
promissory note for $175,000, with annual interest thereon at nine percent (9%),
to Casimer I. Zaremba. Such new promissory note is due and payable June 30,
1996, but the same may be pre-paid, without penalty, at any time by the Company.
A portion of the proceeds of the Bridge Financing was used to repay $50,000
borrowed thereunder. The Company will use a portion of the proceeds of the
Offering to retire this promissory note on or before June 30, 1996. The Company
believes the terms of its transactions with Casimer I. Zaremba with respect to
the Gaylord Brewery were no less favorable to the Company than those that could
be obtained from unaffiliated third parties.
The Company has entered into a $750,000 revolving credit facility with Gornick
Holdings Ltd. Partnership. Prior to the Pre-Offering Financings, the Company had
borrowed $250,000 under this credit facility. Messrs. Rolinski, Murphy, Zaremba
and Siwecki, shareholders of the Company, guaranteed repayment of this facility.
A portion of the proceeds of the Pre-Offering Financings was used to repay the
$250,000 borrowed thereunder. The revolving credit facility was terminated by
the Company on April 1, 1996.
The Company has entered into a loan agreement with NBD Bank for three separate
loan facilities which aggregate $3.0 million. Messrs. Rolinski, Murphy and
Zaremba, each a director of the Company, have personally guaranteed repayment of
all amounts under this loan agreement. Upon completion of this Offering, Messrs.
Rolinski, Murphy and Zaremba do not intend to personally guarantee obligations
of the Company.
The Company and its affiliates will only engage in other material transactions
with promoters if the transactions are (i) on terms no less favorable to the
Company or its affiliates than those that are generally available from
unaffiliated third parties and (ii) ratified by a majority of independent
outside members of the Company's Board of Directors who do not have an interest
in the transactions.
REGISTRATION OF OTHER SECURITIES
Concurrently with this Offering, the Company is registering the Pre-Bridge
Shares for resale to the public. Such resale will not be underwritten by the
Underwriters.
Upon the Company becoming eligible to use Form S-3 under the Securities Act, the
Company intends to register for resale to the public on behalf of Pyramid and
the holders of the Bridge Units, the Bridge Common Stock and the shares of
Common Stock issuable upon exercise of the Pre-Bridge Warrants and the Bridge
Warrants. Such resale will not be underwritten by the Underwriter. These
registrations for resale are expected to be included in a Registration Statement
on Form S-3 (the "Secondary Registration Statement") intended to be filed by the
Company approximately one year after the date of this Prospectus. The Company
will not receive any proceeds from the resale of these securities. However, the
Company would receive proceeds upon the exercise of the Pre-Bridge Warrants and
the Bridge Warrants.
Sales of the Pre-Bridge Shares or the shares registered in the Secondary
Registration Statement, or even the potential of such sales at any time, may
have an adverse effect on the market price of the Units offered hereby. See
"Description of Securities -- Prior Offerings," and "Shares Eligible for
Future Resale."
PRINCIPAL SHAREHOLDERS
The following table contains certain information as of the date of the Offering
as to the number of shares of Common Stock beneficially owned by (i) each person
who beneficially owns 5% or more of the Company's Common Stock, (ii) each person
who is a director of the Company and (iii) all persons who are directors and
officers of the Company as a group, and as to the percentage of the outstanding
shares held by them on such date. Each person identified below possesses sole
voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
SHARES PERCENT OF OUTSTANDING SHARES(1)
BENEFICIALLY --------------------------------
OWNED (1) BEFORE OFFERING AFTER OFFERING
--------- --------------- --------------
<S> <C> <C> <C>
William F. Rolinski(2) 840,008 31.7 16.9
Casimer I. Zaremba(2) 675,007 25.5 13.6
Dr. Blair A. Murphy(2) 635,007 24.0 12.8
Henry T. Siwecki(2)(3) 136,989 5.2 2.8
All Directors and Executive Officers
as a group (seven persons)(3) 2,287,011 86.3 46.0
</TABLE>
(1) Securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations of the Securities and Exchange Commission and,
accordingly, may include securities owned by or for, among others, the
spouse, children or certain other relatives of such person as well as
other securities as to which the person has or shares voting or
investment power or has the option or right to acquire Common Stock
within 60 days after the date of the Offering. Shares of Common Stock
subject to options, warrants or convertible debt securities currently
exercisable or exercisable within 60 days after the date of the
Offering, are deemed to be outstanding for purposes of computing the
percentage of shares beneficially owned by the person holding such
options, warrants or convertible debt securities, but are not deemed to
be outstanding for purposes of computing such percentage for any other
person. Assumes identified persons do not purchase Units in this
Offering.
(2) The address of Messrs. Rolinski, Murphy, Zaremba and Siwecki is c/o
Michigan Brewery, Inc., 1999 Walden Drive, Gaylord, Michigan 49735.
(3) Includes 6,000 shares of Common Stock subject to currently exercisable
warrants.
DESCRIPTION OF SECURITIES
UNITS
Each Unit offered hereby consists of one share of Common Stock and one
redeemable Class A Warrant. Class A Warrants are immediately exercisable and
separately transferrable from the Common Stock. Each Class A Warrant entitles
the holder to purchase at any time until redemption or four years following the
date of this Prospectus one share of Common Stock at an exercise price of $8.00
per share, subject to adjustment.
CAPITAL STOCK
The Company's Articles of Incorporation authorize it to issue 10,000,000 common
shares, with a par value of $.01 per share. After the closing of this Offering,
there will be issued and outstanding 4,968,120 shares of Common Stock (5,305,620
shares if the Underwriters' over-allotment option is exercised in full) and
Class A Warrants to purchase 2,250,000 shares of Common Stock, (2,587,500 shares
if the Underwriters' over-allotment is exercised in full), and the
Representative's Warrant to purchase up to 225,000 shares of Common Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of record
at each meeting of shareholders. No share of Common Stock is entitled to
preference over any other share, and each share of Common Stock is equal in all
respects to any other share. In any distribution of assets, whether voluntary or
involuntary, holders are entitled to receive pro rata the assets available to
holders of Common Stock after creditors have been paid in full and after any
liquidation preference of any other class of stock has been satisfied. The
outstanding shares are, and the stock offered hereby, upon payment therefor will
be fully paid and nonassessable.
The board of directors of the Company has the authority to issue the remaining
unissued authorized shares without shareholder approval. Shares could be issued
to deter or delay a takeover or other change in control of the Company.
Holders of the Common Stock have no preemptive rights to purchase additional
securities which may be offered by the Company. There is no cumulative voting
for the election of directors. Accordingly, the owners of a majority of
outstanding voting shares may elect all of the directors if they choose to do
so. All shares of Common Stock are entitled to participate equally in all
dividends when, as and if declared by the board of directors out of funds
legally available therefor.
RESTRICTIONS ON CERTAIN PURCHASES OF STOCK
Section 436.19b of the Michigan Liquor Control Act (the "Liquor Act") prohibits
the acquisition of 10% or more of the outstanding stock of a licensed
corporation, such as the Company, without the prior approval of the Michigan
Liquor Control Commission (the "Liquor Commission"). The Liquor Commission makes
its determination as to whether a person's interest in acquiring 10% or more of
the outstanding stock of the Company will be approved in accordance with the
application for license provisions of Section 436.1105 of the Liquor Act.
Pursuant to Section 436.1105, a person seeking to acquire 10% or more of the
outstanding stock of the Company must (i) provide the Liquor Commission
information regarding such person, including without limitation thereto,
information regarding other alcoholic liquor business management experience, in
such form, and with such updates, as may be required by the Liquor Commission;
(ii) respond to written or oral questions from the Liquor Commission and (iii)
consent to the performance of any background investigation that may be required
by the Liquor Commission, including without limitation thereto, an investigation
of certain past criminal convictions.
Section 436.31 of the Liquor Act prohibits certain persons (a "Prohibited
Person") from owning securities of the Company. A manufacturer, mixed spirit
drink manufacturer, warehouseman, wholesaler, outstate seller of beer, outstate
seller of wine, outstate seller of mixed spirit drinks or vendor of spirits may
not have any of the following: (i) a financial interest, directly or indirectly,
in the establishment, maintenance, operation or promotion of the business of the
Company; (ii) an interest by ownership in fee, leasehold, mortgage or otherwise,
directly or indirectly, in the establishment, maintenance, operation or
promotion of the business of the Company (iii) an interest directly or
indirectly by interlocking directors in a corporation or by interlocking stock
ownership in a corporation in the establishment, maintenance, operation or
promotion of the business of the Company. In addition, a stockholder of a
manufacturer may not have any interest described in subpart (ii) of the above
sentence. Finally, a Prohibited Person may not purchase the stock of the Company
and place the stock in any portfolio under an arrangement, written trust
agreement, or investment trust agreement, and sell the participating shares
within the State of Michigan.
