10-Q 1 wdka_10q.htm FORM 10-Q wdka_10q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the Quarterly Period Ended September 30, 2013
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
 
For the Transition Period From ____to _____

Commission File Number: 000-52670

PANACHE BEVERAGE INC.
(Exact name of small business issuer as specified in its charter)
 
Delaware
  
38-3855631
(State or other jurisdiction of incorporation or organization)
  
(IRS Employer Identification No.)
 
150 Fifth Avenue, 3rd Floor, New York, NY 10011
(Address of principal executive offices)

(646) 480-7479
 (Issuer's telephone number)
 
Indicate by check mark whether the registrant (1) has 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes  x No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated Filer
o
Non-accelerated filer
o
Smaller reporting company
x
(Do not check if a smaller reporting company)
      

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes  o No  x

Number of shares of common stock, par value $.001, outstanding as of November 5, 2013:  27,055,891
 
 
 
 
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
 
This Quarterly Report on Form 10-Q of Panache Beverage, Inc. contains "forward-looking statements" that may state our management's plans, future events, objectives, current expectations, estimates, forecasts, assumptions or projections about the company and its business. Statements contained in this Quarterly Report on Form 10-Q which are not historical facts are forward-looking statements within the meaning of the U.S. Securities Exchange Act of 1934, as amended.. The issuer's actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the Company believes," "management believes" and similar language, including those set forth in the discussions under "Notes to Consolidated Financial Statements" and "Management's Discussion and Analysis or Plan of Operation" as well as those discussed elsewhere in this Form 10-Q. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that are subject to the "safe harbor" created by the Private Securities Litigation Reform Act of 1995.

The accuracy of these forward-looking statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. These statements are not guarantees of future performance, and undue reliance should not be placed on these statements. It is important to note that our actual results could differ materially from what is expressed in our forward-looking statements due to the risk factors described in “Item 1A — Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2012, and “Item 1A — Risk Factors” of the Company’s quarterly reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013, and the section of this Quarterly Report titled "Risk Factors," as well as the following risks and uncertainties:

*           Our ability to fund our operations in the short and long term through financing transactions on terms acceptable to us, or at all;
*           Our history of operating losses and the uncertainty surrounding our ability to achieve or sustain profitability;
*           Competition from producers of competing products;
*           Our ability to identify, consummate, and/or integrate strategic partnerships; and
*           The potential for manufacturing problems or delays.

We do not undertake any obligation to update publically any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable law. 
 
 
2
 
 
TABLE OF CONTENTS
 
PART I. FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS
    
4
  
           
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
22
  
           
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
26
  
           
ITEM 4.
CONTROLS AND PROCEDURES
    
26
  
 
PART II. OTHER INFORMATION
 
ITEM 1.
LEGAL PROCEEDINGS
    
27
  
           
ITEM 1A.
RISK FACTORS
    
27
  
           
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
28
  
           
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
    
28
  
           
ITEM 4.
MINE SAFETY DISCLOSURES
    
28
  
           
ITEM 5.
OTHER INFORMATION
    
28
  
           
ITEM 6.
EXHIBITS
    
29
  
           
SIGNATURES
    
30
  
           
INDEX TO EXHIBITS
    
31
  
 
 
3
 
 
ITEM 1.  FINANCIAL STATEMENTS



 
PANACHE BEVERAGE, INC.

CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013 AND 2012
 
 
 
 
 
 
 
4
 
 
PANACHE BEVERAGE, INC.

 TABLE OF CONTENTS

SEPTEMBER 30, 2013 AND 2012
 
Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012 (unaudited)
    
6
  
         
Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012 (unaudited)
    
7
  
         
Consolidated Statement of Equity (Deficit) as of September 30, 2013 (unaudited)
    
8
  
         
Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (unaudited)
    
9
  
         
Notes to Consolidated Financial Statements (unaudited)
    
10
  
 
 
5
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED BALANCE SHEETS - (Unaudited)
 
   
September 30,
    
December 31,
  
   
2013
    
2012
  
             
ASSETS
Current Assets
            
Cash and cash equivalents
  
$
25,367
    
$
714,178
  
Restricted cash
    
2,427,207
      
600,000
  
Accounts receivable – net
    
1,473,812
      
1,384,296
  
Inventory
    
771,684
      
94,696
  
Prepaid expenses and other current assets
    
188,220
      
100,301
  
Total Current Assets
    
4,886,290
      
2,893,471
  
                 
Property and Equipment - net
    
4,359,907
      
10,981
  
                 
TOTAL ASSETS
  
$
9,246,197
    
$
2,904,452
  
                 
LIABILITIES AND EQUITY (DEFICIT)
                 
Current Liabilities
                
Accounts payable
  
$
1,468,932
    
$
1,054,544
  
Due to factor
    
869,208
      
1,008,320
  
Notes payable
    
40,700
      
295,062
  
Loans payable – related parties
    
523,501
      
618,748
  
Accrued interest
    
234,046
      
54,946
  
Other current liabilities
    
536,877
      
569,087
  
Total Current Liabilities
    
3,673,264
      
3,600,707
  
                 
Long term debt
    
11,000,000
      
2,100,000
  
                 
Total Liabilities
    
14,673,264
      
5,700,707
  
                 
Equity (Deficit)
                
Common stock, par value $0.001; 200,000,000 and 200,000,000 shares authorized as of September 30, 2013 and December 31, 2012, respectively; 27,055,891 and 26,760,891 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively
    
27,056
      
26,761
  
Additional paid in capital
    
3,959,469
      
3,212,623
  
Additional paid in capital - warrants
    
450,798
      
234,117
  
Accumulated (deficit)
    
(9,050,065
)
    
(5,783,334
)
Total stockholders' deficit
    
(4,612,742
)
    
(2,309,833
)
Non-controlling interests
    
(814,325
)
    
(486,422
)
Total Equity (Deficit)
    
(5,427,067
)
    
(2,796,255
)
                 
TOTAL LIABILITIES AND EQUITY (DEFICIT)
  
$
9,246,197
    
$
2,904,452
  
 
 
6
 
 
PANACHE BEVERAGE, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS  - (Unaudited)
 
   
For the three months ended
    
For the nine months ended
  
   
September 30,
    
September 30,
  
   
2013
    
2012
    
2013
    
2012
  
                         
REVENUES - NET
  
$
306,159
    
$
271,241
    
$
3,148,732
    
$
1,310,765
  
                                 
COST OF GOODS SOLD
    
291,974
      
115,122
      
2,007,532
      
811,462
  
                                 
GROSS PROFIT
    
14,185
      
156,119
      
1,141,200
      
499,303
  
                                 
OPERATING EXPENSES
                                
Advertising and promotion
    
271,849
      
177,415
      
748,817
      
704,516
  
Consulting
    
214,942
      
48,836
      
506,177
      
333,245
  
Professional fees
    
676,591
      
151,744
      
1,279,795
      
773,747
  
General and administrative
    
318,630
      
498,071
      
1,876,250
      
1,386,777
  
TOTAL OPERATING EXPENSES
    
1,482,012
      
876,066
      
4,411,039
      
3,198,285
  
                                 
LOSS FROM OPERATIONS
    
(1,467,827
)
    
(719,947
)
    
(3,269,839
)
    
(2,698,982
)
                                 
OTHER EXPENSE
                                
Interest expense
    
(223,077
)
    
(38,772
)
    
(492,056
)
    
(61,923
)
Interest income
    
11,033
      
-
      
33,187
      
-
  
Gain on extinguishment of debt
    
-
      
-
      
134,074
      
-
  
                                 
TOTAL OTHER EXPENSE
    
(212,044
)
    
(38,772
)
    
(324,795
)
    
(61,923
)
                                 
LOSS FROM OPERATIONS AND BEFORE NON-CONTROLLING INTERESTS
    
(1,679,871
)
    
(758,719
)
    
(3,594,634
)
    
(2,760,905
)
                                 
LESS: LOSS ATTRIBUTABLE TO NON- CONTROLLING INTERESTS
    
157,543
      
74,020
      
327,903
      
480,329
  
                                 
LOSS BEFORE PROVISION FOR INCOME TAXES
    
(1,522,328
)
    
(684,699
)
    
(3,266,731
)
    
(2,280,576
)
                                 
PROVISION FOR INCOME TAXES
    
-
      
-
      
-
      
-
  
                                 
NET LOSS ATTRIBUTABLE TO PANACHE BEVERAGE, INC.
  
