SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1998
-------------
/ / Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
--------- ---------
Commission file number 0 - 25836
---------------------------
PORTLAND BREWING COMPANY
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Oregon 93-0865997
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2730 N.W. 31st Avenue, Portland, Oregon 97210
---------------------------------------------
(Address of Principal Executive Offices)
(503)226-7623
---------------------------
(Issuer's Telephone Number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--------------- ---------------
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 2,074,943 shares of common
---------
stock as of August 13, 1998.
---------------
Transitional Small Business Disclosure Format (check one):
Yes X No
--------------- ---------------
1
<PAGE>
PORTLAND BREWING COMPANY
FORM 10-QSB
INDEX
PART 1 - FINANCIAL INFORMATION PAGE
- ------------------------------- ----
Item 1. Financial Statements
Balance Sheets - June 30, 1998
and December 31, 1997 3
Statements of Operations - Three and Six Months
Ended June 30, 1998 and 1997 5
Statements of Cash Flows - Three and Six Months
Ended June 30, 1998 and 1997 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART 11 - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PORTLAND BREWING COMPANY
Balance Sheet
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 12,348 $ 52,719
Accounts receivable, net of
allowance of $15,852 810,019 652,530
Inventories 709,923 683,733
Prepaid assets 290,707 201,541
------------ ------------
Total current assets 1,822,997 1,590,523
Property and equipment, net of
accumulated depreciation of
$3,462,091 and $3,047,618 8,291,339 8,694,106
Other assets, net 151,562 241,515
------------ ------------
Total assets $ 10,265,898 $ 10,526,144
============ ============
The accompanying notes are an integral part of these statements.
3
<PAGE>
PORTLAND BREWING COMPANY
Balance Sheet
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1998 1997
----------- ------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 1,511,892 $ 1,094,201
Customer deposits held 151,804 165,203
Accrued payroll 110,932 109,979
Other accrued liabilities 47,330 51,867
Line of credit 422,158 203,000
Long-term debt reclassified as current 2,334,648 _
Current portion of long term debt 606,472 381,947
------------ ------------
Total current liabilities 5,185,236 2,006,197
Long-term debt, less current portion _ 2,575,777
Stockholder's loans, long-term 400,000 400,000
STOCKHOLDERS' EQUITY:
Preferred stock, no par value,
100,000 shares authorized, no shares
issued _ _
Common stock, no par value, 5,000,00
shares authorized, 2,074,943 shares
issued and outstanding 6,715,423 6,715,423
Accumulated deficit (2,034,761) (1,171,253)
------------ ------------
Total stockholders' equity 4,680,662 5,544,170
------------ ------------
Total liabilities and stockholders'
equity $ 10,265,898 $ 10,526,144
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
PORTLAND BREWING COMPANY
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
SALES $2,720,419 $3,289,995 $4,964,819 $6,072,346
EXCISE TAX 126,322 148,902 221,464 267,099
------------ ------------ ------------ -------------
Net Sales 2,594,097 3,141,093 4,743,355 5,805,247
COST OF SALES 1,873,519 2,108,095 3,560,975 4,039,272
------------ ------------ ------------ -------------
GROSS PROFIT 720,578 1,032,998 1,182,380 1,765,975
GENERAL AND ADMINISTRATIVE EXPENSES 326,494 392,937 635,872 744,714
SELLING EXPENSES 486,245 638,367 982,362 1,181,129
------------ ------------ ------------ -------------
OPERATING INCOME (LOSS) (92,161) 1,694 (435,854) (159,868)
Interest Expense (86,224) (77,726) (169,989) (141,662)
Other Expense, net (102,817) (54,198) (257,665) (57,611)
------------ ------------ ------------ -------------
Total other expense, net (189,041) (131,924) (427,654) (199,273)
Net loss before provision for
income taxes (281,202) (130,230) (863,508) (359,141)
PROVISION FOR INCOME TAXES - - - -
------------ ------------ ------------ -------------
Net loss ($281,202) ($130,230) ($863,508) ($359,141)
============ ============ ============ =============
NET LOSS PER SHARE ($0.14) ($0.06) ($0.42) ($0.17)
============ ============ ============ =============
Weighted average shares outstanding 2,074,943 2,074,943 2,074,943 2,074,943
============ ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
PORTLAND BREWING COMPANY
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, June 30,
1998 1997
---------------- ----------------
<S> <C> <C>
CASH FLOW RELATING TO OPERATING ACTIVITIES:
Net loss ($863,508) ($359,141)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation 527,802 520,796
Amortization 78,835 65,844
