<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO THE
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
January 29, 1998
- --------------------------------------------------------------------------------
(Date of earliest event reported)
Frederick Brewing Co.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 0-27800 52-1769647
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4607 Wedgewood Blvd., Frederick, Maryland 21703
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(301) 694-7899
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Page 1 of 19 Pages
Exhibit Index appears on Page 2
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Pursuant to the requirements of Item 7(a)(4) and Item 7(b)(2) of Form
8-K, the Company hereby files this Amendment No. 1 to the current Report on Form
8-K filed with the Commission on February 12, 1998 with the financial
information and exhibits required by Item 7.
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(a) Financial Statements of Wild Goose Brewery, Inc.
Independent Auditors Report 4
Balance Sheet as of December 31, 1997 5
Statement of Operations for the Year
Ended December 31, 1997 7
Statement of Stockholders' Equity for the
Year Ended December 31, 1997 8
Statement of Cash Flows for the Year
Ended December 31, 1997 9
Notes to Financial Statements 10
Frederick Brewing Co. And Wild Goose Brewery, Inc.
(b) Frederick Brewing Co. And Wild Goose Brewery, Inc.
Pro Forma Financial Information. 14
Unaudited Pro Forma Consolidated Balance Sheet
as of December 31, 1997 15
Unaudited Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1997 16
Notes to Pro Forma Consolidated Financial Statements 17
SIGNATURES 19
</TABLE>
Exhibits and Index:
Exhibit Number Description
23 Consent of Experts and Counsel.
-2-
<PAGE> 3
Item 7(a)
FINANCIAL STATEMENTS
OF
WILD GOOSE BREWERY, INC.
-3-
<PAGE> 4
IRELAND & EVERNGAM, LLC
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS: MEMBERS OF:
John D. Ireland, CPA American Institute of
K. Thomas Everngam, Jr., CPA Certified Public Accountants
Maryland Association of
Certified Public Accountants
Board of Directors
Wild Goose Brewery, Inc.
Cambridge, Maryland
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Wild Goose Brewery, Inc. as of
December 31, 1997 and the related statement of operations, stockholders' equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wild Goose Brewery, Inc. as of
December 31, 1997 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Ireland & Everngam, LLC, CPA's
February 19, 1998
P.O.Box 29 101 Bay Street Easton, MD 21601 * 204 High Street Cambridge, MD 21613
Phone: 410-822-9336 410-476-5000 410-228-3111 Fax: 410-822-1842
-4-
<PAGE> 5
WILD GOOSE BREWERY, INC.
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS
- --------------
<S> <C>
Cash and Cash Equivalents $ 29,652
Accounts Receivable, Net 245,618
Other Receivables 478
Inventory 328,099
Prepaid Expenses 9,199
----------
TOTAL CURRENT ASSETS 613,046
----------
PROPERTY AND EQUIPMENT, AT LOWER OF
- -----------------------------------
CARRYING AMOUNT OR NET REALIZABLE VALUE
---------------------------------------
Office Equipment 13,714
Leasehold Improvements 51,447
Machinery and Equipment 1,133,148
----------
TOTAL PROPERTY AND EQUIPMENT, AT COST 1,198,309
LESS: ACCUMULATED DEPRECIATION 561,951
LESS: ADJUSTMENT TO NET REALIZABLE VALUE
OF ASSETS TO BE SOLD 382,985
----------
TOTAL PROPERTY AND EQUIPMENT, AT LOWER OF
CARRYING AMOUNT OR NET REALIZABLE VALUE
LESS ACCUMULATED DEPRECIATION 253,373
----------
OTHER ASSETS
- ------------
Loan Origination Costs 4,867
Organization Costs 5,100
----------
TOTAL OTHER ASSETS 9,967
----------
TOTAL ASSETS $ 876,386
==========
</TABLE>
-5-
<PAGE> 6
WILD GOOSE BREWERY, INC.
