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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-QSB
_________________________
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarter Ended March 31, 1996
Commission File Number 33-95606
MILE HIGH BREWING COMPANY
(Exact name of registrant as specified in charter)
Delaware 93-1145738
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
_______________________________
2401 Blake Street
Denver, Colorado 80205
(303) 299-0147
(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. [ ] YES [X] NO
Transitional Small Business Disclosure Format: [ ] YES [X] NO
Number of shares of common stock outstanding as of March 31, 1996: 4,690,167
shares, $.001 par value
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MILE HIGH BREWING COMPANY
INDEX TO FORM 10-Q
Part I - Financial Information
Item 1 Financial Statements
Balance Sheet - March 31, 1996 and December 31, 1995 3
Statement of Operations - Three Months Ended March 31,
1996 and 1995 4
Statement of Cash Flows - Three Months Ended March 31,
1996 and 1995 5
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II - Other Information
Item 6 Exhibits and Reports on Form 8-K 10
Signatures 12
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Mile High Brewing Company
(A Development Stage Company)
Balance Sheet
<TABLE>
<CAPTION>
March 31,
1996 December 31,
ASSETS (unaudited) 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,471 $ 379,691
Accounts receivable 53,835 44,118
Inventories 150,600 86,763
Other current assets, net 41,800 67,837
------------ ------------
Total current assets 258,706 578,409
Property and equipment, net 2,571,427 2,178,732
Deferred stock offering costs 19,284 -
Other non-current assets, net 154,288 131,950
Total assets $ 3,003,705 $ 2,889,091
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease $ 42,540 $ 24,029
Accounts payable 122,411 143,750
Accrued liabilities 79,141 79,526
Payable to parent and affiliated
companies, net 54,021 20,614
Current portion of advances from
affiliates 400,000 400,000
Total current liabilities 698,113 667,919
Capital lease 320,034 5,868
Advances from affiliates 650,000 650,000
Deferred rent 48,060 43,377
------------ ------------
1,716,207 1,367,164
Commitments
Shareholders' equity:
Common stock, $.001 par value -
10,000,000 shares authorized,
4,690,167 shares outstanding 4,690 4,690
Additional paid-in capital 2,245,459 2,245,581
Deficit accumulated during the
development stage (962,651) (728,344)
------------ ------------
1,287,498 1,521,927
Total liabilities and shareholders'
equity $ 3,003,705 $ 2,889,091
============ ============
</TABLE>
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Mile High Brewing Company
(A Development Stage Company)
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
------------ ------------
<S> <C> <C>
Gross sales 104,614 3,353
Less: excise taxes 4,407 -
------------ ------------
Net sales 100,207 3,353
Cost of sales 173,669 865
------------ ------------
Gross profit (deficit) (73,462) 2,488
Selling, general and
administrative expenses 160,070 41,599
------------ ------------
Loss from operations (233,532) (39,111)
Other income (expense)
Interest income 2,937 9,851
Interest expense (3,712) -
------------ -------------
(775) 9,851
Net loss $ (234,307) $ (29,260)
============ =============
Net loss per common share $ (0.05) $ (0.01)
============ =============
Weighted average number of
common shares outstanding 4,690,167 4,670,573
============ =============
</TABLE>
The accompanying notes are an integral part of this financial statement
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Mile High Brewing Company
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (234,307) $ (29,260)
Reconciliation of net loss to net
cash used for operating activities:
Depreciation and amortization 42,500 -
Increase in deferred rent 4,683 -
Changes in assets and liabilities:
Accounts receivable (9,717) -
Inventories (63,837) (49)
Other current assets 26,037 (3,518)
Accounts payable (21,339) (20,288)
Accrued liabilities (385) 1,361
Payables to parent and affiliated
companies 33,407 50,038
------------ ------------
Net cash used for operating activities (222,958) (1,716)
Cash flows from investing activities:
Purchases of property and equipment (435,317) (251,657)
Increase in other non-current assets (22,338) (3,403)
------------ ------------
Net cash used for investing activities (457,655) (255,060)
Cash flows from financing activities:
Increase in deferred stock offering costs (19,284) -
Increase in stock offering costs - (38,437)
Proceeds from capital lease 345,690 -
Principal payments on capital lease (13,013) -
------------ ------------
Net cash (used for) provided by
financing activities 313,393 (38,437)
------------ ------------
Net decrease in cash and cash equivalents (367,220) (295,213)
Cash and cash equivalents:
Beginning of period 379,691 2,252,087
------------ ------------
End of period $ 12,471 $ 1,956,874
============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement
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MILE HIGH BREWING COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
DEVELOPMENT STAGE COMPANY
Mile High Brewing Company (the "Company") was formed on June 8, 1994 for the
purpose of developing and operating one or more breweries in Colorado for the
production of high quality, hand-crafted ales for sale in bottle and draft.
