UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-QSB
Amendment #2
-----------------------------------
Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities
Exchange Act of 1934
For the Quarter Ended March 31, 1997
Commission File Number 0-27458
NOR'WESTER BREWING COMPANY, INC.
(Exact name of registrant as specified in charter)
Oregon 93-1099661
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization Identification Number)
66 SE Morrison Street
Portland, Oregon 97214
(503) 232-9771
(Address, including Zip code, and telephone number,
including area code, of registrant's principal executive
offices)
Indicate by 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.
[X] YES [ ] NO
Transitional Small Business Disclosure Format
[ ] YES [X] NO
Number of shares of common stock outstanding as of March
31, 1997: 3,711,097 shares, no par value.
NOR'WESTER BREWING COMPANY, INC.
INDEX TO FORM 10-QSB
PART I - FINANCIAL INFORMATION
The information included herein is unaudited. However, such information
reflects all adjustments (consisting solely of normal, recurring
adjustments)which are, in the opinion of the Company's management,
necessary for a fair presentation of the results of operations for the
interim periods. The interim financial information and notes thereto
should be read in conjunction with the Company's latest annual report on
Form 10-KSB/A. The results of operations for the three months ended
March 31, 1997 are not necessarily indicative of results to be expected
for the entire year.
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheet March 31, 1997 and December 31, 1996
Consolidated Statement of Operations - Three Months Ended
March 31, 1997 and 1996
Consolidated Statement of Cash Flows - Three Months Ended
March 31, 1997 and 1996
Notes to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II - Other Information
Item 3 -- Defaults Upon Senior Securities
Item 6 -- Exhibits and Reports on Form 8-K
Signatures
Item 1 - Consolidated Financial Statements
NOR'WESTER BREWING COMPANY, INC.
Consolidated Balance Sheet
March 31,
1997 December 31,
ASSETS (unaudited) 1996
Current assets: ----------- -----------
Cash and cash equivalents $80,543 $252,049
Accounts receivable 592,813 606,642
Income tax receivable 103,761 103,761
Receivable from affiliated companies 1,928,984 1,798,350
Inventories 830,902 720,507
Marketing supplies 77,982 77,530
Other current assets, net 336,912 221,223
--------- ---------
Total current assets 3,951,897 3,780,062
Property and equipment, net 11,787,919 11,968,471
Other non-current assets, net 65,000 40,000
---------- ----------
Total assets $15,804,816 $15,788,533
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit $1,041,000 $1,041,000
Current portion of long-term debt
and capital lease 1,939,289 1,938,709
Notes payable 1,750,000 1,150,000
Accounts payable 2,356,868 2,427,073
Container deposits 127,396 130,921
Accrued payroll and other
liabilities 223,266 309,256
--------- ---------
Total current liabilities 7,437,819 5,343,568
Long-term debt and capital lease 10,825 1,664,796
--------- ---------
Total liabilities 7,448,644 7,008,364
Shareholders' equity:
Preferred stock, 15,000,000 shares
authorized in 1996, no shares
issued and outstanding - -
Common stock, no par value - 10,000,000
shares authorized, 3,711,097 shares
outstanding 11,064,480 11,064,480
Accumulated deficit (2,708,308) (2,284,311)
--------- ---------
Total shareholders' equity 8,356,172 8,780,169
--------- ---------
Total liabilities and
shareholders' equity $15,804,816 $15,788,533
========== ==========
NOR'WESTER BREWING COMPANY, INC.
Consolidated Statement of Operations
(unaudited)
Three Months Ended March 31,
1997 1996
---------- ----------
Gross sales $1,317,212 $1,554,845
Less: excise taxes (63,365) (75,059)
--------- ---------
Net sales 1,253,847 1,479,786
Cost of sales 980,409 968,267
--------- ---------
Gross profit 273,438 511,519
Selling, general and administrative
expenses 578,838 475,471
--------- ---------
Income (loss) from operations (305,400) 36,048
Interest and other income, net (118,597) 38,321
--------- ---------
Income (loss) before income taxes and
minority interest (423,997) 74,369
Provision for income taxes - (29,004)
--------- ---------
Income (loss) before minority interest (423,997) 45,365
Minority interest - 17,692
--------- ---------
Net income (loss) $(423,997) $63,057
========= =========
Net income (loss) per common share $(0.11) $0.02
========= =========
Weighted average number of
common shares outstanding 3,696,041 3,651,554
---------- ---------
NOR'WESTER BREWING COMPANY, INC.
Consolidated Statement of Cash Flows
(unaudited)
Three Months Ended March 31,
1997 1996
Cash flows from operating ---------- ----------
activities:
Net income (loss) $(423,997) $63,057
Minority interest in loss from
joint venture - (17,692)
Reconciliation of net income to net
cash provided by operating activities:
Depreciation and amortization 209,707 67,742
Changes in assets and liabilities:
Accounts receivable 13,829 (126,284)
Inventories (110,395) 14,732
Other current assets (116,141) 239,957
Other non-current assets (25,000) 102,521
Accounts payable (70,205) (391,715)
Accrued liabilities and container
deposits (89,515) (259,992)
--------- --------
Net cash used for operating activities (611,717) (307,674)
Cash flows from investing activities
Purchases of property and equipment (29,155) (928,938)
--------- ---------
Net cash used for investing activities (29,155) (928,938)
Cash flows from financing activities:
Advances to affiliated companies (130,634) (218,966)
Payments on line of credit - (500,000)
Increase in borrowings 600,000 231,282
Net proceeds from stock offering - 7,689,840
--------- ---------
Net cash provided by financing activities 469,366 7,202,156
--------- ---------
Net increase (decrease) in cash and
cash equivalents (171,506) 5,965,544
Cash and cash equivalents:
Beginning of period 252,049 276,807
--------- ---------
End of period $80,543 $6,242,351
========= =========
NOR'WESTER BREWING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The Company's consolidated financial statements enclosed herein are
unaudited and, because of the seasonal nature of the business and the
varying schedule of its special sales efforts, these results are not
necessarily indicative of the results to be expected for the entire
year. In the opinion of management, the interim financial statements
reflect all adjustments, consisting of only normal recurring items which
are necessary for a fair presentation of the results for the periods
presented. The accompanying financial statements have been prepared in
accordance with GAAP and SEC guidelines applicable to interim financial
information which require management to make certain estimates and
assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities as of the date of the financial statements, and the
reported amounts of revenues and expenses during the period. Actual
results could differ from those estimates. The accompanying financial
statements and related notes should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report on Form 10-KSB/A for the year ended December 31, 1996.
