UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended April 30, 1998
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
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(Exact name of registrant as specified in its charter)
Bermuda 72-1323940
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State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization
One Galleria Boulevard, Suite 1714, Metairie, Louisiana 70001
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(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 June 15, 1998: 3,909,676
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED
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FORM 10-Q
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PART I FINANCIAL INFORMATION
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ITEM 1. Financial Statements (unaudited):
Consolidated Balance Sheets-
April 30, 1998 and October 31, 1997
Consolidated Statements of Operations-
Three and six months ended April 30, 1998 and 1997
Consolidated Statements of Cash Flows-
Three and six months ended April 30, 1998 and 1997
Notes to Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
PART II OTHER INFORMATION
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ITEM 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts expressed in United States Dollars)
(Unaudited)
April 30, October 31,
1998 1997
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 83,637 $ 59,619
Accounts receivable, 237,831 216,928
Inventories 287,952 395,480
Prepaids and other current assets 78,917 139,420
---------- -----------
Total current assets 688,337 811,447
Equipment and capital leases, net 2,751,893 3,349,015
Rental, utility and other deposits 330,097 706,475
Deposits and advanced royalties for beer purchases 964,021
621,827
Notes receivable from officer/shareholder 35,300 35,000
Notes receivable noncurrent 58,966 ---
Goodwill, net 73,889 75,877
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Total assets $4,902,503 $ 5,599,641
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $1,948,763 $1,483,509
Current loans payable 1,025,000 415,053
Capital lease obligations, current portion 4,224 20,657
Shareholders' loans 50,000 150,000
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Total current liabilities 3,027,987 2,069,219
Long-term loan, net of current portion 141,245 ---
Capital lease obligations, net of current portion 4,735 7,660
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Total liabilities 3,173,967 2,076,879
Minority interests 305,505 356,401
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, 3,909,676 shares
issued and outstanding 39,097 36,969
Common stock warrants, 2,090,876 outstanding 181,906 181,906
Additional paid-in capital 7,489,583 7,388,205
Cumulative translation adjustment (101,508) (46,887)
Accumulated deficit (6,186,047) (4,393,832)
---------- -----------
Total shareholders' equity 1,423,031 3,166,361
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Total liabilities and shareholders' equity $4,902,503 $ 5,599,641
========== ===========
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts expressed in United States Dollars)
(Unaudited)
Three Months Ended Six Months Ended
--------------------- --------------------------
April 30, April 30, April 30, April 30,
1998 1997 1998 1997
--------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 723,363 $ 158,837 $ 1,238,160 $ 333,401
Cost of sales (699,717) (106,358) (1,167,545) (217,780)
--------- ---------- ------------ ------------
Gross profit 23,645 52,479 70,615 115,621
Selling, general and administrative expenses 705,558 764,161 1,144,786
Non-operating expenses 57,360 --- 331,071 ---
Interest (income) expense, net 26,607 (20,163) 51,852 (32,092)
Other expense, net (1,178) 32,501 (2,527) 68,548
--------- ---------- ------------ ------------
Total expenses 788,346 776,499 1,880,500 1,181,242
Loss before income taxes (764,701) (724,020) (1,873,805) (1,065,621)
Income tax benefit --- 9,550 --- 24,037
--------- ---------- ------------ ------------
Loss after income taxes (764,701) (714,470) ( 1,873,805) (1,041,584)
Minority interests 18,998 19,000 44,555 19,229
--------- ---------- ------------ ------------
Net loss $(745,703) $(695,470) $(1,829,250) $(1,022,355)
========= ========== ============ ============
Net loss per common share $ (0.20) $ (0.19) $ (1.63) $ (0.28)
========= ========== ============ ============
Weighted average number of shares outstanding 3,803,213 3,696,876 3,790,047 3,696,876
========= ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts expressed in United States Dollars)
(Unaudited)
Six Months Ended
----------------
April 30, April 30,
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,829,250) $(1,022,355)
Adjustments to reconcile net loss to net cash used in operating
activities:
Loss or gain on sale of subsidiary 74,369 ---
Depreciation and amortization 139,721 47,947
Deferred income taxes --- (24,037)
Minority interests (44,555) (19,229)
Increase in operating assets, net of assets acquired:
Accounts receivable (22,298) (91,078)
Inventories 70,232 (116,490)
Prepaids and other current assets 49,968 (171,871)
Other assets (96,932) (661,785)
Notes receivable from Employees/shareholder (300)
(35,000)
Decrease in operating liabilities, net of liabilities acquired:
Accounts payable and accrued liabilities 606,074
--------
23,945
-----------
Net cash used in operating activities (1,052,972) (2,069,953)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of subsidiary 453,394 ---
Purchase of equipment (161,729) (1,610,805)
Investment in AmBrew USA, net of cash received ---
--------
(90,502)
--------
Net cash used in investing activities 291,664 (1,701,307)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution from joint venture partner 33,632 434,525
Payment of capital lease obligations (2,661) (4,924)
Additional paid in capitol 102,861 ---
Repayment of bank loan 651,111 ---
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Net cash provided by financing activities 784,944
429,601
-------
Effect of exchange rate changes on cash 382 (6,942)
---------- -----------
Decrease in cash 24,019 (3,348,601)
Cash at beginning of period 59,618 5,780,672
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Cash at end of period $ 83,637 $ 2,432,071
========= ===========
SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOWS:
Cash interest paid $ 271 $ 1,000
The accompanying notes are an integral part of these financial statements.
