Our business is speculative and involves substantial risks. Factors bearing upon the success of our business include, among others, the quality of our product, the attractiveness of the packaging, the adequacy of distribution in the market place, and the experience and skill of our management. In addition, general economic conditions also affect our potential profitability.
Robert Nowaczyk is a part-time officer. As such, it is likely that the company will not make the same progress as it would if that were not the case.
Daniel Johnson is a part-time officer. As such, it is likely that the company will not make the same progress as it would if that were not the case.
Tom Nikosey is a part-time officer. As such, it is likely that the company will not make the same progress as it would if that were not the case.
Chris Allender is a part-time officer. As such, it is likely that the company will not make the same progress as it would if that were not the case.
We face substantial competition from several competitors, some of whom have far greater resources, which may make it more difficult for us to achieve significant market penetration. The market for beverage products is intensely competitive, subject to rapid change, and significantly affected by new product introductions and other market activities of industry participants. While we believe that our products occupy a unique niche in each individual marketplace, other companies offer similar products that compete for the same demographic, and could compete more directly with us by developing products functionally the same as ours. Most of these competitors are larger and more deeply funded companies with significantly greater resources for product development and marketing. In addition to the current market players, at any time, other companies may develop additional competitive products in the same category. If we are unable to compete effectively against existing or future competitors, net revenues of our products would decline. Some of our competitors may compete by lowering the price of their products or ancillary supplies. If these competitors’ products were to gain acceptance by consumers, a downward pressure on prices for our products could result. If prices were to fall, we may not grow sufficiently to achieve profitability.
Our competitors may join forces against us and other craft brewers. Consolidation is frequently occurring in our industry and larger competitors may merge, resulting in even larger, more powerful competition. Competitors could work together in an effort to stunt craft growth. Additionally, it is unknown at this point what effect potential mergers and acquisitions will have on the marketplace.
Obtaining contracts to sell products with retailers carrying our products is very difficult and time consuming and without these types of contracts, we will not be able to sell our products and our business will fail. In the beverage sections in retail locations, shelf space is very expensive and difficult to obtain. Since we are a small early stage company, it has been and we expect it will continue to be very time consuming and expensive to obtain the types of contracts which are required to sell our products and successful retail shelf placement. If we are not able to continue to secure these contracts, we will not be able to expand sales of our product and our business could suffer.
Establishing and maintaining a customer base is difficult to achieve and increase, especially since consumers are always cost conscious. If we cannot continue to attract and expand our customer base, we face a high risk of business failure which would result in the loss of your investment. Attracting, building, and managing a retail customer base through the efforts of our independent distributors is very difficult to accomplish in the retail beverage market. Customers are very cost sensitive and will switch to any other product based on cost or taste. If we cannot continue to build a consistent customer base, our future sales, and operating results will be negatively impacted and our business could fail.
We use third parties to produce the products for our brands. We utilize third parties to manufacture our beverage products. We need to work with contract brewers to brew beer for us in the types and styles we are marketing. We may have disagreements with our beverage suppliers or brewers due to costs, production runs, timing, and availability. Any unresolved issues may lead to the loss of these established relationships endangering our business. If these relationships are lost, we will have to find new suppliers or brewers which could result in production delays or increased costs.
Failure of manufacturers. Our business could suffer as a result of a manufacturer’s inability to produce goods on time and to certain specifications. We depend on independent third parties for the manufacture of our products. Our products are manufactured to our specifications and under our own brand. The inability of a manufacturer to ship orders of products in a timely manner or to meet quality standards could cause us to miss the delivery date requirements of our customers for those items. Although we have developed plans for such incidents, this could result in the cancellation of orders, refusal to accept deliveries or a reduction in purchase prices, any of which could have a materially adverse effect on our financial condition and results of operations.
We are dependent on relationships with key merchandise supply partners, distributors, and retail chains, and the ability to create more such relationships. Our business model for all of our products offered is based on steady supply and growing distribution. Successful implementation of it is predicated on our ability to create and nurture strong partnerships with distributors, suppliers, and retail chains. If we are unable to maintain existing partnerships or establish new ones, our revenues may decrease and we may never attain profitability.