The accompanying consolidated financial statements have been prepared
assuming the Company continue as a going concern. The Company has
recorded significant losses in the current year, has negative working
capital of $3,485,922, is not in compliance with its debt covenants, and
has limited access to capital with which to fund future operations.
There can be no assurance that the Company will produce and sell its
products on a profitable basis to sustain operations. Such factors,
among other, raise substantial doubt as to its ability to continue as a
going concern.
In light of significant losses and negative working capital the Company
has developed and is implementing plans for the continuation of the
business. In particular, the Company has taken steps to: (i) reduce or
eliminate cooperative brewing arrangements which proved to be
inefficient and costly; (ii) eliminate national roll-out programs in
favor of stepped-up regional sales and marketing efforts; (iii)
negotiate with past due creditors which could involve extended terms and
payment plans; (iv) hire and retain high-quality employees familiar with
the brewing industry, (v) use available bridge loans from a proposed
investor (see Proposed Merger note) to fund operations until new
strategies result in positive cash flows and improved profitability,
and; (vi) use proceeds from the disposition of duplicative and/or
unutilized assets created by the proposed merger. Management believes
these plans will result in the Company sustaining operations as a going
concern for the next 12 months.
As part of the plans, the Company entered into an investment agreement
to be merged with other affiliated companies and convert its stock into
shares of a new publicly traded entity as discussed in the Proposed
Merger note.
Statement of Cash Flows
The Company considers short-term investments which are highly liquid,
have maturities of fewer than three months and are readily convertible
into cash to be cash equivalents.
During the quarter ended March 31, 1996 the North Country Brewing
Company, Inc. ("NCBCI") entered into a joint venture agreement with the
Company relating to the ownership and operation of a brewery in Saratoga
Springs New York. NCBCI financed its minority interest in the joint
venture with a short-term note payable, in the amount of $2,550,000, to
the joint venture. NCBCI has failed to make payment on the note and its
interest in the joint venture has been terminated. This non-cash
transaction has been excluded from the accompanying statement of cash
flows.
Inventories
Inventories consist of the following:
March 31, December 31,
1997 1996
------------- ------------
Beer-making and packaging materials $ 520,806 $ 460,423
Work-in-process 74,933 75,553
Finished goods 235,163 184,531
------------- ------------
$ 830,902 $ 720,507
NOR'WESTER BREWING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Property and Equipment
Property and Equipment consists of the following:
March 31, December 31,
1997 1996
-------------- -------------
Land and improvements $ 243,072 $ 243,071
Leasehold improvements 2,359,098 2,338,391
Equipment 10,004,764 9,612,828
Construction in progress 164,303 547,792
-------------- -------------
12,771,237 12,742,082
Less accumulated depreciation (983,318) (773,611)
-------------- --------------
$ 11,787,919 $ 11,968,471
============== ===============
Shareholders' Equity
The Company is authorized to issue 10 million shares of its common
stock. Each share of common stock entitles the holder to one vote. At
its discretion, the Board of Directors may declare dividends on shares
of common stock, although the Board does not anticipate paying dividends
in the foreseeable future. During 1996, the Company completed a public
offering of 1,115,000 shares of common stock at $7.00 per share. The
underwriters for the offering exercised an over-allotment option for an
additional 172,500 shares of common stock at $7.00 per share. Net
proceeds to the Company totaled approximately $7,963,000, net of selling
commissions and offering expenses of approximately $1,320,000. In
January 1996, the shareholders of the Company authorized 15 million
shares of preferred stock to be available for issuance, the terms of
which the Board of Directors have the authority to establish. There are
no current agreements or understandings for the issuance of any shares
of preferred stock.
Net Loss Per Share
Net loss per common share is calculated based on the weighted average
number of common shares and common share equivalents outstanding during
the three month periods ended March 31, 1997 and 1996. Outstanding
options to purchase shares of the Company's common shares have not been
included in the calculation for the quarter ended March 31, 1997 as
their effect would be anti-dilutive.
Line of Credit and Notes Payable
The Company had a $1,000,000 revolving bank line of credit bearing
interest at the bank's reference rate plus 0.5% (8.75% at March 31,
1997) which expired on December 31, 1996. The line is secured by the
Company's assets, and contains certain covenants and restrictions (see
Proposed Merger note). At March 31, 1997 $1,000,000 was outstanding
under this line of credit. In addition, the Company's North Country
subsidiary had $41,000 outstanding on a separate line of credit bearing
interest at 9.75% at March 31, 1997. The Company has a $250,000 loan
payable to its president, bearing interest at 10.5%. Repayment of the
loan is required upon completion of the proposed merger with UBA (see
Proposed Merger note). The Company has a $1.5 million bridge loan
payable to UBA, bearing interest at 11.25%, related to an investment
agreement the Company entered into during the three months ended March
31, 1997 (see Proposed Merger note). The Company has a $1,842,351 bank
term loan which bears interest at the bank's reference rate plus 0.5%
(8.63% at March 31, 1997) and is payable in equal monthly installments
over seven years. At March 31, 1997, $1,842,351 was borrowed under this
facility. This non-revolving credit facility and the revolving credit
facility discussed above are secured by the Company's assets and contain
covenants which require the Company to maintain financial ratios and
prohibit the Company from making any dividend payments without the bank
approval. At March 31, 1997, the Company was not in compliance with
certain loan covenants relating to both the non-revolving credit
facility and the revolving credit facility. The Company is involved in
discussions with the lender in order to (i) renew the $1 million
revolving line of credit facility to mature on the earlier of September
30, 1997, or 10 days following closing of the investment by UBA (see
Proposed Merger note). and (ii) waive the loan covenants associated with
theses loans so long as the Company remains in compliance with all terms
of the investment agreement and achieves reasonable progress toward
closing the investment with UBA. Subsequent to March 31, 1997, the bank
notified the Company that the non-revolving credit facility would also
be due on September 30, 1997. However, final approval of amendment to
the lender's loan agreements has not yet been received. If final
approval is not received or if received but the Company subsequently
violates the terms of the amendment, then the Company would be in
default of its loans which could lead to foreclosure and sale of all or
an important part of the Company's assets. Such an event would have a
material adverse impact on the Company's business, financial condition
and results of operations. The Company is obligated under the
provisions of a capital lease to make monthly payments of $248 through
the year 2002.
