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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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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 0-25986
WILLAMETTE VALLEY, INC.
Microbreweries across America
(Exact name of registrant as specified in charter)
Oregon 93-1131247
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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66 SE Morrison Street, Portland, OR 97214
(503) 231-7616
(Address, including Zip code, and telephone number,
including area code, of registrant's principal executive offices)
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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 Issuer Disclosure Format: [ ] YES [X] NO
Number of shares of common stock outstanding as of March 31, 1997 4,850,796
shares, $.01 par value
WILLAMETTE VALLEY, INC.
Microbreweries across America
INDEX TO FORM 10-QSB
Part I - Financial Information
Item 1 -- 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 6 -- Exhibits and Reports on Form 8-
Signatures
Part I - Financial Information
WILLAMETTE VALLEY, INC.
Microbreweries Across America
Consolidated Balance Sheet
March 31,
1997 December 31,
ASSETS (unaudited) 1996
------------ ------------
Current assets:
Cash and cash equivalents $ 24,569 $ 90,492
Trade accounts receivable 269,679 211,078
Inventories 324,097 349,870
Other current assets 57,066 8,170
------------ ------------
Total current assets 675,411 659,610
Property and equipment, net 5,033,490 5,124,746
Other non-current assets 8,169 -
------------ ------------
Total assets $ 5,717,070 $ 5,784,356
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,665,130 $ 1,470,891
Accrued liabilities 208,662 184,572
Payable to affiliated companies 1,940,988 1,795,066
Reserve for impairment loss 50,000 50,000
Current portion of long-term debt 75,372 73,328
------------ ------------
Total current liabilities 3,940,152 3,573,857
Long-term debt 273,708 298,888
Deferred Rent 78,602 70,103
------------ ------------
Total liabilities 4,292,462 3,942,848
Minority interest 120,066 283,706
Shareholders' equity:
Common stock, $.01 par value -
10,000,000 shares authorized,
4,850,796 shares issued outstanding 48,610 48,610
Additional paid-in capital 5,453,712 5,453,712
Accumulated deficit (4,197,780) (3,944,520)
------------ ------------
Total shareholders' equity 1,304,542 1,557,802
------------ ------------
Total liabilities and shareholders' equity $ 5,717,070 $ 5,784,356
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WILLAMETTE VALLEY, INC.
Microbreweries Across America
Consolidated Statement of Operations
(unaudited)
Three Months Ended March 31,
1997 1996
------------ ------------
Gross sales $ 408,054 $ 434,648
Less: excise taxes (22,638) (24,624)
------------ ------------
Net sales 385,416 410,024
Cost of beer and related retail products 463,882 597,144
------------ ------------
Gross deficit (78,466) (187,120)
Selling, general and
administrative expenses 327,917 525,057
------------ ------------
Loss from operations (406,383) (712,177)
Other income (expense), net (10,517) (4,789)
------------ ------------
Loss before minority interest (416,900) (716,966)
Minority interest 163,640 226,679
------------ ------------
Net loss $ (253,260) $ (490,287)
============ ============
Net loss per common share $ (0.05) $ (0.10)
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Weighted average number of
common shares outstanding 4,850,796 4,850,796
============ ============
WILLAMETTE VALLEY, INC.
Microbreweries Across America
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended March 31,
1997 1996
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Cash flows from operating activities:
Net loss (253,260) (235,828)
Minority interest in losses of
consolidated subsidiaries (163,640) (226,679)
Equity in losses of joint venture - 17,692
Reconciliation of net loss to net cash used
by operating activities:
Depreciation and amortization 94,823 105,498
Deferred rent 8,499 -
Changes in assets and liabilities:
Trade accounts receivable (58,601) -
Receivables from affiliates - 153,322
Inventories 25,773 -
Other current assets (48,896) 66,633
Accounts payable 194,239 -
Accrued liabilities 24,090 -
Payables to affiliated companies 145,922 (22,698)
---------- ----------
Net cash used for operating activities (31,051) (142,060)
Cash flows from investing activities
Deposits made - (117,886)
Disposition of property and equipment - 88,486
Purchases of property and equipment (3,567) (171,526)
Change in other non-current assets (8,169) 148,187
---------- ----------
Net cash used for investing activities (11,736) (52,739)
Cash flows from financing activities:
Payments on long-term debt and capital leases (23,136) (16,368)
---------- ----------
Net cash provided by (used for) financing
activities (23,136) (16,368)
---------- ----------
Net decrease in cash and cash equivalents (65,923) (211,167)
Cash and cash equivalents:
Beginning of period 90,492 1,117,134
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End of period $ 24,569 $ 905,967
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WILLAMETTE VALLEY, INC.
