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 September 30, 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.
[X] YES [ ] NO
Transitional Small Business Disclosure Format:
[ ] YES [X] NO
Number of shares of common stock outstanding as of
September 30, 1996: 4,692,707 shares, $.001 par value
============================================================
MILE HIGH BREWING COMPANY
INDEX TO FORM 10-Q
============================================================
Part I - Financial Information
Item 1 -- Financial Statements
Balance Sheet - September 30, 1996 and
December 31, 1995 . . . . . . . . . . . . . . . . . . 3
Statement of Operations - Three Months
and Nine Months Ended June 30, 1996 and 1995. . . . . 4
Statement of Cash Flows - Nine Months
Ended September 30, 1996 and 1995 . . . . . . . . . . 5
Notes to Financial Statements. . . . . . . . . . . . . 6
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . 9
Part II - Other Information
Item 5 -- Other Information. . . . . . . . . . . . . . 13
Item 6 -- Exhibits and Reports on Form 8-K . . . . . . 13
Signatures. . . . . . . . . . . . . . . . . . . . . . 15
MILE HIGH BREWING COMPANY
(A Development Stage Company)
Balance Sheet
September 30,
1996 December 31,
ASSETS (unaudited) 1995
_____________ ____________
Current assets:
Cash and cash
equivalents $ - $ 379,691
Accounts receivable 207,977 44,118
Inventories 294,840 86,763
Other current assets,
net 53,341 67,837
_____________ ____________
Total current assets 556,158 578,409
Property and equipment,
net 2,829,907 2,178,732
Other non-current assets,
net 29,737 131,950
_____________ ____________
Total assets $ 3,415,802 $ 2,889,091
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of
capital lease $ 67,376 $ 24,029
Accounts payable 718,922 143,750
Accrued liabilities 153,204 79,526
Payable to parent and
affiliated companies,
net 513,760 20,614
Current portion of
advances
from affiliates - 400,000
___________ ____________
Total current
liabilities 1,453,262 667,919
Capital lease 254,052 5,868
Advances from affiliates 1,125,000 650,000
Deferred rent 53,913 43,377
___________ ____________
2,886,227 1,367,164
___________ ____________
Commitments
Shareholders' equity:
Common stock, $.001 par value
10,000,000 shares authorized,
4,692,707 and 4,690,167
shares outstanding 4,693 4,690
Additional paid-in
capital 2,245,578 2,245,581
Deficit accumulated during
the development stage (1,720,696) (728,344)
___________ ____________
529,575 1,521,927
___________ ____________
Total liabilities and
shareholders' equity $ 3,415,802 $ 2,889,091
=========== ============
MILE HIGH BREWING COMPANY
(A Development Stage Company)
Statement of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
________ ________ ________ ________
Gross sales 791,892 38,854 1,359,042 44,654
Less: excise
taxes 20,414 676 69,970 676
________ ________ _________ ________
Net sales 771,478 38,178 1,289,072 43,978
Cost of
sales 829,616 30,960 1,517,166 33,186
________ ________ _________ ________
Gross profit
(deficit) (58,138) 7,218 (228,094) 10,792
Selling,
general and
administrative
expenses 197,866 229,154 522,675 452,563
________ ________ ________ ________
Loss from
operations (256,004) (221,936) (750,769) (441,771)
Other income
(expense)
Other
expense (211,847) - (211,847) -
Interest
income 779 10,749 4,157 67,255
Interest
expense (16,481) - (33,893) -
_________ ________ _________ ________
(227,549) 10,749 (241,583) 67,255
_________ ________ _________ ________
Net loss $ (483,553) $(211,187) $(992,352)$(374,516)
========= ========= ========= ========
Net loss
per common
share $ (0.10) (0.05) (0.21) (0.08)
========= ========= ========= ========
Weighted average
number of
common shares
outstanding 4,692,707 4,690,167 4,691,578 4,684,143
========= ========= ========= ==========
MILE HIGH BREWING COMPANY
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
Nine Months Ended September 30,
1996 1995
___________ ___________
Cash flows from operating
activities:
Net loss $(992,352) $(374,516)
Reconciliation of net
loss to net cash used for
operating activities:
Depreciation and
amortization 139,916 11,269
Increase in deferred rent 10,536 34,002
Changes in assets and
liabilities:
Accounts receivable (163,859) (12,103)
Inventories (208,077) (76,084)
Receivable from
affiliates - (52,282)
Other current assets 14,496 (58,167)
Other non-current assets 102,213 -
Accounts payable 575,172 169,453
Accrued liabilities 73,678 66,909
