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Liquidity and Management Plans
12 Months Ended
Dec. 31, 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 with a maturity date of June 23, 2016 of up to $10,000,000 consisting of a $4,119,000 revolving facility, a $1,934,000 machinery and 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 issued to UBA are subordinated to the Cole Taylor facility.

  

At December 31, 2011, the Company had cash and cash equivalents of $312,200, an accumulated deficit of $14,389,100 and a working capital deficit of $2,795,400 due to losses incurred since 2005 in connection with its subsidiary KBEL's operations in the UK.  (For additional information, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.")

 

On February 15, 2011 and again on March 2, 2012, United Breweries (Holdings) Limited ("UBHL") issued a letter of financial support on behalf of KBEL (each, a "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.  There is no maximum dollar limit on the amount of funds which UBHL will provide to KBEL specified in the Letters of Support.  The type of financial support provided by UBHL and the terms of such financial support are not specified in the Letters 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 dated February 15, 2011 was issued for at least a one year minimum period which ran through February 14, 2012. The Letter of Support dated March 2, 2012 was issued for a 12 month minimum period. The Company's management intends to seek UBHL's consent to keep the current Letter of Support in force beyond the minimum period, if necessary, or request that UBHL issue a new letter of support for the period after such minimum period. UBHL controls the Company's two largest shareholders, UBA and Inversiones Mirabel S.A., and as such UBHL is the Company's indirect majority shareholder.  UBHL represented in the Letters of Support that it has the requisite financial resources to meet its commitment to KBEL under the Letters of Support. The Chairman of the Company's Board of Directors, Dr. Vijay Mallya, is also the chairman of the board of directors of UBHL.

 

The Company's management has taken several actions to enable the Company to meet its working capital needs through March 31, 2013, including reducing discretionary expenditures, expanding business in new territories and securing additional brewing contracts in an effort to utilize a portion of excess production capacity.   The Company may also seek additional capital infusions to support its operations.

 

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