<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
[ ] Exchange Act of 1934 for the quarterly period ended January 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________
to ___________
Commission File Number 1-12119
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
(Exact name of registrant as specified in its charter)
Bermuda 72-123940
------------------------------- ------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization
One Galleria Boulevard, Metairie, Louisiana 70001
------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 849-2739
Indicate by a check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of common stock outstanding
At March 12, 1997: 3,696,876
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
Form 10-Q
Part I Financial Information
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets-
January 31, 1997 and October 31, 1996
Consolidated Statements of Operations-
Three months ended January 31, 1997 and 1996
Consolidated Statements of Cash Flows-
Three months ended January 31, 1997 and 1996
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
2
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts expressed in United States Dollars)
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
----------- ------------
<S> <C> <C>
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 4,429,215 $ 5,780,672
Accounts receivable, net of allowance for doubtful accounts of 185,358 73,581
$1,500 and $1,500
Inventories 169,853 35,508
Prepaids and other current assets 168,386 126,465
---------- ----------
Total current assets 4,952,812 6,016,226
Equipment and capital leases, net 1,059,029 663,830
Other assets 776,008 235,749
Deferred tax assets 99,988 85,501
---------- ----------
Total assets $6,887,837 $7,001,306
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 228,598 $ 242,014
Capital lease obligations, current portion 12,858 12,858
---------- ----------
Total current liabilities 241,456 254,872
Capital lease obligations, net of current portion 14,149 17,364
---------- ----------
Total liabilities 255,605 272,236
Minority Interests 230,047 --
Commitments and Contingencies -- --
Shareholders' equity:
Preferred stock, $0.01 par, 500,000 shares authorized, none issued -- --
Common stock, $0.01 par, 10,000,000 shares authorized, 3,696,876
shares issued and outstanding 36,969 36,969
Common stock warrants, 2,090,876 outstanding 181,906 181,906
Additional paid-in capital 7,388,205 7,388,205
Accumulated deficit (1,204,895) (878,010)
---------- ----------
Total shareholders' equity 6,402,185 6,729,070
---------- ----------
Total liabilities and shareholders' equity $6,887,837 $7,001,306
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
January 31, January 31,
1997 1996
---------- -----------
<S> <C> <C>
Net sales $174,564 $ 124,544
Cost of sales 111,422 22,599
-------- ---------
Gross profit 63,142 101,945
Selling, general and administrative expenses 380,625 89,810
Interest (income) expense, net (11,929) 12,219
Other expense, net 36,047 379
-------- --------
Total expenses 404,743 102,408
Loss before income taxes (341,601) (463)
Income tax benefit 14,487 76
--------- ---------
Loss after income taxes (327,114) (387)
Minority interest 229 --
--------- ----------
Net loss $(326,885) $ (387)
========= ==========
Net loss per common share $(0.09) --
========= =========
Weighted average number of shares outstanding 3,696,876 2,000,000
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
January 31, January 31,
1997 1996
----------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (326,885) $ (387)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 20,703 14,461
Deferred income taxes (14,487) (76)
Minority interest (229) --
Increase in operating assets, net of assets acquired:
Accounts receivable (106,176) (18,435)
Inventories (112,646) (12,456)
Prepaids and other current assets (41,921) (3,117)
Other assets (464,920) --
Decrease in operating liabilities, net of liabilities acquired:
Accounts payable and accrued liabilities (29,379) (1,036)
----------- ---------
Net cash used in operating activities (1,075,940) (21,046)
----------- ---------
Cash flows from investing activities:
Purchase of equipment (413,202) (29,960)
Investment in AmBrew USA, net of cash received (90,502) --
----------- ---------
Net cash used in investing activities (503,704) (29,960)
----------- ---------
Cash flows from financing activities:
Contribution from joint venture partner 231,402 --
Payment of capital lease obligations (3,215) (2,568)
Subscription monies received in advance -- 22,859
----------- ---------
Net cash provided by financing activities 228,187 20,291
----------- ---------
Decrease in cash (1,351,457) (30,715)
Cash at beginning of period 5,780,672 102,248
----------- ---------
Cash at end of period $ 4,429,215 $ 71,533
=========== =========
Supplemental disclosure to statements of cash flows:
Cash interest paid $ 1,100 $ 442
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in United States Dollars)
(Unaudited)
1. Basis for Preparation of the Consolidated Financial Statements
The consolidated financial statements have been prepared by American
Craft Brewing International Limited ("AmBrew International") and its
subsidiaries (collectively, the "Company"), without audit, with the exception of
the October 31, 1996 consolidated balance sheet. The financial statements
include consolidated balance sheets, consolidated statements of operations and
consolidated statements of cash flows. In the opinion of management, all
adjustments, which consist of normal recurring adjustments, necessary to present
fairly the financial position, results of operations and cash flows for all
periods have been made.