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CURRENT LIABILITIES
- -------------------
<S> <C>
Note Payable $ 93,610
Current Maturities of Long Term Debt 448,500
Accounts Payable and Accrued Expenses 595,260
Accrued Payroll and Payroll Taxes Withheld 10,654
Keg and Slip Board Deposits 28,066
-----------
TOTAL CURRENT LIABILITIES 1,176,090
-----------
STOCKHOLDERS' DEFICIT
- ---------------------
Preferred Stock, $0.01 Par Value; 50,000
Shares Authorized, Issued and Outstanding 500
Common Stock, $0.01 Par Value; 50,000
Shares Authorized, 10,000 Shares
Issued and Outstanding 100
Additional Paid in Capital 221,952
Retained Earnings (Deficit) (522,256)
-----------
TOTAL STOCKHOLDERS' DEFICIT (299,704)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 876,386
===========
</TABLE>
See Independent Auditors' Report
See Notes to Financial Statements
-6-
<PAGE> 7
WILD GOOSE BREWERY, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
GROSS SALES $ 2,515,535
- -----------
EXCISE TAXES, RETURNS, ALLOWANCES
AND DISCOUNTS 268,030
-----------
NET SALES 2,247,505
- ---------
COST OF GOODS SOLD 1,636,773
- ------------------ -----------
GROSS PROFIT 610,732
SELLING EXPENSES 268,263
- ----------------
LOSS ON ADJUSTMENT TO NET REALIZABLE
VALUE OF ASSETS TO BE SOLD 382,195
GENERAL AND ADMINISTRATIVE EXPENSES 332,431
- ----------------------------------- -----------
OPERATING LOSS (372,947)
LOSS ON DISPOSAL ON EQUIPMENT
- -----------------------------
LOSS ON SALE OF EQUIPMENT (6,248)
-----------
LOSS BEFORE FINANCIAL EXPENSE
AND TAXES ON INCOME (379,195)
FINANCIAL EXPENSE, NET 66,947
- ---------------------- -----------
LOSS BEFORE TAXES ON INCOME (446,142)
INCOME TAX EXPENSE (BENEFIT) -
- ---------------------------- -----------
NET LOSS $ (446,142)
===========
</TABLE>
See Independent Auditors' Report
See Notes to Financial Statements
-7-
<PAGE> 8
WILD GOOSE BREWERY, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
-------------------- --------------------- ADDITIONAL RETAINED
Shares Amount Shares Amount PAID IN CAPITAL EARNINGS (DEFICIT)
------ ------ ------ ------ --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 9,776 $ 98 48,395 $ 484 $192,340 $ (76,114)
STOCK SALE 224 2 1,605 16 29,612 -
NET LOSS - - - - - (446,142)
------- -------- -------- -------- -------- -----------
BALANCE, DECEMBER 31, 1997 10,000 $ 100 50,000 $ 500 $221,952 $ (522,256)
======= ======== ======== ======== ======== ===========
</TABLE>
See Independent Auditors' Report
See Notes to Financial Statements
-8-
<PAGE> 9
WILD GOOSE BREWERY, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
<S> <C>
Net Loss $(446,142)
Adjustments to Reconcile Net Loss to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 126,531
Loss on Sale of Assets 6,248
Loss on Adjustment to Net Realizable Value
of Assets to be Sold 382,985
Decrease (Increase) in Assets:
Trade Receivables (88,781)
Inventories (49,269)
Other Receivables 825
Prepaid Expenses (2,172)
Income Tax Refund Receivable 40,703
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses 146,477
Accrued Payroll and Payroll12
Taxes Withheld (4,170)
Keg Deposits (4,302)
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 108,933
---------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Purchase of Fixed Assets (48,850)
Proceeds from Sale of Assets 1,907
---------
NET CASH PROVIDED FROM INVESTING ACTIVITIES (46,943)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Increase in Notes Payable 11,000
Payment of Long-Term Debt (117,000)
Sale of Stock 29,630
---------
NET CASH PROVIDED FROM FINANCING
ACTIVITIES (76,370)
---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (14,380)
CASH AND CASH EQUIVALENTS, BEGINNING 44,032
- ------------------------------------ ---------
CASH AND CASH EQUIVALENTS, ENDING $ 29,652
- --------------------------------- =========
SUPPLEMENTAL CASH FLOW INFORMATION
- ----------------------------------
Cash Paid for Interest $ 67,170
=========
Income Taxes Paid (Refunds Received) $ (40,703)
=========
</TABLE>
See Independent Auditors' Report
See Notes to Financial Statements
-9-
<PAGE> 10
WILD GOOSE BREWERY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE A. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company started business in 1989, brewing beer for wholesale
distribution. All manufacturing operations took place at the Company's
Cambridge, Maryland location. The Company sold its products to
customers throughout the Eastern and Midwestern United States.