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. 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, 1997, and the footnotes thereto included in the Company's Annual Report on
Form 10-K (the "Form 10-K").
As discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the Company is actively seeking
additional sources of working capital in both the debt and equity markets. The
successful completion of additional financing may enable the Company to meet
its obligations including (1) the repayment of short-term loans and
shareholders' loans, (2) continued expansion of production facilities
necessary to achieve profitable production levels, and (3) additional
marketing of certain brands under distribution agreements with the Company, as
more fully described below. The Company believes that sources of working
capital are available. There can be no assurance, however, that the Company
will obtain additional sources of working capital or that any additional
working capital secured will be sufficient to provide the Company with the
necessary capital to continue as a going concern.
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. Sale of South China and SCBC
On December 22, 1997, the Company sold all of the issued and outstanding
shares of capital stock of the South China Brewing Company Limited ("South
China") and SCBC Distribution Company Limited ("SCBC") to Gold Crown
Management Limited ("Gold Crown"), an unrelated party. The Company also
assigned to Gold Crown loans from the Company to South China and SCBC
collectively in the amount of $1,719,844 (the "Sale and Assignment"). The
net consideration that will be paid to the Company in connection with the Sale
and Assignment will be approximately $700,000, which includes $200,000 placed
in escrow to be released upon the completion of certain equipment shipments
and other events. The Company recognized a loss of $74,369 associated with
equipment purchases and freight charges required under the terms of the sales
contract. Currently, $100,000 remains in escrow. In addition, the Company
issued two options to Gold Crown, as more fully described below.
In connection with the Sale and Assignment, the Company and Gold Crown
entered into two option agreements. The first option allows Gold Crown, at
its election, to exchange 30% of the issued and outstanding shares of capital
stock of South China and SCBC for an aggregate of 125,000 shares of the common
stock of the
Company. The option is exercisable by Gold Crown during the period commencing
May 31, 1998 through November 30, 2002 or such later date as the Company, in
its sole discretion, shall determine. The Company's obligations to deliver
the shares upon Gold Crown's exercise of the first option is subject to
certain conditions specified in the option agreement including, among others,
minimum net assets at South China of $700,000.
<PAGE>
AMERICAN CRAFT BREWING INTERNATIONAL LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
The value assigned for this option was approximately $50,000. The second
option allows Gold Crown to exchange 100% of the issued and outstanding shares
of capital stock of South China and SCBC for a certain number of shares as
calculated based on the terms of the second option agreement. Gold Crown may
exercise the second option only if the government of Hong Kong fails to
unconditionally renew South China's license to operate a brewery and the
Company has not cured such non-renewal within 45 days of the date on which
Gold Crown notifies the Company of such non-renewal. Management of the
Company estimates that the likelihood of such non-renewal is remote and has
assigned no value to the second option.
In connection with the sale of South China and SCBC, the Company signed
cross distribution agreements, which granted AmBrew USA the right to
distribute certain South China Brewery products in the United States and
certain territories. Additionally, the Company granted South China Brewery
distribution rights to certain of the Company's brands for Hong Kong and the
People's Republic of China. The distribution agreements expire in December
2001.