Microbreweries across America
NOTES TO FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The Company's 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 Company has recorded significant losses in the quarter ended March 31,
1997 and during the prior year, has negative working capital of $3.265
million, 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 others, raise substantial doubt as to its ability to continue as a
going concern. During the quarter ended March 31, 1997 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 and Investment by UBA note below.
Inventories
Inventories consist of the following:
March 31, December 31,
1997 1996
------------ ------------
Raw materials $ 191,362 $ 190,114
Work-in-process 57,221 38,898
Finished goods 35,320 82,425
Retail products 40,194 38,433
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$ 324,097 $ 349,870
Property and Equipment
Property and Equipment consists of the following:
March 31, December 31,
1997 1996
------------ ------------
Land and improvements $ 2,480,139 2,480,139
Brewery equipment 3,895,622 3,891,572
Office furniture and equipment 165,784 166,267
Vehicles 40,740 40,740
------------ ------------
6,582,285 6,578,718
Less accumulated depreciation (716,554) (621,731)
Write down to fair value (832,241) (832,241)
------------ ------------
$ 5,033,490 $ 5,124,746
============ ============
Income Taxes
No benefit for income taxes was recognized for the periods 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 benefit could be realized. Accumulated net operating loss
carryforwards at March 31, 1997 and December 31, 1996 were approximately $4
million and $3.9 million , respectively.
Stock Incentive and Stock Grant Plans
During 1994, the Board of Directors established a pool of 591,851 shares of
the Company's common stock for a stock incentive plan for issuance to
employees, consultants, directors, and consultants 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.
As of March 31, 1997, options for a total of 587,500 shares have been
awarded, net of cancellations. Options have vesting periods ranging from
five years to ten years.
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 at the same conversion rate as the conversion of common stock
discussed in the Pending Consolidation note.
Related Parties
Nature of related parties
The Company's president, Jim Bernau, partially owns and controls Willamette
Valley Vineyards (WVV), a winery in Oregon, and Nor'Wester Brewing Company,
Inc.(Nor'Wester), a microbrewery in Oregon; as well as the following
subsidiaries of the Company: Aviator Ales, Inc. (AAI); Mile High Brewing
Company (MHBC); Bayhawk Ales, Inc. (BAI); and North Country Brewing Company,
Inc. (NCBCI); companies located in Washington, Colorado and California,
respectively. As a result of certain arrangements between the Company and
its affiliates, as well as the Mr. Bernau'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, 1997, the Company has contracted with
Nor'Wester to provide management and administrative services to the Company
and its subsidiaries. During the quarter ended March 31, 1997 the Company and
it's subsidiaries purchased $47,067 worth of services from Nor'Wester. For
the three months ended March 31, 1996, the Company provided certain management
and administrative services, including operational oversight and human
resources, to affiliated companies, charging a total of $16,125. In 1996, the
Company purchased services from Nor'Wester at a cost of $21,590 per month and
with WVV to provide stock transfer and sales support services at a cost of
$2,800 per month.
The Company has entered into a Strategic Alliance (the "Alliance") with AAI,
MHBC, BAI, NCBCI, and Nor'Wester. 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 full
capacity and the fact that attempting to develop other regional markets for
its products has not yielded significant results, the Cooperative Brewing
Agreements are not being utilized. Should the consolidation occur as planned
(see Proposed Merger and Investment by UBA note), the Strategic Alliance and
agreements thereunder will terminate.
Net Loss Per Share
Net loss per common share is calculated based on the weighted average number
of common shares outstanding. Founder shares held in escrow are included in
the weighted average number of common shares outstanding. Common stock
equivalents are excluded from the loss per share calculation as their effect
is antidilutive.