The Company entered into an agreement and plan of reorganization with
Frederick Brewing Co. on December 15, 1997. The plan was approved by
the Company's stockholders on January 7, 1998 and settlement occurred
on January 29, 1998.
As part of the reorganization, all of the preferred and common stock
shares of Wild Goose Brewery, Inc. were exchanged for shares of
Frederick Brewing Co. The Frederick Brewing Co. paid the notes due to
Signet Bank on January 29,1998. Significantly all of the operations at
the Cambridge location ceased on that date as well.
BASIS OF PRESENTATION
The financial statements of Wild Goose Brewery, Inc. have been prepared
on the accrual basis of accounting.
CASH AND CASH EQUIVALENTS
The Company considers all investments with a maturity of three months
or less when purchased to be cash equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company uses the allowance method in accounting for bad debts. The
amount of the allowance is determined by an analysis of the accounts at
year-end. At December 31, 1997, the Company provided for an allowance
in the amount of $12,500.
INVENTORY
Inventory is accounted for at lower cost or market on a first-in,
first-out method.
PROPERTY AND EQUIPMENT
The Company's policy was to charge all additions to the asset account
but to charge the cost of repairs, maintenance and minor betterments to
operations in the year in which the cost was incurred. Asset and
accumulated depreciation accounts were relieved when properties were
retired or otherwise disposed.
Substantially all of the property and equipment at the Company's
Cambridge location will be sold at auction or abandoned by May 15,
1998. Based on an appraisal and the costs of selling those assets,
property and equipment has been adjusted to its net realizable value of
$253,373.
See Independent Auditors' Report
-10-
<PAGE> 11
WILD GOOSE BREWERY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE A. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
USE OF ESTIMATES
Due to the Company's inability to confirm the number of kegs and
slipboards possessed by customers, the liability for deposits has been
estimated. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual amounts could
differ from these estimates.
NOTE B. INVENTORY
The following is a summary of inventory at December 31, 1997:
Raw Materials $218,003
Beer 81,970
Other 28,126
--------
TOTAL $ 328,099
=========
NOTE C. DEPRECIATION
The following are the estimated useful lives of each class of
depreciable property.
Furniture and Fixtures 5 to 10 Years
Equipment 5 to 10 Years
Leasehold Improvements 40 Years
Depreciation is calculated using the straight-line method over the
estimated useful lives of the related assets.
Depreciation expense of all property for the year ended December 31,
1997 was $121,224.
NOTE D. INTANGIBLE ASSETS
Costs incurred in organizing the Company were capitalized and are being
amortized over a period of five (5) years. Amortization expense charged
to operations was $3,600 for the year ended December 31, 1997. Loan
origination costs are being amortized over a period of five (5) years.
Amortization of costs were charged to interest expense in the amount of
$1,708 for the year ended December 31, 1997.