Loss (gain) on sale of asset (6,693) -
(Increase) decrease in:
Accounts receivable (157,489) (212,098)
Inventories (49,104) (46,598)
Prepaid assets (89,166) 13,058
(Decrease) increase in:
Accounts payable 417,691 256,599
Customer deposits held (13,933) (10,608)
Accrued payroll and other accrued liabilities (3,584) 457
--------- ---------
Net cash provided by operating activities (158,615) 228,309
--------- ---------
CASH FLOWS RELATING TO INVESTING ACTIVITIES:
Purchase of property and equipment (132,275) (120,881)
Proceeds from sale of plant and equipment 13,399 -
Changes in other assets 34,032 (44,669)
--------- ---------
Net cash used in investing activities (84,310) (165,550)
--------- ---------
CASH FLOWS RELATING TO FINANCING ACTIVITIES:
Borrowings under credit line, current 219,158 270,000
Issuance of note payable to distributors 97,698 -
Repayments of long-term debt (114,302) (132,334)
Changes in stock notes receivable - 2,149
--------- ---------
Net cash provided (used in) by financing activities 202,554 139,815
--------- ---------
NET INCREASE (DECREASE) IN CASH (40,371) 202,574
CASH, beginning of period 52,719 49,054
--------- ---------
CASH, end of period $ 12,348 $251,628
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $169,989 $141,662
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
PORTLAND BREWING COMPANY
Notes to Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
interim periods presented. The financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the Company's
financial statements filed as part of the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1997. This quarterly report should be
read in conjunction with such Annual Report.
Operating results for the three and six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending December 31, 1998, or any portion thereof.
2. Impact of Recently Issued Accounting Standards
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.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130), which establishes
requirements for disclosure of comprehensive income. Also, in June 1997, the
FASB issued Statement of Financial Accounting Standard No. 131, "Disclosure
about Segments of an Enterprise and Related Information" (SFAS 131), which
establishes requirements for disclosure of information about operating segments.
SFAS 130 and SFAS 131 is effective for fiscal years beginning after December 15,
1997. Reclassification of earlier financial statements for comprehensive
purposes is required. The Company believes the implementation of these
Statements will not have a material effect on its results of operations or
financial disclosures.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Certain statements in the Management's Discussion and Analysis of Financial
Condition and Results of Operations are forward-looking statements. These
forward-looking statements are based on current expectations and entail various
risks and uncertainties that could cause actual results to differ materially
from those expressed in such forward-looking statements. Such risks and
uncertainties include general business and economic conditions, competitive
products and pricing, fluctuations in demand and availability of financing.
These forward-looking statements include but are not limited to sections under
"Liquidity and Capital Resources" regarding the Company's ability to meet its
cash requirements.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997 COMPARISON
Net sales in the second quarter of 1998 decreased 17% to $2,720,419
from $3,289,995 for the same period in 1997. Gross profit decreased 30% to
$720,578 (27.8% of net sales) in the second quarter of 1998 from $1,032,998
(32.9% of net sales) for the same period in 1997. The decrease in gross profit
was primarily a result of lower production volumes. Shipments for the three
months ended June 30, 1998 were 13,229 barrels, a decrease of 17% from 15,845
barrels for the three months ended June 30, 1997. The shortfall in shipments was
due to continued competitive pressure in the craft segment of the beer industry.
General and administrative expenses decreased 17% to $326,494 (13% of
net sales) in the second quarter of 1998 from $392,937 (13% of net sales) for
the same period in 1997. The decrease is due to the continued effect of cost
containment programs. Sales and marketing expenses decreased 24% to $486,245
(19% of net sales) in the second quarter of 1998 from $638,367 (20% of net
sales) for the same period in 1997. The decrease resulted from lower selling
expenses related to shipments and personnel changes.
Interest expense increased to $86,224 for the quarter ended June 30,
1998 from $77,726 for the same quarter in 1997. Other expense of $102,817
includes settlement charges to transfer distribution rights in California.