Payables to parent and
affiliated companies 493,146 553,951
__________ __________
Net cash provided by
(used for)
operating activities 44,869 262,432
Cash flows from investing
activities:
Purchases of property
and equipment (490,799) (2,224,470)
Sale of asset 45,708 -
__________ ___________
Net cash used for
investing activities (445,091) (2,224,470)
Cash flows from financing
activities:
Cash advances from
affiliated companies 75,000 -
Deferred stock offering
costs - (86,723)
Net proceeds from stock
offering - 43,612
Deferred rent 10,536 -
Principal payments on
capital lease (65,005) -
__________ __________
Net cash (used for) provided
by financing activities 20,531 (43,111)
__________ __________
Net decrease in cash and
cash equivalents (379,691) (2,005,149)
Cash and cash equivalents:
Beginning of period 379,691 2,252,087
__________ __________
End of period $ - $ 246,938
=========== ==========
MILE HIGH BREWING COMPANY
NOTES TO FINANCIAL STATEMENTS
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 had 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 September 30, 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 September 30, 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.
Statement of Cash Flows
During 1996, the Company obtained approximately $346,000 of
assets under a capital lease obligation. This non-cash
transaction has been excluded from the accompanying statement
of cash flows.
MILE HIGH BREWING COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
Inventories
Inventories consist of the following:
September 30, December 31,
1996 1995
_____________ ____________
Raw materials $ 128,619 $ 18,372
Work-in-process 32,100 26,332
Finished goods 130,158 25,915
Retail products 3,963 16,144
_____________ ____________
$ 294,840 $ 86,763
============= ============
Property and Equipment
Property and equipment consists of the following:
September 30, December 31,
1996 1995
_____________ ____________
Building and improvements $ 1,586,420 $ 1,277,484
Brewery equipment 1,348,596 893,798
Office furniture and equipment 25,274 23,034
Vehicles 21,250 21,250
Construction in progress 32,626 14,000
_____________ ____________
3,014,166 2,229,566
Less accumulated depreciation
and amortization (184,259) (50,834)
_____________ ____________
$2,829,907 $2,178,732
============= ============
Income Taxes
No benefit for income taxes was recognized for the periods
ended September 30, 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 September 30, 1996 and
December 31, 1995 were $1,777,352 and $785,000, respectively.
Shareholders' Equity
In May 1996, the Company commenced a registered public stock offering
sell up to 1,053,000 shares of its Common Stock at a proposed offering
price of $1.85 per share. This offering was terminated in November
1996 and all stock subscription funds received and held in escrow will
be returned with interest.
MILE HIGH BREWING COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
Related Party Transactions
For the three months ended September 30, 1996, the Company
purchased management and administrative services from WVI at
a total cost of $4,245. 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.
In April 1996, the Company commenced brewing of Nor'Wester beer
under the Cooperative Brewing Agreement. Sales to Nor'Wester
under this agreement totaled $796,540 through September 30, 1996.
To promote the sale of Nor'Wester products in the Denver area
Nor'Wester advanced the Company $250,000 for the construction of
a pub adjacent to the brewery.
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.
Contingencies
In September 1996, the Company's parent, WVI, 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 planned
investment of $9.0 million in cash and certain intangible
consideration in exchange for an equity interest in the resulting
entity following the proposed consolidation of the Company, WVI and
WVI's subsidiaries-- the Company, Aviator Ales, Inc., located
in Woodinville, Washington and Bayhawk Ales, Inc., located in Irvine,
California, and Nor'Wester and Nor'Wester's subsidiary, North Country
Brewing Company, located in Saratoga Springs, New York. Although the
parties are proceeding toward signing a definitive agreement setting
forth the terms and conditions of the proposed investment, there can
be no assurance that an equity investment by The UB Group will be made
or, if made, the ultimate terms of such investment.