See Independent Auditors' Report
-11-
<PAGE> 12
WILD GOOSE BREWERY, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
NOTE E. NOTE PAYABLE
Note payable consists of the following at December 31:
Signet Bank; Revolving Line of Credit;
Interest at Prime, 8.25% at
December 31, 1996;
Interest Payable Monthly $ 93,610
========
The line of credit provides for a maximum loan amount of the lesser of
$100,000 or 80% of accounts receivable as are acceptable to the bank.
The note is subject to the same covenants referred to in Note F.
NOTE F. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
Signet Bank; Interest at Prime
Plus 4.0%, 8.75% at December 31,
1996; Interest Plus Principal of
$9,750 Payable Monthly;
Secured by Accounts Receivable,
Property and Equipment $ 448,500
LESS: CURRENT MATURITIES 448,500
---------
TOTAL LONG TERM DEBT LESS
CURRENT MATURITIES $ -
=========
Total interest expense for the year ending December 31, 1997 was
$67,170.
Loan agreements with Signet Bank include certain financial covenants
which the Company was not in compliance with at December 31, 1997.
Signet bank entered into a forbearance agreement with the Company,
effective April 15, 1997, in response to events of default, including
non-compliance with ratio covenants in the original debt agreement.
Under the agreement, the interest rate on both notes increased by 2.0%.
The tenure of the forbearance agreement was through December 31, 1997.
However, the bank agreed to take no action pending the plan of
reorganization with Frederick Brewing Co., as described in Note A.
See Independent Auditors' Report
-12-
<PAGE> 13
WILD GOOSE BREWERY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE G. LEASES
The Company leases its facility under an operating lease for a five
year period at an annual rental of $62,400. The lease was to expire in
July of 1999, but was renegotiated to end on June 30, 1998, with a
contingency that all property and equipment be removed from the
premises by May 15, 1998.
The Company leases a forklift under an operating lease. The lease is
for a five year period at an annual rental in the amount of $3,900. The
lease expires in July of 2000.
The following is a schedule of estimated future minimum lease payments
for the next five years:
1998 35,100
1999 3,900
2000 2,275
2001 -
2002 -
Total rent expense incurred in 1997 was $66,487.
NOTE H. INCOME TAXES
The Company has a net operating loss carryforward of approximately
$420,000 at December 31, 1997, giving rise to a deferred tax asset of
approximately $160,000. Realization of the net deferred tax asset at
the balance sheet date is dependent on future earnings which are
uncertain. Accordingly, a full valuation allowance was recorded against
the asset. During the year ended December 31, 1997 the valuation
allowance was increased primarily related to the increase in the net
operating loss carryforwards.
See Independent Auditors' Report
-13-
<PAGE> 14
Item 7(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Financial Statements give effect
to the acquisition by Frederick Brewing Company (the Company) of the net assets
of Wild Goose Brewery, Inc. (Wild Goose) on January 29, 1998 and are based on
the historical financial statements of the Company and Wild Goose. These
historical financial statements were prepared in accordance with generally
accepted accounting principles. The unaudited pro forma adjustments are based
upon available information and certain assumptions that management of the
Company believes are reasonable. The Pro Forma Financial Information and
accompanying notes should be read in conjunction with the historical financial
statements of Wild Goose and the historical financial statements of the Company,
which are included in the Company's Annual Report on Form 10-KSB.
The Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1997 has
been prepared as if the acquisition had occurred on that date. The Unaudited
Consolidated Pro Forma Statement of Operations for the year ended December 31,
1997 gives effect to the acquisition as if it had occurred at the beginning of
the year.
The Unaudited Pro Forma Consolidated Financial Statements are presented for
informational purposes only and do not purport to be indicative of what the
Company's consolidated financial position or consolidated results of operations
would actually have been had the acquisition been completed on such date or at
the beginning of the year indicated, or to project the Company's consolidated
financial position for any future date or the Company's consolidated results of
operations for any future period.
