ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of
our financial condition and results of our operations should be read in conjunction with our financial statements and the notes
thereto which appear elsewhere in this report. The results shown herein are not necessarily indicative of the results to be expected
for any future periods.
This discussion contains forward-looking
statements, based on current expectations. All statements regarding future events, our future financial performance and operating
results, our business strategy and our financing plans are forward-looking statements and involve risks and uncertainties. In many
cases, you can identify forward-looking statements by terminology, such as “may,” “will,” “should,”
“expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology.
These statements are only predictions. Known and unknown risks, uncertainties and other factors could cause our actual results
and the timing of events to differ materially from those projected in any forward-looking statements. In evaluating these statements,
you should specifically consider various factors, including, but not limited to, those set forth in our Annual Report on Form 10-K
for the year ended June 30, 2015 and in this report.
General
Our Company
Since September 2013 until recently, we
were primarily engaged in the business of making commercial secured real estate loans. Our business model until the ABH acquisition
was solely focused upon making commercial secured real estate loans under advantageous and risk adverse terms. We no longer will
be involved in the commercial secured real estate loans as we will devote our total efforts in the development and operations of
World of Beer franchises.
On April 21, 2015, we commenced operations
in a new line of business, the ownership of World of Beer taverns that serve craft and imported beer along with food and other
spirits. ABH currently owns in a joint venture, an interest in one World of Beer tavern located in West Hartford, Connecticut and
just started construction of a second World of Beer Tavern in Milford, Connecticut and just signed a lease agreement to build a
World of Beer in Cambridge, Massachusetts. ABH also has a two year option to own 51% of the World of Beer franchise in Stamford,
Connecticut which has not been exercised. World of Beer began as a neighborhood tavern and has grown to close to 80 locations in
20 states.
In December 2014, ABH entered into a joint
venture with New England World of Beer and together opened a 4,000 sq. foot tavern in West Hartford, Connecticut that sells a selection
of over 500 craft and imported beers along with tavern food and other spirits and cocktails. New England World of Beer holds franchise
rights for all of Connecticut and Massachusetts. Similar taverns are currently open in 20 states, namely AL, AZ, CO, CT, FL, GA,
IL, LA, MD, MI, NC, NJ, NY, OH, SC, TN, TX, VA, WA and WI.
History and Other Information
We were incorporated on June 5, 2008, under
the laws of the State of Nevada under the name of Sharp Performance Inc. From inception until September 2013, our business focus
was on the provision of consulting services to the American automobile industry. On October 24, 2013, we changed our name to Harrison,
Vickers and Waterman Inc. in conjunction with the change in our business focus. As we have now changed our business only to the
development and operations of World of Beer franchises, we recently filed a Definitive Statement to change our name to Attitude
Beer, Inc. which we expect to file the Certificate of Amendment to our Certificate of Incorporation to effectuate the name change
in the latter part of 2015.
Our mailing address is 11231 U.S. Highway
1, #201, North Palm Beach, FL 33408. Our telephone number is (561) 227-2727. Our fiscal year end is June 30
th.
Plan of Operations
We are continuing to seek other sources
of financing to develop our business plan, implement our sales and marketing plan and to meet other operational expense requirements
and to find and develop new World of Beer locations. Historically, we have had to rely on convertible debt financings to cover
operating costs. Based on the available cash, we have no assurance that we will be able to obtain additional funding to sustain
our operations. If we do not obtain additional funding, we may need to cease operations until we do so and, in that event, may
consider a sale of our interest in the World of Beer locations if we do not continue to obtain the proper financing for our needs.
However, certain of our convertible debt obligations for $2,371,545 are secured by our assets. Failure to fulfill our obligations
under these notes and related agreements could lead to the loss of these assets, which would be detrimental to our operations.
We will consider equity and/or convertible
debt financings, either or both of a private sale or a registered public offering of our common stock; however, at this time and
with the current economy, it seems unlikely that we can obtain an underwriter.
This discussion and analysis of our consolidated
financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance
with accounting principles that are generally accepted in the United States of America.
Results of Operations for the Three
Months Ended September 30, 2015 As Compared to September 30, 2014
Commensurate with the change in business
model described, under “General” above, the Company generated $838,683 in gross revenues for the three months ended
September 30, 2015. These are revenues associated with the operations of the West Hartford World of Beer location. There are no
comparable figures for the three months ended September 30, 2014 as the West Hartford World of Beer location was not open at that
time.
Administrative Salaries, taxes and employee
benefits were zero for the three months ended September 30, 2015 as compared to $37,500 for the prior year. There are no corporate
employees in 2015 as Attitude Drinks Incorporated’s employees provide all needed management services for the Company.
General and administrative expenses increased
$9,666 mainly due to the creation of a new website and increased filing fees in 2015.
Professional fees increased $13,900 for
the three months period ended September 30, 2015 versus September 30, 2014, primarily due to increased accounting and legal fees
incurred in 2015.
Liquidity and Capital Resources
Our ability to continue as a going concern
will be dependent upon us receiving additional third party financings to build our new World of Beer franchises and to fund our
business at least throughout the next twelve months in our new fiscal year. Ultimately, our ability to continue is dependent
upon the achievement of profitable operations. There is no assurance that further funding will be available at acceptable
terms, if at all, or that we will be able to achieve profitability. These conditions raise substantial doubt about our
ability to continue as a going concern. The accompanying financial statements do not reflect any adjustments that may
result from the outcome of this uncertainty.
External Debt Financing:
On July 29, 2015, we issued a convertible
note payable to Alpha Capital Anstalt in which we received $80,000.
Proceeds of $40,000 from the above financing
were used for payments on the new Milford, Connecticut World of Beer location, and the rest was used for working capital purposes.