MILE HIGH BREWING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that
involve risks and uncertainties. Actual future results and trends
may differ materially depending on a variety of factors, including,
but not limited to, pricing and availability of raw materials and
packaging, successful execution of internal performance and expansion
plans, impact of competition, distributor changes, availability of
financing, and other risks detailed below and in the Company's Securities
and Exchange Commission filings, including the Company's Registration
Statement on Form SB-2 relating to its recently terminated public
offering and its periodic reports.
Results of Operations
Three Months Ended September 30, 1996
Gross Sales. Sales in dollars and barrels for the three
months ended September 30, 1996 were $791,892 and $5,297,
respectively. This represents an increase in sales dollars
for the quarter ended September, 1996 of 1,938% over the
same period in 1995, and an increase of 6,159% in barrels
sold for the quarter ended September 1996 over the same
period in 1995. Sales of beer under the cooperative brewing
agreements with affiliated breweries during the three months
ended September 30, 1996 were $472,423, or 60% of total
sales. The remaining 40% increase in sales was attributable
to the fact that the Company commenced its brewing operation
near the end of the third quarter of 1995. As discussed in the
Liquidity and Capital Resources section below the Company has
not been able to generate the sales volume of its own products
necessary to sustain the growth required for profitable operations.
Excise Taxes. Excise taxes increased from $676 (2% of gross
sales) for the three months ended September 30, 1995 to
$20,414 (2.5% of gross sales) for the third quarter of 1996 which
is due to the increase in the portion of beer sales to retail items
in 1996.
Cost of Sales. Cost of sales as a percentage of net revenues
for the third quarters ended 1996 and 1995 was 108% and 81%,
respectively, 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. With the introduction of its products to other
states, the Company has also experienced an increase in
shipping costs. In addition, the margin on cooperative
brewed beer is substantially less than the Company's own
products thereby increasing the cost of sales as a percentage
of net revenues.
Selling, General and Administrative Expenses. Selling,
general, and administrative expenses for the three months
ended September 30, 1996 totaled $409,713, or 53% of net sales,
as compared to $229,154, or 4,959% of net sales, for the
comparable period in 1995. This was primarily due to higher
management and administrative support costs and increased selling
costs for the quarter ended September 30, 1996.
Other Income and Expenses. In May 1996, the Company commenced a
registered public stock offering to sell up to 1,053,000 shares of its
Common Stock at a proposed offering price of $1.85 per share. The
Company has determined that continuance of the offering was no longer
in the best interest of the Company or investors. Accordingly, the
Company has elected to terminate the offering and return all funds held
in escrow, together with interest, to the prospective investors. With
the termination of the offering the Company took a one-time charge for
legal and other deferred stock offering costs of $207,175 in the three
months ended September 30, 1996.
Nine Months Ended September 30, 1996
Gross Sales. Sales for the nine months ended September 30,
1996 were $1,359,042, an increase of 2,943% as compared to
gross sales of $44,654 for the comparable period in 1995.
This reflects an increase in sales volume from 86 barrels
in 1995 to 10,628 in 1996. Sales of beer under the cooperative
brewing agreements with affiliated breweries were $796,540, or
59% of the total, for the nine months ended September 30, 1996.
Excise Taxes. Excise taxes increased from $676 (2% of gross
sales) for the nine months ended September 30, 1995 to
$69,970 (5% of gross sales) for the nine months ended September
30, 1996. The increase in excise taxes is due to the increased
volume of production and sales in the third quarter of 1996 and
because brewing operations did not begin until August 1995.