$
(1,522,328
)
  
$
(684,699
)
  
$
(3,266,731
)
  
$
(2,280,576
)
                                 
BASIC AND DILUTED RESULTS PER SHARE OF COMMON STOCK:
                  
                                 
LOSS PER SHARE ATTRIBUTABLE TO PANACHE BEVERAGE, INC.: BASIC AND DILUTED
  
$
(0.06
)
  
$
(0.03
)
  
$
(0.12
)
  
$
(0.09
)
                                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED
    
27,055,891
      
26,392,674
      
27,010,616
      
26,025,519
  
 
 
7
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED STATEMENT OF EQUITY (DEFICIT)  - (Unaudited)
AS OF SEPTEMBER 30, 2013
 
   
Common Stock
    
Additional
Paid in
    
Common
Stock
    
Treasury
    
Accumulated
    
Total Stockholders' Equity
    
Non-Controlling
    
Total Equity
  
   
Shares
    
Amount
    
Capital
    
Warrants
    
Stock
    
Deficit
    
(Deficit)
    
Interests
    
(Deficit)
  
                                                       
Balance, January 1, 2012
     25,107,891     $ 25,108     $ 1,303,412     $ 163,097     $ -     $ (2,516,269 )   $ (1,024,652 )   $ (123,696 )   $ (1,148,348 )
                                                                         
Capital contributions
     -       -       -       -       -       -       -       257,944       257,944  
                                                                         
Common stock and warrants issued for $0.50 per share
     120,000       120       99,761       20,119       -       -       120,000       -       120,000  
                                                                         
Common stock and warrants issued for $1.00 per share
     590,000       590       631,712       105,198       -       -       737,500       -       737,500  
                                                                         
Common stock & warrants issued for services rendered
     487,000       487       487,213       -       -       -       487,700       -       487,700  
                                                                         
Warrants vested for services rendered
     -       -       -       8,351       -       -       8,351       -       8,351  
                                                                         
Common stock issued to satisfy debt
     150,000       150       149,850       -       -       -       150,000       -       150,000  
                                                                         
Shares repurchased
     -       -       -       -       (150,000 )     -       (150,000 )     -       (150,000 )
                                                                         
Treasury shares sold
     -       -       -       -       50,000       -       50,000       -       50,000  
                                                                         
Treasury shares retired
     (100,000 )     (100 )     (99,900 )     -       100,000       -       -       -       -  
                                                                         
Warrants from debt issuance
     -       -       -       14,449       -       -       14,449       -       14,449  
                                                                         
Warrants exercised
     230,000       230       337,506       (47,736 )     -       -       290,000       -       290,000  
                                                                         
Warrants modified
     -       -       (148,395 )     148,395       -       -       -       -       -  
                                                                         
Warrants expired
     -       -       177,756       (177,756 )     -       -       -       -       -  
                                                                         
Stock-based compensation
     -       -       248,884       -       -       -       248,884       -       248,884  
                                                                         
Issuance of shares from stock-based compensation
     176,000       176       (176 )     -       -       -       -       -       -  
                                                                         
Beneficial interest in conversion feature of convertible debt
     -       -       25,000       -       -       -       25,000       -       25,000  
                                                                         
Net loss for the period ended December 31, 2012
     -       -       -       -       -       (3,267,065 )     (3,267,065 )     (620,670 )     (3,887,735 )
                                                                         
Balance, December 31, 2012
     26,760,891       26,761       3,212,623       234,117       -       (5,783,334 )     (2,309,833 )     (486,422 )     (2,796,255 )
                                                                         
Common stock issued for services rendered
     260,000       260       145,740       -       -       -       146,000       -       146,000  
                                                                         
Warrants vested for services rendered
     -       -       -       351,877       -       -       351,877       -       351,877  
                                                                         
Warrants expired
     -       -       135,196       (135,196 )     -       -       -       -       -  
                                                                         
Stock-based compensation
     -       -       465,945       -       -       -       465,945       -       465,945  
                                                                         
Issuance of shares from stock-based compensation
     35,000       35       (35 )     -       -       -       -       -       -  
                                                                         
Net loss for the period ended September 30, 2013
     -       -       -       -       -       (3,266,731 )     (3,266,731 )     (327,903 )     (3,594,634 )
                                                                         
Balance, September 30, 2013
     27,055,891     $ 27,056     $ 3,959,469     $ 450,798     $ -     $ (9,050,065 )   $ (4,612,742 )   $ (814,325 )   $ (5,427,067 )
 
 
8
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
 
   
For the nine months ended
  
   
September 30,
  
   
2013
    
2012
  
CASH FLOWS FROM OPERATING ACTIVITIES
            
Net (loss) income for the period
  
$
(3,266,731
)
  
$
(2,280,576
)
Adjustments to Reconcile Net (Loss) Income to Net Cash Used in Operating Activities:
  
Non-controlling interest
    
(327,903
)
    
(480,329
)
Depreciation
    
33,011
      
4,585
  
Stock issued and warrants vested for services rendered
    
497,877
      
445,000
  
Advertising expense from capital contribution
    
-
      
257,944
  
Stock-based compensation
    
465,945
      
56,900
  
Changes in assets and liabilities:
                
Restricted cash
    
(1,827,207
)
    
-
  
Accounts receivable
    
(89,516
)
    
(108,403
)
Inventory
    
(676,988
)
    
37,034
  
Prepaid expenses
    
(87,919
)
    
5,020
  
Accounts payable
    
414,388
      
353,672
  
Consulting fees payable – related party
    
-
      
(2,705
)
Accrued interest
    
179,100
      
18,302
  
Other current liabilities
    
(32,210
)
    
163,703
  
CASH FLOWS USED IN OPERATING ACTIVITIES
    
(4,718,153
)
    
(1,529,853
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES
                
Purchase of property and equipment
    
(881,937
)
    
(8,441
)
CASH FLOWS USED IN INVESTING ACTIVITIES
    
(881,937
)
    
(8,441
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES
                
Proceeds from notes payable
    
22,861
      
272,500
  
Repayments of notes payable
    
(277,223
)
    
(7,368
)
Proceeds from loans payable – related parties
    
-
      
213,198
  
Repayments of loans payable – related parties
    
(95,247
)
    
-
  
Net (decrease) increase in due to factor
    
(139,112
)
    
(17,296
)
Proceeds from long term debt
    
5,400,000
      
-
  
Proceeds from issuance of stock and warrants
    
-
      
1,022,700
  
Repurchase of treasury stock
    
-
      
(50,000
)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
    
4,911,279
      
1,433,734
  
                 
NET INCREASE (DECREASE) IN CASH
    
(688,811
)
    
(104,560
)
Cash, beginning of period
    
714,178
      
152,464
  
Cash, end of period
  
$
25,367
    
$
47,904
  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
                
Cash paid for interest
  
$
312,956
    
$
80,225
  
                 
NONCASH INVESTING AND FINANCING ACTIVITIES
                
Stock issued and warrants vested for services rendered
  
$
497,877
    
$
445,000
  
Debt financed property and equipment purchases
  
$
3,500,000
    
$
-
  
Capital contribution – Advertising services
  
$
-
    
$
257,944
  
Conversion of accounts payable to notes payable - related party
  
$
-
    
$
21,000
  
 
 
9
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations

Panache Beverage Inc. (the “Company”) was incorporated in the State of Florida on December 28, 2004 under the name as Biometrix International Inc. On May 30, 2007, the Company changed its name to BMX Development Corp. On September 6, 2011, the Company filed an Articles of Amendment to the Articles of Incorporation with the Florida Secretary of State to change its name to Panache Beverage Inc. and believed the new name would more accurately reflect its business after a stock exchange transaction with Panache LLC, a New York Limited Liability Company.