We face risks associated with changes in customer tastes and preferences, spending patterns and demographic trends. Changes in customer preferences, general economic conditions, discretionary spending priorities, and demographic trends affect the beverage industry. Our success depends to a significant extent on consumer confidence, which is influenced by general economic conditions, local and regional economic conditions in the markets in which we operate, and discretionary income levels. Our sales may lag during future economic downturns, which can be caused by various factors such as high gasoline prices, high unemployment, declining home prices or tight credit markets. Any material decline in consumer confidence or a decline in family spending could adversely affect our sales, operating results, and financial condition.
We may not be able to source enough raw materials at competitive prices. Although we benefit from yearly contracts entered into by our manufacturing partner, the marketplace for hops, malt, yeast and other raw ingredients are subject to fluctuation due to a variety of factors: weather, crop yield, blight, economic incentive to grow other crops, pressure from larger customers and many other potentially unknown factors.
Our business is subject to seasonal fluctuations. Seasonal factors may cause our revenues to fluctuate from quarter to quarter. Historically, average daily sales are lower in the first and fourth quarters due, in part, to the holiday season and because fewer people drink alcoholic beverages during periods of inclement weather (the winter months) than during periods of mild or warm weather (the spring, summer and fall months). Other factors also have a seasonal effect on our potential results.
We are subject to regulations of and licensing by various governmental agencies. The U.S. alcohol industry is subject to extensive regulation by the Federal Bureau of Alcohol, Tobacco and Firearms and various foreign agencies, state liquor authorities and local authorities. These regulations and laws dictate such matters as licensing requirements, trade and pricing practices, permitted distribution channels, shipping restrictions, permitted and required labeling, advertising and relations with wholesalers and retailers. In addition, new regulations or requirements or increases in excise taxes, income taxes, property and sales taxes or international tariffs, could negatively impact us financially. Future legal challenges to the industry, either individually or in the aggregate, could harm our business if they impose requirements which we are unable to meet.
We have all of the requisite licenses and permits to operate at our present level, however, future growth may require additional licenses or permits. The inability or failure to attain any such required items could result in our inability to expand our business as described in this Memorandum.
Changes in applicable law may affect product and service offerings. Our products may become subject to greater regulation, particularly at the federal level. The applicable laws and regulations may change significantly in the future. We continuously monitor these developments and modify our operations as necessary. We may not be able to adapt our operations to address new regulations which could adversely affect our business.
Rising fuel and freight costs may have an adverse impact on our sales and earnings. The volatility in the global oil markets can result in rising fuel and freight prices, which many shipping companies pass on to their customers. Our shipping costs, and particularly our fuel expenses, have been increasing and we expect these costs may continue to increase. Due to the price sensitivity of our products, we do not anticipate that we will be able to pass all of these increased costs on to our customers. The increase in fuel and freight costs could have a material adverse impact on our financial condition.
Infringement of our brand name may damage our business. Our products are branded consumer products. Our ability to distinguish our brand name from those of our competitors depends, in part, on the strength and vigilant enforcement of our brand name. Competitors may use trademarks, trade-names or brand names that are similar to ours, thereby weakening our intellectual property rights. If our competitors infringe on our rights, we may have to litigate in order to protect such rights. Litigation may result in significant expense and divert our attention from business operations. In addition, we cannot assure you that we would be successful in protecting our rights.
Risks associated with intellectual property. Our inability to adequately protect our intellectual property could allow our competitors and others to provide beverages with formulas and other intellectual property rights similar to our own, which could substantially impair our ability to compete. Despite our efforts to safeguard our unpatented and unregistered intellectual property rights, we may not be successful in doing so or the steps taken by us in this regard may not be adequate to detect or deter misappropriation of our formulas or to prevent an unauthorized third party from copying or otherwise obtaining and using our products and other proprietary information. Our inability to adequately protect our intellectual property could allow our competitors and other to produce similar products and could substantially impair our ability to compete.
