SecProbe.io

<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
<PAGE>

                                  July 18, 2005

                                                                        8712.008

VIA MAIL & FAX 202-942-9648
---------------------------

Mr. George F. Ohsiek, Jr.
Branch Chief
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549

RE:     MENDOCINO BREWING COMPANY, INC.
        FORM 10-K FOR FISCAL YEAR ENDED
        DECEMBER 31, 2004
        FILED MAY 13, 2005
        FORMS 10-Q FOR FISCAL QUARTER ENDED
        FILE NO. 001-13636

Dear  Mr. Ohsiek:

        We have been asked by Mendocino Brewing Company, Inc. (the "Company") to
respond on its behalf to the items included in your letter of comments dated
July 7, 2005.

        We have used our best efforts to provide the following responses to your
request as accurately and expeditiously as possible. We have also attached a
statement of the Company's President, Yashpal Singh, which includes certain
representations of the Company as requested in your letter. My direct line is
415-772-5761; please contact me at your convenience, so that we may discuss
these responses and how best to proceed.

FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2004

CONSOLIDATED BALANCE SHEETS, PAGE F-2

1.      Please tell us your basis in GAAP for classifying as non-current the
        subordinated notes due to related party that mature in August 2005. We
        note your disclosure that the notes are classified as long-term because
        they are subordinated in right to other long-term debt outstanding;
        however, we do not believe that this alone

<PAGE>

Mr. George F. Ohsiek, Jr.
July 18, 2005
Page 2

        is sufficient justification for classifying as non-current notes that
        become payable within one year of the balance sheet date. Please advise.

        United Breweries of America, Inc. ("UBA") provided Mendocino Brewing
Company, Inc. (the "Company") with funds that are evidenced by convertible notes
issued to UBA. The total amount owed to UBA, including interest accrued as of
December 31, 2004, was $2,010,100.

        The Company also has a real estate loan of $2,299,400 from Savings Bank
of Mendocino County ("SBMC") that matures in 2012, and a $2 million revolving
credit facility from BFI Business Finance ("BFI") that matures in May 2006.

        UBA entered into subordination agreements with both of SBMC and BFI,
which are attached hereto (each, a "Subordination Agreement"). The Subordination
Agreement with SBMC provides that payments on the debt owed by the Company to
UBA can be made only on "indefeasible payment or satisfaction in full" of the
amount due SMBC. Additionally, under the Subordination Agreement between BFI and
UBA, UBA agreed not to "demand, accept or receive" any payment from the Company
"until all indebtedness of Debtor (MBC) to BFI has been paid in full".

        Based on this fact pattern, the Company referred to guidance in
Accounting Research Bulletin (ARB) 43. Chapter 3, paragraph 7, of ARB 43 states
"... other liabilities whose regular and ordinary liquidation is expected to
occur within a relatively short period of time, usually twelve months, are also
intended for inclusion, such as short-term debts arising from the acquisition of
capital assets, serial maturities of long-term obligations, amounts required to
be expended within one year under sinking fund provisions, and agency
obligations arising from the collection or acceptance of cash or other assets
for the account of third persons. The current liability classification is also
intended to include obligations that, BY THEIR TERMS, (emphasis ours) are due on
demand or will be due on demand within one year (or operating cycle, if longer)
from the balance sheet date, even though liquidation may not be expected within
that period."

        While the Company's debt to UBA is scheduled to mature within the next
12 months, it will not require the use of working capital because, by the terms
of the Subordination Agreements, payments, to UBA will be subsequent to payment
in full of both the BFI debt (due in May 2006) and the SBMC debt (due in 2012).

        Based on the terms of the Subordination Agreements as set forth above,
the Company has classified the debt owed to UBA as a long term liability. The

<PAGE>

Mr. George F. Ohsiek, Jr.
July 18, 2005
Page 3

Company will provide a complete disclosure of the basis of the classification in
future filings.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME, PAGE F-3

2.      Please tell us your basis for classifying your legal dispute settlement
        as a non-operating expense. In this regard, we note that unless Rule
        5-03.9 of Regulation S-X expressly permits classification of an item as
        non-operating, the presumption is that the item should be classified as
        an operating item. Thus, absent compelling evidence that your legal
        dispute was unrelated to transactions made during the ordinary course of
        your operations, we believe the settlement expense should be classified
        in operating income. If you continue to believe that your current income
        statement classification is appropriate, please advise us in detail as
        to the basis for your position. Otherwise please tell us how you intend
        to revise your filing accordingly.

