Liquidity and Management Plans

9 Months Ended

Sep. 30, 2011

Liquidity Disclosures [Abstract]

Liquidity Disclosures [Text Block]

2.           Liquidity and Management Plans

On June 23, 2011, MBC and Releta entered into a Credit and Security Agreement (the "Agreement") with Cole Taylor Bank, an Illinois banking corporation (“Cole Taylor”).  The Agreement provides a credit facility of up to $10,000,000, with a maturity date of June 23, 2016, consisting of a $4,119,000 revolving facility, a $1,934,000 machinery & equipment term loan, a $2,947,000 real estate term loan and a $1,000,000 capital expenditure line of credit.  The proceeds were used to repay credit facilities provided by Marquette Business Credit, Inc. ("Marquette") and Grand Pacific Financing Corporation ("Grand Pacific"). Convertible promissory notes from United Breweries of America, Inc. ("UBA") are subordinated to Cole Taylor.

At September 30, 2011, we had cash and cash equivalents of $163,000, an accumulated deficit of $13,871,900 and a working capital deficit of $2,334,700 due to losses incurred since 2005 in connection with the operations of our indirect subsidiary, KBEL, in the UK.  (For additional information, see Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.")

We have had a history of past losses in our domestic operations in the US as substantial infrastructure costs were incurred in advance of obtaining customers and generating revenue.  

On February 15, 2011, United Breweries (Holdings) Limited ("UBHL") issued a letter of financial support on behalf of KBEL (the "Letter of Support"), to KBEL's accountants, to confirm that UBHL had agreed to provide funding on an as needed basis to KBEL to ensure that KBEL is able to meet its financial obligations as and when they fall due.  The Letter of Support does not specify a maximum dollar limit on the amount of funds which UBHL will provide to KBEL.  The type of financial support provided by UBHL and the terms of such financial support are not specified in the Letter of Support.  UBHL's financial support to KBEL is contingent upon compliance with any applicable exchange control requirements and other applicable laws and regulations relating to the transfer of funds from India to the UK.  The Letter of Support was issued for at least a one year minimum period which runs through February 14, 2012.  Our management intends to request that UBHL continue to keep the Letter of Support in force beyond the minimum specified period, if necessary.  UBHL controls our two largest shareholders, UBA and Inversiones Mirabel S.A., respectively, and as such, UBHL is our indirect majority shareholder.  UBHL represented in the Letter of Support that it has the requisite financial resources to meet its commitment to KBEL. The Chairman of our Board of Directors, Dr. Vijay Mallya, is also the Chairman of the Board of Directors of UBHL.

Our management has taken several actions to enable us to meet our working capital needs through September 30, 2012, including reducing discretionary expenditures, expanding our business in new territories and also securing additional brewing contracts in an effort to utilize a portion of our excess production capacity.   We may also seek additional capital infusions to support our operations.

If it becomes necessary to seek UBHL's financial assistance under the Letter of Support and UBHL is either unable or unwilling to fulfill its commitment to KBEL under the Letter of Support or to extend the time period of such commitment if necessary, it may result in a material adverse effect on KBEL's, UBIUK's and our financial position and on our ability to continue operations.  In addition, if we are in default under our secured credit facilities, our lenders may seek to satisfy any outstanding obligations through recourse against the applicable pledged collateral which may include our real property and fixed and current assets.  The loss of any material pledged asset would likely have a material adverse effect on our financial position and results of operations.