Innovation Beverage Group Ltd 20-F for FY2024
Innovation Beverage Group Ltd (IBG)
About this 20-F
Innovation Beverage Group Ltd filed this 20-F on May 15, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.93M
- down 6.9% from $3.15M a year earlier
- Net loss
- $2.57M
- compared with a net loss of $2.01M a year earlier
- Diluted EPS
- -$0.31
- compared with -$0.26 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report ____________
For the transition period from ____________ to ____________
Commission File No.: 333-[ ]
(Exact name of registrant as specified in its charter)
Translation of registrant’s name into English: Not applicable
| (Jurisdiction of incorporation or organization) | (Address of principal executive offices) |
Chief Executive Officer
Tel: +
Email:
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class to be registered | Trading Symbol(s) | Name of each exchange on which each class is to be registered | ||
share |
The |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2024: Ordinary Shares.
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act of 1934.
Yes ☐
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Emerging Growth Company |
If an emerging growth company that prepares its financial
statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has
filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report.
If securities are registered pursuant to Section 12(b)
of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of
an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.
| International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ |
Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark
whether the registrant is a shell company. Yes ☐
TABLE OF CONTENTS
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INTRODUCTION
Unless the context otherwise requires, references in this annual report on Form 20-F to the “Company,” “IBG,” “we,” “us,” “our” and other similar designations refer to Innovation Beverage Group Limited. All references to “ordinary shares” are to our ordinary shares, no par value.
The financial statements were prepared in accordance with generally accepted accounting principles in the United States, or GAAP.
Unless otherwise indicated, or the context otherwise requires, references in this Annual Report to financial and operational data for a particular year refer to the fiscal year of our Company ended December 31 of that year.
Our reporting currency and functional currency is the U.S. dollar. In this Annual Report, “AUD$” or “AUD” refer to Australian Dollars, and “$,” “US$” and “U.S. dollars” refer to United States dollars.
EMERGING GROWTH COMPANY STATUS
We qualify as an “emerging growth company,” as defined in the U.S. Jumpstart Our Business Startups Act of 2012, or JOBS Act, and we may take advantage of certain exemptions, including exemptions from various reporting requirements that are otherwise applicable to public traded entities that do not qualify as emerging growth companies. These exemptions include:
| ● | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; and |
| ● | not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis). |
Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, for complying with new or revised accounting standards. This means that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult. In addition, the information that we provide in this annual report may be different than the information you may receive from other public companies in which you hold equity interests.
We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion; (ii) the last day of the fiscal year following the fifth anniversary of the date of our initial public offering; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the aggregate worldwide market value of our ordinary shares, including ordinary shares represented by warrants, held by non-affiliates is at least $700 million as of the last business day of our most recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during any three-year period.
TRADEMARKS
We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. All trademarks, service marks, or trade names referred to in this Annual Report on Form 20-F are the property of their respective owners. Solely for convenience, the trademarks, service names, and trade names in this Annual Report on Form 20-F are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we and any of their other respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included or incorporated by reference in this Annual Report on Form 20-F may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are often characterized by the use of forward-looking terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” or other similar words or expressions denoting uncertainty or an action that may, will or is expected to occur in the future, but are not the only way these statements are identified.
These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.
Examples of forward-looking statements include:
| ● | the timing of the development of future products; |
| ● | projections of revenue, earnings, capital structure and other financial items; |
| ● | statements regarding the capabilities of our business operations; |
| ● | statements of expected future economic performance; |
| ● | statements regarding competition in our market; and |
| ● | assumptions underlying statements regarding us or our business. |
Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.
Important factors that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but not limited to, the factors summarized below:
| ● | the size of the market opportunity for our products and future products; |
| ● | the success of competing products that are or may become available; |
| ● | our plans relating to the further development of our future products, including additional products we may develop, manufacture, market, export, and/or retail; |
| ● | existing regulations and regulatory developments in the United States and other jurisdictions; |
| ● | our plans and ability to obtain or protect intellectual property rights and our ability to avoid infringing the intellectual property rights of others; |
| ● | the need to hire additional personnel and our ability to attract and retain such personnel; |
| ● | our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; |
| ● | our financial performance; |
| ● | the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements; |
| ● | our ability to generate revenue and profit margin under our anticipated contracts which is subject to certain risks; |
| ● | our ability to restructure our operations to comply with future changes in government regulation; and |
| ● | those factors referred to in “Item 3.D.3.D Risk Factors,” “Item 44. Information on the Company,” and “Item 55. Operating and Financial Review and Prospects,” as well as in this Annual Report on Form 20-F generally. |
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These and other factors could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Consequently, you should not place undue reliance on these forward-looking statements.
These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this Annual Report on Form 20-F in greater detail under the heading “Risk Factors” and elsewhere in this Annual Report on Form 20-F. You should not rely upon forward-looking statements as predictions of future events.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Annual Report on Form 20-F. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
MARKET, INDUSTRY AND OTHER DATA
Market data and certain industry data and forecasts used throughout this Annual Report on Form 20-F were obtained from sources we believe to be reliable, including market research databases, publicly available information, reports of governmental agencies, and industry publications and surveys. We have relied on certain data from third party sources, including industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry. While we are not aware of any misstatements regarding the industry data presented in this Annual Report on Form 20-F, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” and elsewhere in this Annual Report on Form 20-F.
Statements made in this Annual Report on Form 20-F concerning the contents of any agreement, contract or other document are summaries of such agreements, contracts or documents and are not a complete description of all of their terms. If we filed any of these agreements, contracts or documents as exhibits to this Report or to any previous filing with the Securities and Exchange Commission, or SEC, you may read the document itself for a complete understanding of its terms.
In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Note Regarding Forward-Looking Statements.”
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
You should carefully consider the risks described below, together with all of the other information in this Annual Report on Form 20-F. The risks and uncertainties described below are those material risk factors, currently known and specific to us, that we believe are relevant to an investment in our securities. Additional risks and uncertainties not currently known to us or that we now deem immaterial may also harm us. If any of these risks materialize our business, results of operations or financial condition could suffer, and the price of our ordinary shares could decline substantially.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” below. These risks include, among others, the following:
Summary of Risks Associated with our Business
Our business is subject to a number of risks of which you should be aware before a decision to invest in our Ordinary Shares. You should carefully consider all the information set forth in this annual report and, in particular, should evaluate the specific factors set forth in the sections titled “Risk Factors” before deciding whether to invest in our Ordinary Shares. Among these important risks are, but not limited to, the following:
Potential decline in the consumption of products we sell due to consumer preference and taste could have a negative impact on our sales, operations, and business.
Our business depends upon consumers’ consumption of our beverage brands. Consumer preferences and tastes may shift due to, among other reasons, changing taste preferences, demographics, or perceived value. Consequently, any material shift in consumer preferences and taste in our major markets away from our beverage brands, or from the categories in which they compete could have a negative impact on our business, liquidity, financial condition, and/or results of operations. Consumer preferences may shift due to a variety of factors, including changes in demographic or social trends, and changes in leisure, dining, and beverage consumption patterns. 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 or geopolitical conditions; | |
| ● | concern about the health consequences of consuming beverage alcohol products and about drinking and driving; | |
| ● | a general decline in the consumption of beverage alcohol products in on-premise establishments, which may result from stricter laws relating to driving while under the influence of alcohol; | |
| ● | the increased activity of anti-alcohol groups; |
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| ● | increased federal, state, provincial, and foreign excise, or other taxes on beverage alcohol products and possible restrictions on beverage alcohol advertising and marketing; | |
| ● | increased regulation placing restrictions on the purchase or consumption of beverage alcohol products or increasing prices due to the imposition of duties or excise tax or changes to international trade agreements; | |
| ● | inflation; and | |
| ● | wars, health epidemics or pandemics, quarantines, weather, and natural or man-made disasters. |
Demand for our products may be adversely affected by changes in category trends and consumer preferences.
Consumer preferences for our beverage brands change continually. Our success depends on our ability to predict, identify and interpret the tastes and habits of consumers and to offer products that appeal to those preferences.
If we do not succeed in offering products that appeal to consumers, our sales and market share will decrease, and our profitability could suffer. We must be able to distinguish among short-term fads, mid-term trends, and long-term changes in consumer preferences. If we are unable to accurately predict which shifts in consumer preferences will be long-term, or if we fail to introduce new and improved products to satisfy those preferences, our sales could decline. In addition, because of our varied consumer base, we must offer a sufficient array of products to satisfy the broad spectrum of consumer preferences. If we fail to expand our product offerings successfully across product categories or if we do not rapidly develop products in faster growing and more profitable categories, demand for our products will decrease and our profitability could suffer.
We may experience a reduced demand for some of our products due to health concerns (including obesity) and legislative initiatives against sweetened beverages.
Consumers are concerned about health and wellness; public health officials and government officials are increasingly vocal about obesity and its consequences. There has been a trend among some public health advocates and dietary guidelines to recommend a reduction in sweetened beverages, as well as increased public scrutiny, new taxes on sugar-sweetened beverages (as described below), and additional governmental regulations concerning the marketing and labeling/packing of the beverage industry. Additional or revised regulatory requirements, whether labeling, tax or otherwise, could have a material adverse effect on our financial condition and results of operations. Further, increasing public concern with respect to sweetened beverages could reduce demand for our beverages and increase desire for more low-calorie soft drinks, water, enhanced water, coffee-flavored beverages, tea, and beverages with natural sweeteners. We are continuously working to reduce calories and sugar in our products while launching new products, to pair with existing brand extensions that round out our diversified portfolio.
We may not be able to consummate proposed acquisitions or divestitures successfully or integrate acquired businesses successfully.
From time to time, we acquire businesses, assets, or securities of companies that we believe will provide a strategic fit with our business. We integrate acquired businesses with our existing operations; our overall internal control over financial reporting processes; and our financial, operations, and information systems. If the financial performance of our business, as supplemented by the assets and businesses acquired, does not meet our expectations, it may make it more difficult for us to service our debt obligations and our results of operations may fail to meet market expectations. We may not effectively assimilate the business or product offerings of acquired companies into our business or within the anticipated costs or timeframes, retain key customers and suppliers or key employees of acquired businesses, or successfully implement our business plan for the combined business. In addition, our final determinations and appraisals of the estimated fair value of assets acquired and liabilities assumed in our acquisitions may vary materially from earlier estimates, and we may fail to realize fully anticipated cost savings, growth opportunities, or other potential synergies. We cannot assure that the fair value of acquired businesses or investments will remain constant.
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We may also divest ourselves of businesses, assets, or securities of companies that we believe no longer provide a strategic fit with our business. We may provide various indemnifications in connection with the divestiture of businesses or assets. Divestitures of portions of our business may also result in costs stranded in our remaining business. Delays in developing or implementing plans to address such costs could delay or prevent the accomplishment of our financial objectives.
In addition, our continued success depends, in part, on our ability to develop new products. The launch and ongoing success of new products are inherently uncertain, especially with respect to consumer appeal. A new product launch can give rise to a variety of costs. An unsuccessful launch, among other things, can affect consumer perception of existing brands, and our reputation. Unsuccessful implementation or short-lived popularity of our product innovations may result in inventory write-offs and other costs.
We cannot assure that we will realize the expected benefits of acquisitions, divestitures, or investments. We also cannot assure that our acquisitions, investments, or joint ventures will be profitable, that forecasts regarding our acquisitions, divestitures, or investment activities will be accurate, or that the internal control over financial reporting of entities which we must consolidate as a result of our investment activities will be as robust as the internal control over financial reporting for our wholly-owned entities. Our failure to adequately manage the risks associated with acquisitions or divestitures, or the failure of an entity in which we have an equity or membership interest, could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.
We may not be able to retain and recruit executive management or build morale and performance amongst our workforce.
Our success depends upon the efforts and abilities of our executive management team, key senior management, and a high-quality employee base, as well as our ability to attract, motivate, reward, and retain them. If one of our executive officers or critical senior management terminates his or her employment, we may not be able to replace their expertise, fully integrate new personnel, or replicate the prior working relationships. The loss of critical employees might significantly delay or prevent the achievement of our business objectives. Qualified individuals with the breadth of skills and experience in our industry that we require are in high demand, and we may incur significant costs to attract them. Difficulties in hiring or retaining key executive or employee talent, or the unexpected loss of experienced employees could have an adverse impact on our business performance. In addition, we could experience business disruption and/or increased costs related to organizational changes, reductions in workforce, or other cost-cutting measures.
We may not be able to secure additional capital and achieve adequate liquidity to grow and compete.
We will require additional capital to operate, grow and compete, and failure to obtain such additional capital could limit our operations and our growth. We may need to raise additional funds through private or public equity and/or debt financing. We cannot assure that additional financing will be available to us on acceptable terms or at all. If additional capital is either unavailable or cost prohibitive, our operations and growth may be limited, and we may need to change our business strategy to slow the rate of, or eliminate, our expansion or to reduce or curtail our operations. Also, any additional financing we undertake could impose covenants upon us that restrict our operating flexibility, and, if we issue equity securities to raise capital, our existing shareholders may experience dilution and the new securities may have rights, preferences, and privileges senior to those of our ordinary shares.
If we are not able to successfully execute on our future operating plans and objectives, our financial condition, and results of operation may be materially adversely affected, and we may not be able to continue as a going concern.
It is important that we meet our sales goals and increase sales going forward as our operating plan already reflects prior significant cost containment measures and may make it difficult to achieve top-line growth if further significant reductions become necessary. If we do not meet our sales goals, our available cash and working capital will decrease and our financial condition will be negatively impacted.