These financial statements should be read in conjunction with the
consolidated financial statements as of and for the fiscal year ended October
31, 1996, and the footnotes thereto included in the Company's Annual Report on
Form 10-K.
2. Basis of Presentation
The consolidated financial statements include the accounts of AmBrew
International and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
3. Acquisition
In December 1996, the Company purchased 95% of the outstanding capital
stock of Atlantis Import Company Incorporated, now AmBrew USA, for approximately
$100,000 plus an agreement to pay certain royalties in the future.
4. Net loss per common share
Net loss per common share is computed by dividing net loss by the
weighted average common shares outstanding during the periods, on the basis that
the Share Exchange, the Share Split and the Merger (as defined in the Form 10-K)
had been consummated prior to the periods presented. Average common equivalent
shares for common stock warrants have not been included, as the computation
would not be dilutive.
5. Inventories
Inventories are composed of the following:
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
------------- ------------
<S> <C> <C>
Raw materials $ 32,434 $ 31,451
Work-in-process and finished goods 137,419 4,057
--------- ----------
$ 169,853 $ 35,508
========= =========
</TABLE>
6
<PAGE>
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Amounts expressed in United
States Dollars) (Unaudited)
6. Subsequent Events
Subsequent to January 31, 1997, the following events took place:
a. On February 12, 1997, the Company entered into an employment contract
with Mr. Peter W.H. Bordeaux. Mr. Bordeaux's new position with the Company is
President and Chief Executive Officer. Mr. Bordeaux will continue to hold the
position of Chairman of the Board. Under the terms of the contract Mr. Bordeaux
will have a base compensation of $200,000 per annum with a bonus payment of
$100,000 guaranteed for the first year only. Subsequent bonus payments will be
dependent on the achievement of specified performance goals. The initial term of
the employment contract is three years.
b. On February 4, 1997, the final payment of $242,209 was remitted on
the brewing equipment for Celtic Brew, LLC. The equipment was shipped in
February 1997 and is scheduled to arrive at the Dublin site in March 1997. The
lease for the site is in the final stages of negotiation. The final contribution
to Celtic Brew, LLC was remitted during March 1997. The grand opening ceremonies
for the Dublin brewery are scheduled for April 1997.
c. On February 4, 1997, the Company placed an additional down payment of
$85,903 on the equipment for the Tecate brewery. The site is undergoing initial
preparation in anticipation of the equipment's arrival. The equipment is
scheduled to ship and arrive at the Tecate site in April 1997. The grand opening
ceremonies are scheduled for May 1997.
d. On February 14, 1997, the Company signed a consultant agreement with
Mr. David Haines. The agreement is effective from January 1, 1997 through
October 31, 1997. Mr. Haines will have a per annum compensation of $66,000
inclusive of allowances. Mr. Haines will continue to hold his position as
Director.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The following discussion addresses the Company's consolidated financial
condition and results of operation, which, for the three months ended January
31, 1996 includes only the Hong Kong brewing and distribution subsidiaries,
South China Brewing Company Limited ("South China") and SCBC Distribution
Company Limited ("SCBC"). The consolidated information as of and for the three
months ended January 31, 1997 also includes AmBrew International, AmBrew USA,
Celtic Brew, LLC ("Celtic Brew") and Cerveceria Rio Bravo, S.A. de C.V.