Stock Incentive and Stock Grant Plans
In 1993, the Board of Directors established a pool of 128,482 shares of
the Company's common stock for a stock incentive plan for issuance to
employees, consultants, distributors and their employees, and directors
of the Company pursuant to the exercise of stock options granted under
the plan or stock grants or stock sales. Administration of the plan,
including determination of the number of shares to be issued, the term
of exercise of any option, the option exercise price, and type of
options to be granted, lies with the Board of Directors or a duly
authorized committee of the Board of Directors. In January 1996, the
shareholders of the Company approved an increase to the number of shares
available under the Company's stock incentive plan to 360,000 shares.
In January 1996, the shareholders also approved the adoption of a non-
employee director's stock option plan and the reservation of 40,000
shares thereunder. As of March 31, 1997, options for a total of 266,539
shares have been awarded, net of cancellations. Options have vesting
periods ranging from two years to ten years. Exercise prices range from
$1.99 per share to $3.25 per share with a weighted average exercise
price per share of $3.09. No options have been exercised through March
31, 1997. During the quarter ended March 31, 1997, options for 140,000
shares of the Company's common stock were issued with an exercise price
of $3.25 per share. In addition, during the quarter ended March 31,
1997, the Company adjusted the exercise price to $3.25 for all
previously issued and outstanding options with an exercise price in
excess of $3.25. Subsequent to March 31, 1997 the company repriced all
outstanding options to $1.75. A total of 126,539 options were re-
priced. No compensation expense has been recorded as a result of
granting any of the options as all such options were granted with an
exercise price equal to the market price on the date of grant. Options
granted by the Company are expected to be converted to options of the
new company expected to be formed in the consolidation of the Company
and its affiliates. See Proposed Merger note. The options will be
converted at the same conversion rate as the conversion of common stock
discussed in the Pending Consolidation note.
Income Taxes
No benefit for income taxes was recognized for the quarters ended March
31, 1997 and 1996 in the accompanying statement of operations as there
can be no assurance that the Company will generate taxable income in the
future against which such benefits could be realized. At March 31,
1997, the Company had a net operating loss carryforward aggregating
approximately $4.6 million for federal income tax purposes, which may be
used to offset future taxable income, if any. The annual utilization of
this carryforward may be limited if the Company undergoes the ownership
change anticipated by management (see Proposed Merger note ) or fails to
meet continuity of business requirements defined by the Internal Revenue
Code. The Company's net operating loss carryforwards begin expiring in
2013.
Related Parties
Nature of related parties
The Company's president partially owns and controls Willamette Valley
Vineyards (WVV), a winery in Oregon, and Willamette Valley Inc.
Microbreweries across America (WVI), a company organized to establish
microbreweries throughout the United States. Additionally, the
Company's president , Jim Bernau, is the president of each of the
following subsidiaries of WVI: Aviator Ales, Inc. (AAI); Mile High
Brewing Company (MHBC); Bayhawk Ales, Inc. (BAI); and North Country
Brewing Company, Inc. (NCBCI); development stage companies located in
Washington, Colorado and California, respectively. As a result of
certain arrangements between the Company and its affiliates, as well as
the Company president's positions with and/or ownership interests in
each of these companies, inherent conflicts of interest exist with
respect to the pricing of services, the sharing of resources and
allocation of the Company president's time.
Related party transactions
For the three months ended March 31,1996, the Company purchased human
resources and other administrative services from affiliated companies,
under a general services agreement at a total cost of $12,150. For the
three months ended March 31, 1997, the Company performed these services
internally. For the three months ended March 31, 1996, the Company
purchased stock and sales support services from an affiliated company,
Willamette Valley Vineyards, Inc., for $3,600. For the three months
ended March 31, 1997, the Company performed these services internally.
Under the general services agreement, the Company provided services such
as accounting, sales management and executive oversight to WVI and it's
subsidiaries and WVV. The Company charged affiliates $48,567 for such
services for the three months ended March 31, 1997 and $60,075 for the
three months ended March 31, 1996.
Strategic Alliance and Cooperative Brewing Agreements
The Company has entered into a Strategic Alliance (the "Alliance") with
AAI, MHBC, BAI, NCBCI, and WVI. The Company, AAI, MHBC, and BAI are
individually referred to as a "Cooperative Brewer." The purpose of the
Alliance is to promote and support the growth of all of the Alliance
members by increasing production at each Cooperative Brewer's facility
and supporting the entry of Nor'Wester products into new markets. To
achieve this goal, each Cooperative Brewer agreed to cooperatively brew
Nor'Wester's products, and to support the entry of these products into
new markets by facilitating Nor'Wester's access to the Cooperative
Brewer's network of distributors. However, due to the fact that
Nor'Wester's Portland Brewery is not currently operating at capacity, as
well as the fact that attempting to develop other regional markets for
its products, the Cooperative Brewing Agreements are not being utilized.
Should the consolidation occur as planned (see Proposed Merger note),
the Strategic Alliance and agreements thereunder will terminate.
In connection with the Cooperative Brewing Agreement with AAI and MHBC
described above, Nor'Wester advanced $250,000 to each AAI and MHBC
during 1995 for the purchase of ingredients and packaging materials for
the cooperative brewer's initial production of Nor'Wester's products.
In 1996, the Company advanced $100,000 and $350,000 to AAI and MHBC,
respectively, for the cooperative brewing purchases and operating
expenses. In addition, the Company provided a loan of $35,000 to
Bayhawk Ales, Inc. ("BAI") for the purchase of a grain silo and milling
system to reduce cooperative brewing costs. At March 31, 1997 these
advances remain outstanding. Because management expects these advances
will eventually be eliminated when the proposed merger occurs, as
discussed in the Pending Consolidation note, these advances have been
classified as current receivables from affiliates at March 31, 1997.