The net loss for the three months ended June 30, 1998 was $281,202;
depreciation and amortization for the period totaled $301,776; and capital
expenditures were $78,223. This compares to a net loss of $130,230; depreciation
and amortization of $282,974; and capital expenditures of $23,812 for the
three months ended June 30, 1997.
SIX MONTHS ENDED JUNE 30, 1998 AND 1997 COMPARISON
Shipments for the first six months of 1998 totaled 24,195 barrels, a
decrease of 19% compared to 29,739 barrels for the same period in 1997. The
decrease in shipments is due to the continued competition in the specialty
segment of the beer market. Net sales for the six months ended June 30, 1998
were $4,964,819 compared to $5,805,247, a 14% decrease. Gross profit for the six
months ended June 30, 1998 decreased to $1,182,380 (25% of sales) from 1,765,975
(30% of sales) in 1997. The decrease in gross profit was primarily a result of
lower production volumes.
General and administrative expenses for the six months ended June 30,
1998 decreased 15% to $635,872 (13% of sales) from $744,714 (13% of sales) for
the previous year. The decrease is a result of continued cost containment
programs. Sales and marketing expenses for the period decreased 17% to $982,362
(21% of sales) from $1,181,129 (33% of sales) for the six months ended June 30,
1997. The decrease resulted from lower selling expenses related to shipments and
personnel changes.
Interest expense increased to $169,986 in first six months of 1998 from
$141,662 in the first six months of 1997. The increase resulted from increased
debt outstanding in 1998 and some interest was capitalized in 1997. Other
expense of $257,665 include settlement charges to transfer distribution rights
in California.
The net loss for the six months ended June 30, 1998 was $863,511;
depreciation and amortization for the period totaled $606,637; and, capital
expenditures of $132,275. This compares to a net loss of $359,141; depreciation
and amortization of $586,640; and, capital expenditures of $120,881 for the six
months ended June 30, 1997.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital principally to fund its working capital
needs. The Company has met its capital requirements through cash flow from
operations, bank borrowings, borrowings from certain stockholders, and the
private and public sale of its Common Stock.
The Company has a $1,000,000 revolving line of credit with a bank which
was capped at $600,000 through June 30, 1998. At June 30, 1998, $422,158 was
outstanding at the bank's reference rate plus 1.5% (10% at June 30, 1998). The
Company also has term loans outstanding with the bank. At June 30, 1998,
$2,806,830 was outstanding under these term loans. The term loans bear interest
at a fixed rate of 7.55% for $422,158 of the loan with the remaining $2,384,672
bearing interest at the bank's reference rate plus 1/2% (9.00% at June 30,
1998). At August 14, 1998, $3,105,356 was outstanding and immediately due and
payable under the revolving and term loans.
The Company's revolving line matured May 1, 1998. Generally accepted
accounting principles require that the Company's term facilities, which are
cross-collateralized and cross-default with the operating line, be classified as
a current liability pending the renewal or replacement of the Company's credit
facilities. The Company is in default with respect to principal payments and its
debt to worth ratio under the credit facility. On June 26, 1998, the Company
entered into a forbearance agreement with the lender. The Company has operated
pursuant to a series of forbearance agreements with the credit facility lender
which expired on August 10, 1998. There is no assurance that the lender will
extend the forbearance period. Certain major shareholders of the Company are
currently negotiating with the lender to purchase the debt and security
underlying the credit facility and the Company is currently negotiating with
these shareholders to restructure the debt and provide interim financing until
the Company can secure a new credit facility. The shareholders' willingness to
participate in any restructuring is contingent on certain events, including the
Company reaching satisfactory arrangements with its trade creditors. There can
be no assurance the Company will be able to negotiate an agreement with the
shareholders or with its trade creditors or that the shareholders will be able
to negotiate an arrangement with the credit facility lender and the Company.
See Item 3.
See Item 5 for a discussion of the status of the $400,000 note
obligation of the Company.
