1812 Brewing Company Inc (KEGS)

[xyz1002]

How else Tom could have handled the CD situation:

It seems Tom mentioned to someone in an email (if that is true) that he had no choice but to honor the previous CD's. Although he didn't say honoring the CD's by issuing shares, I gather thats what he meant. He obviously could have honor the CD's simply by paying off the debt by raising the $$ by other menas. Basically in that email Tom is a telling everyone on this board that we are all idiots. With much hesitation, I'm writing this to defend everyone on this board and tell Tom that he can take his BS somehwre else. I've zero intention of being negative as I've so many shares. Here is what he could have done:

1) He could have explained the whole situation (all that he wrote to us in the "Dear Shareholder" letters about the mergers) to a bank and taken a short term loan or a bridge loan from a legitmate PE guy and paid off the CD and then sell shares in the market directly and pay off the loan. That would have been a lot less shares. Agreed it's not easy to get a loan from bank or a bridge loan from a PE guy. A PE guy even with a mere $50M fund wouldn't talk to this kind of companies. So the second option is 200% doable and here it is

2) He could have taken an equity line of credit from another hedge fund at a 10-20% discount which is very standard practice. 10% is the norm for a good legitimate company like SWVC, 20%-40% is the norm for those companies that own all the oil fields in Texas but have no revenue. And most hedge funds would have jumped into that kind of opportunity as they carry zero risk.

How does that work for those who don't know. Tom would essentially draw down $$ as and when needed and issue the required amount of shares to the hedge fund to sell in the open market. Very simillar to the CD except, the hedge fund would sell the shares and will keep the 10-20% cut from it and use the rest to pay off the drawn down LOC. Why company do that instead of selling shares directly? Simply to look good. When a company sell directly it's considered a negative event by the market. But an equity line is not considered that bad in comparison.

Basically it's the company selling shares thorugh a third party vendor and giving them a small cut. Since Tom knew very well that the pps was going to go up after he retired a whole lot of shares and putting out the news letter, he could have sold say for example 100M shares via the equity line at say 0.03 avergae getting $3M and pay off the CD and keep some for the woring capital. Hell, even he could have sold a lot more at higher prices and the pps could have susatined, as we have seen.

Why didn't he do it then? Well there is a conflict. The existing CD holders were waiting to sell for a long time and if he had brought in another hedge fund and taken a LOC, then the new hedge fund and the exsiting CD holders would be competing to sell at the same time as the pps went up. That would really piss off the existing CD holders. Besides if Tom actually did this and paid off the CD holders, then the exsiting CD holders would be exteremly pissed off by receiving such a small retrun as they know they have the opportunity to convert and make like 3000-8000% return which they did or are doing. Tom couldn't do that as he will need them more now than ever as he is creating all these new GS businesses. So he took the easy route to please the CD holders so that he can use them in future.

Moral- This conversion didn't have to happen this way, if he wanted to but he chose to do so. May be little more than just to honor the past obligation.

Another caveat: I wonder who the CD holders are that are converting at 0.001. Because in an earlier 10Q's there is reference to a CD holder of a company run by the wife of an ex-CEO (which would indicate thats is KK's wife). Well may be all in the family, except I don't know. Just my thought.

So now that is past, let us move on. Convert the remaining CD's and grow the business. All will be happy at the end.

AIMHO.