Joint Venture Agreement and Principles of Consolidation
In 1996, the Company entered into a joint venture agreement with
NCBI for the purpose of constructing, owning and operating a brewery in
Saratoga Springs, New York (the "Saratoga Springs Brewery"). Under the
terms of this agreement, the Company contributed $4,000,000 in cash and
equipment which was used to construct and operate the brewery, as well
as certain intangible assets for a 61% interest in the joint venture
known as North Country Joint Venture, LLC (NCJV). The Company also
advanced $2,550,000 to the joint venture. NCBCI was to repay the
Company $2,550,000 in cash by October 1996 for its 39% of the joint
venture in accordance with the agreement. NCBI did not repay the
Company. Accordingly, NCBCI's rights to NCJV terminated and Nor'Wester
became the 100% owner of NCJV. Because Nor'Wester owned 100% of NCJV at
March 31, 1997, no minority interest is recorded in the accompanying
balance sheet or statement of operations. The Saratoga Springs brewery
makes up approximately 57% of the Company's net fixed assets.
Receivables from affiliates
The Company has not been repaid for a significant portion of the
services provided and cash advanced to the affiliated companies.
Accordingly, the Company has recorded on the accompanying balance sheet
receivables from affiliates aggregating $1.9 million. Because these
receivables are expected to be eliminated or received in cash after the
proposed merger with UBA occurs (see Proposed Merger note), these
receivables have been classified as current at March 31, 1997.
Receivables from each of the affiliated companies are as follows:
WVV $ 21,093
WVI 379,275
AAI 629,857
MHB 735,134
BAI 67,497
NCBI 96,128
----------
$1,928,984
These balances are not expected by management to be fully collected in
cash. Instead, a portion is expected to be collected when the assets of
MHBC are sold subsequent to March 31, 1997, and the remainder are
expected to be eliminated when the companies are merged into the new
company expected to be formed (see Proposed Merger note).
Commitments and Contingencies
Commitments
The Company has entered into five-year operating lease arrangements for
brewery and pub facilities in Oregon and New York which expire on
January 31, 2000 and February 15, 2002, respectively. The term of the
lease in Oregon is renewable for an additional 10 years. The New York
lease has three five-year renewal options. Annual payments under the
leases total $178,740 (totaling approximately $2,078,717, including
payments under renewal terms, over the terms of the leases) plus net
charges for property taxes, fire insurance, and utilities. Rent
payments are adjusted annually based on increases in the consumer price
index, limited to no more than a four percent annual increase. The
Company paid lease consideration of $50,000 in 1995 to hold the New York
facility until construction began. This payment was capitalized and is
being amortized over a period of five years.
Significant Customers
A significant portion of the Company's sales are to distributors located
in Oregon.
Proposed Merger, Bridge Loan, and Subsequent Investment By UBA
During the quarter ended March 31, 1997, the Company, along with its
affiliates (WVI, AAI, MHBC and BAI) entered into an Investment Agreement
with United Breweries of America, Inc. ("UBA"), an entity controlled by
the UB Group of Bangalore, India. The agreement provides for
Nor'Wester, WVI, AAI, MHBC and BAI to merge into a company to be known
as United Craft Brewers (UCB). This proposed merger will result in the
issuance of newly registered shares of UCB common stock in exchange for
shares of Nor'Wester, WVI and its subsidiaries. The merger and share
exchange will require approval by the Boards of Directors and
shareholders of each of the entities. Following the merger, all
shareholders in the Nor'Wester/WVI alliance will hold shares in UCB, a
company which is intended to be listed for trading on the Nasdaq
National Market system under the symbol ALES. Proposed exchange ratios
for each of the entities are as follows, based on an average closing
price of $2.63 for Nor'Wester's common stock for the 20 trading days
immediately preceding execution of the merger:
Company Exchange
Ratio
Nor'Wester 1.00000:1
WVI 1.99159:1
AAI 2.98739:1
BAI 1.99159:1
MHBC 2.98739:1
Following the proposed merger, UBA has proposed to invest $8.63 million
in exchange for a 45% equity interest in the new entity, UCB. Of the
$8.63 million proposed investment by UBA, $2.75 million is in the form
of bridge loans conditionally available to Nor'Wester during the
consolidation phase. As of March 31, 1997, $1.5 million has already
been loaned to Nor'Wester, the majority of which has been advanced to
North Country. At closing, it is anticipated that the bridge loans will
be converted into shares of UCB and the remaining $5.88 million cash
investment will be made directly in shares of UCB. All principal and
interest related to the bridge loans is secured by the assets of North
Country Joint Venture, the Company's wholly-owned subsidiary, and by the
Company's ownership interest in North Country Joint Venture. Repayment
of all principal and interest is guaranteed personally by the Company's
president. The closing of the proposed investment remains subject to
(i) approval by the shareholders of each of the companies, (ii)
achievement of certain operating results at each of the breweries, (iii)
maintenance of certain operating conditions and covenants, including
that there shall be no material adverse change in the businesses of the
affiliated breweries taken as a whole, (iv) approval by federal and
state liquor control agencies, (v) registration with the U.S. Securities
and Exchange Commission of UCB shares to be exchanged in the merger,
(vi) extension of Nor'Wester's $1 million revolving line of credit
through September 30, 1997 and the lender shall have waived any defaults
under the line of credit agreement and the line of credit shall have
been converted to a term loan and (vii) such other customary conditions
for transactions of this type. Immediately following the proposed
investment by UBA, UBA would own 45% and the Company's president would
own 10% of UCB. The public shareholders of Nor'Wester, WVI, and
subsidiaries would own the remaining 45% of UCB.
Impact of Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
No. 128 "Earnings Per Share" ("SFAS 128") and Statement of
Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" ("SFAS 129")which are
effective for fiscal years ending after December 15, 1997.
The Company believes the implementation of these statements
will not have a material effect on its results of operations
or financial statement disclosures.