In management's opinion, the Company's current financial resources will
meet its working capital needs through December 31, 1998, provided an
arrangement can be negotiated with certain shareholders and trade creditors.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company is currently in default with respect to principal payments
and its debt to worth ratio under its credit facility with the Bank of America,
NT&SA ("B of A"). The Company has entered into a series of forbearance
agreements with B of A in which B of A has agreed to forbear from exercising its
rights and remedies up until certain dates. The Fourth Forbearance Agreement
provided that B of A will forbear until August 10, 1998. There has been no
extension of the forbearance period. As of August 14, 1998, the total amount of
the default and the total arrearage under the credit facility was $3,105,356.
See Item 1.
ITEM 5. OTHER INFORMATION
In December 1997, the Company borrowed a total of $400,000 under 10%
Subordinated Notes (the "Notes"). Of the $400,000, $200,00 was borrowed from
each of (i) Harmer Company ("Harmer"), an entity controlled by Robert W.
MacTarnahan, a Director of the Company; and (ii) Charles A. Adams Family Trust
("Adams Trust"), an entity controlled by Charles A. Adams, a Director and the
President of the Company. Payments under the Notes are due in thirty six equal
monthly principal payments of $11,111 commencing July 1, 1999. Interest is
payable monthly at 10% per annum, commencing on February 1, 1998. The Notes are
secured by a second security interest in the Company's accounts receivable and
inventory.
The Company is currently negotiating with Harmer Company and Adams
Trust to cancel the Notes in exchange for 1,290,324 shares of Common Stock
of the Company. In addition, as part of the purchase of the indebtedness (as
described in Item 1), it is contemplated that a voting agreement will be
entered into granting R. Scott MacTarnahan the right to vote the shares owned by
Electra Partners, Inc. and Charles A. Adams as Trustee of the Charles A. Adams
Family Trust. As of August 14, 1998, there were 2,074,943 shares of Common Stock
of the Company outstanding. As of August 14, 1998, Robert W. MacTarnahan
beneficially owned 296,043.75 shares of Common Stock, or 14% of the outstanding
Common Stock, R. Scott MacTarnahan beneficially owned 273,783.75 shares of
Common Stock, or 13% of the outstanding Common Stock, and Charles A. Adams
beneficially owned 282,228.75 shares of Common Stock, or 14% of the outstanding
Common Stock. As a result of the possible acquisition of Common Stock and
transfer of voting power in the above described transactions, there may be a
change in control of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
Exhibit Number Description
- -------------- -----------
Exhibit 10 Forbearance Agreement
Exhibit 11 Calculation of net (loss) income per share
Exhibit 27 Financial Data Schedule
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the quarter ended June 30, 1998.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PORTLAND BREWING COMPANY
-------------------------------------------
(Registrant)
Date August 14, 1998 /s/ CHARLES A. ADAMS
------------------------- -------------------------------------------
(Signature)
Charles A. Adams, Chairman of the Board and
President (Principal Executive Officer)
Date August 14, 1998 /s/ GLENMORE JAMES
------------------------- -------------------------------------------
(Signature)
Glenmore James, Chief Financial Officer
(Principal Financial and Accounting Officer)
11
FORBEARANCE AGREEMENT
This Agreement is made as of June 26, 1998, between BANK OF AMERICA,
NT&SA ("BANK"), a national banking association, and PORTLAND BREWING COMPANY,
("BORROWER").
RECITALS:
A. Borrower is indebted to Bank as a successor by merger to Bank of
America Oregon as provided in that certain business loan agreement dated as of
December 15, 1995, as submitted in five amendments dated as of July 23, 1996,
December 19, 1996, March 28, 1997, April 23, 1997, and November 24, 1997.
(Collectively, the "Loan Agreement").
B. Borrowers' obligation to repay is secured by a Security Agreement
(Receivables, Inventory, and Equipment), dated as of December 15, 1997. The Loan
Agreement and the Security Agreement, together with all other documents which
evidence, secure or perfect Borrower's obligation to Bank are collectively, the
"Loan Documents.".
C. Borrower is in default of its obligation as described in section 2
below and has requested that Bank forbear exercise of its remedies provided for
in the Loan Documents.
D. Bank is prepared to grant Borrower's request to forbear the exercise
of its remedies in consideration of the agreements and promises contained
herein.