("Cerveceria Rio Bravo"). Celtic Brew and Cerveceria Rio Bravo had not commenced
operations as of January 31, 1997. In addition, the period-to-period
presentation set forth under "Results of Operations" will not necessarily be
indicative of future results and future net losses can be expected as increased
expenses are incurred in connection with the establishment of expansion
breweries that the Company proposes to establish and operate, either through
wholly-owned subsidiaries or through majority-owned or otherwise
Company-controlled joint venture arrangements with strategic local partners.
With the exception of historical information, the matters discussed
herein are "forward looking statements" within the meaning of the Private
Litigation Reform Act of 1995. Such forward looking statements are subject to
risks, uncertainties and other factors which could differ materially from future
results implied by such forward looking statements. Potential risks and
uncertainties include, but are not limited to, the Company's ability to
7
<PAGE>
<PAGE>
establish and operate additional breweries on a timely basis, increased
acceptance by consumers of the Company's brands and development by the Company
of new brands of beer and the Company's ability to finance and additional
capital expenditures once the proceeds of the Offering have been committed.
Results of Operations
The following table sets forth certain line items from the Company's
consolidated statements of operations expressed as a percentage of net sales for
the periods ended January 31, 1997 and 1996.
<TABLE>
<CAPTION>
Three Months Ended
January 31, 1997 January 31, 1996
---------------- ----------------
<S> <C> <C>
Net Sales 100% 100%
Cost of Sales 64% 19%
Gross Profit 36% 82%
Selling, general and administrative expenses 218% 72%
Operating income (loss) (282%) 10%
Interest (income) expense, net (7%) 10%
Net income (loss) (187%) --
</TABLE>
Net Sales. For the three months ended January 31, 1997 and 1996 the
Company had net sales of $174,564 and $124,544, respectively. The growth in
sales resulted from the recently acquired distribution rights to the Cerveza
Mexicali and Charles Wells labels, which offset a sales decrease at the South
China Brewery. The sales of the South China Brewery's proprietary brands
accounted for 30% of the Company's net sales and contract brewing accounted for
8% of the Company's net sales. During that same time period, sales of the
Cerveza Mexicali and Charles Wells labels accounted for 62% of the Company's net
sales. Neither Celtic Brew, nor Cerveceria Rio Bravo had sales during the
period.
The South China Brewery is a party to custom brewing contracts with
Delaney's (Wanchai) Limited, owner of Delaney's Irish Pub ("Delaney's"), and
Iconic America ("Iconic"). The custom brewing contract with Delaney's expires in
September 1997 and the contract with Iconic expires in August 1997.
The South China Brewery had net sales of $66,815 for the three months
ended January 31, 1997, a decline of $57,830 compared to those experienced
during the first quarter of 1996. This decline is due mainly to a reduction in
the volume of custom brewing under the contracts with Delaney's and Iconic,
compared to the volumes under the previous contracts. The South China Brewery
also continued to experience seasonally low sales volumes during the holiday
season. The Company is actively seeking additional customers and other
opportunities to increase revenues from the South China Brewery. The South China
Brewery will begin exporting its proprietary brands during the first half of
1997. AmBrew USA will distribute the product via its national distribution
network.
Cost of Sales. Cost of sales increased as a percentage of sales to 64%
in for the three months ended January 31, 1997 from 18% in the corresponding
period in 1996. The increase is primarily the result of the acquisition of
AmBrew USA during the quarter. AmBrew USA's cost of sales for the three months
ended January 31, 1997 was $89,625, or 83% of sales. AmBrew USA's cost of sales
is higher than the South China Brewery's as it functions solely as a
distributor. Also, the South China Brewery's cost of sales increased to 33% of
sales from 18% in the prior year due to less efficient use of equipment and
resources as a result of under utilized capacity.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended January 31, 1997 and 1996
were $380,625 and $89,810, respectively. The increase is primarily attributable
to the addition of AmBrew International, with expenses of $198,412, AmBrew USA,
with expenses of $21,267, and Cerveceria Rio Bravo, with rent expenses of
$29,167. The remainder of the increase relates to additional salaries and
marketing costs at the South China Brewery.