The net tangible book value of our outstanding stock is substantially below the Offering price of the Shares in this Offering. Existing shareholders will realize an immediate increase in the net tangible book value of shares owned by them. Furthermore, we may conduct additional financings in the foreseeable future to raise additional working and expansion capital, which may be at different prices and on different terms than the current financing and will have a dilutive effect on the investors in the current financing.
We may not be able to raise adequate capital. If we are unable to successfully complete this financing, we will have less marketing and advertising money, which could impact our growth.. This will require us to revise our business plan and may require that us to seek additional capital on less favorable terms. Our inability to obtain required capital could preclude us from achieving profitability.
Early Investors bear greater risk in this Offering. The minimum amount of this Offering is only $100,000. Therefore, early investors bear a greater risk that we will not be able to raise sufficient funds to utilize towards the goals expressed in this Memorandum
We are dependent on key management. We are highly reliant on the services of our founder, Robert Nowaczyk, as well as our Chief Executive Officer, Roger Baer, and our Chief Operating Officer, David Johnson, and their actions greatly influence our success. We are also highly
dependent on the other members of our management team and the outlined projections in the Memorandum rely on that team remaining with us. The implementation of our business plan and our continued success relies on key members of the management team and sales, marketing, and finance personnel. These employees may not continue to work for us and we may not be able to replace these employees with personnel of similar caliber, should they leave us. Should one or more of these members leave us, our financial results may be impaired.
We may not be able to attract or retain vital employees. We need to continue to hire an experienced sales team to drive the business forward. We may have difficulty identifying, attracting, and retaining such qualified individuals.
We may have difficulty managing our growth. Our ability to compete effectively and to manage future growth will depend on our ability to continue to implement and improve operational, financial, and management information systems on a timely basis and to expand, train, motivate, and manage our work force. We intend to rapidly and significantly expand our operations, and anticipate that further significant expansion will be required to implement our business strategy and penetrate market opportunities. This expansion is expected to place a significant strain on our managerial, operational, and financial resources. To manage the expected growth of our operations, we will be required to develop and maintain operational and financial systems and procedures and controls. There can be no assurance that our personnel, systems, procedures, and controls will be adequate to support our operations, and any deficiencies in that regard could have a material adverse effect on our business, financial condition, or results of operations.
Our growth will depend on our ability to develop awareness. We believe that establishing widespread awareness will be critical to achieving widespread acceptance and adoption of our products. Promoting and positioning of our products will depend largely on the success of our marketing efforts, distribution channels, and our ability to provide high quality service. Establishing a significant presence for beverages often requires substantial marketing investment to develop distribution networks and consumer loyalty. Promotional activities may not yield increased revenues, and even if they do, any increased revenues may not offset the expenses we incur in building our essence and our products.
Our management team will continue to hold a substantial percentage of our Common Stock following the Offering. As a result, our Management will be able to control considerable influence over the outcome of any matters submitted to a vote of our shareholders, including the election of our Board of Directors. The voting power of our Management could delay or prevent a change in control and will have a substantial impact on the outcome of all corporate actions requiring shareholder approval, including potential mergers, acquisitions, consolidations, and sales of all or substantially all of our assets. The voting power of our Management could also discourage others from seeking to acquire control of us through the purchase of our common stock.
There is no marketability or liquidity of our Shares. The nature of early stage investing dictates a long period between the initial investment and realization of gains, if any. Such investments, if successful, typically take a number of years from the date of investment to reach a state of maturity where distributions or liquidation are possible. Moreover, an investment in us will be subject to restrictions on transfer because these are unregistered securities. There is no established public market for the offered Shares or any of our securities, nor is any such market likely to develop in the foreseeable future. None of our securities have been registered under the Securities Act of 1933, nor qualified under applicable state or other security laws, and we have no present plans to register any of our securities for public sale. None of our securities, including the offered Shares, may be resold or otherwise transferred unless they have been registered under the Act and qualified under applicable state or other security law, or unless they are exempt from such registration. This is a long-term investment.