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In order to be successful, we believe that we must, among other things:
| ● | increase the sales volume and gross margins for our products; | |
| ● | maintain efficiencies in operations; | |
| ● | manage our operating expenses to sufficiently support operating activities; | |
| ● | maintain fixed costs at or near current levels; and | |
| ● | avoid significant increases in variable costs relating to production, marketing, and distribution. |
We may not be able to meet these objectives, which could have a material adverse effect on our results of operations. We have incurred significant operating expenses in the past and may do so again in the future and, as a result, will need to increase revenues in order to improve our results of operations. Our ability to increase sales will depend primarily on success in expanding our current markets, improving our distribution base, entering into DTC arrangements with national accounts, and introducing new brands, products or product extensions to the market. Our ability to successfully enter new distribution areas and obtain national accounts will, in turn, depend on various factors, many of which are beyond our control, including, but not limited to, the continued demand for our brands and products in target markets, the ability to price our products at competitive levels, the ability to establish and maintain relationships with distributors in each geographic area of distribution and the ability in the future to create, develop and successfully introduce one or more new brands, products, and product extensions.
Our reliance on distributors, retailers, and brokers could affect our ability to efficiently and profitably distribute and market our products, maintain our existing markets and expand our business into other geographic markets.
Our ability to maintain and expand our existing markets for our products, and to establish markets in new geographic distribution areas, is dependent on our ability to establish and maintain successful relationships with reliable distributors, retailers, and brokers strategically positioned to serve those areas. Most of our distributors, retailers, and brokers sell and distribute competing products, including non-alcoholic and alcoholic beverages, and our products may represent a small portion of their businesses. The success of this network will depend on the performance of the distributors, retailers, and brokers of this network. There is a risk that the mentioned entities may not adequately perform their functions within the network by, without limitation, failing to distribute to sufficient retailers or positioning our products in localities that may not be receptive to our product. Our ability to incentivize and motivate distributors to manage and sell our products is affected by competition from other beverage companies who have greater resources than we do. To the extent that our distributors, retailers, and brokers are distracted from selling our products or do not employ sufficient efforts in managing and selling our products, including re-stocking the retail shelves with our products, our sales and results of operations could be adversely affected. Furthermore, such third-parties’ financial position or market share may deteriorate, which could adversely affect our distribution, marketing, and sales activities.
Our ability to maintain and expand our distribution network and attract additional distributors, retailers, and brokers will depend on a number of factors, some of which are outside our control. Some of these factors include:
| ● | the level of demand for our brands and products in a particular distribution area; | |
| ● | our ability to price our products at levels competitive with those of competing products; and | |
| ● |
our ability to deliver products in the quantity and at the time ordered by distributors, retailers, and brokers. |
We may not be able to successfully manage all or any of these factors in any of our current or prospective geographic areas of distribution. Our inability to achieve success with regards to any of these factors in a geographic distribution area will have a material adverse effect on our relationships in that particular geographic area, thus limiting our ability to maintain or expand our market, which will likely adversely affect our revenues and financial results.
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A key component of our business is our arrangement with Coca-Cola Europacific Partners (“CCEP”) to exclusively manufacture the bitters sold under the Australian Bitters Company brand for distribution in Australia. The disruption of this distribution strategy or the loss of this manufacturing and distribution partnership could result in a significant loss of revenue.
IBG exclusively manufactures Australian Bitters Company bitters for distribution in Australia due to our partnership with CCEP. In 2024, distribution and sales of our bitters under the Australian Bitters Company brand accounted for approximately 98% of our total revenue. If we fail to maintain good relations with CCEP and our agreement with CCEP were to expire or terminate, then we could incur a significant loss of revenue, which would negatively impact our results of operations.
Coca-Cola Europacific Partners could potentially terminate their agreement with us in the event of a change of control.
Under our Manufacturing Agreement (the “Agreement”) with Coca-Cola Europacific Partners, Coca-Cola Europacific Partners has the right to terminate the Agreement in the event of a change of control (as defined in the Agreement). Our initial public offering did not constitute a change of control for purposes of the Agreement unless an entity that is a direct competitor of Coca-Cola Europacific Partners in the beverage industry had come to hold, directly or indirectly, a legal or beneficial interest in any shares in the Company. There can be no assurance that Coca-Cola Europacific Partners will not determine that such a competitor had or has become a holder, directly or indirectly of a legal or beneficial interest in any shares in the Company. In addition, events may occur, or may have occurred, after the consummation of our initial public offering that would constitute a change of control under other elements of the definition of change of control set forth in the Agreement and thus trigger Coca-Cola Europacific Partners’ right to terminate the Agreement. Termination of the Agreement could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.
Upon the termination of the 2020 Manufacturing Agreement, two manufacturing and distribution licenses will expire, one of which would have a negative impact on our revenue.
On July 31, 2020, the Company (formerly known as Australian Boutique Spirits Pty Ltd) and Sway (formerly known as Elegance Brand, Inc.) entered into a Manufacturing, Supply and License Agreement, as amended on March 10, 2021, June 14, 2021, and October 21, 2022 (“2020 Manufacturing Agreement”). Upon the termination of the 2020 Manufacturing Agreement, two licenses granted thereunder will expire. Pursuant to said agreement, (i) IBG holds a royalty-free license to Twisted Shaker to manufacture, use and sell the product throughout the world, except the U.S., its territories and possessions; and (ii) Sway holds a royalty-free license to use the intellectual property rights associated with VOCO to manufacture, use and sell the brand in the U.S., its territories and possessions. The expiration of the license to manufacture and distribute Twisted Shaker would negatively impact our revenue as it accounted for $27,583 (1%) of our group consolidated revenue for fiscal year 2024, whereas the expiration of Sway’s royalty-free license to manufacture and distribute VOCO would return the rights to us. For further details about the 2020 Manufacturing Agreement, please see “Item 4. Business Overview–Material Agreements.”
Under the 2020 Manufacturing Agreement, Sway has a right to a Favored Nations Price Adjustment and if we fail to comply to provide such a pricing obligation, Sway is entitled to terminate the agreement.
Sway is entitled to a Favored Nations Price Adjustment (as described further under the section “Material Agreements”) on one occasion only during each Anniversary Year (meaning the period from August 1 through July 31) and it only applies to sales and purchases of Covered Products (as defined in the section “Material Agreements”) in the next succeeding Anniversary Year. If IBG fails to provide Sway with a Favored Nations Price Adjustment to which it may be entitled, Sway may, at its option, in addition to all of its other rights under this Agreement or at law, terminate this Agreement without liability to IBG. The termination of the 2020 Manufacturing Agreement would adversely effect our revenue, financial condition and results of operations.
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It is difficult to predict the timing and amount of our sales because our distributors are not required to place minimum orders with us.
Our independent distributors and national accounts are not required to place minimum monthly or annual orders for our products. In order to reduce their inventory costs, independent distributors typically order products from us on a “just in time” basis in quantities and at such times based on the demand for the products in a particular distribution area. Accordingly, we cannot predict the timing or quantity of purchases by any of our independent distributors or whether any of our distributors will continue to purchase products from us in the same frequencies and volumes as they may have done in the past. Additionally, our larger distributors and national partners may make orders that are larger than we have historically been required to fill. Shortages in inventory levels, supply of raw materials, or other key supplies could negatively affect us.
If we do not adequately manage our inventory levels, our operating results could be adversely affected.
We need to maintain adequate inventory levels to be able to deliver products to distributors on a timely basis. Our inventory supply depends on our ability to correctly estimate demand for our products. Our ability to estimate demand for our products is imprecise, particularly for new products, seasonal promotions, and new markets. If we materially underestimate demand for our products or are unable to maintain sufficient inventory of raw materials, we might not be able to satisfy demand on a short-term basis. If we overestimate distributor or retailer demand for our products, we may end up with too much inventory, resulting in higher storage costs, increased trade spend, and the risk of inventory spoilage. If we fail to manage our inventory to meet demand, we could damage our relationships with our distributors and retailers and could delay or lose sales opportunities, which would unfavorably impact our future sales and adversely affect our operating results. In addition, if the inventory of our products held by our distributors and retailers is too high, they will not place orders for additional products, which would also unfavorably impact our sales and adversely affect our operating results.
We rely upon our ongoing relationships with our key flavor suppliers. If we are unable to source our flavors on acceptable terms from our key suppliers, we could suffer disruptions in our business.
We currently purchase our flavor concentrate from various flavor concentrate suppliers, and continually develop other sources of flavor concentrate for each of our products. Generally, flavor suppliers hold the proprietary rights to their flavor specific ingredients. Although we have the exclusive rights to flavor concentrates developed with our current flavor concentrate suppliers, and while we have the rights to the ingredients for our products, we do not have the list of ingredients for our flavor extracts and concentrates. Consequently, we may be unable to obtain these exact flavors or concentrates from alternative suppliers on short notice. If we have to replace a flavor supplier, we could experience disruptions in our ability to deliver products to our customers, which could have a material adverse effect on our results of operations.
We highly depend upon the protection of our trademarks and proprietary rights, and failure to protect our intellectual property rights may result in our inability to continue providing certain of our existing products and beverage brands.
Our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights. We have been granted trademark registrations covering our brands and products and have filed, and expect to continue to file, trademark applications seeking to protect newly developed brands and products. We cannot be sure that trademark registrations will be issued with respect to any of our trademark applications. We could also, by omission, fail to timely renew or protect a trademark and our competitors could challenge, invalidate, or circumvent any existing or future trademarks issued.
Competition from traditional and large, well-financed non-alcoholic and alcoholic beverage manufacturers may adversely affect our distribution relationships and may hinder development of our existing markets, as well as prevent us from expanding our markets.
The beverage industry is highly competitive. We compete with other beverage companies not only for consumer acceptance but also for shelf space in retail outlets and for marketing focus by our distributors, all of whom also distribute other beverage brands. Our products compete with all non-alcoholic and alcoholic beverages, most of which are marketed by companies with substantially greater financial resources than ours. Some of these competitors are placing severe pressure on independent distributors not to carry competitive brands such as ours. We also compete with regional beverage producers and “private label” suppliers.
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Increased competitor consolidations, market-place competition, particularly among branded beverage products, and competitive product and pricing pressures could impact our earnings, market share and volume growth. If, due to such pressure or other competitive threats, we are unable to sufficiently maintain or develop our distribution channels, we may be unable to achieve our current revenue and financial targets. Competition, particularly from companies with greater financial and marketing resources than ours, could have a material adverse effect on our existing markets, as well as on our ability to expand the market for our products.
If we fail to protect our trademarks and trade secrets, we may be unable to successfully market our products and compete effectively.
We have an international registration of certain of our trademarks under the Madrid protocol. We also rely on a combination of trademark and trade secrecy laws, confidentiality procedures, formulation protection procedures and contractual provisions with employees and contractors to protect our intellectual property rights. Failure to protect our intellectual property could harm our brand and our reputation, and adversely affect our ability to compete effectively. Further, enforcing or defending our intellectual property rights, including our trademarks, copyrights, licenses, formulations and trade secrets, could result in the expenditure of significant financial and managerial resources. We regard our intellectual property, and in particular our trademarks and trade secrets, to be of considerable value and importance to our business and our success. However, the steps taken by us to protect these proprietary rights may not be adequate and may not prevent third parties from infringing or misappropriating our trademarks, trade secrets, or similar proprietary rights. In addition, other parties may seek to assert infringement claims against us, and we may have to pursue litigation against other parties to assert our rights. Any such claim or litigation could be costly. In addition, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have a material adverse effect on our ability to market or sell our brands, profitably exploit our products, or recoup our associated research and development costs.
As part of the distribution strategy of our products, we grant licenses to distributors for their respective territory. Although our distribution agreements require that the use of our trademarks and designs is subject to our control and approval, any breach of these provisions, or any other action by any of our licensing partners that is harmful to our brands, goodwill and overall image, could have a material adverse impact on our business.
Supply of quality water, agricultural and other raw materials packaging materials purchased under short-term supply contracts, and glass bottles available from a limited group of suppliers, may harm our supplier which may affect our production costs and cause a shortage of our product supply.
The quality and quantity of water available for use is important to the supply of our agricultural raw materials and our ability to operate our business. Water is a limited resource in many parts of the world and if climate patterns change and droughts become more severe, there may be a scarcity of water or poor water quality which may affect our production costs or impose capacity constraints. We are dependent on sufficient amounts of quality water for operation of our facilities, as well as to conduct our other operations. The suppliers of the agricultural raw materials we purchase are also dependent upon sufficient supplies of quality water for their vineyards and fields. If water available to our operations or the operations of our suppliers becomes scarce or the quality of that water deteriorates, we may incur increased production costs or face manufacturing constraints. In addition, water purification and waste treatment infrastructure limitations could increase costs or constrain operation of our production facilities. A substantial reduction in water supplies could result in material losses of grape crops and vines or other crops, which could lead to a shortage of our product supply.
Our facilities use a large volume of agricultural and other raw materials to produce their products. Our facilities all use large amounts of various packaging materials, including glass, aluminum, cardboard, and other paper products. Our production facilities also use electricity, natural gas, and diesel fuel in their operations. Certain raw materials and packaging materials are purchased under contracts of varying maturities. The supply, on-time availability and price of raw materials, packaging materials, and energy can be affected by many factors beyond our control, including market demand, global geopolitical events (especially as to their impact on crude oil prices), droughts, storms, and other weather conditions or natural or man-made events, economic factors affecting growth decisions, inflation, plant diseases, and theft.
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Disruptions in our supply chains could impact our ability to continue production. To the extent any of the foregoing factors increases the costs of our finished products or lead to a shortage of our product supply, we could experience a material adverse effect on our business, liquidity, financial condition, and/or results of operations.
The volatility of energy and increased regulations may have an adverse impact on our gross margin.