On August 19, 2011, the Company completed a stock exchange transaction with Panache LLC (“Panache”).  Panache was organized as a limited liability company in the State of New York on February 9, 2010.  Panache is an alcoholic beverage company specializing in development, global sales and marketing of spirits brands, and currently owns 65.5% ownership of Wodka LLC (“Wodka”), a New York Limited Liability Company organized on August 14, 2009.  Upon its organization, Panache assumed ownership of Wodka from a related party.  Wodka imports vodka under the brand name Wodka for wholesale distribution to retailers located throughout the United States and internationally.
 
The stock exchange transaction involved two simultaneous transactions:
 
The majority shareholder of the Company delivered 2,560,000 shares of the Company’s common stock to the Panache Members in exchange for total payments of $125,000 in cash and;
 
The Company issued to the Panache Members an amount equal to 17,440,000 new investment shares of common stock of the Company pursuant to Rule 144 under the Securities Act of 1933, as amended, in exchange for one hundred percent (100%) of the issued and outstanding membership interest units of Panache from the Panache Members.

Alibi NYC, LLC (“Alibi”) was organized as a limited liability company in the State of New York on May 17, 2007 and remained dormant until it conducted its first business operations during the first quarter of 2012.  Effective January 1, 2012, the members of Alibi transferred their interests to Panache Beverage, Inc. and Alibi became a 100% owned subsidiary of Panache Beverage, Inc.  Alibi markets and distributes Alibi American Whiskey.
 
Panache Distillery, LLC (“Panache Distillery”) was organized as a limited liability company in the State of Florida on February 20, 2013 as a wholly owned subsidiary of Panache Beverage, Inc.   On August 23, 2013, Panache Distillery closed on the purchase of a distillery in New Port Richey, Florida for a total purchase price of $4,200,000, of which $700,000 was paid in cash at closing and the remaining $3,500,000 is payable in the form of a Promissory Note held by the sellers. The distillery will offer full integration of domestic distillation, bottling and sales operations.

Panache IP Holdings, Inc. (“IP Holdings”) was organized as a domestic corporation in the State of Delaware on September 26, 2013 as a wholly owned subsidiary of Panache Beverage, Inc. IP Holdings was established to preserve the Company’s patented intellectual property and trademarks. As of September 30, 2013, IP Holdings is dormant with no activity.
 
 
10
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

Basis of consolidation

The consolidated financial statements include the accounts of Panache Beverage, Inc., Panache LLC, Wodka LLC, Alibi NYC, LLC, Panache Distillery, LLC and Panache IP Holdings, Inc. (collectively, the “Company”). All material intercompany transactions have been eliminated.

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results to be expected for a full year.

The unaudited consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to the Company’s annual audited consolidated financial statements for the preceding fiscal year.  The financial statements of the Company are presented in US dollars.

Accounting basis

The Company uses the accrual basis of accounting and generally accepted accounting principles in the United States of America (“US GAAP”).  The Company has adopted a December 31 fiscal year end.  Certain reclassifications were made to the 2012 financial statements presentation in order to conform to the 2013 presentation.  Such reclassifications had no effect on reported income.

Revenue recognition

We recognize revenue when title and risk of loss pass to the customer, typically when the product is shipped.  Some sales contracts contain customer acceptance provisions that grant a right of return.  Under these provisions, customers can return products that are not merchantable and fit and suitable for their intended use, are not of the same premium quality as products currently in existence, or are defectively packaged, bottled or labeled.  Customers may also return any product that does not comply with all applicable laws and regulations.  We record revenue net of the estimated cost of sales returns and allowances.  Gross revenue was reduced due to sales returns and allowances by $5,112 and $0 during the three months ended September 30, 2013 and 2012, respectively and $11,495 and $30,325 during the nine months ended September 30, 2013 and 2012, respectively.

Sales discounts were $0 and $1,677 for the three months ended September 30, 2013 and 2012 and $1,191 and $23,943 for the nine months ended September 30, 2013 and 2012.

From time to time the Company provides incentives to its customers in the form of free product.  The costs associated with producing this product is included as an expense in costs of goods sold.  No revenue is recognized with respect to such product giveaways.  The Company did not give away any product during the three and nine months ended September 30, 2013 and the three months ended September 30, 2012.  The Company gave away product costing $1,440 during the nine months ended September 30, 2012.
 
 
11
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

Advertising

Advertising costs are expensed as incurred and aggregated $271,849 and $177,415 for the three months ended September 30, 2013 and 2012, respectively and $748,817 and $704,516 for the nine months ended September 30, 2013 and 2012, respectively.

Wodka received advertising services in the form of out of home media space from a related party who holds a non-controlling interest in Wodka.  The Company recorded advertising expense and capital contributions from non-controlling interests of $0 and $257,944 in relation to this arrangement for the nine months ended September 30, 2013 and 2012, respectively.

Other Significant Accounting Policies

Other significant accounting policies are set forth in Note 1 of the audited financial statements included in the Company’s 2012 Annual Report on Form 10-K and remain unchanged as of September 30, 2013.

Use of estimates

The preparation of financial statements in conformity with GAAP 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 results could differ from those estimates.

Recently issued accounting standards

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.

NOTE 2 – ACCOUNTS RECEIVABLE

The Company grants customers standard credit terms as governed by the terms specified in the contracts. Our major customers receive payment credit terms that range between 30 and 60 days.

The Company evaluates the need of an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible. If actual collections experience changes, revisions to the allowance may be required.  Based on management review of outstanding balances, an allowance for doubtful accounts of $430,402 was recorded as of September 30, 2013 and 2012.

No bad debt expense was recognized for the three and nine months ended September 30, 2013 and 2012

NOTE 3 – PREPAID EXPENSES

The Company has entered into various agreements with consultants whereby the Company issues common stock in exchange for consulting services.  The Company values the common stock and the consulting services based on the closing price of its common stock on the date of the agreement or the negotiated value of the consulting services.  The Company recognized $0 and $59,273 of professional fee expense in relation to these agreements for the three months ended September 30, 2013 and 2012, respectively and $144,417 and $379,802 of professional fee expense in relation to these agreements for the nine months ended September 30, 2013 and 2012.  Prepaid expenses relating to these agreements were $0 and $54,683 as of September 30, 2013 and December 31, 2012, respectively.
 
 
12
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 4 – FACTORING AGREEMENT
 
In the third quarter of 2012, the Company entered into a purchase and sale factoring agreement with a commercial factor whereby the Company sells certain Alchemia accounts receivable to the factor. Under the terms of the agreement, the factor may, in its sole discretion, make advances to the Company of amounts representing up to 75% of the net amount of eligible accounts receivable up to an initial maximum of $150,000 with a possible increased maximum of $300,000.  In the fourth quarter of 2012, the agreement was expanded to include Wodka and Alibi accounts receivable with the initial limits of $250,000 for each brand and possible increased maximum of $1,000,000 and $500,000, respectively.  The factor's purchase of the eligible accounts receivable includes a discount fee which is deducted from the face value of each collection.  The discount fee is based on the number of days outstanding from the date of purchase.  In the second quarter of 2013, the agreement was amended to decrease the discount fee to 3.0% if paid within 30 days and 0.83% for each 10 day period until the account is paid. Based on this arrangement, the Company is liable to the factor if the accounts receivable is not collected, and therefore the Company has accounted for cash received on factored receivables as a liability.

From time to time, the Company enters into purchase and sale factoring agreement with a different commercial factor whereby the Company sells certain accounts receivable to the factor.  Under the terms of these agreements, the factor makes advances to the Company of amounts representing up to 90% of certain accounts receivable.  The factor purchases the accounts receivable at a $500 discount plus monthly compounded interest of 2% of the factored amount for the period the factored accounts receivable remain outstanding.  Based on this arrangement, the Company is liable to the factor if the accounts receivable is not collected, and therefore the Company has accounted for cash received on factored receivables as a liability.