Cost of Sales. Cost of sales as a percentage of net revenues
for the nine months ended of 1996 and 1995 was 118% and
75%, respectively, 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 and freight costs to support sales in new markets
outside of Colorado. If sales of the Company's own products
continue to expand, the increased capacity utilization and
margin on sale price will reduce the cost of sales as a
percentage of net revenues.
MILE HIGH BREWING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended September 30, 1996 (cont.)
Selling, General and Administrative Expenses. Selling,
general, and administrative expenses for the nine months
ended September 30, 1996 totaled $734,522, or 57% net sales,
as compared to $452,563, or 4,547% of net sales, for the
comparable period in 1995. This was primarily due to higher
management and administrative support costs and increased selling
costs required after the Company commenced brewing operations.
Other Income and Expenses. As discussed above the
termination of the offering the Company took a one-time
charge for legal and other deferred stock offering costs of
$207,175 in the period ended September 30, 1996.
MILE HIGH BREWING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources
For the nine months ended September 30, 1996, cash and cash
equivalents decreased $379,691 primarily due to operating
expenses associated with the expansion of sales and production
and the one-time charge of $207,175 for costs associated with
the termination of the Company's second stock offering. Other
uses of funds include an increase in accounts receivable of
$163,859, an increase in inventories of $208,077, purchases of
property and equipment of $490,799, principal debt payments of
$65,005. Primary sources of funds include a decrease in other
current assets of $14,496, a decrease in other non-current
assets of $102,213, an increase in accounts payable of $575,172
to fund growth and development of the Company's product sales,
an increase in accrued liabilities of $73,678, an increase in
amounts due to affiliates of $493,146 consisting of advances
for the construction of a brewpub and general administrative
and financial management support, sale of assets for $45,708,
and an increase in advances from affiliated companies of $75,000
for cooperative brewing.
During the third quarter of 1996, the Company implemented several
strategies designed to improve operating results and the related
cash flows. The Company restructured its sales force, reduced
administrative and production personnel and added new products
in an effort to improve sales in existing markets and promote
sales in new markets. To that end, the Company has secured licenses
to sell its procuts in fifteen states. These strategies however, have
not proven to be effective enough to increase sales to a profitable
level. The Company is in arrears with many of its vendors and contractors
and is not generating sufficient cash flow to repay those creditors.
It is unlikely that the Company can continue to operate as a going
concern without an additional capital infusion.
To address these liquidity and capital resources concerns of the
Company and certain of its affiliated breweries, in September, 1996,
the Company's parent, WVI, 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 craft breweries
controlled by WVI and its affiliate, Nor'Wester. Under the terms of
the letter of intent, The UB Group's investment will 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 Brewing Company, located in Saratoga Springs, New York; WVI and
WVI's subsidiaries-- the Company, Bayhawk Ales, Inc., located in Irvine,
California, and Aviator Ales, Inc. located in Woodinville, Washington.
The closing of the proposed investment remains subject to
(i) The UB Group's completion of satisfactory due diligence,
(ii) negotiation and execution of a definitive investment
agreement between the parties, (iii) approval by the boards
of directors and shareholders of each of the Company, WVI,
Nor'Wester and their respective subsidiaries, (iv) registration
with the U.S. Securities and Exchange Commission of Nor'Wester
shares to be exchanged in the merger, and (v) such other
conditions customary for transactions of this type.
Following the 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 $650,000 to sustain and
grow their brewing operations. The UB Group has also indicated
that it may, in its discretion, 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.
In May 1996, the Company commenced a registered public stock
offering sell up to 1,053,000 shares of its Common Stock at
a proposed offering price of $1.85 per share. The Company
terminated the offering in light of its inability to penetrate
the Colorado craft beer market to an acceptable level and the
proposed consolidation and the possible investment from The UB Group.
The subscriber funds, which have been held in escrow, are
being held with interest. If, for any reason, the proposed
consolidation and investment does not take place the
Company would be unable to repay its creditors or finance
its working capital requirements. In such case, alternative
sources of debt financing and/or equity capital would have
to be developed. There can be no assurances 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.