Over the past few years, volatility in the global oil markets has resulted in variable fuel prices, which many shipping companies have passed on to their customers by way of higher base pricing and increased fuel surcharges. If fuel prices continue to increase, we expect to experience higher shipping rates and fuel surcharges, as well as energy surcharges on our raw materials. It is hard to predict what will happen in the fuel markets in the remainder of 2025 and beyond. Due to the price sensitivity of our products, we may not be able to pass such increases on to our customers.
Disruption within our supply chain or distribution channels could have an adverse effect on our business, financial condition, and results of operations.
Our ability, through our suppliers, business partners, independent distributors, and retailers, to make, move and sell products is critical to our success. Damage or disruption to our suppliers or to manufacturing or distribution capabilities due to weather, natural disaster, fire or explosion, terrorism, pandemics such as the COVID-19 pandemic, labor strikes, or other reasons, could impair the manufacture, distribution, and sale of our products. Many of these events are outside of our control. Failure to take adequate steps to protect against or mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition, and results of operations.
Our business operations may be interrupted and negatively affected due to economic and political uncertainties or changes associated with our international operations.
We operate facilities in Australia, which includes a distillery, and in the United States. These countries impose duties, excise taxes, and/or other taxes on beverage alcohol products, and/or on certain raw materials used to produce our beverage alcohol products, in varying amounts. Governmental bodies may propose changes to international trade agreements, treaties, taxes, and other government rules and regulations including but not limited to environmental treaties and regulations. Significant increases in import and excise duties or other taxes on, or that impact, beverage alcohol products could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.
In addition, governmental agencies extensively regulate the beverage alcohol products industry concerning such matters as licensing, warehousing, trade and pricing practices, permitted and required labeling, advertising, and relations with wholesalers and retailers. Certain regulations also require warning labels and signage. New or revised regulations or increased licensing fees, requirements, or taxes could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations. Additionally, various jurisdictions may seek to adopt significant additional product labeling or warning requirements or limitations on the marketing or sale of our products because of what our products contain or allegations that our products cause adverse health effects. If these types of requirements become applicable to one or more of our major products under current or future environmental or health laws or regulations, they may inhibit sales of such products.
These uncertainties and changes, as well as the decisions, policies, and economic strength of our suppliers and distributors, could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.
Volatility in the price or availability of the inputs we depend on, including raw materials, packaging, energy, and labor, could adversely impact our financial results.
The principal raw materials we use include glass bottles, aluminum cans, labels, and cardboard cartons, flavorings, and sweeteners. These ingredient costs are subject to fluctuation. Substantial increases in the prices of our ingredients, raw materials, and packaging materials, to the extent that they cannot be recouped through increases in the prices of finished beverage products, would increase our operating costs and could reduce our profitability. If our supply of these raw materials is impaired or if prices increase significantly, it could affect the affordability of our products and reduce sales.
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If we are unable to secure sufficient ingredients or raw materials including glass, sugar, and other key supplies, we might not be able to satisfy demand on a short-term basis.
Operational disruptions or catastrophic loss to our properties, other production facilities, or distribution systems could cause delays in our production.
If any of our properties, production facilities, or distribution systems were to experience a significant operational disruption or catastrophic loss, it could delay or disrupt production, shipments, and revenue, and result in potentially significant expenses to repair or replace these properties. Also, our production facilities are asset intensive. As our operations are concentrated in a limited number of production and distribution facilities, we are more likely to experience a significant operational disruption or catastrophic loss in any one location from acts of war or terrorism, fires, floods, earthquakes, severe winter storms, hurricanes, pandemics, labor strike, or other labor activities, cyber-attacks, and other attempts to penetrate our information technology systems or the information technology used by our employees who work remotely, unavailability of raw or packaging materials, or other natural or man-made events. If a significant operational disruption or catastrophic loss were to occur, we could breach agreements, our reputation could be harmed, and our business, liquidity, financial condition, and/or results of operations could be adversely affected due to higher maintenance charges, unexpected capital spending, or product supply constraints.
Our insurance policies do not cover certain types of catastrophes and may not cover certain events such as pandemics. Economic conditions and uncertainties in global markets may adversely affect the cost and other terms upon which we are able to obtain property damage and business interruption insurance. If our insurance coverage is adversely affected, or to the extent we have elected to self-insure, we may be at greater risk that we may experience an adverse impact to our business, liquidity, financial condition, and/or results of operations.
Counterfeit or confusingly similar products sold by third parties could harm our brand and cause a decrease in our sales and operations.
To the extent that third parties sell products that are either counterfeit versions of our brands or brands that look like our brands, consumers of our brands could confuse our products with products that they consider inferior. This could cause them to refrain from purchasing our brands in the future and in turn could impair our brand equity and adversely affect our sales and operations.
Failure to obtain satisfactory performance from our suppliers or loss of our existing suppliers could harm our business and as a result, our operations could suffer.
We do not have long-term, written agreements with any of our suppliers. The termination of our relationships or an adverse change in the terms of these arrangements could have a negative impact on our business. If our suppliers increase their prices, we may not be able to secure alternative suppliers, and may not be able to raise the prices of our products to cover all or even a portion of the increased costs. Also, our suppliers’ failure to perform satisfactorily or handle increased orders, delays in shipments of products from suppliers or the loss of our existing suppliers, especially our key suppliers, could cause us to fail to meet orders for our products, lose sales, incur additional costs and/or expose us to product quality issues. In turn, this could cause us to lose credibility in the marketplace and damage our relationships with distributors, ultimately leading to a decline in our business and results of operations. If we are not able to renegotiate these contracts on acceptable terms or find suitable alternatives, our business, financial condition, or results of operations could be negatively impacted.
Failure of our U.S. distributors to distribute our products adequately within their territories could result in a decline of our operations.
In the U.S., we are required by law to use state-licensed distributors or, in 17 states known as “control states,” state-owned agencies performing this function, to sell our products to retail outlets, including liquor stores, bars, restaurants, and national chains in the United States. Our importer has established relationships for our brands with a limited number of wholesale distributors; however, failure to maintain those relationships could significantly and adversely affect our business, sales, and growth.
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Over the past decade there has been increasing consolidation, both intrastate and interstate, among distributors. As a result, many states now have only two or three significant distributors. Also, there are several distributors that now control distribution for several states. If we fail to maintain good relations with a distributor, our products could, in some instances be frozen out of one or more markets entirely. The ultimate success of our products also depends in large part on our distributors’ ability and desire to distribute our products to our desired U.S. target markets, as we rely significantly on them for product placement and retail store penetration. In addition, all of our distributors also distribute competitive brands and product lines. We cannot assure you that our U.S. distributors will continue to purchase our products, commit sufficient time and resources to promote and market our brands and product lines, or that they can or will sell them to our desired or targeted markets. If they do not, our sales will be harmed, resulting in a decline in our results of operations.
If our third-party service providers and business partners do not satisfactorily fulfill their commitments and responsibilities, our financial results could suffer.
In the conduct of our business, we rely on relationships with third parties, including cloud data storage and other information technology service providers, suppliers, distributors, contractors, joint venture partners, and other external business partners, for certain functions or for services in support of key portions of our operations. These third-party service providers and business partners are subject to similar risks as we are, relating to cybersecurity, privacy violations, business interruption, and systems and employee failures, and are subject to legal, regulatory, and market risks of their own. Our third-party service providers and business partners may not fulfill their respective commitments and responsibilities in a timely manner and in accordance with the agreed-upon terms. In addition, while we have procedures in place for selecting and managing our relationships with third-party service providers and other business partners, we do not have control over their business operations or governance and compliance systems, practices and procedures, which increases our financial, legal, reputational, and operational risk. If we are unable to effectively manage our third-party relationships, or for any reason our third-party service providers or business partners fail to satisfactorily fulfill their commitments and responsibilities, our financial results could suffer.
Pandemics, such as the global COVID-19 pandemic, outbreaks of communicable infections or diseases, or other public health concerns in the markets in which our consumers or employees live and/or in which we or our distributors, retailers, and suppliers operate may damage our business and disrupt our operations.
Disease outbreaks and other public health conditions could result in disruptions and damage to our business caused by potential negative consumer purchasing behavior as well as disruption to our supply chains, production processes, and operations. Consumer purchasing behavior may be impacted by reduced consumption by consumers who may not be able to leave home or otherwise shop in a normal manner as a result of quarantines or other cancellations of public events and other opportunities to purchase our products, from bar and restaurant closures, or from a reduction in consumer discretionary income due to reduced or limited work and layoffs. Supply disruption may result from restrictions on the ability of employees and others in the supply chain to travel and work, caused by quarantine or individual illness, or which may result from border closures imposed by governments to deter the spread of communicable infection or disease, or determinations by us or our suppliers or distributors to temporarily suspend operations in affected areas, or other actions which restrict the ability to distribute our products or which may otherwise negatively impact our ability to produce, bottle, and ship our product, for our distributors to distribute our products, or for our suppliers to provide us our raw materials. Ports or channels of entry may be closed or operate at only a portion of capacity, or transportation of products within a region or country may be limited, if workers are unable to report to work due to travel restrictions or personal illness. Our operations and the operations of our suppliers may become less efficient or otherwise become negatively impacted if our executive leaders or other personnel critical to our operations are unable to work or if a significant percentage of the workforce is unable to work or is required to work from home. Our cyber-security could be compromised if persons who are forced to work from home do not maintain adequate information security. A prolonged quarantine or border closure could result in temporary or longer-term disruptions of sales patterns, consumption and trade patterns, supply chains, production processes, and operations. A widespread health crisis, such as the COVID-19 pandemic, could negatively affect the economies and financial markets of many countries resulting in a global economic downturn, which could negatively impact demand for our products and our ability to borrow money. Any of these events could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.
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Contamination and degradation of product quality from diseases, pests, and the effects of weather and climate conditions could delay, disrupt, and harm our sales and operations.
Contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our brands, could adversely affect sales. Various diseases, pests, fungi, viruses, drought, frosts, and certain other weather conditions or the effects of climate conditions, such as smoke taint from wildfires, could affect the quality and quantity of agricultural raw materials available, decreasing the supply and quality of our products. Similarly, power disruptions due to weather conditions could adversely impact our production processes and the quality of our products. We cannot guarantee that we and/or our suppliers of agricultural raw materials will succeed in preventing contamination in existing and/or future vineyards or fields. Future government restrictions regarding the use of certain materials used in growing grapes or other agricultural raw materials may increase vineyard costs and/or reduce production of grapes or other crops. It is also possible that a supplier may not provide materials or product components which meet our required standards or may falsify documentation associated with the fulfillment of those requirements.
Product contamination or tampering or the failure to maintain our standards for product quality, safety, and integrity, including with respect to raw materials, naturally occurring compounds, packaging materials, or product components obtained from suppliers, may also reduce demand for our products or cause production and delivery disruptions. Contaminants or other defects in raw materials, packaging materials, or product components purchased from third parties and used in the production of our products, or defects in the fermentation or distillation process could lead to low beverage quality as well as illness among, or injury to, consumers of our products and may result in reduced sales of the affected brand or all our brands.
If any of our products become unsafe or unfit for consumption, are misbranded, or cause injury, we may have to engage in a product recall and/or be subject to liability and incur additional costs. A widespread product recall, multiple product recalls, or a significant product liability judgment could cause our products to be unavailable for a period, which could further reduce consumer demand and brand equity.
Class action or other litigation relating to abuse of our products, the misuse of our products, product liability, or marketing or sales practices could cause a disruption in our operations.
There has been public attention directed at the beverage alcohol industry, which we believe is due to concern over problems related to harmful use of alcohol, including drinking and driving, underage drinking, and health consequences from the misuse of alcohol. We could be exposed to lawsuits relating to product liability or marketing or sales practices. Adverse developments in lawsuits concerning these types of matters or a significant decline in the social acceptability of beverage alcohol products that may result from lawsuits could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.
Failure of our distributors to secure and maintain listings in the control states in the U.S. could cause our sales to decrease which will negatively impact our operations.
In the control states, the state liquor commissions act in place of distributors and decide which products are to be purchased and offered for sale in their respective states. Products selected for listing in control states must generally reach certain volumes and/or profit levels to maintain their listings. Products in control states are selected for purchase and sale through listing procedures, which are generally made available to new products only at periodically scheduled listing interviews. Products not selected for listings can only be purchased by consumers in the applicable control state through special orders, if at all. If, in the future, we are unable to maintain our current listings in the control states, or secure and maintain listings in those states for any additional products we may develop or acquire, sales of our products could decrease significantly, which would have a material adverse financial effect on our results of operations and financial condition.
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Failure of our key or service product information technology systems, a cyber-security breach, or cyber-related fraud could negatively impact our business, operations, and reputation.
We rely on information technology (“IT”) systems, networks, and services, including internet sites, data hosting and processing facilities and tools, hardware (including laptops and mobile devices), and software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third-parties or their vendors, to assist us in the management of our business.
Increased IT security threats and more sophisticated cyber-crime, pose a potential risk to the security of our IT systems, networks, and services, as well as to the confidentiality, availability, and integrity of our data. If the IT systems, networks, or service providers we rely upon fail to function properly, or if we suffer a loss or disclosure of business or other sensitive information, due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively address these failures on a timely basis, we may suffer interruptions in our ability to manage operations and reputational, competitive, and/or business harm, which may adversely affect our business operations and/or financial condition. In addition, such events could result in unauthorized disclosure of material confidential information, and we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us or to our partners, our employees, customers, suppliers, or consumers. In any of these events, we could also be required to spend significant financial and other resources to remedy the damage caused by a security breach or to repair or replace networks and IT systems.
Litigation and litigation risks may have an adverse impact on our operations, business, and reputation.