The acquisition has been accounted for as a purchase. After the acquisition, the
purchase price was allocated to the assets acquired and liabilities assumed
based on their respective fair values. The final allocation of the purchase
price may differ from the allocation set forth in the attached Unaudited Pro
Forma Consolidated Balance Sheet, since the allocation was based on the net
assets acquired on January 29, 1998. The final allocation is not expected to
differ materially from the allocation set forth herein.
The Company has preliminarily analyzed the savings that it expects to realize
from the reductions in salaries of certain Wild Goose production personnel and
from production efficiencies to be realized from the consolidation of the
production at one brewing facility. The Company has not quantified these savings
and has not included such savings in the Unaudited Pro Forma Consolidated
Results of Operations.
-14-
<PAGE> 15
Frederick Brewing Co. and Wild Goose Brewery Inc.
Pro Forma Consolidated Balance Sheet
December 31, 1997
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Historical Pro-forma
- ------------------------------------------------------------------------------------------------------------------------------
Frederick
Brewing Wild Goose
Company Brewery Adjustments As Adjusted
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equilavents $ 2,625 $ 30 $ (532) c $ 2,123
Trade receivables, net 333 246 --- 579
Inventories, Net 354 328 --- 682
Prepaid expenses and other current assets 104 9 --- 113
---------------------------------------------------------------------
Total current assets 3,416 613 (532) 3,497
Property and equipment, net 8,376 253 --- 8,629
Intangibles, net 258 10 --- 268
Deferred public relation costs 1,131 --- --- 1,131
Other assets 220 --- --- 220
Goodwill --- --- 2,595 e 2,595
---------------------------------------------------------------------
Total assets $ 13,401 $ 876 $ 2,063 $ 16,340
=====================================================================
Current liabilities
Current maturities of long-term debt $ 273 $ 542 $ (532) c $ 283
Capital lease obligations, current portion 89 --- --- 89
Accounts payable 275 549 --- 824
Accrued liabilities 407 85 120 d 612
---------------------------------------------------------------------
Total current liabilities 1,044 1,176 (412) 1,808
Long-term debt 2,209 --- --- 2,209
Capital lease obligations 2,880 --- --- 2,880
---------------------------------------------------------------------
Total liabilities 6,133 1,176 (412) 6,897
=====================================================================
Stockholders' equity (deficit):
Preferred Stock 5,552 --- --- 5,552
Common Stock --- --- --- ---
Additional paid-in capital 12,779 222 2,175 a 14,954
--- --- (222) b
Accumulated deficit (11,063) (522) 522 b (11,063)
---------------------------------------------------------------------
Total stockholders' equity (deficit) 7,268 (300) 2,475 9,443
---------------------------------------------------------------------
Total liabilities and stockholders' equity
(deficit) $ 13,401 $ 876 $ 2,063 $ 16,340
=====================================================================
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
-15-
<PAGE> 16
Frederick Brewing Co. and Wild Goose Brewery Inc.
Pro Forma Consolidated Statement of Operations
Year ended December 31, 1997 (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Historical Pro-forma
- ------------------------------------------------------------------------------------------------------------------------------
Frederick
Brewing Wild Goose
Company Brewery Adjustments As Adjusted
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 3,077 $ 2,247 $ - $ 5,324
Cost of sales 2,837 1,637 (64) f 4,410
---------------------------------------------------------------------
Gross Profit 240 610 64 914
Loss on assets to be disposed - 383 - 383
Selling, general, and administrative expenses 4,622 601 260 g 5,444
(35) h
(4) i
---------------------------------------------------------------------
Operating loss (4,382) (374) (157) (4,913)
(Gain)/loss on sale of equipment (159) 6 (153)
Loss on assets to be disposed - 383 383
Interest expense, net 140 67 (67) j 140
---------------------------------------------------------------------
Loss before taxes (4,363) (447) (90) (4,900)
Provision for income taxes - - -
---------------------------------------------------------------------
Net loss (4,363) (447) (90) (4,900)
Preferred stock dividends requirements (3,612) - (3,612)
---------------------------------------------------------------------
Net loss attributable to common shareholders $ (7,975) $ (447) $ (90) $ (8,512)
=====================================================================
Basic and diluted loss per common share:
Net loss before preferred stock dividend requirements $ (1.59) $ - $ (1.27)
Preferred stock dividend requirements (1.32) - (0.93)
---------------------------------------------------------------------
Net loss per common share $ (2.91) $ - $ (2.20)
=====================================================================
Weighted average common shares and common share
equivalents outstanding 2,742 - 1,127 3,869
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
-16-
<PAGE> 17
Frederick Brewing Company and Wild Goose Brewery, Inc.