The foregoing securities were issued in
reliance upon an exemption from registration under Section 4(a)(2) and/or Regulation D of the Securities Act of 1933, as amended.
All of the investors were accredited investors and/or had preexisting relationships with the Company, there was no general solicitation
or advertising in connection with the offer or sale of securities, and the securities were issued with a restricted legend.
Our cash balance at September 30, 2015
was $152,372, a decrease of $73,716 from June 30, 2015, mainly due to slower summer vacation activities
We have limited capital resources, as,
among other things, we have a limited operating history. We have generated reasonable revenues to date, but we may not be able
to generate sufficient revenues to become profitable in the future.
The report of our independent registered
public accounting firm on our financial statements for the fiscal year ended June 30, 2015 contains an explanatory paragraph regarding
our ability to continue as a going concern based on our history of net losses since our inception.
We do not believe that we have sufficient
funds on hand to fully implement our business operations or to meet our cash obligations for the next 12-month period. As a result,
we may need to seek additional funding in the near future. We currently do not have a specific plan of how we will obtain such
funding; however, we anticipate that additional funding will be in the form of convertible debt financing. At this time, we cannot
provide investors with any assurance that we will be able to generate sufficient funding from the sale of our common stock or through
issuance of debt to meet our obligations over the next 12 months. We do have Additional Investment Rights from two accredited investors
for a total of $5,000,000 to be used for the development of new World of Beer franchise locations, but there is no assurance that
these investors will provide financings for these ventures.
We do not anticipate the need to hire corporate
employees over the next 12 months as Attitude Drinks Incorporated’s employees are providing their services for the operations
and management of the Company.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Our business is subject to numerous
risk factors, including the following:
Risks Related to Our Business
If we are unable to identify and
obtain suitable new franchise sites and successfully open new franchises, our revenue growth rate and profits may be reduced.
We require that all proposed franchise
sites meet our site selection criteria. We may make errors in selecting these criteria or applying these criteria to a particular
site, or there may be an insignificant number of new sites meeting these criteria that would enable us to achieve our planned expansion
in future periods. We face significant competition from other restaurant companies and retailers for sites that meet our criteria,
and the supply of sites may be limited in some markets. Further, we may be precluded from acquiring an otherwise suitable site
due to an exclusivity restriction held by another tenant. As a result of these factors, our costs to obtain and lease sites may
increase, or we may not be able to obtain certain sites due to unacceptable costs. Our inability to obtain suitable sites at reasonable
costs may reduce our growth.
To successfully expand our business, we
must open new World of Beer restaurants on schedule and in a profitable manner. In the past, World of Beer franchisees have experienced
delays in restaurant openings, and we may experience similar delays in the future. Delays in opening new sites could hurt our ability
to meet our growth objectives, which may affect our results of operations and thus our stock price. We cannot guarantee that we
or any future franchisees will be able to achieve our expansion goals. Further, any sites that we open may not achieve operating
results similar or better than our existing restaurant. If we are unable to generate positive cash flow from a new site, we may
be required to recognize an impairment loss with respect to the assets for that restaurant. Our ability to expand successfully
will depend on a number of factors, many of which are beyond our control. These factors include:
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Negotiating acceptable lease or purchase terms for new sites;
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Cost effective and timely planning, design and build-out of sites;
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Creating Guest awareness of our restaurants and taverns in new markets;
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Competition in new and existing markets;
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General economic conditions.
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Our restaurants and taverns may not achieve market acceptance
in the new regions we enter.
Our expansion plans depend on opening restaurants
and taverns in markets starting with New England where we have little or no operating experience. We may not be successful in operating
our locations in new markets on a profitable basis. The success of these new locations will be affected by the different competitive
conditions, consumer tastes and discretionary spending patterns of the new markets as well as our ability to generate market awareness
of our brands. Sales at our locations opening in new markets may take longer to reach profitable levels, if at all.
New restaurants added to our existing markets may take
sales from existing restaurants.
We intend to open new restaurants and taverns
in our existing market, which may reduce sales performance and guest visits for our existing location. In addition, new locations
added in existing markets may not achieve sales and operating performance at the same level as established restaurants in the market.
A security failure in our information
technology systems could expose us to potential liability and loss of revenues.
We accept credit and debit card payments
at our restaurant. A number of retailers have recently experienced actual or potential security breaches in which credit and debit
card information may have been stolen, including a number of highly publicized incidents with well-known retailers. The intentional,
inadvertent or negligent release or disclosure of data by our company or our service providers could result in theft, loss,
fraudulent or unlawful use of customer data which could harm our reputation and result in remedial and other costs, fines
or lawsuits.
Shortages or interruptions in the
availability and delivery of food and other supplies may increase costs or reduce revenues.
Possible shortages or interruptions in
the supply of food items and other supplies to our location(s) caused by inclement weather, terrorist attacks, natural disasters
such as floods, drought and hurricanes, pandemics, the inability of our vendors to obtain credit in a tightened credit market,
food safety warnings or advisories or the prospect of such pronouncements, or other conditions beyond our control could adversely
affect the availability, quality and cost of items we buy and the operations of our restaurants. Our inability to effectively manage
supply chain risk could increase our costs and limit the availability of products critical to our restaurant operations.
Our business is difficult to evaluate
because we are currently focused on a new line of business and have very limited operating history and information.