From time to time, we may become involved in various litigation matters and claims, including employment, regulatory proceedings, administrative proceedings, governmental investigations, and contract disputes. We could face potential claims or liability for, among other things, breach of contract, defamation, libel, fraud, or negligence. We may also face employment-related litigation, including claims of age discrimination, sexual harassment, gender discrimination, immigration violations, or other local, state, and federal labor law violations. Because of the uncertain nature of litigation and insurance coverage decisions, the outcome of such actions and proceedings cannot be predicted with certainty and an unfavorable resolution of one or more of them could have a material adverse effect on our business, financial condition, results of operations, cash flows, reputation, brand identity, and the trading price of our securities. Any such litigation, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks important to the success of our business.
Product liability or other related liabilities could lead to litigation which could damage our operations, business, and reputations.
Although we maintain liability insurance and will attempt to limit our contractual liability for damages arising from our products, these measures may not be sufficient for us to successfully avoid or limit product liability or other related liabilities. Our product liability insurance coverage is limited to AUD$1 million per occurrence and AUD$2 million in the aggregate and our general liability umbrella policy is capped at AUD$5 million, which may be insufficient. Further, any contractual indemnification and insurance coverage we have from parties supplying our products is limited, as a practical matter, to the creditworthiness of the indemnifying party and the insured limits of any insurance provided by these suppliers. In any event, extensive product liability claims could be costly to defend and/or costly to resolve and could harm our reputation or business.
If we encounter product recalls or other product quality issues, our business may suffer.
Product quality issues, real or imagined, or allegations of product contamination, even when false or unfounded, could tarnish our image and could cause consumers to choose other products. In addition, because of changing government regulations or implementation thereof, or allegations of product contamination, we may be required from time to time to recall products entirely or from specific markets. Product recalls could affect our profitability and could negatively affect brand image.
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Our business is subject to many regulations and noncompliance is costly.
The production, marketing and sale of our beverages, including contents, labels, caps, and containers, are subject to the rules and regulations of various federal, provincial, state, and local health agencies. If a regulatory authority finds that a current or future product or production batch or “run” is not in compliance with any of these regulations, we may be fined, or production may be stopped, which would adversely affect our financial condition and results of operations. Similarly, any adverse publicity associated with any noncompliance may damage our reputation and our ability to successfully market our products. Furthermore, the rules and regulations are subject to change from time to time and while we closely monitor developments in this area, we cannot anticipate whether changes in these rules and regulations will impact our business adversely. Additional or revised regulatory requirements, whether labeling, environmental, tax or otherwise, could have a material adverse effect on our financial condition and results of operations.
Significant additional labeling or warning requirements may inhibit sales of affected products.
Various jurisdictions may seek to adopt significant additional product labeling or warning requirements relating to the chemical content or perceived adverse health consequences of certain of our products. These types of requirements, if they become applicable to one or more of our products under current or future environmental or health laws or regulations, may inhibit sales of such products. In California, a law requires that a specific warning appear on any product that contains a component listed by the state as having been found to cause cancer or birth defects. This law recognizes no generally applicable quantitative thresholds below which a warning is not required. If a component found in one of our products is added to the list, or if the increasing sensitivity of detection methodology that may become available under this law and related regulations as they currently exist, or as they may be amended, results in the detection of an infinitesimal quantity of a listed substance in one of our beverages produced for sale in California, the resulting warning requirements or adverse publicity could affect our sales.
Our business and operations would be adversely impacted in the event of a failure or interruption of our information technology infrastructure or as a result of a cybersecurity attack.
The proper functioning of our own information technology (IT) infrastructure is critical to the efficient operation and management of our business. We may not have the necessary financial resources to update and maintain our IT infrastructure, and any failure or interruption of our IT system could adversely impact our operations. In addition, our IT is vulnerable to cyber-attacks, computer viruses, worms and other malicious software programs, physical and electronic break-ins, sabotage and similar disruptions from unauthorized tampering with our computer systems. We believe that we have adopted appropriate measures to mitigate potential risks to our technology infrastructure and our operations from these IT-related and other potential disruptions. However, given the unpredictability of the timing, nature, and scope of any such IT failures or disruptions, we could potentially be subject to downtimes, transactional errors, processing inefficiencies, operational delays, other detrimental impacts on our operations or ability to provide products to our customers, the compromising of confidential or personal information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our cash flows, competitive position, financial condition, or results of operations.
If we fail to comply with personal data protection and privacy laws, we could be subject to adverse publicity, government enforcement actions, and/or private litigation, which could negatively affect our business and operating results.
In the ordinary course of our business, we receive, process, transmit, and store information relating to identifiable individuals (“personal data”), primarily employees, former employees, and consumers with whom we interact. As a result, we are subject to various U.S. federal and state and foreign laws and regulations relating to personal data. These laws have been subject to frequent changes, and new legislation in this area may be enacted in other jurisdictions at any time. These laws impose operational requirements for companies receiving or processing personal data, and many provide for significant penalties for noncompliance. These requirements with respect to personal data have subjected and may continue in the future to subject us to, among other things, additional costs and expenses and have required and may in the future require costly changes to our business practices and information security systems, policies, procedures, and practices. Our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures, and practices we implemented or may implement in the future may not prevent the improper disclosure of personal data by us or the third-party service providers and vendors whose technology, systems and services we use in connection with the receipt, storage, and transmission of personal data. Unauthorized access or improper disclosure of personal data in violation of personal data protection or privacy laws could harm our reputation, cause loss of consumer confidence, subject us to regulatory enforcement actions (including fines), and result in private litigation against us, which could result in loss of revenue, increased costs, liability for monetary damages, fines, and/or criminal prosecution, all of which could negatively affect our business and operating results.
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International operations, worldwide and domestic economic trends, financial market conditions, geopolitical uncertainty, changes to international trade agreements and import and excise duties, other taxes, or other governmental rules and regulations could have a material adverse effect on our business and operations.
Risks associated with international operations, any of which could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations, include:
| ● | changes in local political, economic, social, and labor conditions; | |
| ● | potential disruption from socio-economic violence, including terrorism and drug-related violence; | |
| ● |
restrictions on foreign ownership and investments or on repatriation of cash earned in countries outside the U.S.; | |
| ● | import and export requirements and border accessibility; | |
| ● | currency exchange rate fluctuations; | |
| ● | a less developed and less certain legal and regulatory environment in some countries, which, among other things, can create uncertainty regarding contract enforcement, intellectual property rights, privacy obligations, real property rights, and liability issues; and | |
| ● | inadequate levels of compliance with applicable anti-bribery laws, including the Foreign Corrupt Practices Act. |
Unfavorable global or regional economic conditions, including economic slowdown and the disruption, volatility, and tightening of credit and capital markets, as well as unemployment, tax increases, governmental spending cuts, or a return of high levels of inflation, could affect consumer spending patterns and purchases of our products. These could also create or exacerbate credit issues, cash flow issues, and other financial hardships for us and our suppliers, distributors, retailers, and consumers. The inability of suppliers, distributors, and retailers to access liquidity could impact our ability to produce and distribute our products.
We are also exposed to risks associated with interest rate fluctuations. We could experience changes in our ability to manage fluctuations in interest rates and, accordingly, there can be no assurance that we will be successful in reducing those risks.
We could also be affected by nationalization of our international operations, unstable governments, unfamiliar or biased legal systems, intergovernmental disputes or animus against the U.S. Any determination that our operations or activities did not comply with applicable U.S. or foreign laws or regulations could result in the imposition of fines and penalties, interruptions of business, terminations of necessary licenses and permits, and other legal and equitable sanctions.
We are subject to risks inherent in sales of products in international markets.
Our operations outside of the United States constitute a significant portion of our revenue and profitability, and we believe that developing and emerging markets could present future growth opportunities for us. However, there can be no assurance that existing or new products that we manufacture, distribute, or sell will be accepted or be successful in any particular foreign market, due to local or global competition, product price, cultural differences, consumer preferences, or otherwise. There are many factors that could adversely affect demand for our products in foreign markets, including our inability to attract and maintain key distributors in these markets; volatility in the economic growth of certain of these markets; changes in economic, political or social conditions; the status and renegotiations of the North American Free Trade Agreement; imposition of new or increased labeling, product or production requirements, or other legal restrictions; restrictions on the import or export of our products or ingredients or substances used in our products; inflationary currency, devaluation or fluctuation; and increased costs of doing business due to compliance with complex foreign and U.S. laws and regulations. If we are unable to effectively operate or manage the risks associated with operating in international markets, our business, financial condition, or results of operations could be adversely affected.
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Damage to our reputation could harm our business and cause a decline in our sales.
The success of our brands depends upon the positive image that consumers have of those brands and maintaining a good reputation is critical to selling our branded products. Our reputation could also be impacted negatively by public perception, adverse publicity (whether or not valid, such as the similarity of the name of certain of our brands or trademarks and a type of virus), negative comments in social media, or our responses relating to:
| ● | a perceived failure to maintain high ethical and ESG standards and practices for all our operations and activities; | |
| ● | a perceived failure to address concerns relating to the quality, safety, or integrity of our products, including from contamination, whether arising accidentally or through deliberate third-party action; | |
| ● | allegations that we, or persons associated with us or formerly associated with us, have violated applicable laws or regulations, including but not limited to those related to safety, employment, discrimination, harassment, whistle-blowing, privacy, corporate citizenship, improper business practices, or cyber-security; | |
| ● | our environmental impact, including use of agricultural materials, packaging, water and energy use, and waste management; or | |
| ● | efforts that are perceived as insufficient to promote the responsible use of alcohol. |
Failure to comply with federal, state, or local laws and regulations, maintain an effective system of internal controls, provide accurate and timely financial statement information, or protect our information systems against service interruptions, misappropriation of data, or breaches of security, could also hurt our reputation. Damage to our reputation or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations, as well as require additional resources to rebuild our reputation, competitive position, and brand equity and renew investor confidence.
Due to the highly competitive market we operate in, our sales and operations could be negatively affected by our competitors.
We are in a highly competitive industry and our sales could be negatively affected by numerous factors including:
| ● | our inability to maintain or increase prices; | |
| ● | new entrants in our market or categories; | |
| ● | the decision of wholesalers, retailers, or consumers to purchase competitors’ products instead of ours; or | |
| ● |
a general decline in beverage alcohol consumption due to consumer dietary preference changes or consumers substituting legalized marijuana or other similar products in lieu of beverage alcohol. |
Sales could also be affected by pricing, purchasing, financing, operational, advertising, or promotional decisions made by wholesalers, state and other local agencies, and retailers which could affect their supply of, or consumer demand for, our products. We could also experience higher than expected selling, general, and administrative expenses if we find it necessary to increase the number of our personnel or our advertising or marketing expenditures to maintain our competitive position or for other reasons. We cannot guarantee that we will be able to increase our prices to pass along to our customers any increased costs we incur.
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Our intangible assets, such as customer contracts, software development costs, a liquor license and contract services, could have a material adverse effect in the event of a write-down of the assets.
We have a significant amount of intangible assets such as customer contracts, software development costs, a liquor license and contract services and may acquire more intangible assets in the future. Intangible assets are subject to a periodic impairment evaluation under applicable accounting standards. The write-down of any of these intangible assets could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.
Changes to tax laws, fluctuations in our effective tax rate, accounting for uncertain tax positions, the resolution of tax disputes, and changes to accounting standards, elections, or assertions could harm our business and operations.
The U.S. federal budget and individual state, provincial, local municipal budget deficits, or deficits in other governmental entities, could result in increased taxes on our products, business, customers, or consumers. Various proposals to increase taxes on beverage alcohol products have been made at the federal and state levels or at other governmental bodies in recent years. Federal, state, provincial, local, or foreign governmental entities may consider increasing taxes upon beverage alcohol products as they explore available alternatives for raising funds.
In addition, significant judgment is required to determine our effective tax rate and evaluate our tax positions. Our provision for income taxes includes a provision for uncertain tax positions. Fluctuations in federal, state, local, and foreign taxes, or a change to uncertain tax positions, including related interest and penalties, may impact our effective tax rate and our financial results. When tax matters arise, several years may elapse before such matters are audited and finally resolved. Unfavorable resolution of any tax matter could increase our effective tax rate and resolution of a tax issue may require the use of cash in the year of resolution.
U.S. tax changes or changes in how international corporations are taxed, including changes in how existing tax laws are interpreted or enforced, or changes to accounting standards, elections or assertions could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations.
We may be required in the future to record a significant charge to earnings if our intangible assets become impaired.
Under United States Generally Accepted Accounting Principles (“U.S. GAAP”), we are required to review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that may be considered a change in circumstances indicating that the carrying value of our intangible assets may not be recoverable include, declining or slower than anticipated growth rates for certain of our existing products, a decline in stock price and market capitalization, and slower growth rates in our industry. We may be required in the future to record a significant charge to earnings during the period in which we determine that our intangible assets have been impaired. Any such charge would adversely impact our results of operations. We had a zero balance for the years ended December 31, 2023 and 2024.
Our results of operations may fluctuate from quarter to quarter for many reasons, including seasonality.
Our sales are seasonal and we experience fluctuations in quarterly results as a result of many factors. Companies similar to ours have historically generated a greater percentage of our revenues during the warm weather months of September through December. Timing of customer purchases will vary each year and sales can be expected to shift from one quarter to another. As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance or results expected for the fiscal year.
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Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.
U.S. GAAP and related pronouncements, implementation guidelines, and interpretations with regard to a wide variety of matters that are relevant to our business, such as, but not limited to, stock-based compensation, trade spend and promotions, and income taxes are highly complex and involve many subjective assumptions, estimates, and judgments by our management. Changes to these rules or their interpretation or changes in underlying assumptions, estimates, or judgments by our management could significantly change our reported results.
If we are unable to maintain effective disclosure controls and procedures and internal control over financial reporting, our stock price and investor confidence could be materially and adversely affected.
