Our future success is dependent on the continued service of our senior management. Any loss of key members of our executive team could have a negative impact on our ability to manage and grow our business effectively. The experience, technical skills and commercial relationships of the personnel of the Company provide us with a competitive advantage.
We do not maintain a key person life insurance policy on any of the members of our senior management team. As a result, we would have no way to cover the financial loss if we were to lose the services of members of our senior management team.
Jacob Iest 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.
Various diseases, pests and certain weather conditions could affect quality and quantity of hops and grains. Various diseases, pests, fungi, viruses, drought, frosts and certain other weather conditions could affect the quality and quantity of hops and grains, decreasing the supply of our products and negatively impacting our operating results. Future government restrictions regarding the use of certain materials used in hops and grains growing may increase costs and/or reduce production.
We cannot guarantee that our hop and grain suppliers will succeed in preventing disease in their existing farm lands or that we will succeed in preventing disease If hop and grain crops become contaminated with diseases, operating results would decline, perhaps significantly.
We may not be able to acquire enough quality hops and grain for our beer. While we believe that we can secure sufficient supplies of hops and grains from supply contracts with independent distributors, we cannot be certain that hop and grain supply shortages will not occur. Hop and grain supply shortages resulting from a poor harvest can be caused by a variety of factors outside our control, resulting in reduced product that is available for sale. If revenues decline as a result of inadequate hops and grains supplies, cash flows and profitability would also decline.
We face significant competition which could adversely affect our profitability.
The craft beer industry is intensely competitive and highly fragmented. Our craft beers compete in several craft beer markets within the craft beer industry as a whole with many other domestic and foreign craft beers. Our craft beers also compete with comparably priced generic craft beers and with other alcoholic and, to a lesser degree, non-alcoholic beverages.
A result of this intense competition has been and may continue to be upward pressure on our selling and promotional expenses. Many of our competitors have greater financial, technical, marketing, and public relations resources than we do. There can be no assurance that in the future we will be able to successfully compete with our competitors or that we will not face greater competition from other craft beer and beverage manufacturers.
We compete for shelf space in retail stores and for marketing focus by independent distributors, most of whom carry extensive product portfolios. We sell our products regionally, primarily through independent distributors and brokers for resale to retail outlets, restaurants, hotels and private clubs across the Central Valley, California. We seek to have sales to distributors to increase and to represent a substantial portion of our net revenues in the future.
A change in our relationship with any of our significant distributors could harm our business and reduce our sales. The laws and regulations of several states prohibit changes of distributors, except under certain limited circumstances, making it difficult to terminate a distributor for poor performance without reasonable cause, as defined by applicable statutes. Any difficulty or inability to replace distributors, poor performance of our major distributors or our inability to collect accounts receivable from our major distributors could harm our business.
There can be no assurance that the distributors and retailers we use will continue to purchase our products or provide our products with adequate levels of promotional support. Consolidation at the retail tier, among club and chain grocery stores in particular, can be expected to heighten competitive pressure to increase marketing and sales spending or constrain or reduce prices.
Contamination of our craft beers could harm our business.
We are subject to certain hazards and product liability risks, such as potential contamination, through tampering or otherwise, of ingredients or products. Contamination of any of our craft beers could cause us to destroy our craft beer held in inventory and could cause the need for a product recall, which could significantly damage our reputation for product quality.
We maintain insurance against certain of these kinds of risks, and others, under various insurance policies. However, our insurance may not be adequate or may not continue to be available at a price or on terms that are satisfactory to us and this insurance may not be adequate to cover any resulting liability.
A reduction in consumer demand for craft beers could harm our business.
A limited or general decline in consumption in one or more of our product categories could occur in the future due to a variety of factors, including: a general decline in economic conditions; changes in consumer spending habits; increased concern about the health consequences of consuming alcoholic beverage products and about drinking and driving; a trend toward a healthier diet including lighter, lower calorie beverage, such as diet soft drinks, juices and water products; the increased activity of anti-alcohol consumer groups; and increased federal, state or foreign excise and other taxes on alcoholic beverage products.
A decrease in craft beer score ratings by important rating organizations could have a negative impact on our ability to create greater demand and pricing.
Brands are issued ratings or scores by local and national craft beer rating organizations, and higher scores usually translate into greater demand and higher pricing.
Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business, operations or financial performance, and water scarcity or poor quality could negatively impact our production costs and capacity.
Our business depends upon agricultural activity and natural resources, including the availability of water. There has been much public discussion related to concerns that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters.
Severe weather events and climate change may negatively affect agricultural productivity for our suppliers. The quality and quantity of water available for use is important to the supply of hops and grains and our ability to operate our business. Adverse weather, measures enacted to address climate change, and other environmental factors beyond our control could reduce our hops and grains production and adversely impact our cash flows and profitability.
Changes in domestic laws and government regulations or in the implementation and/or enforcement of government rules and regulations may increase our costs or restrict our ability to sell our products into certain markets.
Government laws and regulations result in increased farming costs, and the sale of craft beer is subject to taxation in various state, federal and foreign jurisdictions. The amount of craft beer that we can sell directly to consumers outside of California is regulated, and in certain states we are not allowed to sell craft beers directly to consumers and/or the amount that can be sold is limited.
Changes in these laws and regulations could have an adverse impact on sales and/or increase costs to produce and/or sell craft beer. The craft beer industry is subject to extensive regulation by the “TTB” and various foreign agencies, state liquor authorities, such as the “CABC”, and local authorities. These regulations and laws dictate such matters as licensing requirements, trade and pricing practices, permitted distribution channels, permitted and required labeling, and advertising and relations with wholesalers and retailers.