In the third quarter of 2013, the Company entered into a factoring and advance agreement with a commercial factor whereby the Company sells its accounts receivables to the factor. Under the terms of the agreement, the factor may purchase individually or collectively any invoice of the Company if the Company agrees to sell them and make advances of amounts representing up to 85% of the net amount of eligible accounts receivable up to $2,000,000. The factor's purchase of the eligible accounts receivable includes a discount fee which is deducted from the face value of each collection.  The discount fee is based on the number of days outstanding from the date of purchase and shall be 2.5% if paid within 30 days and 0.85% for each 10 day period until the account is paid. Based on this arrangement, the Company is liable to the factor if the accounts receivable is not collected, and therefore the Company has accounted for cash received on factored receivables as a liability.

The combined balance due to the factors as of September 30, 2013 and December 31, 2012 was $869,208 and $1,008,320, respectively.  Factor expense (refund) charged to operations for the three months ended September 30, 2013 and 2012 amounted to $(18,213) and $10,263, respectively, and for the nine months ended September 30, 2013 and 2012 amounted to $93,520 and $67,926, respectively.
 
 
13
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 5 – NOTES PAYABLE

On June 11, 2013, the Company borrowed $22,860 from a third party at an interest rate of 7.20% per annum.  The loan was used to finance directors’ and officers’ insurance and is due in nine equal monthly payments of $2,617.  The balance of this loan was $12,700 as of September 30, 2013.

On November 15, 2012, Wodka borrowed $16,875 from a third party at an interest rate of 7.25% per annum.  The loan was used to finance credit insurance and is due in three equal payments of $5,796 due December 15, 2012, March 15, 2013 and June 15, 2013.  The balance of this loan was $0 and $11,283 as of September 30, 2013 and December 31, 2012, respectively.

On September 14, 2012, the Company borrowed $250,000 from a third party for working capital purposes payable on January 15, 2013.  Per the agreement, interest of $25,000 was paid via regular payments through the term of the loan.  The Company repaid the loan in full on January 15, 2013.  The balance of the loan as of September 30, 2013 and December 31, 2012 was $0 and $248,145, respectively.

On August 11, 2011, the Company borrowed $28,000 from a third party for working capital purposes.  The loan is non-interest bearing and payable on demand.  The balance of this loan was $28,000 as of September 30, 2013 and December 31, 2012.

NOTE 6 – LOANS PAYABLE – RELATED PARTIES

The Company had an outstanding loan payable to its chief executive officer, majority shareholder and former member of Panache LLC in the amount of $245,000 as of September 30, 2013 and December 31, 2012.  The loan balance includes $110,275 that was transferred into Wodka from a related entity as a deemed distribution. The loan is unsecured and non-interest bearing. In order to induce a new member to purchase a membership interest, the related party agreed that the loan would not be repaid without unanimous Board approval. In addition, the loan would not become due and payable until all of the equity interests of Wodka, or substantially all of the assets of Wodka are sold to an unrelated third party.

On July 10, 2012, the Company entered into a loan agreement with its chief executive officer and majority shareholder whereby it borrowed $150,000 at an interest rate of 24% per annum.  The loan agreement provided the chief executive officer with the option to convert the outstanding loan balance into shares of Panache Beverage, Inc. common stock at $1.00 per share.  The loan agreement also allowed the Company to borrow an additional $50,000 under the same terms, which the Company did on August 16, 2012.  Per the terms of the agreement, the loan was to be repaid within four months of its commencement.  The Company repaid the loan on February 14, 2013.  The balance of the loan as of September 30, 2013 and December 31, 2012 was $0 and $191,960, respectively.

Because the conversion feature was at a share price less than the Company’s share price at the time of the loan, it is deemed beneficial to the holder.  As such, generally accepted accounting principles required the Company to record the intrinsic value of the conversion feature as additional paid in capital and record a corresponding discount on the loan payable.  This discount was amortized to interest expense over the life of the loan.  The full $25,000 discount on the loan payable due to the intrinsic value of the conversion feature was amortized to interest expense over the four month term of the loan in 2012.

The Company had additional loans payable to related parties totaling $278,501 and $281,898 at September 30, 2013 and December 31, 2012, respectively.  The loans are unsecured and non-interest bearing with no stated payment terms. Proceeds from the loans were used to fund operations.
 
 
14
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 7 – OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following:
 
   
September 30,
    
December 31,
  
   
2013
    
2012
  
Commissions payable
  
$
-
    
$
171,778
  
Excise taxes payable
    
75,954
      
75,954
  
Customer deposits
    
34,200
      
115,464
  
Accrued salaries
    
329,733
      
138,900
  
Accrued expenses and other liabilities
    
96,990
      
66,991
  
Total other current liabilities
  
$
536,877
    
$
569,087
  

NOTE 8 – LONG TERM DEBT
 
On May 9, 2013, Panache Beverage, Inc. issued a promissory note to Consilium Corporate Recovery Master Fund, LTD, which resulted in gross proceeds of $4,000,000 before fees and other expenses associated with the transaction. The note bears interest at 8% per annum with interest payable quarterly in arrears. A final payment of all principal due under the promissory note, plus accrued interest to date, shall be made on May 9, 2016.  The balance of the note as of September 30, 2013 is $4,000,000.

On February 14, 2013, pursuant to a Term Loan Agreement dated February 14, 2013 (“2013 Loan Agreement”) between the parties, Wodka issued a promissory note for $1,400,000 to Consilium Corporate Recovery Master Fund, LTD due on February 14, 2016 and bearing interest at 12% per annum.  Interest is payable quarterly in arrears.  The Company is using the proceeds to fund operations and repay existing debt.  The Company pledged its tangible and intangible assets pursuant to the 2013 Loan Agreement and agreed to retain $800,000 of the proceeds in escrow.

On December 21, 2012, pursuant to a Term Loan Agreement (“Loan Agreement”) between the parties, the Company issued a promissory note for $2,100,000 to Consilium Corporate Recovery Master Fund, LTD due on December 31, 2015 and bearing interest at 12% per annum.  Interest is payable quarterly in arrears.  The Company is using the proceeds to fund operations and repay existing debt.  The Company pledged its tangible and intangible assets pursuant to the Loan Agreement and agreed to retain $600,000 of the proceeds in escrow.  Concurrent with the issuance of the note, the managing director of Consilium Investment Management, LLC (“Consilium”) was appointed to the Board of Directors of the Company.

On August 22, 2013, pursuant to an Amendment to the Asset Purchase Agreement for the purchase of the Panache Distillery previously executed on May 15, 2013 (“APA Amendment”) between the the Company and Douglas Joint Venture, Empire Joint Venture, and V-3 Joint Venture, LLC (“the Sellers”), the Company issued a promissory note for $3,500,000 to the Sellers due on August 22, 2016 and bearing interest at 6% per annum.

Interest is payable quarterly in arrears.  The Promissory note is secured by a first lien Purchase Money Mortgage and Security Agreement secured by the Purchased Assets, as defined in the Asset Purchase Agreement.
 
 
15
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 

NOTE 8 – LONG TERM DEBT – (Continued)

Future maturities of debt as of September 30, 2013 are as follows:

For the year ended:
      
December 31, 2013
  
$
564,201
  
December 31, 2014
    
-
  
December 31, 2015
    
2,100,000
  
December 31, 2016
    
8,900,000
  
December 31, 2017
    
 -
  
   
$
11,564,201
  
 
NOTE 9 – RELATED PARTY TRANSACTIONS
 
On May 9, 2013, Panache Beverage, Inc. issued a promissory note to Consilium Corporate Recovery Master Fund, which resulted in gross proceeds of $4,000,000 before fees and other expenses associated with the transaction. The note bears interest at 8% per annum with interest payable quarterly in arrears. A final payment of all principal due under the promissory note, plus accrued interest to date, shall be made on May 9, 2016.  The balance of the note as of September 30, 2013 is $4,000,000.

On February 14, 2013, pursuant to a Term Loan Agreement dated February 14, 2013 (“2013 Loan Agreement”) between the parties, Wodka issued a promissory note for $1,400,000 to Consilium Corporate Recovery Master Fund, LTD due on February 14, 2016 and bearing interest at 12% per annum.  Interest is payable quarterly in arrears.  The Company is using the proceeds to fund operations and repay existing debt.  The Company pledged its tangible and intangible assets pursuant to the 2013 Loan Agreement and agreed to retain $800,000 of the proceeds in escrow.