We are required to maintain both disclosure controls and procedures and internal control over financial reporting that are effective. Because of their inherent limitations, internal control over financial reporting, however well designed and operated, can only provide reasonable, and not absolute, assurance that the controls will prevent or detect misstatements. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions. The failure of controls by design deficiencies or absence of adequate controls could result in a material adverse effect on our business and financial results, which could also negatively impact our stock price and investor confidence.
We face substantial competition in the alcoholic beverage industry, and we may not be able to effectively compete.
Consolidation among spirits producers, distributors, wholesalers, or retailers could create a more challenging competitive landscape for our products. Consolidation at any level could hinder the distribution and sale of our products as a result of reduced attention and resources allocated to our brands, both during and after transition periods, because our brands might represent a smaller portion of the new business portfolio. Expansion into new product categories by other suppliers, or innovation by new entrants into the market, could increase competition in our product categories. Changes to our distribution channels or partners in important markets could result in temporary or longer-term sales disruption, higher implementation-related or fixed costs, and could negatively affect other business relationships we might have with that partner. Distribution network disruption or fluctuations in our product inventory levels with distributors, wholesalers, or retailers could negatively affect our results for a particular period.
Our competitors may respond to industry and economic conditions more rapidly or effectively than we do. Our competitors offer products that compete directly with ours for shelf space, promotional displays, and consumer purchases. Pricing, (including price promotions, discounting, couponing, and free goods), marketing, new product introductions, entry into our distribution networks, and other competitive behavior by our competitors could adversely affect our sales margins, and profitability.
Our business operations may be adversely affected by social, political, and economic conditions affecting market risks and the demand for and pricing of our products.
These risks include:
| ● | Unfavorable economic conditions and related low consumer confidence, high unemployment, weak credit or capital markets, sovereign debt defaults, sequestrations, austerity measures, higher interest rates, political instability, higher inflation, deflation, lower returns on pension assets, or lower discount rates for pension obligations; | |
| ● | Changes in laws, regulations, or policies – especially those that affect the production, importation, marketing, sale, or consumption of our beverage alcohol products; | |
| ● | Tax rate changes (including excise, sales, duties, corporate, individual income, dividends, capital gains), or changes in related reserves, changes in tax rules or accounting standards, and the unpredictability and suddenness with which they can occur; | |
| ● | Dependence upon the continued growth of brand names; |
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| ● | Changes in consumer preferences, consumption, or purchase patterns, and our ability to anticipate and react to them; | |
| ● | Bar, restaurant, travel, or other on premise declines; | |
| ● | Unfavorable consumer reaction to our products, package changes, product reformulations, or other product innovation; | |
| ● | Decline in the social acceptability of beverage alcohol products in our markets; | |
| ● | Production facility or supply chain disruption; | |
| ● | Imprecision in supply/demand forecasting; | |
| ● | Higher costs, lower quality, or unavailability of energy, input materials, labor, or finished goods; | |
| ● | Direct-to-consumer changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result in higher implementation--related or fixed costs; | |
| ● | Inventory fluctuations in our products by distributors, wholesalers, or retailers; | |
| ● | Competitors’ consolidation or other competitive activities, such as pricing actions (including price reductions, promotions, discounting, couponing, or free goods), marketing, category expansion, product introductions, or entry or expansion in our geographic markets; | |
| ● | Insufficient protection of our intellectual property rights; | |
| ● | Product recalls or other product liability claims; | |
| ● | Product counterfeiting, tampering, or product quality issues; | |
| ● | Significant legal disputes and proceedings; | |
| ● | Government investigations (particularly of industry or company business, trade or marketing practices); | |
| ● | Failure or breach of key information technology systems; | |
| ● | Negative publicity related to our company, brands, marketing, personnel, operations, business performance or prospects; and | |
| ● | Business disruption, decline, or costs related to organizational changes, reductions in workforce, or other cost-cutting measures, or our failure to attract or retain key executive or employee talent. |
Uncertainty in the financial markets and other adverse changes in general economic or political conditions in any of the major countries in which we do business could adversely affect our industry, business and results of operations.
Global economic uncertainties, including foreign currency exchange rates, affect businesses such as ours in a number of ways, making it difficult to accurately forecast and plan our future business activities. There can be no assurance that economic improvements will occur, or that they would be sustainable, or that they would enhance conditions in markets relevant to us.
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The market price of our ordinary shares may be highly volatile, and you could lose all or part of your investment.
The trading price of our ordinary shares is likely to be volatile. We have a relatively small public float due to the relatively small size of our initial public offering, and the concentrated ownership of our ordinary shares among our executive officers, directors and greater than 5% stockholders. As a result of our small public float, our ordinary shares may be less liquid and have greater stock price volatility than the ordinary shares of companies with broader public ownership.
Our stock price could be subject to wide fluctuations in response to a variety of other factors, which include:
| ● | whether we achieve our anticipated corporate objectives; | |
| ● | changes in financial or operational estimates or projections; | |
| ● | general economic or political conditions in the United States or elsewhere. |
In addition, the stock market in general has recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Such rapid and substantial price volatility, including any stock run-up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our ordinary shares. This volatility may prevent you from being able to sell your ordinary shares at or above the price you paid for them. If the market price of our ordinary shares after this offering does not exceed the price at which you purchase our ordinary shares, you may not realize any return on your investment in us and may lose some or all of your investment.
An investment in our ordinary shares is speculative and there can be no assurance of any return on any such investment.
An investment in our ordinary shares is speculative and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment.
Future sales of ordinary shares, or the perception of such future sales, by some of our existing shareholders could cause the price of our ordinary shares to decline.
The market price of our ordinary shares could decline as a result of sales of a large number of shares of our ordinary shares in the market or the perception that these sales may occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell ordinary shares in the future at a time and at a price that we deem appropriate.
From time to time, certain of our shareholders may be eligible to sell all or some of their ordinary shares by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate shareholders may sell freely subject only to the current public information requirement. Affiliates may sell subject to the Rule 144 volume, manner of sale (for equity securities), and current public information and notice requirements.
Because certain shareholders own a large percentage of our voting stock, other shareholders’ voting power may be limited.
As of May 7, 2025, three of our shareholders own or control approximately 30% of our outstanding ordinary shares. If those shareholders act together, they would have the ability to have a substantial influence on matters submitted to our shareholders for approval, including the election and removal of directors and the approval of any merger, consolidation or sale of all or substantially all of our assets. As a result, our other shareholders may have little or no influence over matters submitted for shareholder approval. In addition, the ownership of such shareholders could preclude any unsolicited acquisition of us, and consequently, adversely affect the price of our ordinary shares. These shareholders may make decisions that are adverse to your interests.
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We do not expect to pay dividends and investors should not buy our ordinary shares expecting to receive dividends.
We do not anticipate that we will declare or pay any dividends in the foreseeable future. Consequently, you will only realize an economic gain on your investment in our ordinary shares if the price appreciates. You should not purchase our ordinary shares expecting to receive cash dividends. Since we do not pay dividends, in the absence of an orderly trading market for our ordinary shares, then you may not have any manner to liquidate or receive any payment on your investment. Therefore, our failure to pay dividends may cause you to not see any return on your investment even if we are successful in our business operations. In addition, because we do not anticipate that we will pay dividends, we may have trouble raising additional funds which could affect our ability to expand our business operations.
There can be no assurances that our ordinary shares will not be subject to potential delisting if we do not continue to maintain the listing requirements of Nasdaq.
Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing (i.e., being de-listed from the Nasdaq), would make it more difficult for shareholders to sell our ordinary shares and more difficult to obtain accurate price quotations on our ordinary shares. This could have an adverse effect on the price of our ordinary shares. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our ordinary shares are not traded on a national securities exchange.
Our ordinary shares could be further diluted as the result of the issuance of additional ordinary shares, convertible securities, options, or warrants.
Our issuance of additional ordinary shares, convertible securities, options, and warrants could affect the rights of our shareholders, result in a reduction in the overall percentage holdings of our shareholders, could put downward pressure on the market price of our ordinary shares, could result in adjustments to conversion and exercise prices of outstanding notes and warrants, and could obligate us to issue additional ordinary shares to certain of our shareholders.
We are an “emerging growth company,” and any decision on our part to comply with certain reduced disclosure requirements applicable to emerging growth companies could make our ordinary shares less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, not being required to comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, not being required to comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could remain an emerging growth company until the earlier of: (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our first sale of common equity securities pursuant to an effective registration statement; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer. We cannot predict if investors will find our ordinary shares less attractive if we choose to rely on these exemptions. If some investors find our ordinary shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our ordinary shares and our share price may be more volatile. Further, as a result of these scaled regulatory requirements, our disclosure may be more limited than that of other public companies and you may not have the same protections afforded to shareholders of such companies.
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Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. We have opted for taking advantage of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Jobs Act.
Because we have elected to use the extended transition period for complying with new or revised accounting standards for an emerging growth company, our financial statements may not be comparable to companies that comply with public company effective dates.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our consolidated financial statements may not be comparable to companies that comply with public company effective dates, and thus investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our ordinary shares.
Breaches of our online commerce security could occur and could have an adverse effect on our reputation.
A significant barrier to online commerce and communications is the secure transmission of confidential information over public networks. There can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography and cybersecurity, or other events or developments will not result in a compromise or breach of the technology used by the Company to protect customer transaction data. If any such compromise of the Company’s security were to occur, it could have a material adverse effect on the Company’s reputation and, therefore, on its business, results of operations and financial condition. Furthermore, a party who is able to circumvent the Company’s security measures could misappropriate proprietary information or cause interruptions in the Company’s operations. The Company may be required to expend significant capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches. Concerns over the security of transactions conducted on the Internet and other online services and the privacy of users may also inhibit the growth of the Internet and other online services generally, and the web in particular, especially as a means of conducting commercial transactions. To the extent that activities of the Company involve the storage and transmission of proprietary information, security breaches could damage the Company’s reputation and expose the Company to a risk of loss or litigation and possible liability. There can be no assurance that the Company’s security measures will prevent security breaches or that failure to prevent such security breaches will not have a material adverse effect on the Company’s business, results of operations and financial condition.
Increased IT security threats and more sophisticated cybercrimes and cyberattacks, including computer viruses and other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, social engineering, hacking and other types of attacks pose a potential risk to the security of our IT systems, networks and services, as well as the confidentiality, availability, and integrity of our data. We may in the future experience cyberattacks and other unauthorized access attempts to our IT systems. Because the techniques used to obtain unauthorized access are constantly changing and often are not recognized until launched against a target, we or our vendors may be unable to anticipate these techniques or implement sufficient preventative or remedial measures. If we are unable to efficiently and effectively maintain and upgrade our system safeguards, we may incur unexpected costs and certain of our systems may become more vulnerable to unauthorized access. In the event of a ransomware or other cyber-attack, the integrity and safety of our data could be at risk or we may incur unforeseen costs impacting our financial position. Although we carry insurance covering cyber-attacks including ransomware, these coverages are subject to deductibles and self-insurance obligation, as well as caps on coverage that could be below the value of losses we could incur. If the IT systems, networks or service providers we rely upon fail to function properly, or if we suffer a loss or disclosure of business or other sensitive information due to any number of causes ranging from catastrophic events, power outages, security breaches, unauthorized use or usage errors by employees, vendors or other third parties and other security issues, we may be subject to legal claims and proceedings, liability under laws that protect the privacy and security of personal information (also known as personal data), litigation, governmental investigations and proceedings and regulatory penalties, and we may suffer interruptions in our ability to manage our operations and reputational, competitive or business harm, which may adversely affect our business, results of operations and financial results. In addition, such events could result in unauthorized disclosure of material
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confidential information, and we may suffer financial and reputational damage
because of lost or misappropriated confidential information belonging to us or to our employees, stockholders, customers, suppliers, consumers
or others. In any of these events, we could also be required to spend significant financial and other resources to remedy the damage caused
by a security breach or technological failure and the reputational damage resulting therefrom, to pay for investigations, forensic analyses,
legal advice, public relations advice or other services, or to repair or replace networks and IT systems. As a result of the COVID-19
pandemic, a greater number of our employees are working remotely and accessing our IT systems and networks remotely, which may further
increase our vulnerability to cybercrimes and cyberattacks and increase the stress on our technology infrastructure and systems. Even
though we maintain cyber risk insurance, this insurance may not be sufficient to cover all of our losses from any future breaches or failures
of our IT systems, networks and services.
A failure of one or more of our key IT systems, networks, processes, associated sites or service providers could have a material adverse impact on our business operations, and if the failure is prolonged, our financial condition.
We rely on IT systems, networks, and services, including internet sites, data hosting and processing facilities and tools, hardware (including laptops and mobile devices), software and technical applications and platforms, some of which are managed, hosted, provided and used by third-parties or their vendors, to assist us in the management of our business. The various uses of these IT systems, networks and services include, but are not limited to: hosting our internal network and communication systems; supply and demand planning; production; shipping our products to customers; hosting our brand websites and marketing products to consumers; collecting and storing customer, consumer, employee, shareholder, and other data; processing transactions; summarizing and reporting results of operations; hosting, processing and sharing confidential and proprietary research, business plans and financial information; complying with regulatory, legal or tax requirements; providing data security; and handling other processes necessary to manage our business.
Any significant disruption in or unauthorized access to our computer systems and other technology or those of our customers, partners and other third parties that we utilize in our operations, could result in a loss or degradation of service, unauthorized disclosure of data, or theft or tampering of intellectual property, any of which could materially adversely impact our business.
Our operations, products, data and intellectual property are inherently at risk of loss, inappropriate access, or tampering by both insider threats and external bad actors. In particular, our operations face various cyber and other security threats, including attempts to gain unauthorized access to sensitive information, intellectual property, mission operations, systems and networks. Our systems (internal, customer and partner systems) and assets may also be subject to damage or interruption from natural and other disaster events or disruptions including hurricanes, floods, earthquakes, fires, other extreme weather conditions, epidemics or pandemics, acts of terrorism, power shortages and blackouts, aging infrastructures and telecommunications failures. In addition, insider threats, threats to the safety of our directors and employees, threats to the security of our facilities, infrastructure and supply chain and threats from terrorist acts or other acts of aggression could have a material adverse impact on our business.