Renegotiation of Proposed Merger and Investment by UBA
In light of lower than anticipated 1996 operating results, lower than
anticipated first quarter 1997 sales and other operating results and
adverse conditions with the craft beer industry in general,
representatives of UBA and management and the investment
bankers of the affiliated companies are in the process of
re-negotiating the terms of the UBA investment discussed in
the Proposed Merger note. The re-negotiating will reflect a
significantly lower valuation for the affiliate companies, a
reduction in the total amount of cash to be invested by UBA
to $5.5 million and a reduction of UBA's percentage
ownership position in UCB to 40% following consolidation.
It is anticipated that the $2.75 million bridge loan will
not be reduced. The existing shareholders in the affiliated
companies would retain a 60% interest in UCB. The exact
distribution of ownership interests among shareholders of
the affiliated companies has not yet been determined.
Management will soon seek Board approval by each of the
affiliated companies of any re-negotiated terms. Failure of
the parties to reach a mutually agreeable re-negotiated
investment agreement could lead to a loss of the bridge
loans and the remainder of the UBA investment which would
materially and adversely affect the Company's financial
condition and results of operations. There can be no
assurance that the proposed merger will be completed or that
the Company will obtain the capital needed to sustain
operations.
Item 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
NOR'WESTER MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Information
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this Form 10-QSB contains
forward-looking information within the meaning of the Private Securities
Litigation Reform Act of 1995. This forward-looking information
involves risks and uncertainties that are based on current
expectations, estimates and projections about the Company's business,
management's beliefs and assumptions made by management. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and variations of such words and similar expressions are
intended to identify such forward-looking information. Therefore,
actual outcomes and results may differ materially from what is
expressed or forecasted in such forward-looking information due to
numerous factors, including, but not limited to, availability of
financing for operations, successful performance of internal
operations, impact of competition, changes in distributor relationship
or performance, successful completion of the planned consolidation of
the Affiliated Companies, and other risks detailed below as well as
those discussed elsewhere in this Form 10-QSB and from time to time in
Nor'Wester's Securities and Exchange Commission filings and reports.
In addition, such statements could be affected by general industry and
market conditions and growth rates, and general domestic economic
conditions.
Consolidated Results of Operations.
Nor'Wester's Saratoga Springs Brewery (North Country Brewing) began
producingand selling beer in October 1996. Therefore, the Company's
consolidated results of operations for the quarter ended March 31, 1997
include those of North Country Brewing while the results for the quarter
ended March 31, 1996 do not.
Gross Revenues.
Gross revenues from beer, pub and retail products totaled $1,317,212 for
the quarter ended March 31, 1997 and $1,554,845 for the quarter ended
March 31, 1996. The decrease in revenues is primarily a result of
increased competition in its Pacific Northwest market from the continued
proliferation of new and existing craft brewers and the introduction of
fuller-flavored products by certain major national brewers. North
Country Brewery's gross revenues represented $497,307 of consolidated
gross revenues for the quarter ended March 31, 1997.
Nor'Wester's Portland Brewery currently has an annual production
capacity of 41,000 barrels. Nor'Wester sold 4,480 barrels and 7,966
barrels during the quarter ended March 31, 1997 and 1996 respectively.
Nor'Wester's Saratoga Springs Brewery currently has an annual production
capacity of 30,000 barrels and sold 2,724 and 0 barrels during the
quarter ended March 31, 1997 and 1996, respectively.
Excise Taxes
Excise taxes decreased to $63,365 (4.8 % of gross revenues) for the
quarter ended March 31, 1997 from $75,059 (4.8 % of gross revenues) for
the quarter ended March 31, 1996. The decrease in excise taxes is the
result of the decreased gross sales on which the taxes are assessed.
Cost of Goods Sold.
Cost of goods sold totaled $980,409 (78 % of net revenues) for the
quarter ended March 31, 1997 compared to $968,267 (65 % of net revenues)
for the quarter ended March 31, 1996. The increase in cost of goods
sold as a percentage of net revenues is due primarily to the
commencement of brewing operations at the Saratoga Springs facility
which is operating below designed capacity and the increased cost
structure due to additional brewing equipment (tanks and cooperage)
acquired to meet anticipated sales that never materialized.
Selling, General and Administrative
Selling, general and administrative ("SG&A") expenses increased to
$578,838(46 % of net revenues) for the quarter ended March 31, 1997 from
$475,471 (32 % of net revenues) for the quarter ended March 31, 1996.
The increase in SG&A expenses is primarily attributable to marketing and
related costs associated with initial production at the Saratoga Springs
Brewery and increased shipping costs associated with delivering beer to
markets located considerable distances from the Portland and Saratoga
Brewing facilities.
Net Income (Loss).
As a result of the individual line items discussed above, net loss was
$423,997 for the quarter ended March 31, 1997 compared to net income of
$63,057 for the quarter ended March 31, 1996.
Liquidity and Capital Resources
Cash and cash equivalents decreased $171,506 to $80,543 for the quarter
ended March 31, 1997 primarily due to operating losses incurred during
the quarter. Uses of funds included an increase in inventory of
$110,395, an increase in other current assets (mostly marketing and
point of sale materials) of $116,141, and increases in receivables to
affiliates of $130,634. Bridge loans provided by UBA of $600,000 was
the primary source of funds.
The Company's working capital deficit was $3,485,922 at March 31, 1997,
compared to working capital of $10.4 million at March 31, 1996. The
decreasein working capital reflects the use of funds generated from the
Company's initial public offering in January 1996 to support the
Company's operations, provide capital to build the Saratoga Springs
facility, and fund efforts to expand its markets nationally.
Accounts payable at March 31, 1997 totaled $2,365,868 compared to
$2,427,073 at December 31, 1996, and $479,000 at March 31, 1996. Of the
$2,365,868 at March 31, 1997 $2,093,991 was past due.