Our company was incorporated on June 5,
2008, which makes an evaluation of us extremely difficult. In addition, we have recently shifted our focus from the commercial
real estate lending to restaurant and tavern sales. There is a risk that we will be unable to successfully operate this new line
of business or be able to successfully integrate it with our current management and structure. Our estimates of capital and personnel
required for our new line of business are based on the experience of management and businesses that are familiar to them. We are
subject to the risks such as our ability to implement our business plan, market acceptance of our proposed business and services,
under-capitalization, cash shortages, limitations with respect to personnel, financing and other resources, competition from better
funded and experienced companies, and uncertainty of our ability to generate revenues. There is no assurance that our activities
will be successful or will result in any revenues or profit, and the likelihood of our success must be considered in light of the
stage of our development. In addition, no assurance can be given that we will be able to consummate our business strategy and plans,
as described herein, or that financial, technological, market, or other limitations may force us to modify, alter, significantly
delay, or significantly impede the implementation of such plans. We have insufficient results for investors to use to identify
historical trends or even to make quarter to quarter comparisons of our operating results. You should consider our prospects in
light of the risk, expenses and difficulties we will encounter as an early stage company. Our revenue and income potential is unproven,
and our business model is continually evolving. We are subject to the risks inherent to the operation of a new business enterprise
and cannot assure you that we will be able to successfully address these risks.
We may not be profitable.
We expect to incur operating losses for
the foreseeable future. For the three months ended September, 2015, we had a net operating loss of $2,733 as compared to a net
operating loss of $52,361 for the three months ended September 30, 2014. Our ability to become profitable depends on our ability
to have successful operations and generate and sustain revenues, while maintaining reasonable expense levels, all of which are
uncertain in light of our limited operating history in our current line of business and our beginning of our new food and beverage
line of business.
Our auditors have substantial doubt
about our ability to continue as a going concern.
Our auditors’ report reflects the
fact that the ability of our Company to continue as a going concern and expresses substantial doubt about our ability to continue
as a going concern. This substantial doubt is due to our lack of committed funding and lack of revenue. Our consolidated financial
statements reported a net loss of ($7,252,966) for the three months ended September 30, 2015 which includes a change in the fair
market value of our derivative liabilities for $6,719,460. If we are unable to continue as a going concern, you will lose your
investment. You should not invest in us unless you can afford to lose your entire investment. See the notes to our Financial Statements.
There are general risks associated
with the restaurant industry.
Restaurants are a very cyclical business.
Specific factors that impact our economic recessions can negatively influence discretionary consumer spending in restaurants
and bars and result in lower customer counts as consumers become more price conscientious, tending to conserve their cash amid
unemployment and other economic uncertainty. The effects of higher gasoline prices can also negatively affect discretionary consumer
spending in restaurants and bars. Increasing costs for energy can affect profit margins in many other ways. Petroleum based material
is often used to package certain products for distribution. In addition, suppliers may add fuel surcharges to their invoices. The
cost to transport products from the distributors to restaurant operations will rise with each increase in fuel prices. Higher costs
for electricity and natural gas result in higher costs to a) heat and cool restaurant facilities, b) refrigerate and cook food
and c) manufacture and store food at the Company’s locations.
Inflationary pressure, particularly on
food costs, labor costs (especially associated with increases in the minimum wage) and health care benefits, can negatively affect
the operation of the business. Shortages of qualified labor are sometimes experienced in certain local economies. In addition,
the loss of any key executives could pose a significant adverse effect on the Company.
If consumer confidence in our business deteriorates, our
business, financial condition and results of operations could be adversely affected.
Our business is built on consumers’
confidence in our brand. As a consumer business, the strength of our brand and reputation are of paramount importance to
us. A number of factors could adversely affect consumer confidence in our brand, many of which are beyond our control and could
have an adverse impact on our results of operations. These factors include:
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any regulatory action or investigation against us;
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any negative publicity about a restaurant in the World Of Beer franchise; and
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any negative publicity about our restaurants.
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In addition, we are largely dependent on
the other World of Beer franchisees to maintain the reputation of our brand. Despite the measures that we put in place to ensure
their compliance with our performance standards, our lack of control over their operations may result in the low quality of service
being attributed to our brand, negatively affecting our overall reputation. Any event that hurts our brand and reputation among
consumers as a reliable services provider could have a material adverse effect on our business, financial condition and results
of operations.
We face substantial competition in our target markets
The restaurant industry is highly competitive,
and many of our competitors are substantially larger and possess greater financial resources than we do. Our restaurant(s) have
numerous competitors, including national chains, regional and local chains, as well as independent operators. None of these competitors,
in the opinion of our management, is dominant in the family-style sector of the restaurant industry. In addition, competition continues
to increase from non-traditional competitors such as supermarkets that not only offer home meal replacement but also have in-store
dining space trends that continue to grow in popularity.
The principal methods of competition in
the restaurant industry are brand name recognition and advertising; menu selection and prices; food quality and customer perceptions
of value, speed and quality of service; cleanliness and fresh, attractive facilities in convenient locations. In addition to competition
for customers, sharp competition exists for qualified restaurant managers, hourly restaurant workers and quality sites on which
to build new locations.
The restaurant and bar industry is very
competitive, and we face competition from large national chains as well as individually owned restaurants. Large chains such as
Buffalo Wild Wings have a similar open style that appeals to our sports fan and family demographic. There are additional restaurants
that feature custom beers. Many of these competitors have substantially more resources than we which allows them to have
economies of scale allowing them price points which compare favorably to ours. They also have the ability to market their
restaurants given their sheer size which we do not possess. All of these factors may make it difficult for us to succeed.
Unfavorable publicity could harm our business.