THEREFORE, the parties agree as follows:
1. CONFIRMATION OF DEBT:
--------------------
A. The unpaid principal balance of Borrower's indebtedness to
Lender as of June 9, 1998, is $3,391,830.01 as shown below:
<TABLE>
<CAPTION>
LOAN NO. PRINCIPAL OUTSTANDING
<S> <C>
109 574,208.83
125 421,038.72
133 585,000.00
141 1,551,874.12
216 259,708.34
</TABLE>
B. Valid debt; no defenses. The Loan, Security Agreement and
other Loan Documents are hereby confirmed and ratified by Borrowers as being in
full force and effect as of the date of this Agreement. Borrower acknowledges;
(1) that it is liable under the Agreement and
FORBEARANCE AGREEMENT Page 1 of 4
<PAGE>
all other Loan Documents in accordance with their terms; (2) as of the signing
of this Agreement, it has no defenses or offsets to any of the obligations to
Bank; and (3) Lender has performed all of its obligations under the loans and
Loan Documents.
2. FORBEARANCE
-----------. In consideration of Borrower's agreements herein, and
subject to the terms and conditions of this Agreement, Lender agrees that for
the period from the date of this Agreement and until the earlier of July 10,
1998, or the occurrence of any new or additional default under the Loan
Documents as modified by this Agreement, Bank shall forbear from exercising its
rights and remedies under the Loan Documents, arising by reason of Borrower's
default thereunder in having breached its financial covenants under the Loan
Agreement with respect to maintaining a Debt to Worth Ratio less than 1 to 1,
and failing to pay principal on or before June 1, 1998.
3. NO WAIVER/CURE
--------------. Lender's agreement to forbear is not a waiver of the
prior defaults, the existing defaults, nor does it constitute a cure of the
defaults.
4. CONDITIONS PRECEDENT
--------------------. This Agreement without limitations to Lender's
Forbearance Agreement is subject to and conditioned upon execution by Borrower
of this Agreement on or prior to July 6, 1998.
5. CHANGING LOAN TERMS
-------------------. Upon the execution hereof, or in any event,
beginning upon June 29, 1998,
A. All Borrower's receipts shall be deposited in Bank Control
Account No. 2801801213. The Bank will apply all funds in the Bank Control
Account to the Borrower's Operating Line of Credit (Loan No. 133). So long as no
further event of default occurs under the Loan Documents or this Agreement, Bank
shall make advances to Borrower to fund expenditures in the categories and
amounts set forth in the budget attached as Exhibit A (the "Budget"); provided
that the maximum balance outstanding on the Line of Credit shall not at any time
exceed $585,000.
B. During the forbearance period under this Agreement,
Borrower's failure to pay principal installments on Loan Nos. 109, 125, 141 and
216 when due shall not constitute an event of default under the Loan Documents
or this Agreement, but the Bank's deferral of principal payments shall not
constitute a waiver of the principal amount due on such loans. Debtor shall be
in default of this Agreement and of the Loan Agreements if (i) Borrower's
expenditures measured at the end of each week exceed on a cumulative basis the
amount set forth in the Budget through such period, and (ii) Borrower's revenues
are less than ninety percent (90%) of Budget in any week or ninety-five percent
(95%) of Budget on a cumulative basis.
C. Borrower shall make no change in its direction to its
accounts payable obligors with respect to direction of all payments to a lock
box in conformity with arrangements now in existence.
6. NO CONDITIONAL ADDITIONAL EXTENSION
-----------------------------------. Although Borrower and Bank
intend to meet on or before July 10, 1998 to discuss an extension of the Loans
beyond such date, Borrower acknowledges there is no agreement of any kind,
express or implied, that Lender will grant any additional forbearance or
extension of the maturity of the line of credit beyond July 10, 1998.
FORBEARANCE AGREEMENT Page 2 of 4
<PAGE>
7. REPRESENTATIONS AND WARRANTIES.
------------------------------
A. Borrower represents, warrants and acknowledge as follows:
i. As of the date stated in this Agreement, the
unpaid principal balance of all obligations to Bank is set forth as
stated above.
ii. All disbursements of loan proceeds made prior to
the date hereof by the Bank are approved and ratified.
iii. Borrower has no disputes with or claims against
Lender of any kin including for any breach or violation by Lender of
any of the terms or conditions of the loans or Loan Documents.
iv. There are no other loans, loan commitments, or
alleged loan commitments, verbal or written, made or claimed to have
been made by Bank to Borrower.
v. The loan is for business or investment purposes
and is not for personal, family or household purposes.
vi. All information and materials submitted by
Borrower in connection with Borrower's request for the forbearance and
modification of the loan are true and correct in all material respects,
and contain no material misstatements or misrepresentations, and do not
omit any material facts or information.