In light of these statutory restrictions, the Company's Articles of
Incorporation state that the acquisition of 10% or more of the outstanding stock
of the Company requires the prior approval of the Liquor Commission and that no
person shall acquire any outstanding stock of the Company in violation of
Section 436.31 of the Liquor Act, as it may be amended from time to time.
Article X of the Company's Articles of Incorporation further provides that any
shares of Common Stock purchased in violation of Section 436.19b or Section
436.31 of the Liquor Act (shares held by a "Disqualified Holder") may be
repurchased by the Company at any time by action of the Board of Directors. Such
redemptions will be subject to the following terms and conditions: (i) the
redemption price of the shares to be redeemed shall be equal to the fair market
value of such shares or such other redemption price as required by pertinent
state or federal law pursuant to which the redemption is required; (ii) if less
than all the shares held by a Disqualified Holder are to be redeemed, the shares
to be redeemed shall be selected in such manner as shall be determined by the
Board of Directors; (iii) at least thirty(30) days' written notice of the date
upon which redemption is to occur shall be given to a Disqualified Holder
(unless waived in writing by the Disqualified Holder) provided that redemption
may occur on the date on which written notice shall be given to the Disqualified
Holder if the funds necessary to effect the redemption shall have been deposited
in trust for the benefit of the Disqualified Holder and subject to immediate
withdrawal by the Disqualified Holder upon surrender of the stock certificates
for the shares to be redeemed; (iv) from and after the date upon which
redemption occurs or such earlier date as mandated by pertinent state or federal
law, any and all rights of whatever nature, which may be held by the
Disqualified Holder of shares selected for redemption (including without
limitation any rights to vote such shares), shall cease and terminate and the
Disqualified Holder shall thenceforth be entitled only to receive the funds
payable upon redemption and (v) such other terms and conditions as the Board of
Directors shall determine.
These provisions of the Company's Articles of Incorporation would delay and
could prevent a change in control of the Company.
PRIOR OFFERINGS
In December 1995, the Company entered into a financing agreement with Pyramid
Partners, L.P. ("Pyramid") for the issuance of (i) a $250,000 non-interest
bearing promissory note (the "Pre-Bridge Convertible Note") which, upon the
earlier of the completion of this Offering or January 1997, is convertible into
a number of shares of Common Stock equal to $250,000 divided by the lesser of
(x) $4.00 or (y) two-thirds of the Price to Public of the Units in this Offering
(the "Pre-Bridge Shares"), (ii) a $250,000 non-convertible promissory note
bearing interest at 10% per annum which will become due upon the earlier of the
completion of this Offering or July 1996 (the "Pre-Bridge Non Convertible Note")
and (iii) warrants (the "Pre-Bridge Warrants") to purchase 62,500 shares of
Common Stock at the lesser of (x) $4.00 or (y) two-thirds of the Price to Public
of the Units in this Offering. These sales to Pyramid are collectively referred
to herein as the "Pre-Bridge Financing."
Concurrently with this Offering, the Company is registering the Pre-Bridge
Shares for resale to the public. Such resale will not be underwritten by the
Underwriter. The Company will not receive any proceeds from such resales.
Sales of Pre-Bridge Shares, or even the potential of such sales at any time,
may have an adverse effect on the market prices of the securities offered
hereby. See "Registration of Other Securities."
In February 1996, the Company sold, for $25,000 each, 60 bridge units (the
"Bridge Units"). Each Bridge Unit consisted of (i) 2,500 shares of Common Stock
(the "Bridge Common Stock"), (ii) a $12,500 principal amount promissory note
bearing interest at 10% per annum due upon the earlier of 20 days after the
completion of this Offering or August 1996 (the "Bridge Notes") and (iii)
warrants to purchase 2,500 shares of Common Stock at $5.00 per share expiring in
February 2001 (the "Bridge Warrants"). The sales of the Bridge Units are
referred to herein as the "Bridge Financing." The Pre-Bridge Financing and the
Bridge Financing are collectively referred to herein as the "Pre-Offering
Financings."
The Pre-Offering Financings resulted in the aggregate sale of (i) a $250,000
promissory note convertible upon completion of this Offering into 68,120 shares
of Common Stock, (ii) 150,000 shares of Common Stock, (iii) $1.0 million of
principal amount of promissory notes outstanding and due upon completion of this
Offering and (iv) the issuance of warrants to purchase an aggregate of 212,500
shares of Common Stock. The Pre-Bridge Warrants and the Bridge Warrants expire
five years from their respective dates of issuance.
Upon the Company becoming eligible to use Form S-3 under the Securities Act, the
Company intends to register for resale to the public on behalf of Pyramid and
the holders of the Bridge Units the Bridge Common Stock and the shares of Common
Stock issuable upon exercise of the Pre-Bridge Warrants and the Bridge Warrants.
Such resales will not be underwritten by the Underwriter. The Company will not
receive any proceeds from such resales. These registrations for resale to the
public are expected to be included in a Registration Statement on Form S-3
intended to be filed by the Company approximately one year after the date of
this Prospectus (the "Secondary Registration Statement"). Sales of shares
registered in the Secondary Registration Statement, or even the potential of
such sales at any time, may have an adverse effect on the market price of the
Units offered hereby.
CLASS A WARRANTS
The Class A Warrants included as part of the Units being offered hereby will be
issued under and governed by the provisions of a Warrant Agreement (the "Warrant
Agreement") between the Company and Norwest Bank Minnesota, N.A., as Warrant
Agent (the "Warrant Agent"). The following summary of the Warrant Agreement is
not complete and is qualified in its entirety by reference to the Warrant
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The shares of Common Stock and the Class A Warrants offered as part of the Units
are detachable and separately transferable. One Class A Warrant entitles the
holder thereof ("Warrantholder") to purchase one share of Common Stock during
the four years following the date of this Prospectus, subject to earlier
redemption, provided that at such time a current prospectus relating to the
shares of Common Stock issuable upon exercise of the Class A Warrants is in
effect and the issuance of such shares is qualified for sale or exempt from
qualification under applicable state securities laws. Each Class A Warrant will
be exercisable at an exercise price of $8.00 per share, subject to adjustment in
certain events.
The Class A Warrants are subject to redemption by the Company beginning 90 days
after the date of this Prospectus, on not less than 30 days written notice, at a
price of $.01 per warrant at any time following a period of 20 consecutive
trading days where the per share closing high bid price of the Common Stock
exceeds $9.00 (subject to adjustment). For these purposes, the closing high bid
price of the Common Stock shall be determined by the closing bid price as
reported by the Nasdaq SmallCap Market so long as the Common Stock is quoted on
the Nasdaq SmallCap Market and, if the Common Stock is listed on a national
securities exchange, shall be determined by the last reported sale price on the
primary exchange on which the Common Stock is traded. Warrantholders will
automatically forfeit all rights thereunder except the right to receive the $.01
redemption price per warrant unless the Class A Warrants are exercised before
they are redeemed.
The Warrantholders are not entitled to vote, receive dividends or exercise any
of the rights of holders of shares of Common Stock for any purpose. The Class A
Warrants are in registered form and may be presented for transfer, exchange or
exercise at the office of the Warrant Agent. Although the Class A Warrants have
been approved for designation as Nasdaq SmallCap Market Securities, pending
completion of this Offering, there is currently no established market for the
Class A Warrants, and there is no assurance that any such market will develop.
The Warrant Agreement provides for adjustment of the exercise price and the
number of shares of Common Stock purchasable upon exercise of the Class A
Warrants to protect Warrantholders against dilution in certain events, including
stock dividends, stock splits, reclassification and any combination of Common
Stock, or the merger, consolidation or disposition of substantially all the
assets of the Company.
The Class A Warrants may be exercised upon surrender of the certificate therefor
on or prior to the expiration date (or earlier redemption date) at the offices
of the Warrant Agent, with the Purchase Form on the reverse side of the
certificate properly completed and executed as indicated, accompanied by payment
of the full exercise price (by certified or cashier's check payable to the order
of the Company) for the number of Class A Warrants being exercised.