4. Net Loss per Common Share
Net loss per common share is computed by dividing net loss by the
weighted average common shares outstanding during the periods, on the basis
that the Share Exchange, the Share Split and the Merger (as defined in the
Form 10-K) had been consummated prior to the periods presented.
Net income (loss) ($ 745,703)
------------
Weighted average shares outstanding 3,803,213
------------
Primary earnings (loss) per share ($0.20)
------------
Fully diluted weighted average shares outstanding 6,396,339
------------
Diluted earnings per share ($0.12)
------------
5. Inventories
Inventories are composed of the following:
April 30, October 31,
1998 1997
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Raw materials $ 163,918 $ 255,281
Work-in-process and finished goods 231,562 140,199
--------- ----------
$ 395,400 $ 395,480
6. Subsequent Events
Subsequent to April 30, 1998, the following events took place:
a. The Company reported on Form 8-K dated June 12, 1998 that the assets of
Cerveceria Rio Bravo had been put into some question and that the company was
seeking legal remedies in Mexico and the United States. It also stated that
Anheuser-Busch had terminated its Supply and Contract Production Agreement.
<PAGE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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GENERAL
The following discussion addresses the Company's consolidated financial
condition and results of operations as of and for the three months ended
January 31, 1998, which includes the operations of AmBrew International,
AmBrew USA, Cerveceria Rio Bravo, S.A. de C.V. ("Cerveceria Rio Bravo"), and
Celtic Brew, LLC ("Celtic Brew"). The consolidated information as of and for
the three month period ended January 31, 1997 also includes South China and
SCBC. In addition, the period-to-period presentation set forth under "Results
of Operations" will not necessarily be indicative of future results. Future
net losses can be expected as increased expenses are incurred and sales
decrease due to the lack of working capital at some or all of the breweries
that the Company has established and operates.
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
operate the existing breweries on a profitable basis, increased acceptance by
consumers of the Company's brands and development by the Company of new brands
of beer, the addition of new products to its distribution portfolio and the
Company's ability to obtain additional financing for its operations and
working capital requirements.
RESULTS OF OPERATIONS
Sales. For the three months ended April 30, 1998 and 1997 the Company
had net sales of $723,363and $158,837, respectively. which represents an
increase in sales of $564,526. For the six months ended April 30, 1998 and
1997 the Company had net sales of $ 1,238,160 and $333,401, respectively.
The increase in net sales for the three month period ended April 30, 1998 of $
208,566 as compared to the three month period ended January 31, 1998 is
primarily attributed to AmBrew USA and its recently acquired distribution
rights to KALIK beer, produced by Commonwealth Brewery Ltd in the Bahamas.
The increase in sales for the six months ended April 30, 1998 as compared to
the same period in 1997 is due in part to the increased production and sales
at the Company's Irish brewery, Celtic Brew, and partly attributed to certain
distribution rights acquired by AmBrew USA
For the six-month period ended April 30, 1998 AmBrew USA has sales of
$1,015,105 or 82% of net sales. The sales of Dixie Brewing Company ("Dixie")
products accounted for $692,011, or 56% of net sales. Additionally, the
recently acquired distribution rights for KALIK Beer by AmBrew USA had a
positive impact on net sales. For the six month period ended April 30, 1998
the sale of KALIK beer accounted for $244,920 or approximately 20% of net
sales. For the period ended April 30, 1998 AmBrew USA had an increase in
sales of approximately 1201% or $937,083, compared to the same period during
1997.
During the quarter ended April 30, 1998 the aggregate sales of Celtic
Brew were $23,905. The sales of Celtic Brew accounted for approximately 3.3%
of the Company's net sales for the quarter. For the six month period ended
April 30, 1998 Celtic Brew accounted for approximately 2.6% or $32,297 of the
Company's net sales. Celtic Brew was not fully operationally during the same
period in 1997. Celtic Brew continued to complete deliveries of both its
proprietary brand- Finian's Irish Red Ale and its custom brew product-
Independence Lager to European, Irish, and British customers. While it was
anticipated that AmBrew USA would have begun to import into the United States
products from Celtic Brew during the first half of calendar 1998, due to the
lack of working capital those plans have been delayed. Provided that AmBrew
USA is able to obtain additional working capital, it is still anticipated that
AmBrew USA will import the products of Celtic Brew into the United States
sometime during fiscal 1998.
