========================================================================
=====
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 0-25986
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)
-----------------------------------------------------------------
- -
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)
-----------------------------------------------------------------
- -
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
=========== ============
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)
============ ============
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
---------- ---------
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) (106,131)
Receivables from affiliates - 153,322
Inventories 25,773 (67,480)
Other current assets (48,896) 66,633
Accounts payable 194,239 (165,619)
Accrued liabilities 24,090 (36,886)
---------- ----------
Net cash used for operating activities (176,973) (767,629)
Cash flows from investing activities
Deposits made - (117,886)
Disposition of property and equip - 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:
Payables to affiliated companies 145,922 (5,006)
Increase in stock offering costs - (4,263)
Payments on long-term debt and
capital leases (23,136) (16,368)
---------- ----------
Net cash provided by (used for)
financing activities 122,786 (25,637)
---------- ----------
Net decrease in cash and
cash equivalents (65,923) (846,005)
Cash and cash equivalents:
Beginning of period 90,492 1,117,134
---------- ----------
End of period $ 24,569 $ 271,129
=========== ==========
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 is a development stage company formed on December 2, 1993 to
establish a series of microbreweries throughout the United States using
a consumer-owned capitalization plan and certain marketing strategies.
From the date inception (December 2, 1993) trough March 31, 1997, the
Company's efforts have been directed primarily toward organizing and
issuing a public offering of its common stock and providing support to
its subsidiaries in their efforts to raise additional capital and to
build and equip their breweries.
The accompanying financial statement have been prepared assuming the
Company will continue as a going concern. The Company is a development
stage company which has a limited and unprofitable operating history,
has negative working capital of $3,624,741 and has limited access to
capital 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 the Company's 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 plan, 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.
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
------------ ------------
$ 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 $6.2 million and $6 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 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
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 drectors 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 re-
negotiating the terms of the UBA investment discussed above. The re-
negotiation 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.
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 America.
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.]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the Balance Sheet at March 31, 1997
(Unaudited) and the Statement of Operations for the Three
Months Ended March 31, 1997 (Unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 24569
<SECURITIES> 0
<RECEIVABLES> 269679
<ALLOWANCES> 0
<INVENTORY> 324097
<CURRENT-ASSETS> 675411
<PP&E> 5750044
<DEPRECIATION> (716554)
<TOTAL-ASSETS> 5717070
<CURRENT-LIABILITIES> 3940152
<BONDS> 0
0
0
<COMMON> 48610
<OTHER-SE> 5453712
<TOTAL-LIABILITY-AND-EQUITY> 5717070
<SALES> 408054
<TOTAL-REVENUES> 385416
<CGS> 463882
<TOTAL-COSTS> 791808
<OTHER-EXPENSES> 8636
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1881
<INCOME-PRETAX> (253260)
<INCOME-TAX> 0
<INCOME-CONTINUING> (253260)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (253260)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