MICHIGAN ANTI-TAKEOVER LAWS
Generally, upon the Company having greater than 100 shareholders, depending upon
the final distribution of the shares of the Common Stock, the Company will be
subject to Chapters 7A and 7B of the Michigan Business Corporation Act. Chapters
7A and 7B may affect attempts to acquire control of the Company. In general,
under Chapter 7A, "business combinations" (defined to include, among other
transactions, certain mergers, dispositions of assets or shares and
recapitalizations) between covered Michigan business corporations or their
subsidiaries and an "interested shareholder" (defined as the direct or indirect
beneficial owner of at least 10% of the voting power of a covered corporation's
outstanding shares) can be consummated only if approved by at least 90% of the
votes of each class of the corporation's shares entitled to vote and by at least
two-thirds of such voting shares not held by the interested shareholder or such
shareholder's affiliates, unless five years have elapsed after the person
involved became an "interested shareholder" and unless certain price and other
conditions are satisfied. The Board may exempt "business combinations" with a
particular "interested shareholder" by resolution adopted prior to the time the
"interested shareholder" attained that status.
In general, under Chapter 7B of the Michigan Business Corporation Act, an entity
that acquires "Control Shares" of the Company may vote the Control Shares on any
matter only if a majority of all shares, and of all non-"Interested Shares," of
each class of shares entitled to vote as a class, approve such voting rights.
Interested Shares are shares owned by officers of the Company,
employee-directors of the Company and the entity making the Control Share
acquisition. Control Shares are shares that, when added to shares already owned
by an entity, would give the entity voting power in the election of directors
over any of three thresholds: one-fifth, one-third and a majority. The effect of
the statute is to condition the acquisition of voting control of a corporation
on the approval of a majority of the pre-existing disinterested shareholders.
The Board has the option of choosing to amend the Bylaws before a Control Share
acquisition occurs to provide that Chapter 7B does not apply to the Company.
TRANSFER AGENT AND REGISTRAR
Norwest Bank Minnesota, N.A. is the transfer agent and registrar for the
Common Stock, the Class A Warrants and the Units.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, there will be 4,968,120 shares of Common Stock
issued and outstanding (5,305,620 shares if the Underwriters' over-allotment
option is exercised in full) and 7,218,120 shares (7,893,120 if the
Underwriters' over-allotment option is exercised in full) upon exercise of all
outstanding Class A Warrants. The Units, Class A Warrants and shares of Common
Stock purchased in this Offering will be freely tradable without registration or
other restriction under the Securities Act, except for any shares purchased by
an "affiliate" of the Company (as defined in the Securities Act). Shares
purchased by an "affiliate" of the Company will be subject to Rule 144.
All of the Company's currently outstanding securities were acquired in reliance
upon the "private placement" exemptions provided by the Securities Act and are
deemed restricted securities within the meaning of Rule 144 ("Restricted
Shares"). Restricted Shares may not be sold unless they are registered under the
Securities Act or are sold pursuant to an applicable exemption from
registration, including an exemption under Rule 144. Between September 1996 and
November 1997, 2,375,011 shares of currently outstanding Common Stock held by
affiliates will become eligible for sale in the public market, subject to
compliance with Rule 144.
In general, under Rule 144 as currently in effect, any person (or person whose
shares are aggregated) including persons deemed to be affiliates, whose
restricted securities have been fully paid for and held for at least two years
from the later of the date of issuance by the Company or acquisition from an
affiliate, may sell such securities in broker's transactions or directly to
market makers, provided that the number of shares sold in any three-month period
may not exceed the greater of 1% of the then-outstanding shares of Common Stock
or the average weekly trading volume of the shares of Common Stock in the
over-the-counter market during the four calendar weeks preceding the sale. Sales
under Rule 144 are also subject to certain notice requirements and the
availability of current public information about the Company. After three years
have elapsed from the later of the issuance of restricted securities by the
Company or their acquisition from an affiliate, such securities may be sold
without limitation by persons who are not affiliates under the rule. In
connection with this Offering, however, the directors of the Company have agreed
to escrow their shares for three years or earlier if (i) the Company meets
certain earnings requirements established by the State of Minnesota, or (ii)
until the State of Minnesota determines that the escrow agreement is no longer
necessary. A total of 2,287,011 shares of Common Stock (including a warrant to
purchase 6,000 shares of Common Stock) will be subject to escrow.
Concurrent with this Offering, the Company is registering for resale under the
Securities Act the 68,120 shares of Common Stock purchasable upon conversion of
the Pre-Bridge Convertible Note. In addition, upon the Company being eligible to
use Form S-3 under the Securities Act, the Company has agreed to register for
resale the Bridge Common Stock and the shares of Common Stock issuable upon
exercise of the Pre-Bridge Warrants and the Bridge Warrants.
Following this Offering, the Company cannot predict the effect, if any, that
sales of the Common Stock or the availability of such Common Stock for sale will
have on the market price prevailing from time to time. Nevertheless, sales by
existing shareholders of substantial amounts of Common Stock could adversely
affect prevailing market prices for the Common Stock if and when a public market
exists.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement between the
Company and the Underwriters, the Underwriters have severally agreed to purchase
from the Company the following respective number of Units:
NUMBER OF
NAME UNITS
- ---- -----
R.J. Steichen & Company
---------
Total 2,250,000
=========
The Underwriting Agreement provides that the obligations of the Underwriters are
subject to approval of certain legal matters by counsel and to various other
conditions. The nature of the Underwriters' obligations are such that they are
committed to purchase and pay for all of the Units if any are purchased.
The Underwriters propose to offer the Units initially to the public at the Price
to Public set forth on the cover page of this Prospectus, and at such price less
a concession not in excess of $ per Unit to certain selected dealers. The
Underwriters and such dealers may reallow part of such concessions not in excess
of $ per Unit to other securities dealers. Each of the concessions allowed
will be to members of the National Association of Securities Dealers, Inc. The
Underwriters will purchase the Units from the Company at the Price to Public set
forth on the cover page of this Prospectus less an underwriting discount of
$ per Unit. After the initial public offering, the public offering price
and other selling terms may be changed by the Underwriters. The Underwriters
have advised the Company that they do not intend to confirm sales of Units to
any accounts over which they exercise discretionary authority.
The Company has granted the Underwriters a 45-day over-allotment option to
purchase up to an aggregate of 337,500 additional Units exercisable at the Price
to Public less the underwriting discount. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of the
Units offered hereby.
The Company's directors who own 2,281,011 shares of Common stock in the
aggregate have agreed that they will not sell, grant any option for the sale of
or otherwise dispose of any equity securities of the Company (or any securities
convertible into or exercisable or exchangeable for equity securities of the
Company) for a period of 180 days after the date hereof without the prior
written consent of R.J. Steichen & Company (the "Representative").
The Company has agreed to indemnify the Underwriters against certain
liabilities, losses and expenses, including liabilities under the Securities
Act, or to contribute to payments that the Underwriters may be required to make
in respect thereof. Insofar as indemnification for liabilities under the
Securities Act may be permitted by contract, the Company has been advised that
in the opinion of the Commission, such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
The Company has agreed to sell to the Representative, for $50, five year
warrants to purchase up to 225,000 shares of Common Stock at an exercise price
of 120% of the Price to Public (the "Representative's Warrant"). The
Representative's Warrant may be exercised commencing one year after the date of
this Prospectus. The exercise price and the number of shares may, under certain
circumstances, be subject to adjustment pursuant to anti-dilution provisions.
The Representative's Warrant also provides for certain demand and participatory
registration rights with respect to such Warrant and the shares of Common Stock
issuable upon its exercise. Any profits realized by the Representative on the
sale of the Representative's Warrant or the securities issuable upon exercise
thereof may be deemed to constitute additional underwriting compensation.
The Company has agreed to pay the Representative a nonaccountable expense
allowance equal to 2.5% of the aggregate offering price of the Units or $309,375
($355,781 if the Underwriters' over-allotment option is exercised in full).
Prior to the Offering, there existed no public market for the securities of the
Company. The initial public offering price of the Units has been arbitrarily
determined by negotiations between the Company and the Underwriters, bears no
relationship to the Company's earnings, book value, net worth or any other
financial criteria of value and may not be indicative of the market price for
the Units after this Offering. There can be no assurance that the price at which
the Common Stock, the Class A Warrants or the Units will sell in the public
market after this Offering will not be lower than the initial public offering.
The foregoing is a brief summary of the provisions of the Underwriting Agreement
and does not purport to be a complete statement of its terms and conditions. A
copy of the Underwriting Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Briggs and Morgan, Professional Association, Minneapolis, Minnesota.
Certain legal matters will be passed upon for the Underwriters by Parsinen
Bowman Kaplan & Levy P.A., Minneapolis, Minnesota.
EXPERTS
The financial statements as of December 31, 1994 and 1995 and for the years then
ended included herein have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said report.