Our customers and partners (including our supply chain) face similar threats. Customer or partner proprietary, classified, or sensitive data and information transmitted to, from, or stored on our networks are at risk. Assets and intellectual property and products in customer or partner environments are also at risk. We also have risk where we have access to customer and partner networks and face risks of breach, disruption or loss as well. Our supply chain for products and services is becoming more diverse and therefore that risk is also growing.
While we have implemented reasonable measures consistent with government regulations aimed at reducing the risk of cyber threats as well as to help thwart bad actors and protect our data and our systems and assets, the techniques used to gain unauthorized access are constantly evolving, and we may be unable to anticipate or prevent all unauthorized access, disruption, loss, or harm. Because of our desired data and intellectual property, we (and/or partners we use) may be an attractive target for such attacks. We cannot offer assurances, however, that future attacks will not materially adversely affect our business or reputation.
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Unstable market and economic conditions caused by the ongoing conflict between the Ukraine and Russia, and Israel and Hamas, could have adverse consequences on our business, financial condition and results of operations.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions as a result of the ongoing conflict between the Ukraine and Russia and between Israel and Hamas, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates and uncertainty about economic stability. We could suffer inflationary pressure in our business such as through the increased costs of the supplies that we use to manufacture our products, bottling our bitters, and distributing our products to all our customers where we do business. Any such volatility and disruptions could have adverse consequences on us or the third parties upon whom we rely.
You should consult your independent tax advisor regarding any tax matters arising with respect to our ordinary shares.
All prospective purchasers of our ordinary shares are advised to consult their own tax advisors regarding the U.S. federal, state, local and non-U.S. tax consequences relevant to the purchase, ownership, and disposition of our ordinary shares.
Some of our directors and executive officers are non-residents of the United States and as a result, it may not be possible for shareholders to enforce civil liabilities against those directors and executive officers.
Some of our directors and executive officers are non-residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible for stockholders to effect service of process within the United States upon such persons or to enforce against them judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Australia in original actions, or in actions for enforcement of judgments of U.S. courts, of civil liabilities to the extent predicated upon the federal securities laws of the United States.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Innovation Beverage Group Limited (“IBG”) was incorporated in Australia pursuant to the Corporations Act of 2001 on April 20, 2018 as “Australian Boutique Spirits PTY LTD” and changed its name on May 2, 2022 to “Innovation Beverage Group PTY Limited”. Subsequently, on June 11, 2022, the Company converted from a proprietary company to a public limited company. Our registered office is located at 29 Anvil Road, Seven Hills, NSW 2147, Australia. Our main telephone number is +61 (02) 9620 4574. Since its beginning in 2018 as Australian Boutique Spirits Pty Ltd, IBG has been a committed innovator within the beverage industry.
IBG has three wholly-owned subsidiaries, IBG USA LLC, Reg Liquors LLC (d/b/a Wired for Wine), and Innovation Beverage Group USA Inc. On July 13, 2021, IBG formed Bevmart USA LLC, a Delaware limited liability company, and on July 8, 2022, we changed the name to IBG USA LLC. On November 3, 2021, IBG acquired 100% of the outstanding equity interests in Reg Liquors LLC, a New Jersey limited liability company formed on August 16, 2016. On October 28, 2024, we formed Innovation Beverage Group USA Inc., a Nevada corporation.
Our company commercial website address is www.innovationbev.com and our investors relations website address is investors.innovationbev.com. Information contained on or accessible through our website is not a part of this Annual Report on Form 20-F, and the inclusion of our website address herein is an inactive textual reference only. The SEC also maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our filings with the SEC will also be available to the public through the SEC’s website at www.sec.gov.
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Our cash used in investing activities for equipment and intangible assets purchase in 2024, 2023 and 2022 are $0. The Company has sufficient manufacturing capacities.
B. Business Overview
We are a developer, manufacturer, marketer, exporter and retailer of a growing beverage portfolio of 70 formulation across 14 alcoholic and non-alcoholic brands. Our focus is on premium and super premium brands.
Innovation Beverage Group Limited has three wholly-owned subsidiaries, IBG USA LLC (“IBG USA”), Reg Liquors LLC (d/b/a Wired for Wine), and Innovation Beverage Group USA Inc. (“IBG USA INC”). IBG USA INC was formed for the purpose of importing, producing via co-packers, marketing and wholesaling the IBG owned portfolio of brands in the United States.
IBG USA INC began these activities since October 2024 with several distribution agreements with Republic National Distribution Company (“RNDC”) in California, Hawaii, Alaska, Nevada, Ohio and Washington states and with Houston’s Inc. in Oregon. IBG USA INC also has a sales and marketing agreement with Blue Ridge Wine & Spirits Inc., which covers all 50 U.S. states. Reg Liquors LLC, our e-commerce retailer of wines and spirits, which operated its own marketplaces, www.wiredforwine.com and www.bevmart.com, ceased operations during October 2024.
In October of 2024, we decided to focus our efforts on building our own brands in the United States and other export markets, and as a result we have ceased retailing of certain third-party brands via our retail websites, www.wiredforwine.com and www.bevmart.com for the United States. Our long term strategy to build and grow our owned brands, which we believe will lead to significant growth in our business. We will continue to retail third-party brands in Australia via our retail website www.bevmart.au. We are currently actively looking to divest the liquor license as well as all inventory held by Reg Liquors LLC due to this focus on IBG’s own brands.
Our flagship Australian Bitters Company (“ABC”) brand accounted for approximately 40% of our revenues in 2022 and 89% of our revenues in 2023 which reflects the revenue contribution by Wired For Wine after its acquisition in November 2021. In 2024 ABC accounted for 98%. By geographic market, our total revenues are:
| 2024 (USD) |
2023 (USD) |
2022 (USD) | ||||||||||
| Australian Market | $ | 2,931,243 | $ | 2,876,251 | $ | 1,965,734 | ||||||
| U.S. Market (1) | $ | — | $ | 271,512 | $ | 2,564,662 | ||||||
| Total Revenue | $ | 2,931,243 | $ | 3,147,763 | $ | 4,530,396 | ||||||
(1) Solely for the purpose of this chart, exports to the U.S. are included as revenue attributable to the U.S. market. IBG manages its business in two geographical segments, Australia and the United States, and for accounting purposes, the revenue allocation is different in our Notes to Consolidated Financial Statements given that the export sales to the U.S. Market as shown in this chart, represent revenue generated from sales to IBG’s customers or distributors located in the Australia Market, who in turn distribute the sale of those products onward to consumers in the U.S. Market.
The Australian Bitters Company (“ABC”) brand was launched in 2015 and developed as an Australian alternative to a well-known, nearly 200-year-old brand, Angostura Bitters. By the end of 2024, ABC had approximately 45% of the market share in Australia. We believe that the growth of ABC to its current position in the markets shows that ABC has become the first Australian-made challenger brand to Angostura Bitters. By way of distribution through Coca-Cola Europacific Partners (CCEP), Australia’s largest beverage distributor, ABC has managed to grow its market share substantially. CCEP has a distribution network that reaches over 90% of postcodes across Australia. As a brand in CCEP’s distribution network, we anticipate significant continued growth. ABC also has the home-field advantage of being locally produced in Australian rather than being an imported product.
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Our Company relies on certain business relationships to manufacture and/or distribute different brand-name products. Among such relationships is our business with Sway Energy Corp. Our Chief Executive Officer, Chief Operating Officer and Chairman of our board of directors is Sahil Beri, who is the brother of Amit Beri, the Chief Executive Officer and a director of Sway Energy Corp. This family relationship presents a potential conflict of interest between the companies.
The following chart summarizes the arrangements we have with respect to our different brand-name products. For a complete description about the related agreements, see “Item 4. Business Overview–Material Agreements.”
| Brands | Summary | Governing Agreement | IP | Consideration/Royalty | |
| Australis Gin | IBG owns this brand after repurchasing it from Sway Energy pursuant to the June 2021 Agreement. |
● Manufacturing, Supply and License Agreement dated July 31, 2020 between ABS and Elegance
● Termination of BevMart Agreement and Amendment to Manufacturing Agreement, between Australian Boutique Spirits Pty Ltd and Elegance Brands, Inc., dated June 14, 2021 (“June 2021 Agreement”) |
IBG owns the intellectual property rights, including formulations, associated with the brand Australis Gin. | ABS paid USD$42,500 representing 100% of the costs and expenses incurred by Elegance as at that time in developing the Australis Gin beverage and brand | |
| Twisted Shaker | IBG holds a royalty-free license to Twisted Shaker to manufacture, use and sell the product throughout the world, except the U.S., its territories and possessions. |
● Manufacturing, Supply and License Agreement dated July 31, 2020 between ABS and Elegance
● Termination of BevMart Agreement and Amendment to Manufacturing Agreement, between Australian Boutique Spirits Pty Ltd and Elegance Brands, Inc., dated June 14, 2021 |
IBG sold its intellectual property rights, including related formulations, associated with the Twisted Shaker brand to Sway.
Sway granted IBG a royalty-free non-exclusive license to use its intellectual property rights associated with the Twisted Shaker brand to manufacture, use and sell Twisted Shaker throughout the world, except for the U.S., its territories and possessions, which are Sway’s exclusive territories. The license expires upon termination of the 2020 Manufacturing Agreement.
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IBG received as consideration from Sway USD$10,000 for each of the formulations possessed by IBG with respect to the Twisted Shaker brand
IBG agreed with Sway to offset future royalties payable for Twisted Shaker to Sway in return for a royalty free right Sway to sell VOCO in the USA.
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| BitterTales |
Sway owns this brand globally, but does not own the formulations.
With respect to formulations, IBG granted Sway a license to manufacture, use and sell all formulations of BitterTales within the USA and other countries located in Sway’s territories. |
Manufacturing, Supply and License Agreement dated July 31, 2020 between ABS and Elegance | IBG granted to Sway a non-exclusive, non-transferable, non-sublicensable license to make, use and sell all formulations with respect to the BitterTales brand of alcoholic products. |
One-time upfront royalty payment in the amount of USD$40,000 paid on August 15, 2020
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| VOCO | IBG owns this brand and granted Sway a royalty-free license to use its intellectual property rights associated with VOCO to manufacture, use and sell the brand in the U.S., its territories and possessions. |
● Manufacturing, Supply and License Agreement dated July 31, 2020 between ABS and Elegance
● Termination of BevMart Agreement and Amendment to Manufacturing Agreement, between Australian Boutique Spirits Pty Ltd and Elegance Brands, Inc., dated June 14, 2021 |
IBG granted Sway a royalty-free, non-exclusive, non-transferable, non-sublicensable license to the intellectual property rights associated with the VOCO brand to make, use and sell the brand in the U.S., its territories and possessions. The license expires upon termination of the 2020 Manufacturing Agreement.
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Sway paid to IBG the paid-up sum of USD$200,000, in lieu of all current and future royalties due.
IBG agreed with Sway to offset future royalties payable for Twisted Shaker to Sway in return for a royalty-free right for Sway to sell VOCO in the U.S.
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| Australian Bitters Company |
Within Australia, CCEP owns the right to distribute the Australian Bitters Company brand and IBG has the exclusive right to manufacturer the product.
Outside Australia, IBG owns the brand and has the right to manufacture and distribute Australian Bitters Company products. With respect to the U.S., its territories and possessions, IBG has a distribution arrangement with Sway whereby Sway pays USD$60 per case.
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● Europa and CCA 2016 Manufacturing Agreement dated Dec. 22, 2016, which terminates on Dec. 31, 2031
● Deed of Novation, date July 2, 2018
● Manufacturing, Supply and License Agreement dated July 31, 2020 between ABS and Elegance
● Termination of BevMart Agreement and Amendment to Manufacturing Agreement, between Australian Boutique Spirits Pty Ltd and Elegance Brands, Inc., dated June 14, 2021 |
IBG sold its right, title and interest to all brands, line extensions, and flavor line extensions associated with the Australian Bitters Company brand to Sway for sale and distribution in the U.S., its territories and possessions.
Sway distributes Australian Bitters Company products in the U.S. for IBG. |
Sway pays USD$60 per case of Australian Bitters Company products
Sway and IBG terminated all agreements and sway no longer purchases products from IBG.
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Cheeky Vodka and flavor variants
Coventry Estate Gin and flavor variants
Geo Liqueurs in multiple variants
Cheeky Espresso Martini in multiple variants |
IBG owns and manufactures these brands. |
● Manufacturing, Supply and License Agreement dated July 31, 2020 between ABS and Elegance
● Termination of BevMart Agreement and Amendment to Manufacturing Agreement, between Australian Boutique Spirits Pty Ltd and Elegance Brands, Inc., dated June 14, 2021 |
IBG owns and manufactures these brands, as well as the BevMart.com.au website and business.
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IBG paid as consideration to Sway USD$188,630.41, which represented 100% of the fully burdened costs and expenses incurred by Sway in developing the website and developing and creating formulations for each of the brands. | |
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Our goal is to increase our market share in the $800 million global market for bitters. Our partnership with Coca-Cola Europacific Partners (NASDAQ: CCEP), one of the world’s largest Coca-Cola bottlers, to exclusively manufacture ABC bitters for distribution in Australia is a key component of this strategy. We retain distribution rights for ABC bitters outside Australia and are actively negotiating new distribution arrangements for new markets.