8
<PAGE>
<PAGE>
Net Interest Expense. Net interest (income) expense for the three months
ended January 31, 1997 and 1996 was ($11,929) and $12,219, respectively. The
increased income relates to the investment of the proceeds from the initial
public offering.
Liquidity and Capital Resources
The Company's material commitments for future capital expenditures
relate primarily to the financing of the proposed expansion breweries. The
Company has placed an order for twenty micro-brewery systems with Micro Brew
Systems and made a $200,000 non-refundable deposit on the equipment. For the
period ended January 31, 1997, the Company paid additional down payments of
$340,081 on two systems in production for the Dublin and Tecate expansion
breweries. In addition the Company placed a down payment of $131,927 for five
bottling systems to be used at selected expansion brewery sites. The Company is
required to pay the remaining balances of $615,842 for the equipment in
production, as it is completed and ready for shipment.
In addition to the deposits and down payments placed for brewery
equipment, the Company has also placed deposits totaling $350,000 in connection
with the distribution rights of the Cerveza Mexicali label.
At January 31, 1997, the South China Brewery had fixed capital lease
obligations of $ 12,885, $17,179 and $6,025, respectively, for each of the three
years in the period ending October 31, 1999. At January 31, 1997, the South
China Brewery had $77,123 in operating lease commitments over the two year
period ending October 31, 1998 relating to its warehouse and brewery facility.
At January 31, 1997, AmBrew International had an operating lease
obligation of $66,540 over the three year period ending November 30, 1999
relating to the lease of its corporate office. AmBrew International Limited also
had operating lease obligations of $29,331 for the three years ending January
31, 2000 relating to company vehicles. Additionally, AmBrew International has
fixed annual salary expenses of $538,000 related to various employment
agreements with its employees, including the contract with Mr. Peter Bordeaux.
At January 31, 1997, Cerveceria Rio Bravo had obligations of $385,500
for the period ending September 10, 2001 in connection with a related party
operating lease for its brewery site.
At January 31, 1997, approximately $4,128,015 of the proceeds from the
initial public offering remained invested in tax-exempt interest-bearing
accounts and $10,346 was invested in interest bearing accounts. The Company
expects to be able to finance, using its own funds, funds provided by joint
venture partners and third party financing, if available, up to six expansion
breweries in 1997, including the Tecate and Dublin breweries. The Company
expects that it will require additional external financing in 1998 to continue
its expansion and to meet working capital requirements. The Company may seek
such additional financing in the form of additional equity or borrowed funds.
The Company has not yet begun to investigate the potential availability of such
additional financing whether in the form of debt of equity.
The Company believes that its working capital will provide it with
sufficient capital resources and liquidity to meet its foreseeable needs.
9
<PAGE>
<PAGE>
PART II- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN CRAFT BREWING
INTERNATIONAL LIMITED
Date: March 14, 1997
/s/ James L. Ake
---------------------------
James L. Ake
Executive Vice President,
Chief Operating Officer
and Secretary
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JAN-31-1997
<PERIOD-TYPE> 3-MOS
<CASH> 4,429,215
<SECURITIES> 0
<RECEIVABLES> 185,358
<ALLOWANCES> 1,500
<INVENTORY> 169,853
<CURRENT-ASSETS> 4,952,812
<PP&E> 1,170,185
<DEPRECIATION> 111,156
<TOTAL-ASSETS> 6,887,837
<CURRENT-LIABILITIES> 241,456
<BONDS> 0
<COMMON> 36,969
0
0
<OTHER-SE> 6,365,216
<TOTAL-LIABILITY-AND-EQUITY> 6,887,837
<SALES> 174,564
<TOTAL-REVENUES> 174,564
<CGS> 111,422
<TOTAL-COSTS> 492,047
<OTHER-EXPENSES> 36,047
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (11,929)
<INCOME-PRETAX> (341,601)
<INCOME-TAX> (14,487)
<INCOME-CONTINUING> (327,114)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (327,114)
<EPS-PRIMARY> (0.09)<F1>
<EPS-DILUTED> 0
<FN>
<F1>Refer to Note 3 of the Notes to the Financial Statements for discussion
of total common shares used in EPS.
</FN>
</TABLE>