Any expansion of our existing facilities or development of new opportunities may be limited by present and future zoning ordinances, environmental restrictions and other legal requirements. In addition, new regulations or requirements or increases in excise taxes, income taxes, property and sales taxes or international tariffs, could affect our financial condition or results of operations. Recently, many states have considered proposals to increase, and some of these states have increased, state alcohol excise taxes. New or revised regulations or increased licensing fees, requirements or taxes could have a material adverse effect on our financial condition, results of operations or cash flows.
Our success depends on our ability to uphold the reputation of our brand, which will depend on the effectiveness of our marketing, our product quality, and our customer experience.
Any harm to our brand could have a material adverse effect on our company
We rely upon our suppliers to produce our products consistently, on time and with the highest level of quality. Many of our products are only available from only one supplier.
The operations of our suppliers can be subject to additional risks beyond our control, including shipping delays, labor disputes, trade restrictions or any other change in local conditions. Any disruption in our supply chain could have a material adverse effect on our business.
We rely upon information systems to operate our website, process transactions, and communicate with customers. Any disruption or slowdown of our systems, including system failures, breaches or other causes could disrupt our business and reduce our sales.
Our success depends on our ability to design and manufacture products that appeal to our
It is possible that future new products will fail to gain market acceptance for any number of reasons. If the new products fail to achieve significant sales and acceptance in the marketplace, this could materially and adversely impact the value of your investment.
We rely on third parties to provide services essential to the success of our business. Our third party partners provide a variety of essential business functions, including warehousing and distribution, website hosting and design, and many others.
If we encounter problems with one or more of these parties and they fail to perform to expectations, it could have a material adverse impact on the company.
An economic downturn in our key markets may adversely affect consumer discretionary spending and demand for our products.
Factors affecting the level of consumer spending include general economic conditions, consumer confidence in future economic conditions, the availability of consumer credit, levels of unemployment, and tax rates, among others. Poor economic conditions may lead consumers to delay or reduce purchase of our products, which could have a material adverse effect on our financial condition.
Local political climate, urban infill general plan and policy could change.
The City of Fresno has created the Urban Form, Land Use and Design Element in its General Plan which establishes the structural framework for the city to enhance the character of neighborhoods and districts, creating vibrant centers of activity and a public realm that is engaging and livable, crafting a tapestry of distinctive, connected communities, and strengthening Fresno’s identity. Included in this initiative is streamlined construction permitting and zoning ordinance flexibility. A reverse in Fresno's current position on growth and community revitalization could adversely affect our business.
The speed at which our competition could replicate our recipes could affect demand for our products.
Larger competitors with greater resources have the ability to replicate our craft beer recipes and bring them to market fast and cheaper. If we are unable to protect our intellectual property or to create new recipes to replace those lost to our competition our business could be harmed and our financial condition to suffer.
Our trademarks may conflict with the rights of others and we may be prevented from selling some of our products. We have not yet applied for several United States and foreign trademark registrations. We cannot guarantee that any of our future trademark applications will be approved. Additionally, third parties may assert intellectual property claims against us, particularly as we expand our business.
Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products. In addition, resolution of claims may require us to redesign our products, license rights from third parties or cease using those rights altogether. Any of these events could harm our business and cause our results, liquidity and financial condition to suffer.
Requirement for further investment.
The Company may require additional capital in the future for expansion, its activities and/or business development, whether from equity or debt sources. There can be no guarantee that the necessary funds will be available on a timely basis, on favorable terms, or at all, or that such funds if raised, would be sufficient. If additional funds are raised by issuing equity securities, dilution to the then existing equity owners may result.
The level and timing of future expenditure will depend on a number of factors, many of which are outside our control. If we are not able to obtain additional capital on acceptable terms, or at all, we may be forced to curtail or abandon such expansion, activities and/or business development which could adversely impact upon the Company, its business, development, financial condition, operating results or prospects.
There is no assurance the maximum amount of this offering will be sold.
The Offering will be undertaken through the services of a registered third party that will act as the Company’s online portal and there can be no assurance that all of the units offered hereby will be sold.
Failure to sell all of the units offered may result in the Company having less capital than the Company considers ideal, which could adversely affect the ability of the Company to take advantage of business opportunities.
The offer and sale of the units pursuant to the offering have not been and will not be registered under the Securities Act or any state securities act by reason of specific exemption from registration under such acts. Thus, prospective investors cannot rely upon any regulatory agency having reviewed the terms of the offering, including the nature and amount of compensation, disclosure of risk and the fairness of the terms of the offering. Accordingly, prospective investors must judge the adequacy of disclosure and fairness of the terms of the offering on their own, and without the benefit of prior review by any regulatory agency.
Investors will have no voting rights with respect to decisions of the Company.
We are offering units of our non-voting, Class (B) Membership Units. Investors will have no voting rights attached to their units and therefore will have no ability to impact or otherwise influence corporate decisions of the Company. Specifically, and without limitation, the majority holders of our other classes of membership units may determine to sell the Company and, depending on the nature of the transaction, be forced to sell their units in that transaction regardless of whether they believe the transaction is the best or highest value for their units, and regardless of whether they believe the transaction is in their best interests
This investment is illiquid. There is no currently established market for reselling these securities. If you decide that you want to resell these securities in the future, you may not be able to find a buyer. You should be prepared to hold this investment until the company is acquired or has an initial public offering, both of which depend on a variety of factors outside of our control, and may never occur.
The units are being offered pursuant to exemptions from the registration requirements of the Securities Act, and must be held indefinitely unless the units are subsequently registered under the Securities Act or an exemption form such registration is available and state securities laws are complied with. The Company is under no obligation to register the units under the Securities Act or qualify such units under any state securities laws