        It is customary in the industry that during a change of distributorship,
the new distributor pay the old distributor for developing the territory.
Normally the payment occurs outside of the Company and the Company is not
involved in the determination of the amount payable. These transactions do not
occur during the normal course of the Company's operations and are highly
exceptional. The Company does not receive any revenues in association with the
creation of new distribution arrangements.

        Effective March 28, 2003, the Company terminated a distribution
agreement with the House of Daniels, Inc., dba Golden Gate Distributing Company
("GGD"), in accordance with the provisions of the agreement, and appointed two
new distributors to service the territory covered by GGD. Because of the ongoing
litigation between MBC and GGD, instead of making a payment directly to GGD, the
two new distributors paid $683,600 to the Company for the `goodwill' developed
by GGD. Since these payments were ultimately payable to GGD, the Company
classified the funds received as a liability pending settlement of the dispute.
The dispute was settled in November 2004. The result of the settlement was that
the Company was to pay GGD $900,000 over a period of time. The Company
classified the difference between the $900,000 payable to GGD and the amount
received from the new distributors as a non operating expense.

        To support this position, the Company followed the guidance in Concept
Statement 6, paragraph 82 to 86. Those paragraphs discuss gains and losses, and
how losses are decreases in equity from peripheral or incidental transactions of
the company. Paragraph 86 states "GAINS AND LOSSES MAY ALSO BE DESCRIBED OR
CLASSIFIED AS "OPERATING" OR "NONOPERATING," DEPENDING ON THEIR RELATION TO AN
ENTITY'S MAJOR ONGOING OR CENTRAL OPERATIONS".

<PAGE>

Mr. George F. Ohsiek, Jr.
July 18, 2005
Page 4

        The Company also reviewed the requirements of S-X Rule 5-03.9, pursuant
to which it was to separately state in the statement of operations material
miscellaneous income deductions, and to clearly indicate the nature of the
transaction.

        The Company considered the legal dispute settlement to be a decrease in
equity that was not related to its ongoing operations as it was incidental to a
changing of distributors that generally has no cost to the Company. As such, the
Company considered the classification of the legal settlement in the statement
of operations to be appropriate.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGE F-6

NOTE 1 -- DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES, PAGE F-6

CONCENTRATION OF CREDIT RISKS, PAGE F-6

3.      You indicate that certain of your cash is restricted for use as
        collateral for a note payable. Please tell us where this restricted cash
        is presented on your balance sheet and in your statement of cash flows.
        In this connection, please note that restricted cash should be presented
        apart from cash and cash equivalents on the face of the balance sheet
        and likewise should not be included in the cash and cash equivalents
        total in the statement of cash flows. If you now believe that your
        financial statement presentation of restricted cash is inappropriate,
        please tell us how you plan to revise your financial statements
        accordingly.

        The restricted cash is included in the cash and cash equivalents on the
balance sheet as well as on the statement of cash flows, because the Company
negotiated the release of the restrictions on the cash, which was formerly held
as collateral, in April 2005. This event, which occurred subsequent to December
31, 2004, provided additional evidence with respect to the restriction and
therefore the Company decided it was appropriate to show the cash as
unrestricted as of December 31, 2004. The Company inadvertently failed to update
the disclosure.

REVENUE RECOGNITION, PAGE F-7

4.      Please disclose whether you offer sales incentives or rebates, pay
        slotting fees, engage in cooperative advertising programs, have buydown
        programs, or make other payments to resellers or customers. Also
        disclose your accounting policy for each of these types of arrangements,
        as applicable, including the statement of operations line item that each
        type of arrangement is included in. For each type of arrangement treated
        as an expense rather than as a reduction of

<PAGE>

Mr. George F. Ohsiek, Jr.
July 18, 2005
Page 5

        revenues, please tell us how this type of arrangement meets the
        requirements in EITF 01-9. Please also discuss in MD&A any significant
        estimates resulting from these arrangements.

        The Company offers sales incentives and rebates, and engages in
cooperative promotions. The Company follows an accounting policy that meets with
the requirements of EITF 01-9, and all of such arrangements are shown as a
reduction of revenue. Such arrangements reduced revenues in 2004 by $756,600.
The Company will include this accounting policy footnote in all future filings.