The Shares cannot be transferred. The Shares sold in this Offering will be “restricted” securities, which have not been registered under federal or state securities laws and will not be transferable. This Offering is made pursuant to exemptions from the registration requirements of federal securities laws. In addition, the Offering will not be registered in any state in reliance on exemptions from registration for private offerings under state securities laws. To satisfy the requirements of certain exemptions from registration, each investor must acquire his or her Shares for investment purposes only and not with a view towards distribution. Consequently, certain conditions of the Act may need to be satisfied prior to any sale, transfer, or other disposition of the Share. Some of these conditions may include a minimum holding period, availability of certain reports, including financial statements from us, limitations on the percentage of Shares sold and the manner in which they are sold. We will serve as our own transfer agent and registrar and can prohibit any sale, transfer or disposition unless we receive an opinion of counsel provided at the holder’s expense, in a form satisfactory to us, stating that the proposed sale, transfer or other disposition will not result in a violation of applicable federal or state securities laws and regulations.
Investors in this Offering will not have the opportunity to have us redeem their Shares. Accordingly, purchasers of the Shares must be willing and able to bear the economic risk of their investment for an indefinite period of time. Investors will not be able to liquidate their investment in the event of an emergency.
The Shares will bear the following legend: “THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THIS SECURITY MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE BORROWER, SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED.”
The Shares are subordinated to our debt obligations. The Shares are subordinate to the rights of all of our creditors. We may borrow additional funds in the future as necessary to implement our business plan. Thus, in the event of our liquidation, holders of Shares would receive no value until all creditors’ claims are fully satisfied.
We may not have sufficient cash to pay any dividends on the Shares. We have never paid dividends on our common stock. Further, we anticipate that we will not do so in the future as our cash will be needed for business development.
We depend on the reliability and continuity of our data management systems. As a retail centric operation, we are dependent upon the continued reliability of our data management and inventory tracking systems. Although we have reliable systems in place, there is no guarantee that these systems will continue to be accurate and consistent in the future.
Risks associated with financial projections. Our financial projection discussion included in this Memorandum is based upon assumptions that we believe to be reasonable and/or on scenarios such as resource-related rebates that may or may not continue or may continue at different rates or amounts. Such assumptions may, for the foregoing and/or other reasons, be incomplete or inaccurate, and unanticipated events and circumstances may occur. Also, we have a limited operating history on which to base our financial projections. For these reasons, we believe the prediction of future results of operation is difficult and actual results achieved during the periods covered may be materially and adversely different. Even if the assumptions underlying our plans prove to be correct, there can be no assurances that we will not incur substantial operating losses in attaining our goals. Our plans are based on the premise that existing consumer demand for our goods shall continue. However, there can be no assurances that our objectives shall be realized if any of the assumptions underlying our plans prove to be incorrect. Moreover, our independent public accountants have not compiled or examined the projections, and accordingly, are unable to express an opinion or give any other form of assurance concerning such projections.
Management may invest or spend the proceeds of this Offering in ways with which Shareholders may not agree and in ways which may not yield favorable return. Our Management will exert control over the proceeds from this Offering. Our Shareholders may not find these uses desirable and our use of proceeds may not yield a significant return or any return at all. Because of the number and variability of factors that determine the use of the net proceeds of this Offering, we cannot provide assurance that these uses will not vary substantially from our current planned uses.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This Memorandum contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are not historical facts, but rather are based on our current expectations, estimates, and projections about us and our industry. You can identify these forward-looking statements when you see us using words such as “expect,” “anticipate,” “estimate,” “plan,” “believe,” “seek,” and other similar expressions that are intended to identify forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements are not guarantees of future performance and are subject to certain risks, uncertainties, and other factors, some of which are beyond our control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted. All statements other than statements of historical facts included in the Memorandum including, without limitation, the financial projections and assumptions elsewhere in this Memorandum, are forward-looking statements. These risks and uncertainties include those described in “Risk Factors.” You should not place undue reliance on these forward-looking statements, which reflect our management’s view only on the date of this Memorandum. We undertake no obligation to update these statements or to report the result of any revision to the forward-looking statements that we may make to reflect events or circumstances after the date of this Memorandum or to reflect the occurrence of unanticipated events. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.