Our direct-to-consumer (DTC) distribution channel is a network of eCommerce platforms: www.bevmart.com.au and www.drummerboy.com. We launched BevMart.com.au in Australia in May 2021 Our Drummerboy brand is offered through its own DTC website, www.drummerboy.com. We offer our brands, as well as other brands, through our eCommerce platforms. (Our previous eCommerce platforms, www.bevmart.com, www.wiredforwine.com, have ceased retailing third-party brands.)
In 2021, we introduced a new non-alcoholic spirit brand called Drummerboy, our first entry into the growing non-alcoholic beverage market. No-and-Low Alcohol products are becoming increasingly accepted as a lifestyle and societal norm, making it more accessible and approachable for consumers. The market value of no/low alcohol in key global markets in 2021 was just under USD$10 billion. With a direct to consumer (DTC) retail price per bottle of AUD$50 (approximately USD$35) and via manufacturing efficiencies through in-house manufacturing, we have a margin of approximately 80% when selling Drummerboy through its own www.drummerboy.com website in a DTC sale.
We have launched Twisted Shaker, our first entry in the bottled cocktail market, in Australia. The pre-batched cocktail market grew significantly during the beginning of the COVID pandemic with consumers loving the convenience and cost efficiency of this type of product. Twisted Shaker cocktails are full-strength, high-quality bottled cocktails. We launched Twisted Shaker in the U.S. in November 2022. Currently, we are in the process of identifying distributors in Australia and the U.S.
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IBG eCommerce
* Depicted in this image are products we distribute through our eCommerce websites on behalf of customers as well as our Twisted Shaker and Drummerboy products.
Bevmart AU
Bevmart is a vertically integrated, direct-to-consumer spirits website for Australian Boutique Spirits. Bevmart specializes in exclusive spirits and imported celebrity brands for the Australian market. Bevmart offers a range of 50 SKUs (primarily our produced products) with the objective to expand this range significantly by end of our 2025 fiscal year.
Competitive Market
Spirits are driving the most growth in both premium and mainstream categories of the packaged liquor market since 2020, with younger premium customers showing the strongest overall growth than any other segment.
For premium customers, gin, liqueurs and tequila show the highest growth in the spirits category with seltzers and gin-based premix leading the premix category. The opportunity exists to capitalize on the younger premium segment through optimized channel targeting, customer service and range extension.
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Strengths
| ● | Exclusive, award winning and unique product range. | |
| ● | Product range, website and customer service highly rated with an average star rating of 4.65/5 for product and 4.72/5 for website and customer service. | |
| ● | Offers same day delivery in Sydney metro. | |
| ● | Competitive pricing. |
Weaknesses
| ● | Branding and range does not all reflect premium positioning. | |
| ● | Small range limits revenue growth. | |
| ● | Single warehouse location limits our ability to offer pick up across major cities. | |
| ● | Exclusiveness can be hard to secure for small or new brands. |
Opportunity
| ● | Range expansion through exclusive agreements and parallel importing to cover more categories to increase revenue. | |
| ● | Create corporate and gifting destination. | |
| ● | Expert validation of product quality through award shows. | |
| ● | Expand same day delivery to other major cities in Australia. | |
| ● | Leverage technology to solve customer pain points. |
Challenges
| ● | Celebrity product range could be picked up by competitors, diluting the brand proposition. |
Drummerboy
Drummerboy, our non-alcohol spirits brand, is sold direct to consumer (DTC) through www.drummerboy.com, which is managed by IBG directly. We have operational efficiencies when selling our Drummerboy non-alcoholic spirits directly to end users/customers. Drummerboy.com also has the advantage of cross marketing this website to existing loyal customers across the other marketplaces already in revenue. Additionally, we will have efficiencies of scale in our digital, native, influencer, and direct marketing strategies with all websites managed and controlled by one centralized team and agency partnership. IBG will continue to grow Drummerboy in new markets with a DTC channel priority.
Wired For Wine.com and BevMart USA
Reg Liquors LLC, our e-commerce retailer of wines and spirits, which operated its own marketplaces, www.wiredforwine.com and www.bevmart.com, ceased operations during October 2024. Wired For Wine.com was our packaged wine website offering quality wines at highly competitive prices with incentivized free delivery on certain purchases. Bevmart U.S.A was our direct-to-consumer spirits platform in the U.S. market, specializing in exclusive spirits and celebrity brands.
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In October of 2024, we decided to focus our efforts on building our own brands in the United States and other export markets, and as a result we have ceased retailing of certain third-party brands via our retail websites, www.wiredforwine.com and www.bevmart.com for the United States. Our long term strategy to build and grow our owned brands, which we believe will lead to significant growth in our business. We will continue to retail third-party brands in Australia via our retail website www.bevmart.au. We are currently actively looking to divest the liquor license as well as all inventory held by Reg Liquors LLC due to this focus on IBG’s own brands.
eCommerce Advantages
Technological Advantages
Both of our eCommerce brands - www.bevmart.com.au and www.drummerboy.com - are built on Shopify, including their front ends. While there are some customization restraints (ones that are not currently needed), Shopify provides a best-in-class, low-cost solution for our direct-to-consumer functionality needs. Its native features and a large library of app integrations significantly reduce our development costs and allow us to be nimble in an ever-changing digital landscape.
As we scale the brands, there may be a need for additional front end customizations in which we would adopt a headless e-Commerce architecture (custom front end) utilizing Shopify’s back end.
Operational Advantages
IBG has vertically integrated manufacturing, import, sales and marketing company with a focus on direct-to-consumer (DTC) enabling complete capture of the value chain. Our eCommerce and product team consists of members with extensive beverage industry experience garnered at some of the world’s largest alcohol companies, such as Endeavour Drinks Group (Australia’s largest liquor online and brick-and-mortar retail group), Treasury Wine Estates (Australia’s largest wine company and one of the world’s largest wine companies) and Anheuser-Busch InBev (the world’s largest brewer).
IBG’s leased warehouse in Sydney and New Jersey provide logistical advantages for the distribution for our products and those of our clients to nearby large population centers.
Cost Advantages
IBG’s product portfolio is focused on bitters, light spirits and non-alcoholic spirits, which have short manufacturing times. As a result, IBG is more capital efficient as compared to dark spirit manufacturers (e.g. whisky, brandy, etc.), which often require aging in barrels for years before being sold.
With regard to our eCommerce, the flat structure helps to reduce our operating expenses (as we have one digital marketing agency and web development team) and duplication of work. The structure also leverages the team’s experience and capabilities across our eCommerce banners. Owned products, such as Drummerboy and Twisted Shaker, and distribution deals (i.e. Drake’s Virginia Black) allows us to retain margin and push exclusiveness as a competitive difference through our DTC banners (i.e. Bevmart).
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IBG Bitters Products
We produce a range of award-winning Bitters at our distillery and beverage manufacturing facility in Seven Hills, NSW Australia. Our BitterTales Aromatic Bitters was a Gold Medal winner at the 2021 L.A. Spirits Awards and Platinum Medal winner at the 2020 L.A. Spirits Awards. Our product also won Best In Show of the 2020 L.A. Spirits Awards. Our bitters that we manufacture as the Australian Bitters Company, was awarded Gold and Silver medals at the 2018 International Wine and Spirit Competition (IWSC), as well as two Silver Medals at the 2018 L.A. Spirits Awards.
In Australia, our Bitters are predominantly sold to Coca-Cola Europacific Partners (CCEP) under a long-term Australian contract, which expires 2033, in Australia (in 2021, our previous distributor, Coca-Cola Amatil Limited, merged with CCEP). The balance of our Bitters’ sales is exported. Bitters for our Company as a manufacturer and brand owner is a highly profitable category with a gross profit margin of approximately 80%. All of our Bitters are manufactured at our distillery and beverage manufacturing facility in Seven Hills, NSW Australia.
IBG is in discussions with global distribution partners in Europe, Asia and the Americas for its Bitters brands. BitterTales is another successful Bitters product manufactured by IBG.
On July 31, 2020, the Company (formerly known as Australian Boutique Spirits Pty Ltd) and Sway Energy Corp. (formerly known as Elegance Brand, Inc.) (“Sway”) entered into a Manufacturing, Supply and License Agreement, as amended on March 10, 2021, June 14, 2021 and October 21, 2022 (“2020 Manufacturing Agreement”). For further details about the 2020 Manufacturing Agreement, please see “Item 4. Business Overview–Material Agreements.”
Target Market Size
The global bitter market has grown rapidly over the last few years with a global market of around $800 million. Innovation, consumer trends and marketing has led to increases in the category
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The global Cocktail Bitters category has experienced growth in 2024 with a focus on premium cocktails and consumer trends. The category is expected to continue to grow in the future driven by innovation, market acceptance and consumer trends.
Competitive Market
The global bitters market has grown rapidly over the last few years with a global market size of around US$800,000,000. Innovation, consumer trends and marketing has led to category increases. Before the COVID-19 pandemic, the category was more or less evenly split by on and off-premise channels, given market differences. However, with the decline of the on-premise channel, the off-premise channel managed to grow and offset losses, particularly with the help of eCommerce. Many brands were able to pivot and transition efforts to online sales, which has helped to drive interest in the category alongside the rise of the ‘Home Premise’ and at home cocktail making during lockdowns.
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Competitive Analysis
Angostura continues to lead the global Cocktail Bitters category, followed by Peychaud’s and Australian Bitters Co., all of which saw growth in 2020. Several other brands, including Fee Brothers, Bittermen’s, The Bitter Truth, and many more, were impacted in 2020 given their on-premise presence. However, quite a few of these brand owners have managed to adapt during the pandemic and shift their businesses to off-premise, as well as expand their distribution to more markets. It is expected they will return to growth alongside the category.
The US continues to be the dominant cocktail bitters market followed by Australia, Trinidad & Tobago, UK then France, which are the five largest markets globally. According to Angostura Holdings 2024 annual report, Angostura bitters accounts for 90% of the global bitters market. According to The Spirits Business, a well reputed beverage alcohol publisher, Angostura bitters is available in 170 countries worldwide. They also reported that Angostura holdings sales exceeded US$1 billion in 2022 with bitters accounting for 54% of their revenue.
Strengths
| ● | Iconic packaging- proprietary bottle, screen printed bottle provides unique and remarkable look and feel |
| ● | All natural ingredients |
| ● | Great value offer versus Angostura |
| ● | Small size allows IBG to be nimble and adapt quickly to changes in the market with new packaging format, sizes and flavors |
| ● | CCEP distribution machine in Australia |
Weaknesses
| ● | Consumer awareness in Australia |
| ● | Growth in the U.S. will require obtaining a large distributor |
Opportunity
| ● | Innovation into bigger bottles (500ml) and smaller bottles (50ml) to increase the occasions where cocktail bitters may be utilized as an ingredient and, therefore, increase sales. For example, a smaller 50ml bottle may become an affordable yet impulse purchase option for a consumer purchasing a basket of beverages for a party as they may be more inclined to purchase a smaller bottle of our bitters in their basket mix. |
| ● | Strengthen association with cooking |
| ● | Be the “go to” bitters for mocktails (non-alcohol cocktails are commonly referred to as mocktails) |
Challenges
| ● | Market size and scale of Angostura, particularly if they drop price. |
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No-and-Low Alcohol Drummerboy
Drummerboy is a delicious range of non- alcoholic spirits for those that want to forge their own path.
No-and-Low Alcohol products are becoming increasingly accepted as a lifestyle and societal norm, making it more accessible and approachable for consumers. Many new No-and-Low Alcohol (No/Low Alcohol) products are starting to use more natural ingredients, as well as botanicals and bitter flavors as consumers needs and palettes are evolving with the larger health and wellness trend. As a result, there is an opportunity to offer a low-ABV pre-packaged offering made with Cocktail Bitters to tap into the growing ready to drink (RTD) trend of Hard Seltzers and Spritzes. Additionally, the category lines between No Alcohol RTDs and Mixers are starting to blur with big corporations starting to tread into adjacent categories (e.g. Coca-Cola, Pepsi, and Molson Coors) offering premium mixers to tap into the growing soda cocktail trend.
Target Market Size
The market size of No/Low Alcohol is 349.2 million 9L cases or USD$9.9 billion in market value. The expected CAGR from 2021-25 is 8.0% or an enormous 126.4 million 9L cases.
The biggest market for No/Low spirits is the U.S. (719,000 9 Liter Equivalent (LE)), France (515,000 9LE), UK (319,000 9LE), Germany (176,000 9LE), and Australia (63,000 9LE).
Competitive Analysis
No market share data is available for this new category. However, evidence of its attractions can be shown by the market leader, Lyre’s, which closed a funding round of £20m in November 2021 that valued the business at £270m, up from a valuation of £100m earlier the same year.[1] According to Lyre’s founder Mark Livings in 2021, the business has expanded to 60 countries and was on track to generate £50m in 2021.[2]
[1] BusinessWire, “Lyre’s Hits £270 Million Valuation in Category’s Largest Funding Round To-Date” (November 15, 2021).
[2] The Spirits Business, “Lyre’s on track to reach $1bn valuation” (November 15, 2021).
Drummerboy Website
Drummerboy will have its own transactional website for below reasons:
| ● | Allows for greater storytelling capability with more room for content |
| ● | Not subject to online alcohol restriction rules by government and marketing platforms |
| ● | Greater targeting for paid and owned marketing channels |
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We will also utilize the same logistics back end as Bevmart in Australia.
Competitive Market
Online competition will be focused on DTC non-alcohol brands like market leader Lyre’s, Seedlip and online (packaged alcohol and non-alcoholic) retailers carrying a non-alcoholic spirits category.
While technically competitors, we anticipate that packaged alcohol and non-alcoholic retailers in the market, such as Dan Murphy’s, First Choice, and Sans Drinks in Australia, will organically grow the Drummerboy website traffic and revenue once the products are ranged at these retailers.