Notes to Pro Forma Consolidated Financial Statements
Year ended December 31, 1997 (Unaudited)
(Dollars in Thousands, except per share data)
(a) Adjustment reflects the issuance of 1,127,122 shares of the Company's
common stock based on the $1.93 average price of such common stock during the
period from March 30, 1998 to April 8, 1998. The final purchase price was
determined on April 3, 1998.
(b) Adjustment removes the stockholders' deficit balance of Wild Goose.
(c) Adjustment reflects the repayment of the outstanding principal balance on
the Wild Goose debt instruments with a bank as of the January 29, 1998 date of
acquisition, pursuant to the Agreement and Plan of Reorganization by and among
the Company and Wild Goose (the Acquisition Agreement)
(d) Adjustment reflects the accrual of estimated transaction costs related to
the acquisition. Such costs are included as part of the purchase price
allocation in the determination of goodwill.
(e) Adjustment reflects the excess of the cost to the Company over the
assigned value of the net assets of Wild Goose computed as follows:
1,127,122 shares of common stock at $1.93 per share $2,175
Acquisition costs 120
Repayment of outstanding principal 532
----
Purchase price 2,827
Net assets acquired, excluding outstanding Wild Goose debt
instruments repaid by the Company (232)
Excess purchase price allocated to goodwill $2,595
========
(f) Adjustment reflects reduction of depreciation expense recorded during 1997
corresponding to certain machinery and equipment of Wild Goose being held for
sale that were reduced to their estimated net realizable value prior to the
acquisition of Wild Goose by the Company.
(g) Adjustment reflects one years' amortization of the goodwill arising from
the acquisition. The goodwill is being amortized over an estimated useful life
of ten years.
-17-
<PAGE> 18
(h) Adjustment reflects a reduction in rent expense based on agreements
entered into with the landlord of the Wild Goose brewing facility in Cambridge,
Maryland to terminate the existing lease at such facility. Annual rental
payments at this facility were approximately $62 and management negotiated an
early termination of the lease for $27.
(i) Adjustment reflects reduction of depreciation expense recorded during 1997
on leasehold improvements at the Wild Goose brewing facility in Cambridge,
Maryland. All leasehold improvements were written off as management determined
that the improvements did not have any future economic benefit to the Company or
to Wild Goose.
(j) Adjustment reflects the elimination of interest expense associated with
the outstanding principal balances on the Wild Goose debt instruments. These
principal balances were repaid with the Company's existing cash balances, which
were generated primarily through several issuances of preferred stock during
1997.
-18-
<PAGE> 19
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.
FREDERICK BREWING CO.
Date: April 10, 1998 By: /s/ Kevin E. Brannon
-----------------------------
Kevin E. Brannon
Chief Executive Officer
-19-
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Frederick Brewing Company on Form S-3 (File No. 333-25743 and File No.
333-35655) of our report dated February 19, 1998, on our audit of the financial
statements of Wild Goose Brewery, Inc. as of December 31, 1997 and for the year
then ended, which report is included in this Amendment No. 1 to the Current
Report on Form 8-K.
Ireland & Everngam, LLC CPA's
Easton, Maryland
April 10, 1998