ADDITIONAL INFORMATION
Upon completion of this Offering, the Company will be subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith will file periodic reports and other information with the
Securities and Exchange Commission (the "Commission"). Such periodic reports and
other information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at 75 Park Place, 14th
Floor, New York, New York 10007, and Suite 1400, Northwestern Atrium Center, 500
West Madison St., Chicago, Illinois 60661. Copies of such material may be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington D.C. 20549.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 under the Securities Act of
1933, as amended, with respect to the Units offered by this Prospectus. For
further information about the Company and the Common Stock, reference is made to
the Registration Statement and to the consolidated financial statements and
exhibits filed as a part thereof, copies of which can be inspected at and made
at the addresses referenced above. Statements contained in this Prospectus as to
the contents of any contract or any other document are not necessarily complete
and in each instance reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
INDEX TO FINANCIAL STATEMENTS
PAGE
NUMBER
------
Report of Independent Public Accountants F-2
Balance Sheets F-3
Statements of Operations F-4
Statements of Shareholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Michigan Brewery, Inc.:
We have audited the accompanying balance sheets of Michigan Brewery, Inc. (a
Michigan corporation) as of December 31, 1994 and 1995, and the related
statements of operations, shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Michigan Brewery, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
February 9, 1996
MICHIGAN BREWERY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31,
------------------------ 1996
1994 1995 (UNAUDITED)
-------- ----------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $181,185 $ 339,062 $ 90,203
Inventories -- 140,195 91,134
Prepaids and other 8,000 36,236 50,545
-------- ----------- ----------
Total current assets 189,185 515,493 231,882
PROPERTY AND EQUIPMENT, net 601,477 5,751,313 5,824,064
OTHER ASSETS -- 85,785 366,304
-------- ----------- ----------
$790,662 $ 6,352,591 $6,422,250
======== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade $ -- $ 246,246 $ 403,860
Accounts payable -- related party -- 480,986 30,972
Accrued expenses -- 145,496 146,873
Notes payable to shareholders 500,000 300,000 200,000
Line of credit -- 325,000 110,000
Current maturities of long-term debt -- 731,068 1,481,068
-------- ----------- ----------
Total current liabilities 500,000 2,228,796 2,372,773
LONG-TERM DEBT -- 2,714,141 2,402,229
-------- ----------- ----------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000 shares
authorized; 2,025,000, 2,500,000 and
2,650,000 shares issued and outstanding 20,250 25,000 26,500
Warrants -- 18,600 26,100
Additional paid-in capital 282,750 2,482,470 1,982,091
Accumulated deficit (12,338) (1,116,416) (387,443)
-------- ----------- ----------
Total shareholders' equity 290,662 1,409,654 1,647,248
-------- ----------- ----------
$790,662 $ 6,352,591 $6,422,250
======== =========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
MICHIGAN BREWERY, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
YEARS ENDED DECEMBER 31 ENDED MARCH 31,
1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Restaurant sales $ -- $ 2,380,641 $ -- $ 803,327
Wholesale beer and
gift shop sales -- 302,959 -- 83,118
---------- ----------- ---------- ----------
Total revenue -- 2,683,600 -- 886,445
---------- ----------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales -- 1,298,735 -- 354,255
Operating expenses -- 1,376,854 7,040 476,585
Selling, general and
administrative expenses 12,338 823,299 33,912 318,901
---------- ----------- ---------- ----------
Total costs and
expenses 12,338 3,498,888 40,952 1,149,741
---------- ----------- ---------- ----------
LOSS FROM OPERATIONS (12,338) (815,288) (40,952) (263,296)
INTEREST EXPENSE -- 288,790 6,267 124,147
---------- ----------- ---------- ----------
NET LOSS $ (12,338) $(1,104,078) $ (47,219) $ (387,443)
========== =========== ========== ==========
NET LOSS PER COMMON SHARE $ (0.01) $ (0.45) $ (0.02) $ (0.13)
========== =========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING (Note 1) 1,056,241 2,481,676 2,330,169 2,879,345
========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
MICHIGAN BREWERY, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN ACCUMULATED
SHARES AMOUNT WARRANTS CAPITAL DEFICIT
--------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 -- $ -- $ -- $ -- $ --
Sale of common stock for $.01
per share 2,025,000 20,250 -- -- --
Additional shareholders'
capital contributions -- -- -- 282,750 --
Net loss -- -- -- -- (12,338)
--------- ------- ------- ----------- -----------
BALANCE, December 31, 1994 2,025,000 20,250 -- 282,750 (12,338)
Sale of common stock for $.01
per share 350,000 3,500 -- -- --
Additional shareholders'
capital contributions -- -- -- 1,950,970 --
Issuance of common stock for
property and services at $2.00
per share 125,000 1,250 -- 248,750 --
Issuance of warrants (Note 3) -- -- 18,600 -- --
Net loss -- -- -- -- (1,104,078 )
--------- ------- ------- ----------- -----------
BALANCE, December 31, 1995 2,500,000 $25,000 $18,600 $ 2,482,470 $(1,116,416)
Effects of conversion to
C Corporation (unaudited) -- -- -- (1,116,416) 1,116,416
Sale of common stock for $4.95
per share (unaudited) 150,000 1,500 -- 616,037 --
Issuance of warrants
(unaudited) -- -- 7,500 -- --
Net loss (unaudited) -- -- -- -- (387,443)
--------- ------- ------- ----------- -----------
BALANCE, March 31, 1996
(unaudited) 2,650,000 $26,500 $26,100 $ 1,982,091 $ (387,443)
========= ======= ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
MICHIGAN BREWERY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31 ENDED MARCH 31,
------------------------- -------------------------
1994 1995 1995 1996
--------- ----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (12,338) $(1,104,078) $ (47,219) $(387,443)
Adjustments to reconcile
net loss to cash flows used
in operating activities --
Depreciation and amortization -- 156,497 -- 110,231
Change in operating assets and
liabilities:
Inventories -- (140,195) -- 49,061
Prepaids and other (8,000) (28,236) -- (14,309)
Accounts payable -- 727,232 29,552 (292,400)
Accrued expenses -- 145,496 -- 1,377
Other -- (19,039) -- (15,615)
--------- ----------- ----------- ---------
Net cash used in
operating activities (20,338) (262,323) (17,667) (549,098)
--------- ----------- ----------- ---------
INVESTING ACTIVITIES:
Purchases of property and
equipment, net (601,477) (5,047,757 ) (1,673,484) (139,756 )
--------- ----------- ----------- ---------
FINANCING ACTIVITIES:
Proceeds from line-of-credit
borrowings -- 325,000 -- --
Payments on line-of-credit
borrowings -- -- -- (215,000)
Proceeds from issuance of debt to
shareholders 500,000 300,000 500,000 --
Payments on debt to shareholders -- (500,000) -- (100,000)
Proceeds from long-term debt -- 3,484,437 -- 750,000
Payments on long-term debt -- (39,228) -- (316,562)
Proceeds from issuance of
common stock 20,250 3,500 2,250 617,537
Proceeds from issuance of
warrants -- 18,600 -- 7,500
Capital contributions 282,750 1,945,970 1,197,750 --
Payment of deferred offering and
financing costs -- (70,322) -- (303,480)
--------- ----------- ----------- ---------
Net cash provided by
financing activities 803,000 5,467,957 1,700,000 439,995
--------- ----------- ----------- ---------
INCREASE IN CASH 181,185 157,877 8,849 (248,859)
CASH, beginning of period -- 181,185 -- 339,062
--------- ----------- ----------- ---------
CASH, end of period $ 181,185 $ 339,062 $ 8,849 $ 90,203
========= =========== =========== =========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid $ -- $ 114,510 -- $ 89,000
Income taxes paid -- -- -- --
NONCASH TRANSACTION:
Issuance of common stock for
property and services -- 250,000 -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
MICHIGAN BREWERY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS
Michigan Brewery, Inc. (the Company) was organized to develop, own and operate
microbrewery/restaurants known as Big Buck Brewery and Steakhouses. The Company
currently operates one brewery in Gaylord, Michigan (the Brewery) and intends to
open three additional breweries in the next 12 to 18 months. The Company also
intends to utilize each brewery for bottling and wholesale distribution of its
private label beer.
The Company began construction on the Brewery after the purchase of the land in
May 1994 and it opened to the general public on May 26, 1995. Prior to the
opening of the Brewery, the Company was in the development stage. The Company
has met its capital requirements primarily through initial shareholder
contributions, loans from its principal shareholders and officers, bank
borrowings and certain private placement offerings. During February 1996, the
Company received net proceeds of approximately $1,265,000 through a private
placement offering (see Note 7).