MILE HIGH BREWING COMPANY
PART II. OTHER INFORMATION
Item 5. Other Information
On November 19, 1996, the Company announced that it
will be unable to sustain operations at current levels
and is taking aggressive steps to reduce its expenses.
The inability to penetrate the highly competitive craft
beer market in Colorado was cited as the primary reason
that the Company was unable to achieve operating results.
To protect and/or recover the value invested in the brewing
facility, Company officials have chosen to minimize operations
and to explore other options including leasing or selling the
brewery. Options are also being explored to continue production
of the Company's Timberline Ales for sale where distribution
has been established.
The Company has been consistently losing money as it struggles
to establish its brand in Colorado and nearby states. To
address its cash needs, the Company commenced a registered
public stock offering in June 1996 to raise up to $1.95 million.
Although approximately $548,000 had been raised and held in an
interest-bearing escrow account, the Company elected to terminate
the offering because of its inability to penetrate the Colorado
craft beer market to an acceptable level and the proposed
consolidation of the Craft Brewing Alliance followed by the
possible investment by The UB Group. The offering
escrow agent is in the process of returning all funds plus
interest to prospective investors.
Willamette Valley, Inc. Microbreweries Across America, the
Company's parent and 51% shareholder, was no longer able to
provide the Company with interim financing due to its own
cash limitations. WVI has been seeking a financial partner to
support its efforts in building the Craft Brewing Alliance.
In September 1996, WVI and Nor'Wester announced the signing of
a non-binding letter of intent with The UB Group to receive $9.0
million in cash along with certain intangible consideration. The
UB Group's possible investment, expected to be made in the first
quarter of 1997, is conditioned upon negotiation and execution of
mutually satisfactory investment documents, The UB Group's
completion of satisfactory due diligence, and the proposed
consolidation of all members of the Craft Brewing Alliance.
It is not expected that the Company's decision to minimize its
brewing operations will prevent the proposed consolidation and
possible investment by The UB Group in the Craft Brewing Alliance.
Under the consolidation, shareholders of each alliance member,
including Mile High, will receive shares in the resulting entity.
These shares will be listed for trading on NASDAQ under the symbol
ALES and thus provide an increased level of liquidity to
investors.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: (i) Press Release dated November
19, 1996
(ii) Letter to Company's shareholders
dated November 19, 1996
(b) On September 26, 1996, the Company filed a
Form 8-K in connection with its execution of
a non-binding letter of intent with The UB
Group of Bangalore, India relating to The UB
Group's proposed investment of $9.0 million
in cash along with certain other non-cash
intangible consideration into the entity
resulting from the proposed consolidation of
the Company with its affiliates, Willamette
Valley, Inc. Microbreweries Across America,
Aviator Ales, Inc., Mile High Brewing Company,
Nor'Wester Brewing Company, Inc. and North
Country 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 18, 1996, a September
26, 1996 press release relating to the matter,
and a September 26, 1996 letter to the Company's
shareholders describing the matter.
Exhibit (a)(i):
Mile High Brewing Company Reduces Operations
For Immediate Release: Dated November 19, 1996
For more information contact: James W. Bernau
Mile High Brewing Company, producer of Timberline Ales (TM),
announced today that it will be unable to sustain operations
at current levels and is taking aggressive steps to reduce its
expenses.
To address its cash needs, the Company had commenced a registered
public stock offering in May 1996 to raise up to $1.95 million.
Although approximately $548,000 had been raised and held in an
interest-bearing escrow account, the Company has elected to
terminate the offering. The offering escrow agent is in the process
of returning all funds plus interest to prospective investors.
"The craft beer market in Colorado is very competitive and Mile High
simply hasn't built sufficient market share or achieved acceptable
operating results since initiating operations in August 1995," said
James W. Bernau, Mile High President and Chief Executive Officer.
"While Timberline Ales has proven their quality--our stout recently
won a silver medal at the Great American Beer Festival--they have
not proven to be an adequate commercial success in the current market."