Proposed Merger and Investment by UBA
During the quarter ended March 31, 1997, the Company, along with its
affiliates (Nor'Wester, WVI, 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:
Exchange
Company 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, Nor'Wester's wholly-owned subsidiary,
and by Nor'Wester'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 Boad("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.
Subsequent Events
Subsequent to March 31, 1997, 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 renegotiating the terms of the
UBA investment discussed in the Proposed Merger note. The renegotiation will
reflect a significantly lower valuation for the affiliated 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 renegotiated terms. Failure of the parties to
reach a mutually agreeable renegotiated 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
WILLAMETTE VALLEY, INC.
Microbreweries across America
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. In addition, such statements could be affected by general industry
and market conditions and growth rates, and general domestic economic
conditions.
Results of Operations
Gross revenues from beer and retail products totaled $408,054 for the quarter
ended March 31, 1997 and $434,648 for the quarter ended March 31, 1996, a
decrease of 6%. The following explains the decrease in revenues:
AAI: Gross revenues from beer and retail products totaled $298,632 for the
quarter ended March 31, 1997 and $274,105 for the quarter ended March 31,
1996, an increase of 9%. The increase in revenues is primarily a result of
the Company's efforts to build its distribution channel, enhance its
awareness of its line of ales, develop a growing contingency of loyal
customers and an increase in sales of products to affiliated companies.
BAI: Gross revenues from beer and retail products totaled $92,652 for the
quarter ended March 31, 1997 and $55,928 for the quarter ended March 31,
1996, an increase of 66%. The increase in revenues is primarily a result of
increased share in Southern and Northern California beer markets. This
increase in sales, however, is not sufficient for the Company to become self-
sustaining in the near term.
MHB: During the quarter ended March 31, 1997, the Company's management
established a plan to sell the operating assets of the Company. Based on
this plan, management has recorded a partial write-down of operating brewery
assets to their estimated fair market value. The Company based its analysis
on Statement of Financial Accounting Standards No. 121 (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets to be Disposed Of," which
establishes standards to identify and measure impairment of long-lived
assets. Management's best estimate of this write-down, based on the present
value offer is $969,000. In addition, management estimates the cost to
dispose of the assets to be $50,000, and this amount was recorded in the
financial statements as of December 31, 1996, as part of the reserve for
impairment loss. While management searches for potential buyers, the Company
intends to operate on a limited basis as a contract brewer for a local
brewery. Gross revenues from contract brewing during the quarter ended March
31, 1997 were $16,770. No definitive agreement has been reached regarding
the sale or lease of the facility, but management has received an offer of
approximately $2 million in exchange for all of MHB's property and equipment
and assumption of the facility lease.
Excise Taxes
Excise taxes were $22,638 (6% of gross sales) for the three months ended
March 31, 1997 compared to $24,624 (6% of gross sales) for the same period in
1996.
Cost of Revenues
Cost of revenues totaled $463,882 (120% of net revenues) for the quarter
ended March 31, 1997 compared to $597,144 (146% of net revenues) for the
quarter ended March 31, 1996. Although cost of revenues declined as a
percentage of net revenues for the quarter ended March 31, 1997 from the same
period in 1996, the high cost of revenues in 1997 is the result of the
disproportionate cost of production for products sold while the facilities
were operating at less than designed capacity and the high percentage of
sales (about 45% of total AAI volume sold) made to affiliated companies and
beer clubs which the company realizes lower margins.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses decreased to $327,917
(85% of net revenues) for the quarter ended March 31, 1997 from $525,057
(128% net revenues) for the quarter ended March 31, 1996. The decrease in
SG&A expenses is primarily attributable cost cutting measures designed to
lower selling, general and administrative expenses in light of continued
operating losses.
Net Loss
As a result of the individual line items discussed above, net loss was
$253,260 for the quarter ended March 31, 1997 compared to net loss of
$490,287 for the quarter ended March 31, 1996.
Liquidity and Capital Resources
Cash and cash equivalents decreased $65,923 to $24,569 at March 31, 1997.
The Company also had an increase in its working capital deficit of
approximately $350,000 to $3,264,741 at March 31, 1997 from December 31,
1996. The decrease in cash and cash equivalents and the increase in working
capital deficit is primarily due to operating losses incurred for the quarter
offset by increases in accounts payable and payables to affiliates.