The Company incurred a net loss of $1,104,078 and $387,443 for the year ended
December 31, 1995 and the three months ended March 31, 1996, respectively, and
had a working capital deficit of $2,140,891 as of March 31, 1996. The loss for
these periods is primarily attributable to costs and expenses incurred in the
completion of the development and start-up of operations at the Brewery and
unfavorable weather conditions during the first quarter of 1996.
The Company has limited operating history and future revenues and profits will
depend upon various factors, including market acceptance of the Big Buck Brewery
and Steakhouse concept and general economic conditions. The Company's ability to
meet its expansion plan and achieve profitability depends on its ability to
obtain substantial financing for the development of additional breweries. There
are no assurances that such financing will be available on terms acceptable or
favorable to the Company.
INTERIM FINANCIAL STATEMENTS
The balance sheet as of March 31, 1996 and the related statements of operations,
shareholders' equity and cash flows for the three-month periods ended March 31,
1995 and 1996 are unaudited. However, in the opinion of management these interim
financial statements include all adjustments (consisting of only normal
recurring adjustments) which are necessary for the fair presentation of the
results for the interim periods presented. The results of operations for the
unaudited three-month period ended March 31, 1996 are not necessarily indicative
of the results which may be expected for the entire 1996 fiscal year.
INVENTORIES
Inventories consist principally of restaurant food items, raw materials used in
the brewing process, finished goods, including beer in kegs and beer held in
fermentation prior to the filtration and packaging process, and retail goods for
resale. Inventories are stated at the lower of cost (first-in, first-out) or
market and consisted of the following:
DECEMBER 31,
1995 MARCH 31, 1996
-------- --------------
(UNAUDITED)
Food $ 52,369 $32,580
Brewery 53,345 39,534
Retail goods 34,481 19,020
-------- -------
$140,195 $91,134
======== =======
PREOPENING EXPENSES
It is the Company's policy to charge preopening costs (substantially all of
which are the direct and incremental costs of hiring and training the initial
workforce) to operations as incurred until a basis for capitalization exists, at
which time costs are capitalized and amortized over the period from when the
brewery opens until substantially all of the initial workforce is no longer
employed (not to exceed 12 months). Accordingly, preopening costs for the first
brewery have been charged to operations as incurred; preopening costs for
subsequent breweries will be capitalized and amortized as described above.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Improvements are capitalized, while
repair and maintenance costs are charged to operations when incurred. Property
and equipment are depreciated using the straight-line method for financial
reporting purposes and accelerated methods for income tax reporting purposes
over their estimated useful lives. Property and equipment consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31, ESTIMATED
1994 1995 1996 USEFUL LIVES
-------- ---------- ---------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land and improvements $108,885 $ 546,296 $ 546,296 20 years
for
improvements
Building and improvements -- 3,076,914 3,079,366 40 years
Brewery equipment 206,271 932,567 1,017,580 12-30 years
Restaurant equipment -- 807,717 845,354 10 years
Furniture, fixtures and equipment -- 480,136 494,722 5-7 years
Construction in progress 286,321 -- --
Deposits on brewing equipment -- 60,672 60,672
-------- ---------- ----------
601,477 5,904,302 6,043,990
Accumulated depreciation -- (152,989) (219,926)
-------- ---------- ----------
$601,477 $5,751,313 $5,824,064
======== ========== ==========
</TABLE>
OTHER ASSETS
Other assets consisted of the following:
DECEMBER 31, MARCH 31,
1995 1996
------- --------
(UNAUDITED)
Deferred offering costs $ -- $173,480
Deferred financing costs,
net 66,746 158,170
Other 19,039 34,654
------- --------
$85,785 $366,304
======= ========
Deferred offering costs consist of legal, accounting and other costs associated
with the Company's proposed initial public offering of units (see Note 7). Such
costs will be reclassified to shareholders' equity upon the successful
completion of an offering. Such costs will be expensed if an offering of its
units is not completed.
Deferred financing costs consist primarily of underwriting and legal fees
associated with the issuance of notes payable and bridge notes during 1995
and 1996 (see Notes 3 and 7). Amortization of deferred financing costs is
recorded using the effective interest method over the life of the related
notes.
NET LOSS PER SHARE
Net loss per share was computed by dividing net loss by the weighted average
number of shares of common stock and common stock equivalents outstanding during
each period. Common stock equivalents include the effects of options and
warrants which are assumed to be exercised or converted into common stock at the
beginning of the period. Pursuant to Securities and Exchange Commission rules,
shares of stock sold and stock options and warrants granted within one year of
the date of the contemplated initial public offering have been included in the
calculation of common share equivalents, using the treasury stock method, as if
they were outstanding for all periods presented, even if the effect is
antidilutive.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The
ultimate outcomes could differ from those estimates.
RECENTLY ISSUED ACCOUNTING STANDARD
During 1995, the Company adopted the provisions of Financial Accounting
Standards Board (FASB) Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," (SFAS No. 121)
which establishes accounting standards for the recognition and measurement of
impairment of long-lived assets, certain identifiable intangibles and goodwill
either to be held or disposed of. The adoption of SFAS No. 121 had no impact on
the Company's financial position or results of operations.
2. RELATED-PARTY TRANSACTIONS:
NOTES PAYABLE TO SHAREHOLDERS
As discussed in Note 3, the Company has promissory notes due to certain
shareholders. Of the total amount due under the promissory notes, $500,000
and $250,000 was due to two director/shareholders as of December 31, 1994 and
1995 and $50,000 was due to an officer/shareholder as of December 31, 1995.
PURCHASES OF PROPERTY AND SERVICES
The general contractor hired to construct the Brewery building was a company
owned by a director/shareholder. During 1995, this director/shareholder received
shares of common stock in exchange for a $250,000 reduction of the payable due
by the Company. The total amount of property and services purchased from this
company during 1995 was $3,393,000, of which $480,986 remained unpaid as of
December 31, 1995.
During 1995, the Company purchased vehicles totaling $71,780 from an
equipment company owned by a director/shareholder.
SHAREHOLDER GUARANTEES
Certain director/shareholders have guaranteed a substantial portion of the
Company's long-term debt (see Note 3).
3. DEBT:
NOTES PAYABLE TO SHAREHOLDERS
The aggregate amount of promissory notes to shareholders was $500,000 at
December 31, 1994, $300,000 at December 31, 1995 and $200,000 as of March 31,
1996. The notes are unsecured, interest accrues at an annual rate of 9% to
9.7% and principal is due on demand.
LINE OF CREDIT
The Company has a line of credit with a bank with a maximum borrowing limit
of $325,000, with monthly interest payable at the bank's prime rate plus 1%
(9.50% at December 31, 1995). The line is collateralized by all of the assets
of the Company, guaranteed by certain shareholders, and due on demand. The
Company had borrowed up to the maximum limit of $325,000 as of December 31,
1995 with the balance being paid down to $110,000 as of March 31, 1996.
LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 MARCH 31, 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
Mortgage note payable to bank, monthly principal
payments of $5,760 plus interest at 10.2%,
remaining balance due on October 1, 2000,
collateralized by all assets of the Company and
guaranteed by certain shareholders $1,863,480 $1,846,200
Note payable to bank, monthly principal payments
of $13,333 plus interest at 10.2%, remaining
balance due on October 1, 2000, collateralized
by all assets of the Company and guaranteed by
certain shareholders 773,333 733,333
Bridge loan (see below) 500,000 500,000
Bridge notes payable (see Note 7) -- 750,000
Revolving credit note payable to a partnership
with a $750,000 limit; interest at prime plus
1% (9.2% at December 31,1995), payable on
October 20, 1998; convertible to common stock
upon holder's election, such that each $50,000 of
debt is converted to a 1% equity interest in the
Company, not to exceed 15%; collateralized by
personal guarantees of the shareholders; repaid
during March 1996 250,000 --
Notes payable to bank, due in monthly installments
through 1998 and 1999, interest at 10.95% to 13%,
concluding on September 19, 1999, collateralized by
certain equipment 76,996 67,714
---------- ----------
Total 3,463,809 3,897,247
Less -- Original issue discount, being amortized
through January 1997 18,600 13,950
Less -- Current maturities 731,068 1,481,068
---------- ----------
Long-term debt $2,714,141 $2,402,229
========== ==========
</TABLE>
In December 1995, the Company entered into a bridge loan with a limited
partnership which consisted of a $250,000 convertible promissory note
(convertible note), a $250,000 nonconvertible promissory note (nonconvertible
note) and warrants to purchase an aggregate of 62,500 shares of common stock at
the lesser of two-thirds of an initial public offering price or $4.00 per share
expiring in December 2000. The convertible note is noninterest-bearing, is
collateralized by certain brewery equipment and is convertible into common stock
upon the earlier of an initial public offering or January 1997 at the lesser of
two-thirds of an initial public offering price or $4.00 per share. The
nonconvertible note bears interest at 10%, is secured by certain brewery
equipment and is due upon the earlier of an initial public offering or July
1996. The warrants were recorded at their estimated fair value of $0.30 per
warrant.