On December 21, 2012, pursuant to a Term Loan Agreement (“Loan Agreement”) between the parties, the Company issued a promissory note for $2,100,000 to Consilium Corporate Recovery Master Fund, LTD due on December 31, 2015 and bearing interest at 12% per annum.  Interest is payable quarterly in arrears.  The Company is using the proceeds to fund operations and repay existing debt.  The Company pledged its tangible and intangible assets pursuant to the Loan Agreement and agreed to retain $600,000 of the proceeds in escrow.  Concurrent with the issuance of the note, the managing director of Consilium was appointed to the Board of Directors of the Company.

On February 14, 2013, the Company issued Consilium warrants to purchase up to 1,840,000 shares of the Company’s common stock at an exercise price of $0.50 per share in exchange for consulting services to be provided over four years.  The warrants vest in eight equal tranches every six months over the consulting period and are exercisable upon at least 61 days notice.  The warrants expire on February 14, 2018.  The Company valued the stock warrants at $740,968 using the Black Scholes model.
 
On December 21, 2012, the Company also issued Consilium warrants to purchase up to 2,760,000 shares of the Company’s common stock at an exercise price of $0.50 per share in exchange for consulting services to be provided over four years.  The warrants vest in eight equal tranches every six months over the consulting period and are exercisable upon at least 61 days notice.  The warrants expire on December 21, 2017.  The Company valued the stock warrants at $1,229,304 using the Black Scholes model.
 
The Company has recognized $123,142 and $351,416 of consulting expense in relation to these warrant agreements with Consilium for consulting services for the three and nine months ended September 30, 2013, respectively.
 
 
16
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 9 – RELATED PARTY TRANSACTIONS– (Continued)

As noted above, the Company recorded unsecured, non-interest bearing loans totaling $245,000 to a related party in 2009. The loan consists of $110,275 transferred in from a related entity as a deemed distribution, plus cash loans of $134,725 for operations. The loan balance of $245,000 was outstanding as of September 30, 2013 and December 31, 2012.

In addition, the Company received various loans from related parties to fund operations. The related party loans totaled $278,501 and $281,898 at September 30, 2013 and December 31, 2012, respectively, and are unsecured and non-interest bearing with no stated payment terms.

Wodka received advertising services in the form of out of home media space from a related party who holds a non-controlling interest in Wodka during 2012.  The Company recorded advertising expense and
capital contributions from non-controlling interests of $0 and $257,944 in relation to this arrangement for the three and nine months ended September 30, 2012.

NOTE 10 – COMMITMENTS AND CONTINGENCIES
 
On May 2, 2013, the Company settled its dispute with Incubrands Spirits Group (“Incubrands”) concerning an equity agreement with a predecessor of the Company dated April 30, 2007. Per the terms of the settlement, the Company paid Incubrands 40,000 shares of the Company’s common stock and $84,000 payable over ninety days.  As of September 30, 2013, the dispute amount has been paid off in full.

The Company rents furnished office space on a month-to-month basis.  Rent expense was $7,900 and $3,240 for the three months ended September 30, 2013 and 2012, respectively, and $14,380 and $9,560 for the nine months ended September 30, 2013 and 2012, respectively.

NOTE 11 – STOCKHOLDERS’ DEFICIT

On February 14, 2013, as noted above, the Company issued Consilium warrants to purchase up to 1,840,000 shares of the Company’s common stock at an exercise price of $0.50 per share in exchange for consulting services to be provided over four years.  The warrants vest in eight equal tranches every six months over the consulting period and are exercisable upon at least 61 days notice.  The warrants expire on February 14, 2018.  The Company valued the stock warrants at $740,968 using the Black Scholes model with the following assumptions.

Risk free rate
    
0.9
%
Expected dividend yield
    
0.0
%
Expected volatility
    
99
%
Expected life of options
  
5.00 years
  
Exercise price
  
$
0.50
  
Stock price on issuance date
  
$
0.54
  
 
On December 21, 2012, the Company issued Consilium warrants to purchase up to 2,760,000 shares of the Company’s common stock at an exercise price of $0.50 per share in exchange for consulting services to be provided over four years.  The warrants vest in eight equal tranches every six months over the consulting period and are exercisable upon at least 61 days notice.  The warrants expire on December 21, 2017.  The Company valued the stock warrants at $1,229,304 using the Black Scholes model.
 
 
17
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 11 – STOCKHOLDERS’ DEFICIT– (Continued)

The Company is amortizing the value of the warrants to consulting expense ratably over the four year consulting periods.  The Company has recognized $123,124 and $351,416 of consulting expense in relation to these agreements for the three and nine months ended September 30, 2013.

On December 21, 2012, pursuant to the 2012 Non-Qualified Stock and Option Compensation Plan, the Company issued employees warrants to purchase 2,700,000 shares of common stock at an exercise price of $1.00 per share with an expiration date of December 21, 2015.  The warrants vest in two equal tranches on December 31, 2013 and December 31, 2014.

On June 30, 2013, the Company issued a director warrants to purchase 15,000 shares of common stock at an exercise price of $1.50 with an expiration date of June 30, 2015.  The warrants vest on December 31, 2013.

On August 15, 2013, the Company issued an employee warrants to purchase 10,000 shares of common stock at an exercise price $1.50 with an expiration date of August 15, 2016.  The warrants vested immediately.

On September 30, 2013, the Company issued a director warrants to purchase 15,000 shares of common stock at an exercise price of $1.50 with an expiration date of September 30, 2015.  The warrants vest on March 31, 2014.

The Company has recognized $141,545 and $423,445 of stock compensation expense relating to warrants issued to employees and directors for the three and nine months ended September 30, 2013, respectively.

The following table shows the warrant activity for the nine months ended September 30, 2013:

Warrants
  
Number of
 Warrants
    
Weighted
Average
Exercise
Price
    
Weighted
Average
Remaining
Term
  
 
Aggregate
Intrinsic
Value
  
Outstanding as of January 1, 2013
    
6,263,750
    
$
0.86
            
Issued
    
1,890,000
    
$
0.53
            
Exercised
    
-
                    
Expired
    
(460,000
)
                  
Outstanding of September 30, 2013
    
7,693,750
    
$
0.74
    
3.4 years
  
$
-
  
 
On January 24, 2013, the Company entered into a mutual release with a consultant whereby it issued 200,000 shares of the Company’s common stock in consideration and final payment for all compensation due pursuant to a consulting agreement between the parties.  The Company valued the shares at $0.60 per share and recognized $0 and $120,000 of expense for the three and nine months ended September 30, 2013, respectively.
 
On March 12, 2013, the Company engaged a law firm to provide counsel in exchange for 15,000 shares of the Company’s common stock.  The Company valued the shares at $0.60 per share and recognized $0 and $9,000 of professional fees for the three and nine months ended September 30, 2013.
 
 
18
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 11 – STOCKHOLDERS’ DEFICIT– (Continued)

The Company recognized $0 and $42,500 of compensation expense for the three and nine months ended September 30, 2013, respectively, in relation to the grant of 35,000 shares of common stock as stock-based compensation during the nine months ended September 30, 2013.  The shares immediately vested and the fair value of this stock issuance was determined by the value of the services provided.

NOTE 12 – NON-CONTROLLING INTERESTS

As of September 30, 2013 and December 31 2012, the non-controlling interests balance was $(814,325) and $(486,422), respectively, due to minority members owning 34.5% of the membership interests of Wodka.

Profits and losses are allocated to the members of Wodka in accordance with Wodka’s Limited Liability Company Agreement (the “Agreement”). Profits are allocated first to members in the amounts and proportions necessary to bring the members’ respective capital account balances in proportion to their percentage ownership interests and thereafter to the members pro rata in accordance with their percentage ownership interests.  The Agreement allocates losses first to the members in an amount equal to the positive balances in their Capital Accounts until the balances in such accounts are reduced to zero and thereafter to the members pro rata in accordance with their respective percentage ownerships interests.

For the three months ended September 30, 2013 and 2012, $299,102 and $140,532 respectively, of Wodka’s net loss was allocated to Panache and $157,543 and $74,020, respectively, was allocated to non-controlling interests.