At March 31, 1997 the Company had payables to affiliates of $1,940,988 which
accounts for 49% of the Company's current liabilities. The payables to
affiliates are classified as current because management expects that they
will be eliminated upon consolidation with affiliated companies (see
discussion of investment below).
Accounts payable at March 31, 1997 totaled $1,665,130 compared to $1,470,891
at December 31, 1996. Of the total outstanding at March 31, 1997, $1,410,970
was past due.
The Company's management believes that current working capital together with
projected income from operations are 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 financial
statements.
In September 1996, to address the liquidity and capital resources concerns of
the Company and its affiliate Nor'Wester, entered into a non-binding letter
of intent with The UB Group of Bangalore, India setting forth the proposed
terms of The UB Group's possible investment of $9.0 million in cash and
certain intangible consideration including the grant of an exclusive right to
manufacture The UB Group's Kingfisher brand beer for sale in North America
and The UB Group's provision of certain management and technical services to
the alliance of craft breweries controlled by WVI and the Company. Under the
terms of the letter of intent, The UB Group's investment would be made in the
resulting entity following a proposed consolidation of the Craft Brewing
Alliance comprised of Nor'Wester and Nor'Wester's subsidiary, North Country
Joint Venture, located in Saratoga Springs, New York.; WVI and WVI's
subsidiaries-- Mile High Brewing Company, Inc., located in Denver Colorado,
Bayhawk Ales, Inc., located in Irvine, California, and Aviator Ales, Inc.
located in Woodinville, Washington. The closing of the possible investment
remains subject to (i) The UB Group's completion of satisfactory due
diligence, (ii) negotiation and execution of a definitive investment
agreement between the parties, (iii) approval by the boards of directors and
shareholders of each of the Company, WVI, Nor'Wester and their respective
subsidiaries, (iv) registration with the U.S. Securities and Exchange
Commission of shares in the resulting entity following consolidation which
will be exchanged in the merger, and (v) such other customary conditions for
transactions of this type.
Following execution of the letter of intent, The UB Group has provided the
WVI/Nor'Wester alliance of craft breweries with bridge loans in the amount of
$1,900,000 through May 15,1997 to sustain and grow their brewing operations.
The UB Group has also indicated it may, at its discretion to provide
additional bridge loans or guarantees on bank loans in such amounts and at
such times as are necessary to sustain the breweries' operations until
completion of the planned consolidation and closing of the investment. There
can be no assurances that additional bridge loans will be made by The UB
Group, that an equity investment by The UB Group will ultimately be made or,
if made, the final terms of such investment.
Subsequent to March 31, 1997, 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 renegotiating the terms of the
UBA investment discussed above. The renegotiation 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 renegotiated terms. Failure of the parties to reach a mutually
agreeable renegotiated 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.
If, for any reason, the proposed consolidation and investment does not occur,
alternative sources of debt financing and/or equity capital would have to be
developed. 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 business and results of
operations.
WILLAMETTE VALLEY, INC.
Microbreweries across America
PART II. OTHER INFORMATION
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 terms
of 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 Joint Venture.,
Willamette Valley, Inc., Microbreweries across America and its subsidiaries -
Aviator Ales, Inc., Bayhawk Ales, Inc., Mile High Brewing Company. 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.
AVIATOR ALES, INC.
Date: May 20, 1997 By _________________________
Jim 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.
Willamette Valley Inc., Microbreweries across Amercia.
Date: May 20, 1997 By /s/ Jim Bernau
Jim 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)
Willamette Valley, Inc
Microbreweries across America
(Exact name of registrant as specified in its charter)
Oregon 0-25986 93-1131247
(State or other (Commission (IRS Employer
jurisdiction of ) File No.) Identification No.)
of incorporation
66 SE Morrison Street, Portland, Oregon 97214
(Address of principal executive offices)
(503) 232-9771
(Registrant's telephone number, including area code)
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 part of 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 other closing 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 AAI 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 AAI's Securities and
Exchange Commission filings.
WVI's press release regarding UBA's investment in
WVI 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.
Willamette Valley, Inc. Microbreweries across Aemrcia
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
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its entirety by reference to such financial statements.
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