Cerveceria Rio Bravo, which began operations late in fiscal 1997, has sales of
$24,769 or 3.4% of net sales for the period ended April 30, 1998. For the
six-month period ended April 30, 1998 Cerveceria Rio Bravo had sales of
$124,330 or 10% of the Company's net sales. Sales at Cerveceria Rio Bravo
were much lower than expected due to its need for working capital. Cerveceria
Rio Bravo will require an infusion of working capital in order to resume
normal production levels. During the month of June 1998, the facilities of
Cerveceria Rio Bravo were seized by the Company's largest shareholder and his
associates. The major shareholder is a former Director of the Company. The
facilities at Cerveceria Rio Bravo were pledged as collateral for the
previously reported loan from Entrepreneurial Investors Limited ("EIL"). The
Company is not certain what will develop from the seizure of the facilities of
Cerveceria Rio Bravo.
Cost of Sales. Cost of sales increased as a percentage of sales to 96.7% for
the three months ended April 30, 1998 from 67% in the corresponding period in
1997. The increase is primarily the result of the low levels of production at
the brewing facilities and the operations of AmBrew USA. AmBrew USA's cost of
sales is higher than that of the breweries, as it functions solely as a
distributor. AmBrew USA's cost of sales for the three months ended April 30,
1998 was $538,173 or 84% of its sales compared to $72,427 or 93% of sales
experienced in the same period of 1997. For the six-month period ended April
30, 1998 AmBrew USA's cost of sales was $853,956 or 73% of the Company's total
cost of sales compared to $162,052 or 87% of its sales experienced in the same
six-month period of 1997.
The Cerveceria Rio Bravo's cost of sales for the three months ended April 30,
1998 was 494% of its sales or $122,236. The high cost of sales three months
ended April 30, 1998 is a direct result of its underutilized capacity. The
underutilized capacity was a primarily attributed to the shortage of working
capital. Cerveceria Rio Bravo was not operational during the same period in
1997.
Cost of sales for Celtic Brew was 60% of sales or $14,321 for the three months
ended April 30, 1998. Celtic Brew also functioned at a low level of capacity
not only because of its need for working capital, but also due to certain
start up issues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended April 30, 1998 and 1997
were $705,558 and $764,161, respectively. For the three months ended April
30, 1998 AmBrew International, had expenses of $317,188 or a decrease of 36%
compared to the same period in 1997. These expenses include legal and
professional fees of $97,698 or 31% of total selling, general and
administrative expense for the period. Additionally, the Company incurred
loan origination fees of $57,360 reported as a non-operating expense. The
Company also experienced recurring non-cash Directors and Officers insurance
expense relating to its prospectus of approximately $10,980. The Company
continued to experience the high general and administrative expenses
associated with being a publicly traded company. Such expenses include, but
are not limited to salaries, director's fees, legal fees, audit fees and the
preparation of required quarterly and annual reports.
For the three month period ended April 30, 1998 and 1997 AmBrew USA had
expenses of $186,480 and $106,632, respectively. For the period ended April
30, 1998 AmBrew USA experienced an increase in selling general and
administrative expenses of 75% or $79,848 compared to the same period in 1997.
AmBrew USA's selling, general and administrative expense includes a material
reserve for certain assets. The addition of field salespersons also added
to the increase in the expense for the period ended April 30, 1998 compared to
the same period in 1997. For the six-month period ended April 30, 1998 AmBrew
USA has selling, general and administrative expenses of $365,774 or 24% of
the Company's total expense as compared to $127,899 or 11% of the total
expense incurred in the comparable period of 1997.
Cerveceria Rio Bravo had selling, general and administrative expenses of
$155,858, for the three month period ended April 30, 1998 and $ 335,119 for
the six-month period then ended. For the three-month period ended April 30,
1997 Cerveceria Rio Bravo incurred $29,408 in selling, general and
administrative expenses and $67,293 for the six-month period then ended.
Celtic Brew had selling, general and administrative expenses of $46,031 for
the period ended April 30, 1998 and $97,486 for the six-month period then
ended. For the six-month period ended April 30, 1997 Celtic Brew had selling,
general and administrative expenses of $18,604. The increase in the expense
for the six-month periods ended in 1998 and 1997 can be attributed to its
increased operational level.