Maturities of long-term debt as of December 31, 1995 are as follows:
1996 (excluding the original discount) $ 749,668
1997 250,779
1998 498,803
1999 244,230
2000 1,720,329
----------
$3,463,809
==========
4. INCOME TAXES:
The Company has been an S corporation since inception for federal income tax
purposes. As a result, the Company's losses through December 31, 1995 were, for
federal and state income tax purposes, included in the personal tax returns of
the Company's shareholders.
As more fully described in Note 5, the Company organized a private placement
offering of debt and common stock which caused the income tax status of the
Company to change, and the Company is no longer eligible for S corporation
status effective February 5, 1996. Under the provisions of FASB Statement No.
109, "Accounting for Income Taxes," deferred tax assets and liabilities are
computed based on the difference between the financial statement and tax bases
of assets and liabilities using currently enacted tax rates.
As of December 31, 1995, the Company's deferred taxes would have consisted
primarily of preopening costs not currently deductible and accelerated methods
of depreciation used for tax purposes. If the termination of S corporation
status had occurred at December 31, 1995, there would have been no effect on the
financial statements, as the Company would have recorded a full valuation
allowance against the net deferred tax asset due to the uncertainty of realizing
the related benefits.
As of March 31, 1995, the Company had net operating loss carryforwards for
income tax purposes of approximately $350,000. These net operating loss
carryforwards expire in the year 2010. Because of the lack of profitability, a
full valuation allowance has been recorded against the net deferred tax asset.
5. SHAREHOLDERS' EQUITY:
ORIGINAL ISSUANCES
At the inception and during the development of the Company, 2,500,000 shares
of common stock were issued for consideration ranging from $.01 to $2.04 per
share.
STOCK OPTION PLAN
During January 1996, the Company adopted the 1996 Stock Option Plan (the Plan),
pursuant to which options to acquire an aggregate of 300,000 shares of the
Company's common stock may be granted. Under the Plan, the board of directors
may grant options to purchase shares of the Company's stock to eligible
employees, nonemployees and contractors at a price not less than 100% of the
fair market value at the time of the grant for both incentive and nonstatutory
stock options. Options granted under the Plan vest annually over four years from
date of grant and are exercisable for ten years, except that the term may not
exceed five years for incentive stock options granted to persons who own more
than 10% of the Company's outstanding voting stock. During January 1996, 166,000
options at an initial public offering price were granted under the Plan.
DIRECTOR STOCK OPTION PLAN
During January 1996, the Company adopted the 1996 Director Stock Option Plan
(the Director's Plan) pursuant to which options to acquire an aggregate of
100,000 shares of the Company's common stock may be granted to outside
directors. Under the Director's Plan, 5,000 options will automatically be
granted to each outside director upon an initial public offering and thereafter
5,000 options will be granted annually for each year of continued service by the
outside director. Each option is granted at fair market value on the date of
grant and is exercisable for a period of ten years commencing one year after the
date of grant. No options have been granted under the Director's Plan to date.
OTHER STOCK OPTIONS
The Company granted options to purchase 25,000 shares of common stock at an
initial public offering price to a consulting firm for services rendered.
6. LEGAL PROCEEDINGS:
The Company is involved in legal actions in the ordinary course of its business.
Although the outcomes of any such legal actions cannot be predicted, in the
opinion of management there is no legal proceeding pending against or involving
the Company for which the outcome is likely to have a material adverse effect
upon the financial position or results of operations of the Company.
7. PRIVATE PLACEMENT AND PROPOSED PUBLIC OFFERING:
On January 19, 1996, the Company declared a 112.50-for-1 stock split which has
been retroactively reflected in the accompanying financial statements.
During February 1996, the Company sold 60 units in a private placement offering
at an offering price of $25,000 per unit. Each unit consisted of (i) 2,500
shares of common stock at $4.95 per share, (ii) a $12,500 principal amount
promissory note bearing interest at 10%, unsecured and due the earlier of 20
days after an initial public offering or August 1996, and (iii) warrants to
purchase 2,500 shares of common stock at an exercise price of $5.00 per share
expiring in February 2001. The Company received net proceeds of approximately
$1,265,000 after the payment of $235,000 in related underwriting discount and
offering costs. The net proceeds were used to pay off certain debt and purchase
brewery equipment and will be used for working capital purposes.
The Company intends to file with the Securities and Exchange Commission a Form
SB-2 Registration Statement for the sale of 2,250,000 units, each unit
consisting of one share of common stock and one redeemable Class A warrant
(excluding the underwriters' overallotment option to purchase an additional
337,500 units), which will represent approximately 47% of the ownership of the
Company. The proceeds from the offering will be used to finance the
development of additional facilities and pay off indebtedness. There can be
no assurances that the Company will complete this proposed public offering.
[PHOTO]
A view of the Gaylord Brewery from the interstate highway.
[PHOTO]
Big Buck offers a selection of craftbrewed beers ranging from light to dark.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary 3
Risk Factors 6
Use of Proceeds 12
Dividend Policy 12
Prior Subchapter S Corporation Status 13
Capitalization 14
Dilution 15
Selected Financial Data 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 17
Business 20
Management 28
Certain Transactions 31
Registration of Other Securities 32
Principal Shareholders 33
Description of Securities 34
Shares Eligible for Future Sale 38
Underwriting 39
Legal Matters 40
Experts 40
Additional Information 40
Financial Statements F-1
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,250,000 UNITS
MICHIGAN BREWERY, INC.
[LOGO]
Each Unit Consisting of
One Share of
Common Stock
and
One Redeemable
Class A Warrant
PROSPECTUS
[LOGO FOR RJ STEICHEN & COMPANY]
, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
[ADDITIONAL COVER PAGE]
SUBJECT TO COMPLETION, DATED JUNE 12, 1996
PROSPECTUS
[LOGO]
75,000 SHARES
MICHIGAN BREWERY, INC.
COMMON STOCK
Pyramid Partners, L.P. (the "Selling Shareholder") is hereby offering (the
"Selling Shareholder Offering") up to 75,000 Shares of Common Stock (the
"Shares") of Michigan Brewery, Inc. (the "Company"). Concurrent with the Selling
Shareholder Offering, the Company is offering 2,250,000 Units (the "Offering"),
each Unit consisting of one share of Common Stock and one redeemable Class A
Warrant. The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Shareholder. See "Use of Proceeds." The Class A Warrants
are immediately exercisable and transferable separate from the Common Stock.
Each Class A Warrant entitles the holder to purchase at any time until four
years following the date of this Prospectus one share of Common Stock at an
exercise price of $8.00 per share, subject to adjustment. The Class A Warrants
are subject to redemption by the Company for $.01 per warrant at any time 90
days after the date of this Prospectus, on 30 days written notice, provided that
the closing high bid price of the Common Stock exceeds $9.00 per share (subject
to adjustment) for any 20 consecutive trading days. See "Description of
Securities."
Prior to this Offering, there has been no market for the Company's securities.
It is currently anticipated that the initial public offering price per Unit (the
"Price to Public") will be between $5.00 and $6.00. See "Underwriting" for
information relating to the factors considered in determining the Price to
Public. The Company's Common Stock, Class A Warrants and Units have been
approved for designation as Nasdaq SmallCap Market securities under the symbols
"BBUC," "BBUCW" and "BBUCU," respectively, pending completion of this Offering.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON
PAGE 6 HEREIN AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDER(3)
------ ----------- ---------- --------------
Per Unit $ $ $ $
Total(4) $ $ $ $
(1) The Company has agreed to pay R. J. Steichen & Company, as
Representative of the several Underwriters (the "Representative"), a
nonaccountable expense allowance equal to 2.5% of the total Price to
Public. The Company has also agreed to sell to the Representative, for
nominal consideration, a five-year warrant to purchase up to 225,000
shares of Common Stock at an exercise price of 120% of the Price to
Public. In addition, the Company has agreed to indemnify the
Underwriters against certain liabilities. See "Underwriting."
(2) Before deducting expenses of the Offering estimated at $300,000, which
does not include the nonaccountable expense allowance described in Note
1 above.
(3) Per Share of Common Stock.
(4) The Underwriters have been granted an option to purchase up to 337,500
additional Units from the Company for the purpose of covering
over-allotments, if any. If the Underwriters exercise the
over-allotment option in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
The Shares are offered by Pyramid Partners, L.P.