Multi-unit restaurant businesses such as
ours can be adversely affected by publicity resulting from complaints or litigation or general publicity regarding poor food quality,
food-borne illness, personal injury, food tampering, adverse health effects of consumption of various food products or high-calorie
foods (including obesity), or other concerns. Negative publicity from traditional media or on-line social network postings may
also result from actual or alleged incidents or events taking place in our restaurants. Regardless of whether the allegations or
complaints are valid, unfavorable publicity relating to a number of our restaurants, or only to a single restaurant, could adversely
affect public perception of the entire brand. Adverse publicity and its effect on overall consumer perceptions of food safety,
or our failure to respond effectively to adverse publicity, could have a material adverse effect on our business.
Changes in employment laws or regulation could harm our
performanc
e.
Various federal and state labor laws govern
our relationship with our employees and affect operating costs. These laws include minimum wage requirements, overtime pay, healthcare
reform and the implementation of the Patient Protection and Affordable Care Act, unemployment tax rates, workers’ compensation
rates, citizenship requirements, union membership and sales taxes. A number of factors could adversely affect our operating results,
including additional government-imposed increases in minimum wages, overtime pay, paid leaves of absence and mandated health benefits,
mandated training for employees, increased tax reporting and tax payment requirements for employees who receive tips, a reduction
in the number of states that allow tips to be credited toward minimum wage requirements, changing regulations from the National
Labor Relations Board and increased employee litigation including claims relating to the Fair Labor Standards Act.
The Americans with Disabilities Act is
a federal law that prohibits discrimination on the basis of disability in public accommodations and employment. Although our restaurants
are designed to be accessible to the disabled, we could be required to make modifications to our restaurants to provide service
to, or make reasonable accommodations for disabled persons.
Failure of our internal controls over financial reporting
could harm our business and financial results.
Our management is responsible for establishing
and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to
provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting
principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting
is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud.
Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our
financial results accurately and timely or to detect and prevent fraud. A significant financial reporting failure or material weakness
in internal control over financial reporting could cause a loss of investor confidence and decline in the market price of our stock.
Economic conditions could have a
material adverse impact on our landlords or other tenants in retail centers in which we or our franchisees are located, which in
turn could negatively affect our financial results.
Our landlords may be unable to obtain financing
or remain in good standing under their existing financing arrangements, resulting in failures to pay required construction contributions
or satisfy other lease covenants to us. In addition other tenants at retail centers in which we or our franchisees are located
or have executed leases may fail to open or may cease operations. If our landlords fail to satisfy required co-tenancies, such
failures may result in us or our franchisees terminating leases or delaying openings in these locations. Also, decreases in total
tenant occupancy in retail centers in which we are located may affect guest traffic at our restaurants. All of these factors could
have a material adverse impact on our operations.
We may experience higher-than-anticipated
costs associated with the opening of new locations or with the closing, relocating and remodeling of existing restaurants, which
may adversely affect our results of operations.
Our revenues and expenses can be impacted
significantly by the location, number and timing of the opening of new restaurants and the closing, relocating, and remodeling
of existing restaurants. We incur substantial pre-opening expenses each time we open a new restaurant and incur other expenses
when we close, relocate or remodel existing restaurants. These expenses are generally higher when we open restaurants in new markets,
but the costs of opening, closing, relocating or remodeling any of our restaurants may be higher than anticipated. An increase
in such expenses could have an adverse effect on our results of operations.
Our success depends substantially
on the value of our brands and our reputation for offering guests an unparalleled Guest experience.
We believe we have built a strong reputation
for the quality and breadth of our menu items as part of the total experience that guests enjoy in our restaurants. We believe
we must protect and grow the value of our brands to continue to be successful in the future. Any incident that erodes consumer
trust in or affinity for our brands could significantly reduce their value. If consumers perceive or experience a reduction in
food quality, service, or ambiance, or in any way believe we failed to deliver a consistently positive experience, our brand value
could suffer.
Our inability to successfully and
sufficiently raise menu prices could result in a decline in profitabili
ty.
We utilize menu price increases to help
offset cost increases, including increased cost for commodities, minimum wages, employee benefits, insurance arrangements, construction,
utilities and other key operating costs. If our selection and amount of menu price increases are not accepted by consumers
and reduce guest traffic, or are insufficient to counter increased costs, our financial results could be harmed.
Our quarterly operating results may
fluctuate due to the timing of special events and other factors, including the recognition of impairment losses.
Our quarterly operating results depend,
in part, on special events, such as the Super Bowl® and other sporting events viewed by our guests in our World of Beer franchised
locations such as the NFL, MLB, NBA, NHL and NCAA. Interruptions in the viewing of these professional and collegiate sporting league
events due to strikes, lockouts or labor disputes may impact our results. Additionally, our results are subject to fluctuations
based on the dates of sporting events and their availability for viewing through broadcast, satellite and cable networks. Historically,
sales in most of our restaurants have been higher during fall and winter months based on the relative popularity and extent of
national, regional and local sporting and other events. Further, our quarterly operating results may fluctuate significantly because
of other factors, including:
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Fluctuations in food costs, particularly chicken wings;
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he timing of new restaurant openings which may impact margins due to the related
preopening costs and initially higher restaurant level operating expense ratios;
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Potential distraction or unusual expenses associated with our expansion into other geographical territories;
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Our ability to operate effectively in new markets in which we have limited operating experience;
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Labor availability and costs for hourly and management personnel;
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Changes in competitive factors;
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Disruption in supplies;
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General economic conditions, consumer confidence and fluctuations in discretionary spending;
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Claims experience for self-insurance programs;
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Increases or decreases in labor or other variable expenses;
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The impact of inclement weather, natural disasters and other calamities;
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Fluctuations in interest rates;
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The timing and amount of asset impairment loss and restaurant closing charges; and
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As a result of the factors discussed above,
our quarterly and annual operating results may fluctuate significantly. Accordingly, results for any one quarter are not necessarily
indicative of results to be expected for any other quarter or for any year. These fluctuations may cause future operating results
to fall below the expectations of securities analysts and shareholders. In that event, the price of our common stock would likely
decrease.