The Company has built a brewery in a leased commercial building in the historic
LoDo District of downtown Denver, Colorado. The brewery is situated two blocks
north of Coors Field, home of the Colorado Rockies major league baseball team.
The brewery has an initial production capacity of 11,700 barrels per year with
a maximum designed production capacity of 60,000 barrels per year.
The Company is a development stage company that was organized under the laws of
the State of Delaware. From the date of inception (June 8, 1994) through March
31, 1996, the Company's efforts have been directed toward: 1)organizing and
completing a public offering of shares of its Common Stock, 2)building and
equipping its brewery, 3)developing and beginning production of six distinct
styles of hand-crafted ales and 4)establishing a network of 19 independent
distributors. The Company is a majority-owned subsidiary of Willamette Valley,
Inc. Microbreweries across America ("WVI"), a company organized to establish
microbreweries throughout the United States. At March 31, 1996, WVI owned
approximately 51% of the Company's Common Stock.
BASIS OF PRESENTATION
The accompanying interim financial statements are unaudited and have been
prepared by Mile High Brewing Company pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures typically included in financial statements prepared in accordance
with generally accepted accounting standards have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management, the
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for the
interim period presented. The financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's Registration Statement on Form SB-2 for the year ended December
31, 1995 filed with the Securities and Exchange Commission. The results of
operations for an interim period are not necessarily indicative of the results
of operations for a full year.
Inventories
Inventories consist of the following:
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MILE HIGH BREWING COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, December 31,
1996 1995
------------ ------------
Raw materials $ 26,374 $ 18,372
Work-in-process 67,442 26,332
Finished goods 40,335 25,915
Retail products 16,449 16,144
------------ ------------
$ 150,600 $ 86,763
============ ============
Property and Equipment
Property and Equipment consists of the following:
March 31, December 31,
1996 1995
------------ ------------
Building and improvements $ 1,283,084 $ 1,277,484
Brewery equipment 1,304,220 893,798
Office furniture and equipment 23,581 23,034
Vehicles 21,250 21,250
Construction in progress 32,626 14,000
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2,664,761 2,229,566
Less accumulated depreciation and amortization (93,334) (50,834)
------------- ------------
2,571,427 2,178,732
============ ============
Income Taxes
No benefit for income taxes was recognized for the periods ended March 31, 1996
and 1995 in the accompanying statement of operations as there can be no
assurance that the Company will generate taxable income in the future against
which such benefits could be realized. Accumulated net operating loss
carryforwards at March 31, 1996 and December 31, 1995 were $1,020,000 and
$785,000, respectively.
Shareholders' Equity
The Company has commenced a second public offering of common stock. The
Company has registered an offering with the SEC in an effort to sell an
additional 1,053,000 shares of its Common Stock at an offering price of
$1.85 per share.
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MILE HIGH BREWING COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Related Party Transactions
For the three months ended March 31, 1996, the Company purchased management
and administrative services from WVI at a total cost of $8,175. WVI contracts
for certain of these services under a general services agreement between WVI
and Nor'Wester Brewing Company, Inc. ("Nor'Wester"), an affiliated company.
The Company also purchased stock transfer services from Willamette Valley
Vineyards, Inc. ("WVV"), an affiliated company, for $2,649 for the quarter
ended March 31, 1996. In conjunction with the Company's proposed stock
offering, the Company has been charged an aggregate of $5,550 by WVI,
Nor'Wester and WVV for stock offering services.
In April 1996, the Company commenced cooperative brewing of Nor'Wester beer
under the Cooperative Brewing Agreement. Sales to Nor'Wester under this
agreement totaled $172,944 through May 31, 1996. In April, Nor'Wester
purchased $25,000 of 1/2 barrel kegs to be used for production of Nor'Wester
beer.