Non-operating expenses. During the six-month period ended April 30, 1998
the Company recognized a number of expenses that are not related to
operations. These expenses include, but are not limited to: 1) loan
origination fees for the EIL debt $120,000; 2) legal fees associated with
loans $95,071; 3) commission fees associated with the EIL loan $18,000; and 4)
legal fees associated with the Regulation D issue $98,000. The total amount
reported as non-operating expenses totaled $331,071 for the period ended
April 30, 1998.
Loss on sale of subsidiary. The Company experienced a book loss on the
sale of South China totaling $63,919, which is presented as a separate line
item. The sale of South China and SCBC is more fully described in Note 3.
With the exclusion of the above non-operating expenses the results of the
ongoing operations are enhanced and expected to improve once higher levels of
utilization and production are achieved.
Net Interest (Income) Expense. Net interest (income) expense for the
three months ended April 30, 1998 and 1997 was $26,607 and ($20,163),
respectively. For the six-month periods ended April 30, 1998 and 1997 the net
interest expense (income) was $51,852 and ($32,092), respectively. The
expense for the periods ended April 30, 1998 relates to interest incurred on
short term financing, while the interest income from the corresponding periods
in 1997 relates the investment of idle proceeds from the initial stock
offering.
LIQUIDITY AND CAPITAL RESOURCES
As of January 31, 1998, the Company had a working capital deficit of $2.3
million, which includes $1.025 million in short term loans and $50,000 in
shareholders' loans and $141,245 in long term loans. Additionally, the
Company has incurred losses in each year since inception and anticipates it
will continue to do so in fiscal 1998 as capacity is increased at its
production facilities and production has not yet reached levels sufficient to
achieve profitability.
On November 14, 1997 the Company signed a loan agreement with
Entrepreneurial Investors, Ltd. ("Entrepreneurial Investors"). The short-term
loan is evidenced by a senior note in the amount of $900,000 that bears an
interest rate of 10% per annum and is payable on March 31, 1998. The senior
note to Entrepreneurial Investors is collateralized by a pledge of the
Company's interest in its subsidiaries. A portion of the proceeds from the
Entrepreneurial Investors loan was used to pay the October 27, 1997 loan from
Equity Services. Additionally, the Company used a portion of the proceeds to
pay the outstanding promissory notes. The remaining funds from the loan were
used to fund the Company's working capital needs. During the second quarter of
fiscal 1998 the Company signed an additional note in the amount of $100,000
that bears the interest rate of 10% per annum and is payable on May 30, 1998.
The due date of the $900,000 note was also extended to May 30, 1998 at the
signing of the second note.
On December 22, 1997, the Company sold its interest in South China and
SCBC for $650,000, of which $200,000 was placed in escrow pending the outcome
of certain events, as more fully described in Note 3. $100,000 remains in
escrow. The proceeds received at that date were used for additional equipment
and working capital needs.
The Company's projections indicate that it needs approximately $3 million
to fund operations through the end of calendar 1998, at which time the Company
projects it will achieve positive cash flow. In order for the Company to
continue its operations and to address the current cash position and the need
for working capital, the Company is pursuing both immediate and long-term
financial assistance in both the debt and equity markets. Specifically, the
Company is 1) currently having discussions with domestic and foreign banks for
debt financing, 2) utilizing the resources of its individual members of its
Board of Directors and shareholders, 3) having discussions with investors
about both debt and equity investments, 4) looking for joint venture partners
for Cerveceria Rio Bravo to purchase from the Company a partial interest in
that facility and 5) having discussion regarding converting debt to equity.
There can be no assurance that such debt financing or capital will be
available or, if available, under terms and conditions acceptable to the
Company. The Company's inability to obtain additional capital would result in
a material adverse effect on the Company's ability to pay creditors on a
timely basis or meet its various commitments related to operations and its
ability to operate as a going concern. In the past six months, the Company
has been unable to secure additional financing. While the Company continues
to pursue additional financing, there can be no assurance that such additional
financing will be available, or sufficient for the Company to continue as a
going concern
In addition to the liquidity constraints noted above, the Company has
capital requirements for its continued expansion of certain of its production
facilities in order to achieve profitable production levels. Also, the
Company has capital requirements necessary to adequately market and promote
certain products and brands under distribution agreements, including, but not
limited to, the Dixie Agreement. Under the terms of the Dixie distribution
agreement, AmBrew USA has minimum purchase commitments of $2,482,350,
$2,717,000, and $1,420,272 for the years ending October 31, 1998, 1999 and
2000, respectively. In addition the Company expects to spend approximately
$125,000 for the marketing materials during the year ended October 31, 1998.