We may not be able to attract and
retain qualified team members and key executives to operate and manage our business.
Our success and the success of our individual
restaurant(s) and business depends on our ability to attract, motivate, develop and retain a sufficient number of qualified key
executives and restaurant employees, including restaurant managers and hourly team members. The inability to recruit, develop and
retain these individuals may delay the planned openings of new restaurant and tavern locations or result in high employee
turnover in existing locations, thus increasing the cost to efficiently operate our restaurants. This could inhibit our expansion
plans and business performance and, to the extent that a labor shortage may force us to pay higher wages, harm our profitability.
The loss of any of our key executive officers could jeopardize our ability to meet our financial targets.
The sale of alcoholic beverages at
our locations subjects us to additional regulations and potential liabilit
y.
Because our locations sell alcoholic beverages,
we are required to comply with the alcohol licensing requirements of the federal government, states and municipalities where our
restaurants are located. Alcoholic beverage control regulations require applications to state authorities and, in certain locations,
county and municipal authorities for a license and permit to sell alcoholic beverages on the premises and to provide service for
extended hours and on Sundays. Typically, the licenses are renewed annually and may be revoked or suspended for cause at any time.
Alcoholic beverage control regulations relate to numerous aspects of the daily operations of the restaurants and bars, including
minimum age of guests and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, storage
and dispensing of alcoholic beverages. If we fail to comply with federal, state or local regulations, our licenses may be revoked,
and we may be forced to terminate the sale of alcoholic beverages at one or more of our locations. Further, growing movements to
change laws relating to alcohol may result in a decline in alcohol consumption at our facilities or increase the number of dram
shop claims made against us, either of which may negatively impact operations or result in the loss of liquor licenses.
In certain states we are subject to “dram
shop” statutes, which generally allow a person injured by an intoxicated person the right to recover damages from an establishment
that wrongfully served alcoholic beverages to the intoxicated person. Some dram shop litigation against restaurant companies has
resulted in significant judgments, including punitive damages.
Changes in consumer preferences or
discretionary consumer spending could harm our performance
.
The success of our World of Beer franchises
depends, in part, upon the continued popularity of the overall World of Beer system locations throughout the United States as well
as our unique food and beverage items and appeal of sports bars and casual dining restaurants. We also depend on trends toward
consumers eating away from home. Shifts in these consumer preferences could negatively affect our future profitability. Such shifts
could be based on health concerns related to the cholesterol, carbohydrate, fat, calorie or salt content of certain food items,
including items featured on our menu. Negative publicity over the health aspects of such food items may adversely affect consumer
demand for our menu items and could result in a decrease in guest traffic to our restaurants, which could materially harm our business.
In addition, we will be required to disclose calorie counts for all food items on our menus, due to federal regulations, and this
may have an effect on consumers’ eating habits. Other federal regulations could follow this pattern. In addition, our success
depends to a significant extent on numerous factors affecting discretionary consumer spending, including economic conditions, disposable
consumer income and consumer confidence. A decline in consumer spending or in economic conditions could reduce guest traffic or
impose practical limits on pricing, either of which could harm our business, financial condition, operating results or cash flow.
A regional or global health pandemic
could severely affect our business.
A health pandemic is a disease outbreak
that spreads rapidly and widely by infection and affects many individuals in an area or population at the same time. If a regional
or global health pandemic was to occur, depending upon its duration and severity, our business could be severely affected. We have
positioned our brand as a place where people can gather together.
Customers might avoid public gathering
places in the event of a health pandemic, and local, regional or national governments might limit or ban public gatherings to halt
or delay the spread of disease. A regional or global health pandemic might also adversely impact our business by disrupting or
delaying production and delivery of materials and products in its supply chain and by causing staffing shortages in our restaurants.
The impact of a health pandemic might be disproportionately greater than on other companies that depend less on the gathering of
people together for the sale or use of their products and services.
We may be subject to increased labor
and insurance costs
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Our restaurant operations are subject to
federal and state laws governing such matters as minimum wages, working conditions, overtime, and tip credits. As federal and state
minimum wage rates increase, we may need to increase not only the wages of our minimum wage employees, but also the wages paid
to employees at wage rates that are above minimum wage. Labor shortages, increased employee turnover, and health care mandates
could also increase our labor costs. This, in turn, could lead us to increase prices which could impact our sales. Conversely,
if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability
may decline. In addition, the current premiums that we pay for our insurance (including workers' compensation, general liability,
property, health, and directors' and officers' liability) may increase at any time, thereby further increasing our costs. The dollar
amount of claims that we actually experience under our workers' compensation and general liability insurance, for which we carry
high per-claim deductibles, may also increase at any time, thereby further increasing our costs. Also, the decreased availability
of property and liability insurance has the potential to negatively impact the cost of premiums and the magnitude of uninsured
losses.
Our current insurance may not provide
adequate levels of coverage against claims.
We currently maintain insurance customary
for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we
believe are not economically reasonable to insure, such as losses due to natural disasters. Such damages could have a material
adverse effect on our business and results of operations.
We are dependent on information technology
and any material failure of that technology could impair our ability to efficiently operate our business.
We rely on information systems across our
operations, including, for example, point-of-sale processing in our locations, management of our supply chain, collection of cash
and credit and debit card payments, payment of obligations and various other processes and procedures. Our ability to efficiently
manage our business depends significantly on the reliability and capacity of these systems. The failure of these systems to operate
effectively, problems with maintenance, upgrading or transitioning to replacement systems, or a breach in security of these systems
could cause delays in customer service, reduce efficiency in our operations, require significant investment to remediate the issue
or cause negative publicity that could damage our brand. Significant capital investments might be required to remediate any problems.