At March 31, 1997 and December 31, 1996, the Company had outstanding
$2,842,351 million under its bank credit facilities consisting of a $1
million revolving line of credit and a $1,842,351 non-revolving credit
facility. The non-revolving loan bears interest at 8.63% and calls for
equal monthly installments over a 7-year period. The revolving line of
credit expired on December 31, 1996 and remains unpaid. Under the
credit facilities, Nor'Wester must (i) maintain certain financial
ratios, (ii) not incur further debt or create or assume any other lien
on its property without the bank's prior approval, and (iii) make no
payment of dividends without the bank's prior approval. Nor'Wester is
in violation of items (i) and (ii). Nor'Wester is involved in
discussions with the lender in order to (i) renew the $1.0 million
credit facility to mature on the earlier of September 30, 1997 or 10
days following closing of the investment by UBA and (ii) waive the loan
covenants associated with these loans so long as Nor'Wester remains in
compliance with all terms of the Investment Agreement and achieves
reasonable progress toward closing the investment with UBA. Subsequent
to March 31, 1997, the bank notified the Company that the non-revolving
credit facility would also be due on September 30, 1997.
In 1996, Nor'Wester utilized capital primarily to finance the
construction and start-up of the Saratoga Springs Brewery and increases
in brewing capacity to its existing facilities. In addition, Nor'Wester
required capital to finance operations and continues to require capital
for ongoing operations. The recently completed construction and start-
up of the Saratoga Springs Brewery and Nor'Wester's attempts to regain
market share in the Portland area for its Nor'Wester branded products
has had and is expected to continue to have a material impact on
Nor'Wester's assets, liabilities, capital expenditure commitments, and
liquidity.
The Company's management believes that projected income from operations
is not sufficient to meet the Company's cash needs over the next twelve
months. The Company's independent accountants expressed substantial
doubt as to the Company's ability to continue as a going concern in
their report on the Company's 1996 consolidated financial statements.
DEPENDENCE UPON BRIDGE LOANS AND INVESTMENT FROM UNITED BREWERIES OF
AMERICA, INC.
The Company has been and continues to be highly dependent upon the
receipt of bridge loans and investment funds from UBA to pay creditors
and sustain the Company's operations during the expected periods of loss
until profitability is restored. Since October 1996 through the date of
this report, UBA has provided $1.9 million in bridge loans under the
$2.75 million credit facility. The receipt of additional advances under
the credit facility and closing of the investment is subject to the
Affiliated Companies' compliance with certain covenants and conditions
set forth in the Investment Agreement and credit documents, including
the condition that no "material adverse effect" occurs in the businesses
of the Affiliated Companies as a whole. While the Company is dependent
upon the receipt of further bridge and closing of the UBA investment,
the Company does not control the business or operations of the other
Affiliated Companies and can not assure that it or another Affiliated
Company will not violate one or more covenants in the Investment
Agreement or that a closing condition will not be met. Accordingly,
there can be no assurance that the Company will receive further bridge
loan amounts or that the investment will ultimately close or will close
on the terms set forth in the Investment Agreement. See footnotes to
consolidated financial statements -- Pending Consolidation. If for any
reason, the Company is unable to pay past due creditors and finance
working capital requirements through an investment by UBA, alternative
methods of financing would have to be obtained. No assurance can be
given that alternative methods of financing would be obtained. No
assurance can be given that alternative methods of financing would be
available on terms acceptable to the Company, or at all. Having to
develop alternative means of financing would likely slow development of
the existing breweries and such alternative financing may be costly.
The inability of the Company to obtain additional capital would
adversely affect the Company's business and results of operations.
AMOUNTS PAST DUE TO CONTRACTORS, SUPPLIERS AND EQUIPMENT VENDORS.
At March 31, 1997 and as of the date of this report, the Company was
past due on $1.9 million and $2.1, respectively, of its accounts
payable. The Company has communicated with these creditors and has
negotiated acceptable payment terms to be funded primarily through
bridge loans from UBA. If the Company does not have the cash needed to
pay the amounts due and is not able to work out satisfactory alternative
payment arrangements, these contractors, suppliers and vendors may seek
to exercise their remedies, including the filing of liens against the
Company's assets. As of the date of this report, management is aware of
three creditors who have filed liens to secure an aggregate of $414,103
owed. Resolving the Company's payment obligations to its contractors,
suppliers and vendors may distract Management from its other duties,
involve additional expense, and result in production delays which in
turn could have a material adverse impact on the Company's business,
financial condition, and results of operations.
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
The Company had a $1,000,000 revolving bank line of credit which expired
on December 31, 1996. The line is secured by the Company's assets, and
containscertain covenants and restrictions. At March 31, 1997
$1,000,000 was outstanding under this line of credit.
The Company has a $1,842,351 term loan with the same financial
institution. At March 31, 1997, $1,842,351 was borrowed under this
facility.This and the revolving credit facility discussed above are
secured by the Company's assets and contain covenants which require the
Company to maintain financial ratios and prohibit the Company from
making any dividend payments without the bank approval.
At March 31, 1997, the Company was not in compliance with certain loan
covenants relating to both the term loan facility and the revolving
credit facility. The Company is involved in discussions with the lender
in order to (I) renew the $1 million revolving line of credit facility
to mature on the earlier of September 30, 1997, or 10 days following
closing of the investment by UBA, and (ii) waive the loan covenants
associated with theses loans so long as the Company remains in
compliance with all terms of the investment agreement and achieves
reasonable progress toward closing the investment with UBA. Subsequent
to March 31, 1997, the bank notified the Company that the non-revolving
credit facility would also be due on September30, 1997. However, final
approval of amendment to the lender's loan agreements has not yet been
received. If final approval is not received or if received but the
Company subsequently violates the terms of the amendment,then the
Company would be in default of its loans which could lead to foreclosure
and sale of all or an important part of the Company's assets. Such an
event would have a material adverse impact on the Company's business,
financial condition and results of operations. Subsequent to March 31,
1997 the bank notified the Company that the non-revolving credit
facility would also be due on September 30, 1997.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 1 - Definitive Investment Agreement press release dated
January 30, 1997.
(b) Reports on Form 8-K:
On January 30, 1997, the Company filed a Form 8-K in connection with its
execution of a definitive investment agreement with United Breweries of
America, Inc., an affiliate of the UB Group of Bangalore, India. Under
termsof the agreement, UBA will invest approximately $9 million in cash
in exchange for a 45% equity interest in a new entity comprised of the
consolidated businesses of Nor'Wester, North Country Brewing Company,
LLC., Willamette Valley, Inc., Microbreweries across America and its
affiliates - Aviator Ales, Inc., Bayhawk Ales, Inc., Mile High Brewing
Company, Inc. The Form 8-K set forth the terms and conditions of the
proposed investment as outlined in the letter of intent ,and included as
exhibits copies of the letter of intent dated September 26, 1996, and a
January 30, 1997 press release relating to the matter.