The successful completion of additional financing may enable the Company to
meet its obligations including (1) the repayment of short-term loans and
shareholders' loans, (2) continued expansion of production facilities
necessary to achieve profitable production levels, and (3) additional
marketing of certain brands under distribution agreements with the Company, as
more fully described above. The Company believes that sources of working
capital are available. There can be no assurance, however, that the Company
will obtain additional sources of working capital or that any additional
working capital secured will be sufficient to provide the Company with the
necessary capital to continue as a going concern.
Longer term liquidity is dependent on the Company's achievement of
sufficient production levels to sustain profitability and continued access to
capital markets, including its ability to issue additional debt and equity
securities, which in certain cases may require the consent of the existing
shareholders.
At April 30, 1998, AmBrew International had an operating lease obligation
of $173,104 over the period ending June 14, 2002 relating to the lease of its
corporate office. AmBrew International also had operating lease obligations
of $29,150 for the period ending February 28, 2000 relating to company
vehicles. Additionally, the Company has fixed annual salary expenses of
$292,004 related to various employment agreements with its employees.
At April 30, 1998, Cerveceria Rio Bravo had obligations of $288,175 for
the period ending September 10, 2001 in connection with a related party
operating lease for its brewery site.
At April 30, 1998, Celtic Brew had obligations of $46,421 for the period
ending February 30, 2002 in connection with a related party operating lease
for its brewery site.
At April 30, 1998, no proceeds from the initial public offering remained.
To date the Company has $50,000 in outstanding promissory notes to
shareholders.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------------------
(a) At the third annual general meeting of the Company on June
10, 1998, the following resolutions were adopted by the affirmative vote of
the shareholders of the Company, as specified below:
(i) the nominees for directors be elected until the fourth annual general
meeting of the Company or until their respective successors are elected or
appointed
(ii) that the Company's 1996 Stock Option Plan (the "Plan") be amended to
increase the number of shares of Common Stock reserved for issuance thereunder
by an additional 400,000 shares to a total of 1 million shares and to ensure
that the stock options granted under the Plan continue to qualify as
performance-based compensation within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended;
(iii) that the number of authorized shares of the Company's common stock
be increased to 75 million.
(iv) that Coopers & Lybrand L.L.P. be appointed auditors of the Company to
hold office until the close of the fourth annual general meeting.
At the time of this report, the official numbers on the vote count were
not available. What was known was that and adequate number of shares was
voted in the affirmative in order to pass all proposals presented before the
shareholders.
Item 6. Exhibits and Reports on Form 8-K
- -------------------------------------------------
(a) Exhibits:
27.0 - Financial Data Schedule.*
*filed herewith
(b) Reports on Form 8-K.
<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: June 15, 1998 /s/ Peter Bordeaux
Peter Bordeaux
President, Chief Executive Officer,
and Chairman of the Board
<PAGE>
INDEX TO EXHIBITS
NUMBER EXHIBIT
- ------ -------
27.0 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 14745
<SECURITIES> 0
<RECEIVABLES> 314294
<ALLOWANCES> 0
<INVENTORY> 308888
<CURRENT-ASSETS> 766800
<PP&E> 2652931
<DEPRECIATION> 70207
<TOTAL-ASSETS> 4865644
<CURRENT-LIABILITIES> 2482694
<BONDS> 0
<COMMON> 37969
0
0
<OTHER-SE> 2178767
<TOTAL-LIABILITY-AND-EQUITY> 4865644
<SALES> 723363
<TOTAL-REVENUES> 723363
<CGS> 699717
<TOTAL-COSTS> 1405275
<OTHER-EXPENSES> 56182
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26607
<INCOME-PRETAX> (764,701)
<INCOME-TAX> 0
<INCOME-CONTINUING> (764,701)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (745,703)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.12)
</TABLE>