If we are unable to maintain our
rights to use key technologies of third parties, our business may be harmed.
We rely on certain technology licensed
from third parties and may be required to license additional technology in the future for use in managing our internet sites and
providing related services to users and customers. These third-party technology licenses may not continue to be available to us
on acceptable commercial terms or at all. The inability to enter into and maintain any of these technology licenses could significantly
harm our business, financial condition and operating results.
Our future growth may require us
to raise additional capital in the future, but that capital may not be available when it is needed or may be available only at
an excessive cost.
In order to build out our business plan
and to be ultimately successful, we will need ample capital to purchase/rent new properties, build new locations, hire personnel
and market our locations. We may not generate sufficient cash from our existing operations in order to do so. Therefore, we may
at some point choose to raise additional capital to support our continued growth. Our ability to raise additional capital will
depend, in part, on conditions in the capital markets at that time which are outside of our control. Accordingly, we may be unable
to raise additional capital, if and when needed, on terms acceptable to us, or at all. If we cannot raise additional capital when
needed, its ability to further expand operations through internal growth and acquisitions could be materially impacted. In the
event of a material decrease in our stock price, future issuances of equity securities could result in dilution of existing shareholder
interests.
If we are unable to obtain additional
funding, our business operations will be harmed. Even if we do obtain additional financing, our then existing shareholders may
suffer substantial dilution.
It is possible that additional capital
will be required to effectively support the operations and to otherwise implement our overall business strategy. The inability
to raise the required capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations.
Our ability to obtain capital will also depend on market conditions, the national economy and other factors beyond our control.
If we are unable to obtain necessary financing, we will likely be required to curtail our business plans, which could cause the
company to become dormant. Any additional equity financing may involve substantial dilution to our then existing shareholders.
The occurrence of any failure, breach
or interruption in service involving our systems or those of our service providers could damage our reputation, cause losses, increase
our expenses, and result in a loss of customers, an increase in regulatory scrutiny or expose us to civil litigation and possibly
financial liability, any of which could adversely impact our financial condition, results of operations and the market price of
our stock.
Communications and information systems
are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger,
our deposits and our loans. Our operations rely on the secure processing, storage and transmission of confidential and other information
in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant,
the security of our computer systems, software and networks may be vulnerable to breaches, unauthorized access, misuse, computer
viruses or other malicious code and cyber attacks that could have a security impact. In addition, breaches of security may occur
through intentional or unintentional acts by those having authorized or unauthorized access to our confidential or other information
or the confidential or other information of our customers, clients or counterparties. If one or more of such events was to occur,
the confidential and other information processed and stored in and transmitted through our computer systems and networks could
potentially be jeopardized or could otherwise cause interruptions or malfunctions in our operations or the operations of our customers,
clients or counterparties. This could cause us significant reputational damage or result in our experiencing significant losses.
Furthermore, we may be required to expend
significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures
arising from operational and security risks. We also may be subject to litigation and financial losses that are either not insured
against or not fully covered through any insurance we maintain. In addition, we routinely transmit and receive personal, confidential
and proprietary information by e-mail and other electronic means. We have discussed and worked with our customers, clients and
counterparties to develop secure transmission capabilities, but we do not have, and may be unable to put in place, secure capabilities
with all of these constituents, and we may not be able to ensure that these third parties have appropriate controls in place to
protect the confidentiality of such information.
While we have established policies and
procedures to prevent or limit the impact of systems failures and interruptions, there can be no assurance that such events will
not occur or that they will be adequately addressed if they do. In addition, we outsource certain aspects of our data processing
to certain third-party providers. If our third-party providers encounter difficulties, or if we have difficulty in communication
with them, our ability to adequately process and account for customer transactions could be affected, and our business operations
could be adversely impacted. Threats to information security also exist in the processing of customer information through various
other vendors and their personnel.
Our management team is not required
to devote their full time to our business.
Our Chief Executive Officer, Roy Warren,
and our Chief Financial Officer, Tommy Kee, hold the same roles at Attitude Drinks, Incorporated, another publicly traded company
that is the majority owner of Harrison, Vickers and Waterman, Inc. As a result of this other obligation, there is a substantial
risk that both Mr. Warren and Mr. Kee may not devote as much time as is necessary to our operations, which may harm our business
and operating results.
Our Former CEO and Director believes
he is owed $175,000
We had accrued $175,000 to our former CEO
and Sole Director, James Giordano. Upon Mr. Giordano’s exit from our firm, we arranged for the purchase of his common
shares held as complete compensation for his tenure here. All other liabilities to Mr. Giordano for services rendered were
eliminated. Mr. Giordano disputes this assertion. If we are required to remit to Mr. Giordano $175,000, it will take
away funds from operating and expanding the business, which may greatly harm our cash position and growth potential.
On September 4, 2015, the Company was notified
that Mr. Giordano filed a summons in Connecticut Superior Court alleging lost wages.
Shareholders may be diluted significantly
through our efforts to obtain financing and satisfy obligations through issuance of additional shares of our common stock.
We have no committed source of financing.