For the nine months ended September 30, 2013 and 2012, $622,540 and $422,210, respectively, of Wodka’s net loss was allocated to Panache and $327,903 and $480,329, respectively, was allocated to non-controlling interests.

NOTE 13 – CONCENTRATIONS AND RISK

Major customers

The Company had five customers representing approximately 82% of revenues for the three months ended September 30, 2013.  These customers represented approximately 13% of the receivables outstanding as of September 30, 2013.

The Company had two customers representing approximately 98% of revenues for the three months ended September 30, 2012.  This customer represented approximately 46% of the receivables outstanding as of September 30, 2012.

The Company had one customer representing approximately 89% of revenues for the nine months ended September 30, 2013.  This customer represented approximately 83% of the receivables outstanding as of September 30, 2013.

The Company had three customers representing approximately 97% of revenues for the nine months ended September 30, 2012.  This customer represented approximately 99% of the receivables outstanding as of September 30, 2012.
 
 
19
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 13 – CONCENTRATIONS AND RISK – (Continued)

Major suppliers

The Company had three suppliers represent approximately 98% of purchases for the three months ended September 30, 2013.  The Company did not have any account payable outstanding to these suppliers as of September 30, 2013.

The Company had two suppliers representing approximately 94% of purchases for the three months ended September 30, 2012.  This supplier represented approximately 45% of the payables outstanding as of September 30, 2012.

The Company had two suppliers represent approximately 91% of purchases for the nine months ended September 30, 2013.  The Company did not have any account payable outstanding to these suppliers as of September 30, 2013.

The Company had two suppliers representing approximately 97% of purchases for the nine months ended September 30, 2012.  This supplier represented approximately 45% of the payables outstanding as of September 30, 2012.

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with commercial banking institutions. At times, such cash may be in excess of the Federal Deposit Insurance Corporation’s insurance limit. From time to time the Company may also hold cash in accounts with foreign financial institutions. The Company regularly assesses the risk associated with its foreign cash portfolio. The Company performs ongoing credit evaluations of its customers’ financial condition, but does not require collateral to support such receivables.

NOTE 14 – LOSS PER SHARE
 
Basic net loss per share is computed using the weighted average number of common shares outstanding during the three and nine months ended September 30, 2013, respectively.  There was no dilutive earning per share due to net losses during the periods.  
 
 
20
 
 
PANACHE BEVERAGE, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 14 – LOSS PER SHARE– (Continued)

The following table sets forth the computation of basic net loss per share for the periods indicated:

   
Three months ended
 September 30,
    
Nine months ended
September 30,
  
   
2013
    
2012
    
2013
    
2012
  
Numerator:
                        
Net (loss) income attributable to Panache Beverage, Inc.
  
$
(1,522,329
)
  
$
(684,699
)
  
$
(3,266,731
)
  
$
(2,280,576
)
                                 
Denominator:
                                
Weighted average shares outstanding
    
27,055,891
      
26,392,674
      
27,010,616
      
26,025,519
  
                                 
Basic net (loss) income per share
  
$
(0.06
)
  
$
(0.03
)
  
$
(0.12
)
  
$
(0.09
)

NOTE 15 – GOING CONCERN
 
These consolidated financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
 
As of September 30, 2013, the Company had an accumulated deficit of $5,427,067. Management has taken certain actions and continues to implement changes designed to improve the Company’s financial results and operating cash flows.  These actions involve certain cost-saving initiatives and growth strategies, including a) examination on sales and marketing initiatives resulting in the expansion of the Company's sales force  and marketing efforts  in key areas in the United States; b) downward vertical integration into domestic distillation and bottling resulting in diversification of revenue streams; c) upward vertical integration into domestic importation.  Management believes that these actions will enable the Company to improve future profitability and cash flow in its continuing operations through September 30, 2014. As a result, the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as a going concern.

NOTE 16 – SUBSEQUENT EVENTS
 
The Company has evaluated subsequent events from September 30, 2013 to the date on which these financial statements were available to be issued.
 
 
21
 
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. This Quarterly Report may contain certain statements of a forward-looking nature relating to future events or future business performance. Any such statements that refer to the Company’s estimated or anticipated future results or other non-historical facts are forward-looking and reflect the Company’s current perspective of existing trends and information. These statements involve risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, risks and uncertainties detailed in the Company’s Annual Report on Form 10-K and 10K/A, filed with the Securities and Exchange Commission on April 1, 2013 and August 21, 2013, respectively. Any forward-looking statements contained in or incorporated into this Quarterly Report speak only as of the date of this Quarterly Report. Except as may be required by law, the Company undertakes no obligation to update or alter these forward-looking statements, whether as a result of new information, future events, or otherwise.

This management's discussion and analysis should be read in conjunction with the consolidated financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q as well as in our most recent Annual Report on Form 10-K.
 
In this Quarterly Report on Form 10-Q, unless the context indicates otherwise, references to "the Company", "Panache Beverage", "Panache", "our Company", "we", "us", and similar references refer to Panache Beverage, Inc. and its subsidiaries.

Business Overview
 
Panache Beverages, Inc. specializes in the strategic development and aggressive early growth of spirits brands establishing its assets as viable and attractive acquisition candidates for the major global spirits companies. Panache builds its brands as individual acquisition candidates while continuing to develop its pipeline of new brands into the Panache portfolio. Panache's existing portfolio contains three brands and a distillery:
 
Wodka Vodka (www.welovewodka.com)
 
Wodka is triple distilled and charcoal filtered earning it a 90 point rating by the Beverage Testing Institute – a first for any brand available for under $10. Wodka was developed as an egalitarian brand – coming from the position that consumers shouldn’t have to pay $30 for a bottle of quality vodka. This position was authentic – the brand was discovered by Panache while walking through a distillery in Eastern Poland – Wodka Vodka, a relic from Poland's communist era, was government owned/issued vodka. Wodka stands tall in the exploding category of “quality for value” spirit brands. It is uniquely positioned in the category as fun, quirky, aloof – all attributes which have been embraced by trade and consumers making Wodka a true “brand” very quickly.  Since launching in the United States it has been recognized as a category leader by Time Magazine, the Wall Street Journal, Bloomberg Magazine, and CNBC amongst a host of traditional consumer media.
 
Wodka is produced by Przedsiebiorstwo Handlowo-Produkcyjne Wieslaw Wawrzyniak, Kalisz, Poland.
 
Alibi American Whiskey (www.alibiamerica.com)
 
Alibi has been developed to exploit a gap in the exploding brown spirits category – the need for an edgy, cool, premium Whiskey that appeals to the younger generation of LDA drinkers.  Whiskey and Bourbon brands today are largely positioning themselves alongside “tradition” and “heritage”, creating brands that look, feel and are marketing against the classic cocktail era.  Forgotten is the brown spirits tradition Jack Daniels left behind decades ago – badasses drink Whiskey, Whiskey is dangerous and Whiskey is about a mindset of true cool. 
 
Alibi American Whiskey is a smooth 90 proof blended whiskey that is easy to drink; any way you want to drink it.  Alibi is excellent for shooting, sipping with your favorite beer or mixing with your favorite juice, soda or as a key ingredient in a great cocktail.  Since its launch in Q4 it has been embraced by trade and consumers as a unique alternative to what already exists in the marketplace.
 
Alibi is produced by Florida Distillers, Auburndale, Florida, USA
 
 
22
 
 
Alchemia Infused Vodka (www.alchemiainfusions.com)
 
Alchemia is a premium, traditional Polish vodka that is naturally infused with select raw ingredients and made in the “Spiritus Vini”, or “Spirit of Wine”. The spirit is available in three varieties: Chocolate, Ginger, and Wild Cherry. Alchemia’s infusions are a fresh escape for consumers who have been offered very little from a spirits world rife with the artificially flavored vodkas presently taking up store shelves and back bars. Alchemia has found a strategic niche in the exploding culinary world and is being favored by celebrity chefs and their restaurants. Cherry received a 94 PTS by Wine Enthusiast and was named a Top 50 Spirit for 2011. Chocolate received a 92 by The Tasting Panel.
 
Alchemia is produced by Przedsiebiorstwo Handlowo-Produkcyjne Wieslaw Wawrzyniak, Kalisz, Poland.