To protect and/or recover the value invested in the brewing facility,
Company officials have chosen to minimize operations and explore
other options including leasing or selling the brewery. The facility,
located two blocks north of Coors Field on Denver's Blake Street, houses
a 50-barrel brewhouse and has a current annual production capacity of
12,000 barrels and a potential production capacity of 60,000 barrels
if additional tanks are installed. "We are also exploring ways to
continue producing our Timberline Ales in markets where distribution has
been established," Bernau added.
In September 1996, Willamette Valley, Inc. Microbreweries Across America,
the Company's parent and 51% shareholder, and Nor'Wester Brewing Company,
its affiliated brewery in Portland, announced the signing of a non-binding
letter of intent with The UB Group, and international brewer headquartered
in Bangalore, India. Under the terms of the letter of intent, a new
entity would be formed from the proposed consolidation of Nor'Wester,
Nor'Wester's subsidiary, North Country Brewing Company in Saratoga Springs,
New York, and each of the three regional craft breweries owned by
Willamette Valley, Inc. Microbreweries Across America--Aviator Ales in
Woodinville, Washington; Mile High Brewing in Denver; and Bayhawk Ales in
Irvine, California. The new consolidated entity would receive $9.0 million
in cash along with other consideration from The UB Group.
Under the consolidation, shareholders of each alliance member, including
Mile High, would receive shares in the resulting entity. These shares
will be listed for trading on NASDAQ under the symbol ALES thus providing
an increased level of liquidity to investors. The transaction is
conditioned upon the negotiation and execution of mutually satisfactory
investment documents, The UB Group's completion of a satisfactory due
diligence review, and completion of the proposed consolidation.
Exhibit (a)(ii)
November 19, 1996
Shareholders of Mile High Brewing Company
Dear Shareholders:
Despite the best efforts of the employees and volunteers of Mile High
Brewing, we have been unable to sufficiently penetrate the craft beer
market, in Colorado in particular, to get production and sales levels
to a self-sustaining basis.
As a result, the Company has chosen to pursue leasing or selling the
brewery to protect the value invested in the facility. Management
believes the location and facility has significant lont-term value.
In addition, management is currently pursuing several options to continue
producing Timberline Ales for sale in markets where distribution has
successfully been established.
As you know, Mile High Brewing Company is a member of an alliance of craft
brewers which has entered into negotiations with The UB Group of Bangalore,
India, to form United Craft Brewers, Inc., a new national craft brewing
organization to be financed in part by The UB Group. In September 1996,
Willamette Valley, Inc. Microbreweries Across America, the Company's parent
and 51% owner, and Nor'Wester Brewing Company, the Company's affiliated
brewery in Portland, announced the signing of a non-binding letter of
intent with The UB Group to receive $9.0 million in cash along with other
consideration including the grant of an exclusive right to manufacture
The UB Group's Kingfisher brand beer in North America and The UB Group's
provision of certain management and technical services to the breweries.
The UB Group's possible investment, expected to be made in the first
quarter of 1997, is conditioned upon negotiation and execution of
mutually satisfactory investment documents, The UB Group's completion
of a satisfactory due diligence review, and the completion of a proposed
consolidation of all members of the alliance of craft brewers--Nor'Wester
Brewing Company in Portland; Aviator Ales in Woodinville, Washington;
Mile High in Denver; Bayhawk Ales in Irvine, California; and North Country
in Saratoga Springs, New York.
Under the consolidation as currently planned, shareholders of Mile High
will receive shares in the resulting entity. These shares will be listed
for trading on NASDAQ under the symbol ALES, thus providing an increased
level of liquidity to investors.
The Company's second public stock offering has been terminated and all
stock subscription funds received and held in escrow will be returned by
the escrow agent with interest.
If negotiations with The UB Group lead to execution of a definitive
agreement, you will receive, by mail sometime in the first quarter of
1997, formal shareholder meeting materials relating to the proposed
consolidation and share exchange.
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: August 19, 1996 By _______________________
James W. Bernau
President
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
MILE HIGH BREWING COMPANY
Date:_________________ By /s/ James W. Bernau
James W. Bernau
President
23
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