B. Each person executing this Agreement represents and
warrants to the Bank that he is authorized to do so without the consent of any
third party. Borrower shall indemnify, defend, and hold Bank harmless from any
and all losses, costs which have been or may be asserted against or incurred by
Bank as a result of or by reason of or in connection with any of the
representations and warranties set forth above being false or misleading.
8. REAFFIRMATION, RELEASE AND WAIVER
---------------------------------. Borrower reaffirms its
obligations set forth in section 1 above, and renews, reaffirms, ratifies and
confirms its obligations under the Loan Documents as hereby modified. Further,
in consideration of Bank's agreements contained herein, Borrower hereby waives
and releases to Lender, its directors, officers, employees and agents and their
respective successors and assigns from any and all liability, claim or loss
known or unknown arising from or in connection with any act or omission by any
thereof through the date of this Agreement.
9. EXPENSE REIMBURSEMENTS
----------------------. Borrower agrees to pay all costs, fees and
expenses of Bank incurred in connection with the modification of the obligations
evidenced by the loan, preparation of this Agreement, and any other document
executed in connection herewith or therewith, including but not limited to
Bank's attorneys' fees and costs which amount shall be added to and become a
part of the unpaid balance of Borrower's indebtedness to Bank.
FORBEARANCE AGREEMENT Page 3 of 4
<PAGE>
10. MISCELLANEOUS
-------------. Except as expressly modified or amended by this
Agreement, all of the terms and conditions of the Loan Documents shall remain
unchanged and in full force and effect. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties with respect to the subject
matter contained herein, and may not be amended or modified except by written
instrument signed by all parties.
DATED as of the day and year first written above.
NOTICE: UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE
BANK AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
THAT BANK TO BE ENFORCEABLE.
LENDER: BORROWER:
BANK OF AMERICA, NT&SA PORTLAND BREWING COMPANY
By: /s/ Bank of America, NT&SA By: /s/ Charles A. Adams
--------------------------- -----------------------------
Its: President
FORBEARANCE AGREEMENT Page 4 of 4
EXHIBIT 11
PORTLAND BREWING COMPANY
CALCULATION OF NET INCOME (LOSS) PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Actual weighted average shares
outstanding $ 2,074,943 $ 2,074,943 $ 2,074,943 $ 2,074,943
Dilutive common stock options
using the treasury stock method -- -- -- --
-------------- -------------- -------------- --------------
Total shares used in per share
calculations 2,074,943 2,074,943 2,074,943 2,074,943
============== ============== ============== ==============
Net (loss) income (281,202) $ (130,230) $ (863,508) $ (359,141)
============== ============== ============== ==============
Net (loss) income per share (1) $ (0.14) $ (0.06) $ (0.42) $ (0.17)
============== ============== ============== ==============
<FN>
<F1> Fully diluted earning per share is not materially different from primary
earnings per share in the periods presented.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements found in the Company's Report on Form
10-QSB for the quarter ended June 30, 1998, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000943658
<NAME> Portland Brewing Company
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JAN-01-1998
<EXCHANGE-RATE> 1
<CASH> 12
<SECURITIES> 0
<RECEIVABLES> 826
<ALLOWANCES> (16)
<INVENTORY> 710
<CURRENT-ASSETS> 1,823
<PP&E> 11,753
<DEPRECIATION> 3,462
<TOTAL-ASSETS> 10,266
<CURRENT-LIABILITIES> 5,185
<BONDS> 0
0
0
<COMMON> 6,716
<OTHER-SE> (2,035)
<TOTAL-LIABILITY-AND-EQUITY> 10,266
<SALES> 4,964
<TOTAL-REVENUES> 4,743
<CGS> 3,561
<TOTAL-COSTS> 5,179
<OTHER-EXPENSES> 258
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170
<INCOME-PRETAX> (864)
<INCOME-TAX> 0
<INCOME-CONTINUING> (864)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (864)
<EPS-PRIMARY> (.42)
<EPS-DILUTED> (.42)
</TABLE>