ITEM 9A. CONTROLS AND PROCEDURES, PAGE 28

5.      Please revise your disclosures regarding your principal executive and
        financial officers' conclusion as to the effectiveness of your
        disclosure controls and procedures to ensure it encompasses the entire
        definition of disclosure controls and procedures in Exchange Act Rules
        13a-15(e) and 15d-15(e)_ Your current disclosure does not achieve this
        objective. Also confirm to us that your disclosures regarding the
        effectiveness of your disclosure controls and procedures are still
        accurate considering the entire definition of disclosure controls and
        procedures, or otherwise amend this Form 10-K and/or your March 31, 2005
        Form 10-Q accordingly.

        The Company confirms the effectiveness of its disclosure controls and
procedures considering the entire definition of disclosure controls and
procedures set forth in the Exchange Act Rules 13a-15(e) and 15d-15(e). The
Company will make appropriate disclosures in its future filings.

6.      You state that there were no "significant changes" in your "internal
        controls" or in other factors that could "significantly affect" these
        controls "subsequent to the date of the evaluation thereof" However,
        Item 308(c) of Regulation S-K requires that you disclose ANY CHANGE in
        your "internal control over financial reporting" identified in
        connection with the evaluation required by paragraph (d) of Exchange Act
        Rules 13a-15 or 15d-15 THAT OCCURRED DURING THE MOST RECENT FISCAL
        QUARTER that has "materially affected, or is reasonably likely to
        materially affect, the registrant's internal control over financial
        reporting." Please revise your disclosure accordingly. Please also
        confirm to us that there were no changes in your internal control over
        financial reporting during the quarters ended December 31, 2004 and
        March 31, 2005, or otherwise amend your filings to disclose the changes.

        The Company confirms there were no changes in its internal controls that
occurred

<PAGE>

during the quarters ending December 31, 2004 or March 31, 2005. The Company will
revise its disclosures accordingly in its future filings.

FORM 10-Q FOR FISCAL QUARTER ENDED MARCH 31, 2005

ITEM 4. CONTROLS AND PROCEDURES, PAGE 21

7.      We note that your certifying officers disclose their conclusions as to
        the effectiveness of your disclosure controls and procedures "during the
        period of time covered by this report." However, Item 307 of Regulation
        S-K requires that your certifying officers disclose their conclusions
        regarding the effectiveness of your disclosure controls and procedures
        "as of the end of the period covered by the report." See also paragraph
        4(b) of Exhibits 31.1 and 31.2. Please revise your filings accordingly.
        Also confirm to us that your certifying officers concluded that your
        disclosure controls and procedures were effective as of the end of the
        period covered by the report, or otherwise amend your Form 10-Q
        accordingly.

The Company confirms that its disclosure controls and procedures were effective
as of the end of the period covered by its quarterly report for the quarter
ended March 31, 2005. The Company will make appropriate disclosures in its
future filings.

                                                Sincerely,

                                                Sara Finigan

Cc: Yashpal Singh

<PAGE>

                            STATEMENT OF PRESIDENT OF

                         MENDOCINO BREWING COMPANY, INC.

        As President of Mendocino Brewing Company, Inc. (the "Company"), in
connection with the receipt of that certain letter of comment from George F.
Ohsiek, Jr., of the United States Securities and Exchange Commission (the
"Commission"), dated July 7, 2005, I hereby make the following statements on
behalf of the Company: The Company acknowledges and agrees that:

        (1)     The Company is responsible for the adequacy and accuracy of the
                disclosure made in its filings under the Securities Exchange Act
                of 1934, as amended, (the "Filings");

        (2)     Staff comments on the Filings or changes to disclosures
                contained in any Filings in response to staff comments do not
                foreclose the Commission from taking any action with respect to
                the Filings; and

        (3)     The Company may not assert staff comments to the Filings as a
                defense in any proceeding initiated by the Commission or any
                person under the federal securities laws of the United States.

                                        MENDOCINO BREWING COMPANY, INC.

Dated:  July 15, 2005                   /s/ Yashpal Singh
                                        ----------------------------------------
                                        Yashpal Singh, President and CEO

<PAGE>

                             SUBORDINATION AGREEMENT

                         MENDOCINO BREWING COMPANY, INC.
                                   ("Debtor")

        THIS SUBORDINATION AGREEMENT is made this 21st day of APRIL, 2005, by
and between BFI BUSINESS FINANCE, a Cali