The Units are offered by the several Underwriters, subject to prior sale, when,
as and if delivered to and accepted by them. The Underwriters reserve their
rights to withdraw, cancel or modify such offer and to reject orders in whole or
in part. It is expected that delivery of certificates representing the Units
will be made on or about , 1996 in Minneapolis, Minnesota.
The date of this Prospectus is , 1996
THE OFFERINGS
Securities Offered:
Offering 2,250,000 Units, each Unit consisting
of one share of Common Stock and one
redeemable Class A Warrant. Each
Class A Warrant is immediately
exercisable and transferable
separately from the Common Stock.
Each Class A Warrant entitles the
holder to purchase at any time until
four years following the date of this
Prospectus one share of Common Stock
at an exercise price of $8.00,
subject to adjustment. The Class A
Warrants are subject to redemption by
the Company for $.01 per warrant at
any time 90 days after the date of
this Prospectus, on 30 days written
notice, provided that the high
closing bid price of the Common Stock
exceeds $9.00 per share (subject to
adjustment) for any 20 consecutive
trading days. Holders of Class A
Warrants may exercise their rights
until the close of business on the
date fixed for redemption, unless
extended by the Company. See
"Description of Securities."
Selling Shareholder Offering Up to 75,000 shares of Common
Stock(1)
Common Stock Outstanding 2,650,000 shares prior to the Offering and
4,968,120 shares after the Offering(2).
Nasdaq SmallCap
Market Symbols:
Common Stock BBUC
Warrants BBUCW
Units BBUCU
Use of Proceeds Development and opening of three new
Big Buck Breweries and repayment of
debt. See "Use of Proceeds."
RISK FACTORS
An investment in the Units is highly speculative and involves a high degree of
risk and substantial dilution. See "Risk Factors" beginning on page 6 and
"Dilution."
(1) These shares of Common Stock will be acquired by the Selling
Shareholder upon completion of the Offering pursuant to the conversion
of the Pre-Bridge Convertible Note. Pursuant to this conversion, the
Selling Shareholder will acquire up to 75,000 shares of Common Stock.
(2) Includes the conversion of the Pre-Bridge Convertible Note into 68,120
shares of Common Stock at a conversion price of $3.67 per share (See
"Description of Securities -- Prior Offerings). Does not include; (i)
2,250,000 shares issuable upon exercise of the Class A Warrants offered
hereby; (ii) 212,500 shares reserved for issuance upon exercise of the
Pre-Bridge Warrant and the Bridge Warrants (see "Description of
Securities -- Prior Offerings"); (iii) up to 225,000 shares issuable
upon exercise of the Representative's Warrant; (iv) 300,000 shares
reserved for issuance under the Company's 1996 Stock Option Plan; (v)
100,000 shares reserved for issuance under the Company's 1996 Director
Stock Option Plan and (vi) 25,000 shares issuable upon exercise of
outstanding options.
[Additional pages to be substituted in the Selling Shareholder Prospectus]
USE OF PROCEEDS
The net proceeds to the Company from this Offering (at an assumed initial public
offering price of $5.50 per Unit), after deducting estimated costs and expenses
of this Offering, are expected to be approximately $10.8 million (or $12.4
million if the Underwriters' over-allotment option is exercised in full). The
Company intends to use the net proceeds as follows:
DOLLAR PERCENTAGE OF
USE OF PROCEEDS AMOUNT USE OF PROCEEDS
- --------------- ------ ---------------
Development and opening of new
breweries $ 9,600,000 89%
Repayment of notes 1,200,000 11
----------- ---
Total $10,800,000 100%
=========== ===
The Company plans to use approximately $9.6 million of the proceeds of this
Offering for the development and opening of three new Big Buck Breweries. The
Company intends to obtain real estate financing for up to 55% of the costs of
developing and opening the three new Breweries. The Company currently estimates
that the cost of developing and opening the three new Breweries, including
equipment, furniture, fixtures and pre-opening expenses, will aggregate
approximately $21.0 million, depending upon the locations, site conditions,
construction costs and sizes and types of Breweries built. There can be no
assurance that the Company will be able to develop and open the three new Big
Buck Breweries at such costs or obtain the necessary financing on terms
favorable to the Company. In addition, the Company's expansion plans will be
altered absent the enactment of an amendment to current Michigan law. See "Risk
Factors -- Michigan Law May Limit Growth." The Company will not receive any of
the proceeds from the sale of the Shares by the Selling Shareholder.
In February 1996, the Company obtained for $25,000 an option to purchase for
$375,000 a seven acre site in Sault St. Marie, Michigan. This option expires on
June 30, 1996.
Approximately $1.2 million of the net proceeds will be used to repay the
Pre-Bridge Non- Convertible Note, the Bridge Notes, and the April 10, 1996
promissory note to Casimer I. Zaremba. See "Certain Transactions" and
"Description of Securities -- Prior Offerings."
Pending use of the net proceeds for the above purposes, the Company intends to
invest such funds in short-term bank deposits, United States government
securities and other short-term investment-grade securities.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on its Common Stock
and does not intend to pay dividends on its Common Stock in the foreseeable
future. The Company presently expects to retain its earnings to finance the
development and expansion of its business. The payment by the Company of
dividends, if any, on its Common Stock in the future is subject to the
discretion of the Board of Directors and will depend on the Company's earnings,
financial condition, capital requirements and other relevant factors. In
addition, the Company's ability to pay dividends is prohibited by the terms of
its credit facility with its bank. Investors who anticipate a need for immediate
income from their investment should not purchase the Units offered hereby.
[Additional pages to be substituted in the Selling Shareholder Prospectus.]
PRINCIPAL AND SELLING SHAREHOLDERS
The following table contains certain information as of the date of the Offering
as to the number of shares of Common Stock beneficially owned by (i) each person
who beneficially owns 5% or more of the Company's Common Stock, (ii) the Selling
Shareholder, (iii) each person who is a director of the Company and (iv) all
persons who are directors and officers of the Company as a group, and as to the
percentage of the outstanding shares held by them on such date. Each person
identified below possesses sole voting and investment power with respect to such
shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
OFFERING(1) SHARES OWNED AFTER OFFERING(1)
------------------------ OFFERED ------------------------
NUMBER PERCENTAGE HEREBY NUMBER PERCENTAGE
------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
William F. Rolinski(2) 840,008 31.7 -- 840,008 16.9
Casimer I. Zaremba(2) 675,007 25.5 -- 675,007 13.6
Dr. Blair A. Murphy(2) 635,007 24.0 -- 635,007 12.8
Henry T. Siwecki(2) 136,989(3) 5.2 -- 136,989(3) 2.8
Pyramid Partners, L.P.
730 East Lake Street
Wayzata, Minnesota 55391 137,500(4) 5.2 75,000 62,500 1.3
All Directors and Executive
Officers as a group (seven
persons) 2,287,011(3) 86.3 -- 2,287,011(3) 46.0
</TABLE>
(1) Securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations of the Securities and Exchange Commission and,
accordingly, may include securities owned by or for, among others, the
spouse, children or certain other relatives of such person as well as
other securities as to which the person has or shares voting or
investment power or has the option or right to acquire Common Stock
within 60 days after the date of the Offering. Shares of Common Stock
subject to options, warrants or convertible debt securities currently
exercisable or exercisable within 60 days after the date of the
Offering, are deemed to be outstanding for purposes of computing the
percentage of shares beneficially owned by the person holding such
options, warrants or convertible debt securities, but are not deemed to
be outstanding for purposes of computing such percentage for any other
person. Assumes identified persons do not purchase Units in this
Offering.
(2) The address of Messrs. Rolinski, Murphy, Zaremba and Siwecki is c/o
Michigan Brewery, Inc., 1999 Walden Drive, Gaylord, Michigan 49735.
(3) Includes 6,000 shares of Common Stock subject to currently exercisable
warrants.
(4) Includes 62,500 shares of Common Stock subject to currently exercisable
warrants.
[Additional pages to be substituted in the Selling Shareholder Prospectus.]
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary 3
Risk Factors 6
Use of Proceeds 12
Dividend Policy 12
Prior Subchapter S Corporation Status 13
Capitalization 14
Dilution 15
Selected Financial Data 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 17
Business 20
Management 28
Certain Transactions 31
Registration of Other Securities 32
Principal Shareholders 33
Description of Securities 34
Shares Eligible for Future Sale 38
Underwriting 39
Legal Matters 40
Experts 40
Additional Information 40
Financial Statements F-1
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
75,000 SHARES
MICHIGAN BREWERY, INC.