Exhibit 1
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOR'WESTER BREWING COMPANY, INC.
Date: May 15, 1997 By _________________________
James W. Bernau
President
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOR'WESTER BREWING COMPANY, INC.
Date: May 15, 1997 by /s/ James W. Bernau
James W. Bernau
President
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 30, 1997
Date of Report (Date of earliest event reported)
Nor'Wester Brewing Company, Inc.
(Exact name of registrant as specified in its charter)
Oregon 0-27458 93-1099661
(State or other (Commission (IRS Employer
jurisdiction of ) File No.) Identification No.)
of incorporation
66 SE Morrison Street
Portland, Oregon 97214
(503) 232-9771
(Address of principal executive offices)
Not applicable
(Former name or former address, if changed since last report)
Item 5. Other Events.
On January 30, 1997, Nor'Wester Brewing Company, Inc.
("Nor'Wester") and
Willamette Valley, Inc. Microbreweries Across America ("WVI"), a public
holding company comprised of three partially-owned public subsidiaries,
Aviator Ales, Inc. ("AAI"), Bayhawk Ales, Inc. ("BAI"), and Mile High
Brewing of Denver ("MHB"), Colorado, announced the signing of a
definitive investment agreement with United Breweries of America, Inc.
("UBA"), an affiliate of The UB Group of Bangalore, India.
Under the terms of the agreement, UBA will invest $8.63 million in
cash in exchange for a 45% equity interest in a new entity comprised of
the consolidated businesses of Nor'Wester (which includes Nor'Wester
Brewing of Portland, Oregon and North Country Brewing of Saratoga
Springs, New York), WVI and WVI's partially-owned public subsidiaries.
The consolidation is expected to occur by the end of the second quarter
of 1997, pending approval by the various companies' shareholders. The
new entity will be a holding company for five craft breweries being
consolidated and will operate under the name, United Craft Brewers, Inc.
Of the $8.63 million investment by UBA, $2.75 million is in the
form of bridge loans conditionally available to Nor'Wester during the
consolidation phase to cover any shortfalls in operating cash or
payments required to be made to existing creditors. Of this amount,
$1,000,000 has previously been loaned. In addition to obtaining a
perfected security interest in all the assets of North Country Brewing,
among other conditions, all advances under the bridge loan are
conditioned upon there being no material adverse change in the business
of the various brewing companies taken as a whole. At closing, the
$2.75 million in loans and the remaining $5.88 million cash investment
will be converted into shares of United Craft Brewers.
Jim Bernau, President of Nor'Wester and WVI, is transferring to UBA
partof his existing equity stake in the regional breweries. He will
receive no cash consideration in this transaction, and as a result of
the transfer, UBA will own 45% of United Craft Brewers, with Bernau
owning 10% of the new company. The public shareholders of Nor'Wester and
WVI, Aviator Ales, Bayhawk Ales and Mile High Brewing will own the
remaining 45% of United Craft Brewers. The terms of UBA's investment as
set forth in the definitive investment agreement differ from and
supersede the terms of a Letter of Intent between the parties dated
September 18, 1996, previously disclosed by the Company.
Mr. Bernau will serve as President of United Craft Brewers and will
be a member of the Board of Directors. Vijay Mallya, Chairman of The UB
Group, will serve as Chairman of the Board of United Craft Brewers.
United Craft Brewers intends to acquire other craft brewers in the
U.S. to expand its alliance of breweries. Furthermore, United Craft
Brewers intends to utilize The UB Group's experience and resources to
pursue international opportunities for its craft beer alliance.
The UBA investment is subject to several closing conditions
including (i) registration with the Securities and Exchange Commission
of the United Craft Brewers shares to be issued to the public
shareholders of Nor'Wester, WVI and WVI's subsidiary breweries in the
consolidation as well as to UBA in its investment, (ii) successful
completion of the consolidation of the regional breweries including
approval by the shareholders of Nor'Wester, WVI and each of WVI's
subsidiary breweries, and (iii) the achievement of certain designated or
agreed operating results by the breweries. The investment is expected
to close on or about June 1997.
The consolidation is expected to be accomplished through a series
of stock-for-stock mergers whereby shareholders of Nor'Wester, WVI and
its subsidiaries-Aviator, Mile High and Bayhawk-will each exchange their
respective shares for shares of United Craft Brewers according to the
following exchange ratios (based on an average closing price for
Nor'Wester's common stock of $2.63 for the 20 trading days immediately
preceding execution of the definitive investment): Nor'Wester-1:1, WVI-
1.99159:1; Aviator-2.98739:1; Mile High-2.98739:1; and Bayhawk-
1.99159:1. Following consolidation and UBA's investment, the combined
entity will have approximately 13 million shares outstanding.
The Company believes that the information set forth in this Form 8-
K and the Press Release dated January 30, 1997, and attached as an
exhibit hereto include "forward looking statements" within the meaning
of Section 27A of the Securities Act and are subject to the safe harbor
created by that Section. In particular, there can be no assurance that
the consolidation will be approved by the shareholders of the various
companies, that each of the otherclosing conditions to the definitive
investment agreement will be met in time to close or that the investment
will ultimately close. Furthermore, even if the UBA investment closes,
there can be no assurance that UCB will have adequate capital to pursue
acquisitions of, or alliances with, other craft brewers in the U.S. and
internationally, nor can there be any assurance of continued or
additional market acceptance in the U.S. or internationally of UCBs'
beers and ales. Finally, during the consolidation phase, there can be
no assurance that Nor'Wester will meet each of the conditions required
to receive a bridge loan advance from UBA at the time such advance is
needed. There are additional risks and uncertainties that could cause
the actual results to differ materially from the forward-looking
statements including, but not limited to, the factors discussed in
Nor'Wester's Securities and Exchange Commission filings.
Nor'Wester's press release regarding UBA's investment in Nor'Wester
is incorporated herein by reference and filed as an exhibit to this Form
8-K.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
Exhibits
Number Description
99.1 Press Release dated as of
January 30, 1997
SIGNATURES
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.