Net Loss Per Share
Net loss per common share is calculated based on the weighted average number of
common shares outstanding. Shares owned by the Company's parent, WVI, and held
in escrow are included in the weighted average number of common shares
outstanding.
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MILE HIGH BREWING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company began brewing beer in August 1995 and beer sales commenced in
September 1995. Net revenues from beer and retail products totaled $100,207
for the three months ended March 31, 1996. Revenues for the comparable
period in 1995 totaling $3,353 were limited to the sale of retail merchandise
such as T-shirts and hats as the brewery had not yet commenced operations.
Cost of goods sold as a percentage of net revenues for the quarter ended
March 31, 1996 was 173.3% reflecting the disproportionate cost of production
for goods sold during a period when the facility is operating at less than
its maximum designed capacity, as well as development-stage production costs
such as recipe testing. Cost of goods sold for the comparable period in the
prior year was 25.8% reflecting the cost of the retail merchandise sold
during the quarter.
Selling, general and administrative expenses for the three months ended March
31, 1996 totaled $160,070, an increase of $118,471 over the comparable period
in 1995. This is primarily due to the additional management and administrative
support required when the Company commenced operations.
Liquidity and Capital Resources
For the quarter ended March 31, 1996, cash and cash equivalents decreased
$367,220 primarily due to operating losses of $234,307. Other uses of funds
include an increase in accounts receivable of $9,717, an increase in
inventories of $63,837, an increase in deferred stock offering costs of
$19,284, an increase in property and equipment of $435,195, principal debt
payments of $13,013, an increase in other non-current assets of $22,338 and a
decrease in accounts payable of $21,339. Primary sources of funds include a
decrease in other current assets of $26,037, capital lease proceeds of
$345,690 and an increase in amounts payable to affiliated companies of
$33,407.
Management believes that the Company's current working capital, together with
income from operations will satisfy its cash requirements through September
30, 1996. Thereafter, the Company will be dependent upon proceeds from debt
or equity financing as cash flows from operations are not expected to be
sufficient to satisfy the Company's working capital needs for the next twelve
months.
The Company has commenced a second public offering of its common stock.
The Company has registered an offering with the SEC in an effort to sell up
to 1,053,000 shares of its Common Stock at a proposed offering price of
$1.85 per share. This offering, if successfully completed, will generate net
proceeds of approximately $458,000 at a minimum or $1.7 million at a maximum,
which will provide the Company with sufficient funds for the equipment and
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MILE HIGH BREWING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
working capital required to expand production to 39,000 barrels per year, to
repay WVI the first $400,000 of its loan to the Company and to sustain
operations for at least the next twelve months. If, for any reason, the
Company is unable to finance future expansion and working capital requirements
through its second self-underwritten public offering of common stock,
alternative methods of financing would have to be developed. No assurance
can be given that the offering will be successful or that alternative methods
of financing would be available on terms acceptable to the Company or at all.
Having to develop alternative means of financing would likely slow expansion
and such alternative financing may be more costly. The Company's inability
to obtain additional capital would result in a material adverse effect on the
Company's business and results of operations.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) No reports were filed on Form 8-K during the quarter for
which this report is filed
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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.
MILE HIGH BREWING COMPANY
Date: June 13, 1996 By ____________________
James W. Bernau
President
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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.
MILE HIGH BREWING COMPANY
Date: June 13, 1996 By /s/ James W. Bernau
James W. Bernau
President
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at March 31, 1996 (Unaudited) and Statement of Operations for
the Three Month Period Ended March 31, 1996 and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 12471
<SECURITIES> 0
<RECEIVABLES> 53835
<ALLOWANCES> 0
<INVENTORY> 150600
<CURRENT-ASSETS> 258706
<PP&E> 2664761
<DEPRECIATION> (93334)
<TOTAL-ASSETS> 3003705
<CURRENT-LIABILITIES> 698113
<BONDS> 0
0
0
<COMMON> 4690
<OTHER-SE> 2245459
<TOTAL-LIABILITY-AND-EQUITY> 3003705
<SALES> 104614
<TOTAL-REVENUES> 100207
<CGS> 173669
<TOTAL-COSTS> 233532
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3712)
<INCOME-PRETAX> (234307)
<INCOME-TAX> 0
<INCOME-CONTINUING> (234307)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (234307)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