Panache Distillery LLC (www.panachedistillery.com)

In August of 2013 Panache Beverage Inc. acquired a pre-existing distillery and opened Panache Distillery LLC. The distillery provides Panache with the means to manage its own supply chain for its brands while providing the parent company with new and diverse revenue streams.  Production of Wodka Vodka and Alibi American Whiskey will be transitioned to the Panache Distillery over the next year. Additionally, Panache Distillery will offer third party contract distillation and co-packing as ancillary businesses and additional revenue streams.

History of Success

Panache was formed in November 2004 by James Dale as the import company of record for the premium vodka, 42 BELOW NZ. At that time, 42 BELOW was a publically traded company but lacked traction in the most important liquor markets in the world, including the United States. Panache provided the marketing solution for 42 BELOW, and it became a brand available in 19 strategically selected states and was over-performing in top tier image accounts a year later. By mid-2005 42 BELOW was a major player in the business and was being noticed in the United States by major suppliers.
 
After noticing that 42 BELOW has replaced Grey Goose in numerous key accounts, Bacardi added 42 BELOW to a list of top threats to Grey Goose in the US. Shortly thereafter 42 BELOW was formally approached for global acquisition by Barcardi USA Inc. At this stage Panache was responsible for over 50% of the total annual cases sold globally by 42 BELOW and was among the key driving factors in the success of the brand. The Panache/42 Below Importer agreement was purchased in December 2006. 
 
During this time Panache was developing its current pipeline brands Alchemia Vodka and Alibi Whiskey with an eye toward developing a value brand, which became Wodka.
 
Today, Panache has developed a unique set of wholesale and retail relationships as well as sales and marketing infrastructure and proprietary partnerships enabling it to develop, roll out and exit its brands.
 
Recent Developments
 
In the summer of 2013 the Company terminated its exclusive importation agreement with Domaine Select Wine Estates (DSWE) for Wodka Vodka. The Company is now the importer of record for Wodka Vodka as well as the registered agent for Alibi American Whiskey. This upward integration offers Panache the autonomy to tailor national pricing and programming, as well as creates the potential to generate additional profit.

On August 23, 2013, Panache Distillery, LLC ("PDL"), a wholly owned subsidiary of Panache Beverage, Inc., closed on the Asset Purchase Agreement (“APA”) with Douglas Joint Venture, Empire Joint Venture, and V-3 Joint Venture, LLC, (collectively the "Sellers"), pursuant to which, PDL acquired all right, title and interest in and to certain assets owned by the Sellers located at 11807 Little Road, New Port Richey, Florida. This property includes land, buildings, and machinery used in the distillation, bottling and sales operations as consideration, PDL paid to the Sellers a total purchase price of $4,200,000, of which $700,000 was paid in cash at the closing, and the remaining $3,500,000 was paid in the form of a Promissory Note (the “Note) for the benefit of the Sellers, which accrues interest at a rate of 6% payable in semiannual installments of interest only, is prepayable without penalty, and is due thirty six months from the date of execution. The Note is secured by a first lien Purchase Money Mortgage and Security Agreement secured by the Purchased Assets.
 
 
23
 

Results of Operations for the Three and Nine Months Ended September 30, 2013 and 2012

Revenues

Revenues were $306,159 and $271,241 for the three months ended September 30, 2013 and 2012, respectively, an increase of 13%.  Revenues were $3,148,732 and $1,310,765 for the nine months ended September 30, 2013 and 2012, respectively, an increase of 140%.  We generate our revenues from sales of distilled spirits. The revenues are recognized when persuasive evidence of a sale exists, transfer of title has occurred, the selling price is fixed or determinable and collectability is reasonably assured. Our sales arrangements are not subject to warranty.  Gross revenue was reduced due to sales returns and allowances by $5,112 and $0 during the three months ended September 30, 2013 and 2012, respectively and $11,495 and $30,325 during the nine months ended September 30, 2013 and 2012, respectively.
 
The increase in revenue during the three and nine months ended September 30, 2013 compared to the same periods in 2012 was primarily due to the implementation of our marketing and sales strategies as well as the successful launch of the Alibi brand in the fourth quarter of 2012.
 
Cost of Goods Sold
 
Cost of goods sold included expenses directly related to selling our products. Product delivery, broker fees and direct labor would be examples of cost of goods sold items. Cost of goods sold was $291,974, or 95% of revenue, and $115,122, or approximately 42% of revenue, during the three months ended September 30, 2013 and 2012, respectively. Cost of goods sold was $2,007,532, or approximately 64% of revenue, and $811,462, or approximately 62% of revenue, during the nine months ended September 30, 2013 and 2012, respectively.

These increases in cost of goods sold are attributable to increases in revenue.  The increase in costs of goods sold as a percentage of revenue during the three and nine month periods ended September 30, 2013 in comparison to the same periods in 2012 is mostly due to costs associated with the transition to becoming our own importer of Wodka Vodka and the agent for Alibi American Whiskey.

Expenses
 
Operating expenses were $1,482,012 and $876,066 for the three months ended September 30, 2013 and 2012, respectively and $4,411,039 and $3,198,285 for the nine months ended September 30, 2013 and 2012, respectively.
 
The increase in operating expenses was primarily caused by professional fees increasing $524,847 for quarter ended September 30, 2013 compared to the same period in 2012 and $506,048 for the nine months ended September 30, 2013 compared to the same period in 2012 as the Company successfully went through the acquisition of a distillery and two legal proceedings.  General and administrative expenses increased $489,473 for the nine months ended September 30, 2013 over the same period in 2012 due to higher head count and stock compensation, as well as to pre-launch activity at Panache Distillery in 2013.

Net Loss

The Company’s net loss for stockholders was $1,522,328 and $684,699 for the three months ended September 30, 2013 and 2012, respectively and $3,266,731 and $2,280,576 for the nine months ended September 30, 2013 and 2012, respectively.  The change in net loss for the nine months ended September 30, 2013 compared to the same 2012 period was attributable to higher operating expenses, increased interest expense and less loss allocated to non-controlling interests.  The increase in the loss for the three months ended September 30, 2013 compared to the same 2012 period was due to the increase in operating expenses and interest expense.

There can be no assurance that we will achieve or maintain profitability, or that any revenue growth will take place in the future.
 
 
24
 

Liquidity and Capital Resources

Cash flows used in operating activities were $4,718,153 and $1,529,853 for the nine months ended September 30, 2013 and 2012, respectively. Negative cash flows from operations for the nine months ended September 30, 2013 were due primarily to the restrictions on cash stemming from loans from Consilium Corporate Recovery Master Fund, LTD, which decreased cash flows from operations by $1,827,207. Negative cash flows from operations also caused by the net loss of $3,266,731 and the loss allocated to non-controlling interests of $327,903 partially offset by stock issued for services and compensation of $963,822.  Negative cash flows from operations for the nine months ended September 30, 2012 were due primarily to the net loss of $2,280,576 and the loss allocated to non-controlling interests of $480,329 offset by non-cash advertising of $257,944 and stock issued for services and compensation of $501,900.

Cash flows used in investing activities in both 2013 and 2012 were due to the purchase of property and equipment. The Company purchased a distillery on August 23, 2013 for a total purchase price of $4,200,000.

Cash flows provided by financing activities were $4,911,279 and $1,433,734 during the nine months ended September 30, 2013 and 2012, respectively.  Positive cash flows from financing activities during the nine months ended September 30, 2013 were due primarily to proceeds of $5,400,000 from issuances of long term debt partially offset by the net repayments of short term debt of $349,609 and a reduction in factor liabilities of $139,112.  Positive cash flows from financing activities during nine months ended September 30, 2012 were due primarily to proceeds of $1,022,700 from sales of common stock.
    