Nor'Wester Brewing Company, INC.
Date: January 30, 1997 By:/s/ James W. Bernau
James W. Bernau
President
EXHIBIT INDEX
Exhibit No. Description Page
99.1 Press Release dated as of January 30, 1997
UB GROUP SIGNS DEFINITIVE INVESTMENT AGREEMENT
WITH FIVE U.S. MICROBREWERIES
U.S. Craft Breweries to be Subsidiaries of New Holding Company;
UB to Hold 45% Stake in Consolidated Entity
Portland, OR January 30, 1997 -- Nor`Wester Brewing Company
(Nasdaq: ALES) and Willamette Valley, Inc./Microbreweries Across
America, a non-listed public holding company comprised of three
partially-owned public subsidiaries -- Aviator Ales, Inc. of
Woodinville, WA; Bayhawk Ales, Inc. of Irvine, CA; and Mile High Brewing
of Denver, CO. -- today announced the signing of a definitive investment
agreement with United Breweries of America, Inc. ("UBA"), an affiliate
of The UB Group of Bangalore, India. Under the terms of the agreement,
UBA will invest $8.63 million in cash in exchange for a 45%equity
interest in a new entity comprised of the consolidated businesses of
Nor`Wester Brewing Company -- including Nor`Wester Brewing of Portland,
OR and North Country Brewing of Saratoga Springs, NY -- and
WVI/Microbreweries Across America. The consolidation is currently
expected to occur by the end of the second quarter of 1997, pending
approval of the various companies' shareholders. The new entity will be
a holding company for the five craft breweries being consolidated and
will operate under the new name, United Craft Brewers, Inc.. The
company will be traded on the Nasdaq National Market System under the
symbol ALES. Of the $8.63 million investment by UBA,$2.75 million is in
the form of bridge loans conditionally available to Nor`Wester during
the consolidation phase ($1,000,000 has already been loaned). At
closing, the $2.75 million in loans and the remaining $5.88 million cash
investment will be converted into shares of United Craft Brewers.Jim
Bernau, founder and president of both Nor`Wester Brewing and WVI-
Microbreweries Across America, is transferring to UBA part of his
existing equity stake in the regional microbreweries. He will receive
no cash consideration in this transaction, and as a result of the
transfer UBA will own 45% of United Craft Brewers, with Bernau owning
10% of the new company. The public shareholders of Nor`Wester Brewing
and WVI-Microbreweries Across America will own the remaining 45% of
United Craft Brewers. The terms of UBA's investment as set forth in the
definitive investment agreement differ from and supersede the terms of a
Letter of Intent between the parties dated September 18, 1996. Bernau
will serve as President of United Craft Brewers and will be a member of
the Board of Directors. Vijay Mallya, Chairman of The UB Group, will
serve as Chairman of the Board of the new company. "The signing of this
agreement puts our goal of creating a national craft brewing alliance
one large step closer to realization," said Bernau. "And because we
will be benefiting from the experience and resources of The UB Group, I
firmly believe that the alliance is also a very large step closer to
success." Bernau noted that The UB Group and Vijay Mallya have
pursued an operating philosophy similar to that of the microbreweries in
the alliance. "The UB Group is India's largest beer producer, but it is
comprised of twelve smaller, individual breweries that each pursues a
craft beer approach to producing lagers and ales," he explained. "This
emphasis on smaller scale brewing will be at the heart of United Craft
Brewers. We couldn't have found a better partner to join us as we build
this national alliance of leading microbreweries." Mallya agreed that
the investment will significantly strengthen -- and potentially expand
- -- the craft brewing alliance. "Nor`Wester and the other breweries
being consolidated in the new company make some of the best ales and
lagers in America," Mallya said. "Our goal now is twofold: first, to
enhance the financial, marketing and operating strength of these
breweries, and second, to bring other like-minded U.S. craft brewers
under the UCB umbrella. In addition, UCB intends to leverage the UB
Group's strengths to pursue international opportunities for the craft
beer market. "By expanding the size of this unique microbrewery
alliance, we will gain important economies of scale in manufacturing,
marketing and distribution -- all while maintaining and enhancing the
unique character and individual excellence that have made craft brewed
beer increasingly popular in America and elsewhere." Successful
consolidation of the regional breweries is a precondition for closing of
the investment by UBA, as is the achievement of certain operating
results by the five breweries. The investment is expected to close
shortly after the consolidation is completed.The consolidation is
expected to be accomplished through a series of stock-for-stock mergers
whereby shareholders of Nor'Wester, WVI/Microbreweries Across America
and its subsidiaries -- Aviator, Mile High and Bayhawk -- will each
exchange their respective shares for shares of United Craft Brewers
according to the following exchange ratios which are based on an average
closing price of $2.63 for Nor'Wester's common stock for the 20 trading
days immediately preceding execution of the definitive investment :
Nor'Wester --
1:1; WVI -- 1.99159:1; Aviator -- 2.98739:1; Mile High -- 2.98739:1; and
Bayhawk -- 1.99159:1. Following consolidation and UBA's investment, the
combined entity will have approximately 13 million shares outstanding.
The Nor`Wester Brewing Company and WVI--Microbreweries Across America
were founded by Jim Bernau with his first microbrewery, Nor`Wester in
Portland, Oregon in 1993. Bernau is also founder and president of
Willamette Valley Vineyards in Salem, Oregon (Nasdaq: WVVI). The UB
Group is a global beer and spirits company operating in 20 countries on
four continents.
[Note: this press release contains forward-looking statements that
are made pursuant to the safe harbor provisions of The Private
Securities Litigation Reform Act of 1995. The forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from the forward-looking statements,
including, but not limited to, the factors detailed in the Securities
and Exchange Commission filings of Nor'Wester, Willamette Valley, Inc.
Microbreweries across America, Aviator Ales, Inc., Mile High Brewing
Company, Inc. and Bayhawk Ales, Inc. The forward-looking statements
should be considered in light of these risks and uncertainties.]
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This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of operations
filed
part of the quarterly report on form 10-QSB and is qualified in its
entirety by
reference to such report on form 10-QSB.
</LEGEND>
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