Wherever possible, our Board of Directors will attempt to use non-cash consideration to satisfy obligations. In many instances,
we believe that the non-cash consideration will consist of shares of our stock. As of the date of this Report, we have 7,500,000,000
authorized shares of common stock of which 126,337,367 are currently outstanding. We also have 1,000,000 shares of preferred stock
authorized of which 100,000 shares have been designated as Series A Convertible Preferred Stock and 100,000 shares are outstanding
and maybe converted into 100,000,000 shares of common stock. We also have designated and issued 51 shares of Series B Convertible
Preferred Stock that may be converted into 51,000 shares of common stock. Our Board of directors has authority, without action
or vote of the shareholders, to issue all or part of the remaining authorized but unissued common shares. The preferred shares
are subject to certain rights of the holders of the Series A and B Convertible Preferred Stock and may also be issued without the
vote of the common stockholders. In addition, if a trading market develops for our common stock, we may attempt to raise capital
by selling shares of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership
interests of existing shareholders and may further dilute common stock book value. Such dilution may be substantial. Such issuances
may also serve to enhance existing management’s ability to maintain control of the Company because the shares may be issued
to parties or entities committed to supporting existing management.
We are and will continue to be completely
dependent on the services of our Chief Executive Officer, Roy Warren, the loss of whose services may cause our business operations
to cease, and we will need to engage and retain qualified employees and consultants to further implement our strategy.
As of the date of this Report, our operations
and business strategy are completely dependent upon the knowledge and business contacts of Roy Warren, our President and CEO. He
is under no contractual obligation to remain employed by us. If he should choose to leave us for any reason before we have hired
additional personnel, our operations may fail. Even if we are able to find additional personnel, it is uncertain whether we could
find someone who could develop our business along the lines described herein. We will fail without Mr. Warren or an appropriate
replacement(s). We may, in the future, acquire key-man life insurance on the life of Mr. Warren naming us as the beneficiary when
and if we obtain the resources to do so, assuming Mr. Warren remains insurable. We have not yet procured such insurance, and there
is no guarantee that we will be able to obtain such insurance in the future. Accordingly, it is important that we are able to attract,
motivate and retain highly qualified and talented personnel and independent contractors. Furthermore, much of our marking efforts
rely principally on the personality and achievements of Roy Warren. If he was to incur any negative publicity, our operating results
may be harmed.
We are dependent upon affiliated
parties for the provisions of a substantial portion of our administrative services as we do not have the internal capabilities
to provide such services.
We utilize the services of four employees
of Attitude Drinks to perform administrative services for us. These individuals are not obligated to devote any set amount
of time to our business and may not be available when needed. There can be no assurance that we can successfully develop
the necessary expertise and infrastructure on our own without the assistance of these affiliated entities.
Our articles of incorporation provide
for indemnification of officers and directors at our expense and limit their liability, which may result in a major cost to us
and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers and/or directors.
Our articles of incorporation and applicable
Nevada law provide for the indemnification of our directors, officers, employees and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association
with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees,
or agents upon such person's promise to repay us if it is ultimately determined that any such person shall not have been entitled
to indemnification. There is no assurance that we would be able to collect on such promises. Therefore, if it is ultimately determined
that any such person shall not have been entitled to indemnification; this indemnification policy could result in substantial expenditures
by us which we will be unable to recoup.
The costs to meet our reporting and
other requirements as a public company subject to the Securities Exchange Act of 1934, as amended, may be substantial and may result
in us having insufficient funds to expand our business or even to meet routine business obligations.
As a public entity subject to the reporting
requirements of the Exchange Act, we will incur ongoing expenses associated with professional fees for accounting, legal and a
host of other expenses for annual reports and proxy statements. We estimate that these costs will range up to $100,000 per year
for the next few years and will be higher if our business volume and activity increases, but lower during the first year of being
public because our overall business volume will be lower. Until we become profitable, we will be required to sell additional equity
or seek loans to pay such expenses.
Risks Related to Our Common Stock
Any additional funding we arrange
through the sale of our common stock will result in dilution to existing security holders.
Our most likely source of working capital
and additional funds for the foreseeable future will be through the profits from World of Beer restaurants and taverns, and the
sale of additional shares of our common stock. Such issuances will cause security holders’ interests in our common stock
to be diluted which will negatively affect the value of your shares.
Any active trading market that may
develop may be restricted by virtue of state securities “Blue Sky” laws, which prohibit trading absent compliance with
individual state laws. These restrictions may make it difficult or impossible for our security holders to sell shares of our common
stock in those states.
There is a limited public market for our
common stock, and there can be no assurance that an active public market will develop in the foreseeable future. Transfer of our
common stock may also be restricted under the securities regulations and laws promulgated by various states and foreign jurisdictions,
commonly referred to as “Blue Sky” laws. Absent compliance with such individual state laws, our common stock may not
be traded in such jurisdictions. Because the securities registered hereunder have not been registered for resale under the Blue
Sky laws of any state, the holders of such shares and persons who desire to purchase them in any trading market that might develop
in the future should be aware that there may be significant state Blue Sky law restrictions upon the ability of investors to sell
the securities and of purchasers to purchase the securities. These restrictions prohibit or limit the secondary trading of our
common stock.
We currently do not intend to, and may
not be able to, qualify our securities for resale by our selling security holders in approximately 17 states that do not offer
manual exemptions and require shares to be qualified before they can be resold by our security holders. Accordingly, investors
should consider the secondary market for our securities to be a limited one.
Because we do not have an audit or
compensation committee, shareholders will have to rely on our President, who is not independent, to perform these functions.
We do not have an audit or compensation
committee comprised of independent directors. Indeed, we do not have any audit or compensation committee. These functions are performed
by our Chief Executive Officer and Chief Financial Officer. An independent audit committee plays a crucial role in the corporate
governance process, assessing our processes relating to our risks and control environment, overseeing financial reporting and evaluating
internal and independent audit processes. The lack of an independent audit committee may prevent the Board from being independent
from our management in their judgments and decisions and their ability to pursue the responsibilities of an audit committee
without undue influence. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are
unable to attract and retain qualified, independent directors, the management of our business could be compromised. Our lack of
an independent compensation committee presents the risk that our executive officers on the Board may have influence over his personal
compensation and benefits levels that may not be commensurate with our financial performance.