We had cash of $2,452,574 on hand (including restricted cash) as of September 30, 2013. We do not anticipate that additional funding will be needed for the next twelve months. We plan to strengthen our position in the global markets through aggressive marketing and sales of our products, as well as through implementation of other elements of our business plan. However, if our revenue projections fail to materialize and/or our future costs substantially exceed our current estimates, we would need to obtain additional capital to sustain our operations. In the past we have funded our cash needs with a series of debt and equity transactions, primarily with related parties. If we are unable to receive additional cash from our related parties, we may need to rely on financing from outside sources through debt or equity transactions. Our related parties are under no legal obligation to provide us with capital infusions. Failure to obtain such financing could have a material adverse effect on operations and financial condition. For example, if we unable to raise sufficient capital to develop our business plan, we may need to:
 
·
Curtail new product launches
   
·
Limit our future marketing efforts to areas that we believe would be the most profitable.
 
Demand for the products and services will be dependent on, among other things, market acceptance of our products, our brands’ recognition, distilled spirits market in general, and general economic conditions, which are cyclical in nature. Inasmuch as a major portion of our activities is the receipt of revenues from the sales of our products, our business operations may be adversely affected by our competitors and prolonged recession periods.
  
Our success will be dependent upon implementing our plan of operations and the risks associated with our business plans. We specialize in development, global sales and marketing of spirits brands. We plan to strengthen our position in these markets. We also plan to expand our operations through aggressively marketing our products and our concept.
 
 
25
 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information to be reported under this item is not required of smaller reporting companies.
 
ITEM 4.  CONTROLS AND PROCEDURES.
 
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and its Principal Accounting Officer (the “Certifying Officers”), as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, the Certifying Officers carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2013. Their evaluation was carried out with the participation of other members of the Company’s management. Based on an evaluation conducted by the Certifying Officers, of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15(e), the Certifying Officers concluded that our disclosure controls and procedures were effective as of September 30, 2013 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.
 
Changes in internal controls.
 
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 
26
 
 
PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company is involved in the following legal proceedings:

Caribbean Distillers, LLC d/b/a Florida Caribbean Distillers v. Ronnie Call, et al v. Arturo De La Cruz, 10th Circuit Court in and for Polk County, Florida, No. 2013A-2564.   In this action filed at the end of April, 2013, plaintiff named the Company, James Dale, the Company’s CEO, and William Gerhauser, the Company’s head of Investor Relations, as defendants along with 3 former employees of the plaintiff.  Plaintiff accused the Company and its representative of misappropriating confidential information and trade secrets and intentionally interfering in its business relations and sought injunctive relief against the Company to prevent it from, among other things, competing in the bulk alcohol market.  After hearing only the plaintiff’s evidence, and without the need for the defendants to complete their defense, the Polk County court dismissed plaintiff’s claims for injunctive relief and indicated that based on the defendants’ abbreviated evidence, the information about which plaintiff was complaining was not, in fact, confidential. The parties have since settled the remaining issues and the case has been dismissed with prejudice without any material adverse effect on the Company.

Pacific Edge Marketing Group, Inc. v. Panache Beverage, Inc., US District Court for the Central District of California, Case No. CV13-3957, & Panache Beverage, Inc. v. Pacific Edge Marketing Group, Inc., US District Court for the Southern District of New York, Civil Action No. 13-cv-04575.  After Panache learned that Pacific Edge had changed the trade dress of its Gruven brand vodka to be confusingly similar to the Company’s Wodka brand vodka, the Company demanded that Pacific Edge cease the use of its infringing trade dress.  In response, Pacific Edge preemptively filed an action for declaratory judgment in California federal court.  The Company successfully moved to dismiss the California action, and it filed an action in New York federal court against Pacific Edge for violation of the Lanham Act and ancillary state law violations.  Pacific Edge's answered the Company’s complaint and discovery is proceeding.  The Company believes it will prevail in protecting the trade dress of Wodka brand vodka, and the litigation is not expected to have any material adverse effect on the Company.

ITEM 1A.  RISK FACTORS
 
The following risk factors reflect material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on April 1, 2013 (the “2012 Annual Report”).  For a detailed discussion of the other risk factors that should be understood by any investor contemplating an investment in our stock, please refer to Part I, Item 1A “Risk Factors” in the 2012 Annual Report.
 
We have terminated our exclusive distribution agreement with Domaine Select Wine Estates (“DSWE”).

We have terminated our exclusive distribution agreement with Domaine Select Wine Estates (“DSWE”). As a result of the termination of the distribution agreement with DSWE we now are the importer for Wodka and Agent for Alibi.
 
We have become our own importer for Wodka Vodka.

We have become our own importer for Wodka Vodka. While becoming our own importer for Wodka allows us to have more control over our sales and pricing, we take on the risk of dealing directly with distributors and handling billing with a multitude of vendors rather than previously with DSWE being the major vendor.
 
 
27
 
 
We have become our own Agent for Alibi American Whiskey.

We have become our own Agent for Alibi American Whiskey. While becoming our own Agent for Alibi allows us to have more control over our sales and pricing, we must take on the risk of handling billing with a multitude of vendors rather than previously with DSWE being the major vendor.  In addition, we take on the risk of growing the brand’s distributor relationships as the brand is currently still new to the United States.

We, through our wholly owned subsidiary Panache Distillery, LLC, have purchased a Distillery.

We, through our wholly owned subsidiary Panache Distillery, LLC, have purchased a distillery. We intend to procure all necessary permits and licenses in order to operate the facility we purchased in New Port Richey, Florida, but do not yet have such permits, and do not know for certain how long it will take for us to acquire such permits. While we do not have the permits, we are unable to use the distillery for the production of alcoholic beverages. Additionally, there is no guarantee that we will be able to successfully integrate the ownership of the distillery within our organization and the acquisition could disrupt our ongoing business, distract our management from other business operations, and increase our expenses. This acquisition may also impair relationships with our current suppliers.
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
None.
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  MINE SAFETY DISCLOSURES

None.

ITEM 5.  OTHER INFORMATION

None.
 
 
28
 
 
ITEM 6.  EXHIBITS
 
10.1
  
Amendment No. 5 to the Asset Purchase Agreement dated as of August 22, 2013 by and between the Company and Douglas Joint Venture, Empire Joint Venture and V-3 Joint Venture, LLC.
     
10.2
  
$3,500,000 Promissory Note, dated August 22, 2013, payable to Douglas Joint Venture, Empire Joint Venture and V-3 Joint Venture, LLC.
     
10.4
  
Purchase Money Mortgage and Security Agreement and Assignment of Rents and Leases and Fixture Filing, dated August 23, 2013 by and between the Company and Douglas Joint Venture, Empire Joint Venture and V-3 Joint Venture, LLC.
     
21   List of Subsidiaries of the Registrant
     
31.1
  
Certification of Chief Executive Officer
     
31.2
  
Certification of Acting Principal Accounting Officer 
     
32.1
  
Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2
  
Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
   
101.INS **
  
XBRL Instance Document
     
101.SCH **
  
XBRL Taxonomy Extension Schema Document
     
101.CAL **
  
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF **
  
XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB **
  
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE **
  
XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
29
 
 
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, there unto duly authorized.
 
 
PANACHE BEVERAGE INC.
  
       
Date: November 14, 2013
By:  
/s/ James Dale
  
 
James Dale
Chief Executive Officer
  
 
 
30
 
 
INDEX TO EXHIBITS
 
Exhibit No.
  
Description
10.1
  
Amendment No. 5 to the Asset Purchase Agreement dated as of August 22, 2013 by and between the Company and Douglas Joint Venture, Empire Joint Venture and V-3 Joint Venture, LLC.
     
10.2
  
$3,500,000 Promissory Note, dated August 22, 2013, payable to Douglas Joint Venture, Empire Joint Venture and V-3 Joint Venture, LLC.
     
10.4
  
Purchase Money Mortgage and Security Agreement and Assignment of Rents and Leases and Fixture Filing, dated August 23, 2013 by and between the Company and Douglas Joint Venture, Empire Joint Venture and V-3 Joint Venture, LLC.
     
21
  
List of Subsidiaries of the Registrant
     
31.1
  
Certification of Chief Executive Officer
     
31.2
  
Certification of Acting Principal Accounting Officer
     
32.1
  
Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2
  
Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
 
101.INS **
  
XBRL Instance Document
     
101.SCH **
  
XBRL Taxonomy Extension Schema Document
     
101.CAL **
  
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF **
  
XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB **
  
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE **
  
XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
31