[LOGO]
Common Stock
PROSPECTUS
, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article V, Section 3 of the Registrant's Bylaws generally provides that the
Registrant will indemnify its directors and officers to the fullest extent
authorized or permitted under the Michigan Business Corporation Act and that the
Company will make advancements of expenses at the request of a director or
officer. The Michigan Business Corporation Act authorizes a corporation, under
certain circumstances, to indemnify its directors and officers (including to
reimburse them for expenses incurred). Reference is made to Exhibit 3.2 of this
Registration Statement for the complete text of the Registrant's Bylaws.
The Registrant's Restated Articles of Incorporation generally limit the personal
liability of directors for monetary damages for breaches of fiduciary duty. If a
director were to breach such duty in performing his or her duties as a director,
neither the Registrant nor its shareholders could recover monetary damages from
the director, and the only course of action available to the Registrant's
shareholders would be equitable remedies, such as an action to enjoin or rescind
a transaction involving a breach of fiduciary duty. To the extent claims against
directors are limited to equitable remedies, the provision in the Restated
Articles of Incorporation may reduce the likelihood of derivative litigation and
may discourage shareholders or management from initiating litigation against
directors for breach of their fiduciary duty.
Under the Restated Articles of Incorporation, liability for monetary damages
remains for (i) any breach of duty of loyalty to the Registrant or its
shareholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) violations of
Section 551(1) of the Michigan Business Corporation Act, (iv) any transaction
from which the director derived an improper personal benefit or (v) any act or
omission that occurred before the effective date of the provision of the
Articles of Incorporation.
Reference is made to Exhibit 3.1 of this Registration Statement for the complete
text of the Restated Articles of Incorporation.
Michigan corporations are also authorized to obtain insurance to protect
directors and officers from certain liabilities, including liabilities against
which corporations cannot indemnify their directors and officers.
For provisions regarding the indemnification of the Registrant and the directors
and officers of the Registrant by the Underwriter against certain liabilities,
including liabilities under the Securities Act, reference is made to Section 7
of the Underwriting Agreement, filed as Exhibit 1.1 to this Registration
Statement.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The table below sets forth estimated expenses in connection with the issuance
and distribution of the Common Stock being offered:
SEC registration fee $ 12,500
NASD corporate finance review fee 4,000
Small-Cap Market qualification fee 17,500
*Printing expenses 40,000
*Fees and expenses of counsel for the Company 80,000
*Fees and expenses of accountants for the Company 80,000
*Transfer Agent and Registrar fees 17,000
*Blue Sky fees and related expenses 10,000
*Miscellaneous 39,000
--------
Total $300,000 **
========
- -----------------
* Estimated
** Does not include the Underwriter's nonaccountable expense allowance equal to
2.5% of the total Price to Public.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following transactions reflect the issuance during the previous three years
of securities not registered under the Securities Act, giving retroactive effect
to a one for 112.5-for-one stock split in January 1996.
Between September 1994 and November 1995, the Company sold an aggregate of
2,500,000 shares of Common Stock to six individuals, including five officers and
directors, for a total aggregate consideration of approximately $2.4
million. Of the amount of securities sold, 2,136,699 shares were sold for cash
and 363,301 shares were issued as a result of the conversion of $250,000 of the
Company's indebtedness to a certain purchaser and the satisfaction of two
$50,000 promissory notes by certain purchasers. All such securities were sold
through direct private placements with the purchasers, no broker/dealer or
underwriter was involved and no commissions were paid to any person in respect
thereto.
In December 1995, the Company sold to one accredited investor a $250,000
convertible secured promissory note, a $250,000 nonconvertible secured
promissory note and a warrant to purchase 62,500 shares of Common Stock. These
securities were sold for an aggregate purchase price of $500,000.
In February 1996, the Company issued 60 bridge units, each unit consisting of
2,500 shares of Common Stock, $12,500 in the principal amount of notes and
warrants for the purchase of an aggregate of 2,500 shares of Common Stock. These
Units were sold at a purchase price of $25,000 per Unit. All of the purchasers
of the Units were accredited investors as that term is defined under Rule 501 of
Regulation D under the Securities Act.
The Company paid aggregate commissions to R.J. Steichen & Company, a
broker/dealer, totalling $130,000 for sales described in paragraphs 3 and 4
above.
All of the above sales were made in reliance on Section 4(2) of the Securities
Act as transactions not involving a public offering. In addition, the sales
described in paragraphs 3 and 4 above were made in reliance upon Rules 505 and
506 of Regulation D under the Securities Act. With regard to the reliance by the
Company upon the exemption from registration provided under Section 4(2) of the
Securities Act for the sales of securities disclosed above, inquiries were made
by the Company to establish that such sales were qualified for exemption from
the registration requirements. In particular, the Company confirmed that with
respect to the exemption claimed under Section 4(2) of the Securities Act (i)
each purchaser referred to gave written assurance of investment intent and
certificates for the shares sold to each purchaser bear a legend consistent with
such investment intent and restricting transfer and (ii) sales within any
offering were made to a limited number of persons. No general solicitation to
the public was made in connection with such sales.
ITEM 27. EXHIBITS
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EXHIBITS DESCRIPTION
<S> <C>
1.1 Form of Underwriting Agreement (including Form of Representative's Warrant,
Agreement Among Underwriters and Selected Dealers' Agreement)
3.1 Restated Articles of Incorporation
3.2 Amended and Restated Bylaws
4.1 Specimen Form of the Company's Common Stock Certificate
4.2 Form of Warrant Agreement (including Form of Redeemable Class A Warrant)
Form of Subscription and Investment Representation Agreement, dated December
1995, between the Company and Pyramid Partners, LP (including Form of
Convertible Secured Promissory Note, Form of Non-Convertible Secured Promissory
4.3 Note and Form of Warrant)
5.1 Opinion of Briggs and Morgan, Professional Association
10.1 1996 Stock Option Plan
10.2 1996 Director Stock Option Plan
Loan Agreement, dated July 28, 1995, by and among the Company, William F.
10.3 Rolinski, Dr. Blair Murphy, Walter Zaremba, Casimer Zaremba and NBD Bank
11.1 Computation of Net Loss Per Share
Consent of Briggs and Morgan, Professional Association (filed as part of
23.1 Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP
24.1 Power of Attorney (set forth on the Signature Page hereof)
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ITEM 28. UNDERTAKINGS.
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect, in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of the
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) of the Securities Act of 1933 if in
the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For purposes of determining liability, treat each post-effective
amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
The undersigned Registrant hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of the registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Gaylord and State of Michigan, on June 12, 1996.
MICHIGAN BREWERY, INC.
By: /S/ WILLIAM F. ROLINSKI
William F. Rolinski
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities
indicated and on the dates stated.
SIGNATURE TITLE DATE
/S/ WILLIAM F. ROLINSKI President, Chief Executive Officer June 12, 1996
William F. Rolinski and Director
/S/ ANTHONY P. DOMBROWSKI Chief Financial Officer (Principal June 12, 1996
Anthony P. Dombrowski Financial Officer and Accounting
Officer)
* Director
Casimer I. Zaremba
* Director
Blair A. Murphy
* Director
Henry T. Siwecki
* /S/ WILLIAM F. ROLINSKI
William F. Rolinski,
As Attorney-in-Fact
Dated: June 12, 1996
INDEX TO EXHIBITS
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EXHIBITS DESCRIPTION PAGE
<S> <C> <C>
1.1 Form of Underwriting Agreement (including Form of Representative's Warrant,
Agreement Among Underwriters and Selected Dealers' Agreement) *
3.1 Restated Articles of Incorporation *
3.2 Amended and Restated Bylaws *
4.1 Specimen Form of the Company's Common Stock Certificate *
4.2 Form of Warrant Agreement (including Form of Redeemable Class A Warrant) *
4.3 Form of Subscription and Investment Representation Agreement, dated
December 1995, between the Company and Pyramid Partners, LP (including Form
of Convertible Secured Promissory Note, Form of Non-Convertible Secured
Promissory Note and Form of Warrant) *
5.1 Opinion of Briggs and Morgan, Professional Association *
10.1 1996 Stock Option Plan *
10.2 1996 Director Stock Option Plan *
10.3 Loan Agreement, dated July 28, 1995, by and among the Company, William F.
Rolinski, Dr. Blair Murphy, Walter Zaremba, Casimer Zaremba and NBD Bank *
11.1 Computation of Net Loss Per Share *
Consent of Briggs and Morgan, Professional Association (filed as part of 23.1
Exhibit 5.1) *
23.2 Consent of Arthur Andersen LLP
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*Previously filed.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our firm included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
June 12, 1996