There is volatility in our stock
price.
The market for our stock has, from time
to time, experienced extreme price and volume fluctuations. Factors such as announcements of variations in our quarterly financial
results and fluctuations in same-store sales could cause the market price of our stock to fluctuate significantly. In addition,
the stock market in general, and the market prices for restaurant companies in particular, have experienced volatility that often
has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect
the price of our stock, regardless of our operating performance. Additionally, volatility or a lack of positive performance in
our stock price may adversely affect our ability to retain key employees, many of whom have been granted equity compensation.
The market price of our stock can be influenced
by stockholders' expectations about the ability of our business to grow and to achieve certain profitability targets. If our financial
performance in a particular quarter does not meet the expectations of our stockholders, it may adversely affect their views concerning
our growth potential and future financial performance. In addition, if the securities analysts who regularly follow our stock lower
their ratings of our stock, the market price of our stock is likely to drop significantly.
Our common shares are subject to
the "Penny Stock" Rules of the SEC and the trading market in our securities is limited, which makes transactions in our
stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission
has adopted Rule 15g-9, which establishes the definition of a “penny stock,” for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
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that a broker or dealer approve a person's account for
transactions in penny stocks; and
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the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity
of the penny stock to be purchased.
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In order to approve a person's account for transactions
in penny stocks, the broker or dealer must:
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obtain financial information and investment experience
objectives of the person; and
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make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
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The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market,
which, in highlight form:
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sets forth the basis on which the broker or dealer made
the suitability determination; and
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that the broker or dealer received a signed, written agreement
from the investor prior to the transaction.
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Generally, brokers may be less willing
to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors
to dispose of our shares of common stock and cause a decline in the market value of our stock.
Disclosure also has to be made about the
risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both
the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available
to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price
information for the penny stock held in the account and information on the limited market in penny stocks.
If an active market develops for
our shares, sales of our shares relying upon Rule 144 may depress prices in that market by a material amount.
The majority of the outstanding shares
of our common stock held by present stockholders are ”restricted securities” within the meaning of Rule 144 under the
Securities Act of 1933, as amended. The SEC has recently adopted amendments to Rule 144, which became effective on February 15,
2008 and apply to securities acquired both before and after that date. Under these amendments, a person who has beneficially owned
restricted shares of our common stock or warrants for at least six months would be entitled to sell their securities provided that
(i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding,
a sale and (ii) we have been current with the Exchange Act periodic reporting requirements for at least twelve months before the
sale.
Persons who have beneficially owned restricted
shares of our common stock or warrants for at least six months but who are our affiliates at the time of, or at any time during
the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell
within any three-month period only a number of securities that does not exceed 1% of the total number of shares of our common stock
then outstanding, which would equal 1,263,374 shares of our common stock immediately after this offering, for a company trading
on the pink sheets or Over-the-Counter Bulletin Board such as us.
The market for penny stocks has experienced
numerous frauds and abuses which could adversely impact investors in our stock.
We believe that the market for penny stocks
has suffered from patterns of fraud and abuse. Such patterns include:
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Control of the market for the security by one or a
few broker-dealers that are often related to the promoter or issuer;
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Manipulation of prices through prearranged matching
of purchases and sales and false and misleading press releases;
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“Boiler room” practices involving high
pressure sales tactics and unrealistic price projections by inexperienced sales persons;
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Excessive and undisclosed bid-ask differentials and
markups by selling broker-dealers; and
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The wholesale dumping of the same securities by promoters
and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with
consequent investor losses.
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We do not expect to pay dividends
to holders of our common stock in the foreseeable future. As a result, holders of our common stock must rely on stock appreciation
for any return on their investment.
There are no restrictions in our Articles
of Incorporation or Bylaws that prevent us from declaring dividends. The Nevada General Corporation Law, however, does prohibit
us from declaring dividends where, after giving effect to the distribution of the dividend, we would not be able to pay our debts
as they become due in the usual course of business, or if our total assets would be less than the sum of our total liabilities
plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving
the distribution. We have not declared any dividends since our inception, and we do not plan to declare any dividends on our common
stock in the foreseeable future. Accordingly, holders of our common stock will have to rely on capital appreciation, if any, to
earn a return on their investment in our common stock.
We may issue shares of preferred
stock in the future that may adversely impact the right of holders of our common stock.
As of the date of this Report, our Articles
of Incorporation authorizes us to issue up to 1,000,000 shares of preferred stock, of which 100,000 have been designated as Series
A Convertible Preferred Stock and 51 have been designated as Series B Convertible Preferred Stock. Accordingly, our Board of directors
will have the authority to fix and determine the relative rights and preferences of preferred shares, as well as the authority
to issue such shares, without further stockholder approval. As a result, our Board of Directors could authorize the issuance of
a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends
before dividends are declared to holders of our common stock and the right to the redemption of such preferred shares, together
with a premium, prior to the redemption of the common stock. To the extent that we do issue such additional shares of preferred
stock, the rights of holders of common stock could be impaired thereby, including, without limitation, dilution of their ownership
interests in us. In addition, shares of preferred stock could be issued with terms calculated to delay or prevent a change in control
or make removal of management more difficult, which may not be in the interest of holders of common stock. To date, our investors
in the Series A Preferred Convertible Preferred Stock have waived their dividends which we were obligated to pay to them. There
is no guarantee going forward that they will waive these dividends in the future. If so, the number of shares issued may be materially
dilute your investment.