We believe that due to the increased brand awareness, paid media spend (from retailers) and, through our experience, Google’s tendency to rank brand and supplier websites higher over retailers*. (*Not guaranteed. Website must have good Search Engine Optimization (SEO) practices and consistent fresh content for us to take advantage of the google algorithm.)
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Strengths
| ● | Drummerboy Brand - unique positioning encouraging people to rise above peer pressure and stay off the drink when they want too. |
| ● | Packaging- memorable name and unique brand iconography. |
| ● | Ability to expand globally quickly with 3-tier compliant retailers already established in the U.S. |
Weaknesses
| ● | Consumer awareness |
| ● | Distribution |
| ● | Warehouse locations limits our ability to offer Pick up. |
Opportunity
| ● | Create a destination for mocktail recipe content online. |
| ● | Partner with dark warehouse, a fully automated warehouse, and several fast commerce businesses that use applications (apps) that offer 10-minute delivery in cities to reach a fast-growing audience online where our competitors are not. Milkrun and Go Puff are examples of such businesses. |
| ● | Validate quality of product through award shows. |
| ● | Expand globally to No and Low Alcohol key markets |
| ● | Build the brand via strong and relevant marketing |
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Challenges
| ● | Convenience commerce models and third-party marketplaces will continue to dominate the online space. However, we should look to partner with these brands as they are an opportunity to reach a larger audience. |
| ● | Range and category expansion from market leaders. |
| ● | Minimal regulation (compared to alcohol) makes market entry easier. |
Sources and Availability of Raw Materials
Our use of raw materials mainly includes herbs, bottles, and labels. We maintain, and seek to continue maintaining, strong and long-term relationships with our major raw material vendors to create a stable supply of such materials . We forecast raw material purchase at a minimum of 6 months in advance which allows us to control supply chain disruptions and avoid price volatility.
Supply Chain Disruptions
Supply chain disruptions have become a constant source of stress for many beverage companies with global footprints like IBG. Any disruption along the supply chain can disrupt plant operations, production schedules, logistics, and the customer experience. IBG was impacted by the supply chain disruption due to:
| ● | transportation delay for some materials (e.g., bottles) purchased from certain areas such as China; | |
| ● | shipping container shortage that postponed the export of our BitterTales products to the United States; | |
| ● | labor shortages internally and externally due to COVID-associated sick and carer leaves; and | |
| ● | customer demand drops and surges. |
While not every disruption can be avoided, many of them can be managed. Preparation and planning are vital for businesses that want to avoid delays and shutdowns now and in the future. IBG’s management has been working on different aspects to strengthen the resilience of our supply chain. IBG’s key actions include:
| ● | establishing more robust sales and operations planning to monitor customer demand, raw material availability and labor scheduling; | |
| ● | optimize inventory and freight process by implementing a new warehouse management system; |
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| ● | renegotiating the manufacturing agreements with main customers by passing the logistic responsibilities from IBG to the buyers; | |
| ● | diversify the supply networking to avoid heavy reliance on a certain supplier or suppliers from one certain area; and | |
| ● | encourage flexible and remote working arrangements to improve productivity and minimize employee turnover. |
Seasonality
Our business does not experience significant seasonality.
Material Agreements
Deed of Novation
Europa International Pty Ltd. (“Europa”), Coca-Cola Amatil (Australia) Pty Ltd (succeeded by Coca-Cola Europacific Partners, “CCA”) and Australian Boutique Spirits Pty Ltd (“ABS”) entered into a novation agreement on July 2, 2018 (“Europa-CCA-ABS Novation Agreement”). Pursuant to the Europa-CCA-ABS Novation Agreement, we have been assigned Europa’s rights and obligations under the Manufacturing Agreement entered into December 22, 2016; the Manufacturing Agreement dated June 9, 2017, the Intellectual Property Assignment Agreement, the Intellectual Property Co-Existence Deed, and the Deed Poll. As such, the following Manufacturing Agreements of 2016, 2017, and the Notice Under Manufacturing Agreement all fall within the scope of the Deed of Novation.
2016 Europa Manufacturing Agreement
On December 22, 2016, Europa and CCA entered into a Manufacturing Agreement (“2016 Europa Manufacturing Agreement”) that began on January 1, 2017. The 2016 Europa Manufacturing Agreement is effective until December 31, 2031, unless terminated earlier for cause.
In the 2016 Europa Manufacturing Agreement, CCA appointed Europa to manufacture bitters of all flavors produced by Europa, or any product bearing the AUSTRALIAN BITTERS Brand and granted Europa an exclusive, non-transferable, royalty free license to use the AUSTRALIAN BITTERS intellectual property in the territory to the extent needed to manufacture the products. Specifically, the products include (a) 250 mL bottle of Australian Bitters supplied in a case of 12 and (b) 125 mL bottle of Australian Bitters supplied in a case of 12. The territory consists of Australia, New Zealand, and Fiji. CCA must pay Europa within 20 business days of the end of the month in which Europa sends CCA the invoice for products delivered to them. Additionally, in consideration of CCA’s providing marketing services, Europa agreed to pay CCA a contribution amount on all products receipted by CCA from time to time. The aggregate payment may not exceed 50% of the direct marketing expenditure.
While the agreement was originally exclusive in the Commonwealth of Australia, the Commonwealth of New Zealand and the Republic of Fiji, now, since neither CCA nor any of its related parties supplied any products to any customer located in New Zealand or Fiji by January 1, 2019, both Fiji and New Zealand ceased being considered territories. As such, we are able to expand our markets.
Notice Under 2016 Europa Manufacturing Agreement
On January 9, 2019, we sent a letter to CCA regarding the 2016 Agreement. We notified CCA, in accordance with clause 1.1 of the 2016 Agreement, that we would now be able to import, sell, allow or procure any third party to sell, any products to any person within New Zealand and Fiji. We are able to sell in these territories because neither CCA nor any of its related parties have supplied any products to any customer located in Fiji or New Zealand from the start date of the 2016 Agreement to January 1, 2019.
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Manufacturing, Supply and License Agreement between Australian Boutique Spirits Pty Ltd and Elegance Brands, Inc. dated July 31, 2020, as amended (“2020 Manufacturing Agreement”) by that certain Amendment Agreement dated March 10, 2021 (“March 2021 Amendment Agreement”), that certain Termination of BevMart Agreement and Amendment to Manufacturing Agreement between Australian Boutique Spirits Pty Ltd and Elegance Brands, Inc. dated June 14, 2021 (“June 2021 Amendment Agreement”) and that certain Amendment Agreement dated October 21, 2022 (“October 2022 Amendment Agreement”)
On July 31, 2020, IBG and Elegance Brands, Inc. (now known as Sway Energy Corp.) (“Sway”) entered into a manufacturing, supply and license agreement whereby IBG agreed to manufacture and sell Covered Products (as defined below) to Sway. Subsequently on March 10, 2021, June 14, 2021 and October 21, 2022, sections of the agreement were amended by that certain March 2021 Amendment Agreement, the June 2021 Amendment Agreement and the October 21, 2022 Amendment Agreement.
The term of the 2020 Manufacturing Agreement is such that at its initial execution in July 2020, the initial term was July 31, 2020 through July 21, 2022 pursuant to a 24-month initial term period. The March 10 Amendment Agreement changed the initial term from a 24-month initial term period to a 36-month initial term period. As a result of the amendment, the initial term period of the 2020 Manufacturing Agreement was July 31, 2020 through July 31, 2023, at which time the term automatically renewed for 24 months to July 31, 2025. Each subsequent term may be automatically renewed for up to 24 months, unless either party provides written notice of non-renewal.
A description of the material terms of the 2020 Manufacturing Agreement follows. “Covered Products” means the individual and collective reference to (a) the alcoholic drinks and Formulations sold as (i) each of the BevMart Brands, (ii) BitterTales, (iii) Cocktail Bitters, (iv) VOCO and (v) Australian Bitters Company. “BevMart Brands” means the individual brands and line extensions of: (a) Cheeky Vodka and flavor variants, (b) Coventry Estate Gin and flavor variants, (c) Geo Liqueurs in multiple variants, (d) Cheeky Espresso Martini in multiple variants., and (e) all future brands developed by Sway which ABS determines to offer for sale on the BevMart websites www.bevmart.com and www.bevmart.com.au.
Pursuant to the 2020 Manufacturing Agreement, Sway purchases Covered Products from IBG, who manufactures and sells such products in accordance with purchase orders received from Sway. Sway also provides its best projections and estimates as to the quantity, in units and cases, of each of the Covered Products that Sway will need to purchase from IBG for the next succeeding 90 days. Based on such projections, IBG maintains sufficient manufacturing capacity, stocks of raw materials and packaging to enable it to meet such requirements.
During a requisite 12 month period following July 31, 2020, IBG had the right, but not the obligation, to manufacture and sell to Sway all new alcoholic products branded under Sway’s intellectual property rights and to be sold or distributed by Sway in its territory, meaning, only the U.S., its territories and possessions with respect to the Australian Bitters Company Covered Products and VOCO covered products, and the rest of the world with respect to all other Covered Products. Sway accepted IBG’s exercise of such right; consequently, IBG gained the right to manufacture and sell other new products in addition to the Covered Products.
The 2020 Manufacturing Agreement may be terminated by either party for cause. Sway may terminate by providing written notice to IBG: (a) if IBG repudiates or threatens to repudiate, any of its obligations under this Agreement; (b) except as otherwise specifically provided under Sway’s right to terminate for cause, if IBG is in material breach of, or threatens to breach, any material representation, warranty or covenant of IBG under this Agreement and either the breach cannot be cured or, if the breach can be cured, it is not cured by IBG within a commercially reasonable period of time under the circumstances, in no case exceeding sixty (60) days following IBG’s receipt of written Notice of such breach; (c) if IBG repeatedly fails to, or threatens not to, timely deliver Covered Products conforming to the requirements of, and otherwise in accordance with, the terms and conditions of this Agreement; (d) if IBG (i) becomes insolvent or is generally unable to pay, or fails to pay, its debts as they become due, (ii) files or has filed against it, a petition for voluntary or involuntary bankruptcy or otherwise becomes subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency law, (iii) makes or seeks to make a general assignment for the benefit of its creditors, or (iv) applies for or has appointed a receiver, trustee, custodian or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business; (e) if IBG fails to provide Sway, within a commercially reasonable time after Sway’s request (but in no case exceeding 30 days after such request) with adequate and reasonable assurance of IBG’s financial and operational capability to perform timely any of IBG’s obligations under the 2020 Manufacturing Agreement; (f) if, as a result of any repeated and material breach by IBG of any of its obligations under
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this Agreement, Sway’s customer requires that Sway obtain another supplier of Covered Products;
(g) if IBG takes any action, or fails to take any action, required under this Agreement or any other agreement between Sway and IBG, or
as reasonably requested by Sway, the result of which is an imminent interruption or delay, or the threat of an imminent interruption or
delay, in any production at any of Sway’s or its customer’s manufacturing facilities; (h) if, without obtaining Sway’s
prior written consent, (i) IBG sells, leases or exchanges a material portion of IBG’s assets, (ii) IBG merges or consolidates with
or into another Person (as defined in said agreement), other than Sway, or (iii) a change in Control (meaning the possession, directly
or indirectly, of the power to direct or cause the direction of the management or policies of another Person (as defined in said agreement),
whether through the ownership or voting securities, by contract, or otherwise) of IBG occurs; or (i) upon the occurrence of any other
event constituting grounds for termination set forth in under the 2020 Manufacturing Agreement.
Any termination under Sway’s right to terminate for cause will be effective on IBG’s receipt of Sway’s written notice of termination or such later date (if any) set forth in such termination notice. Upon the occurrence of any of the events described under Sway’s right to terminate for cause, Sway may, in addition to any of its other rights to suspend performance under the 2020 Manufacturing Agreement or applicable law, immediately suspend its performance under all or any part of such agreement, without any liability of Sway to IBG, and, notwithstanding anything to the contrary contained in such agreement Sway may, at its election, recover any and all direct and indirect actual and incidental damages (but not including consequential damages) and costs (including attorneys’ and other professionals’ fees and costs), expenses and losses incurred by Sway as a result of any event described under Sway’s right to terminate for cause or any breach of the 2020 Manufacturing Agreement by IBG.
With respect to IBG, the Company has a right to terminate the 2020 Manufacturing Agreement for cause by providing written notice to Sway: (a) if Sway is in material breach of any material representation, warranty or covenant of Sway under said Agreement, and either the breach cannot be cured or, if the breach can be cured, it is not cured by Sway within a commercially reasonable period of time, in no case exceeding sixty (60) days, after Sway’s receipt of written notice of such breach; or (b) if Sway (i) becomes insolvent or is generally unable to pay, or fails to pay, its debts as they become due, (ii) files or has filed against it, a petition for voluntary or involuntary bankruptcy or otherwise becomes subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency law, (iii) makes or seeks to make a general assignment for the benefit of its creditors, or (iv) applies for or has appointed a receiver, trustee, custodian or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business.
Any termination by IBG will be effective on Sway’s receipt of IBG’s written notice of termination or such later date (if any) set forth in such notice.
Immediately upon the effectiveness of a notice of termination delivered by Sway to IBG, IBG shall promptly, unless otherwise directed by Sway, and subject to IBG’s obligation provide resourcing cooperation: (i) terminate all performance under the 2020 Manufacturing Agreement and under any outstanding purchase orders; (ii) transfer title and deliver to Sway all Covered Products produced and paid for pursuant to the 2020 Manufacturing Agreement prior to effectiveness of the notice of termination; and (iii) return to Sway all bailed property and any other property furnished by or belonging to Sway or any of Sway’s customers, or dispose of such bailed property or other property in accordance with Sway’s instructions (provided that Sway will reimburse IBG for the actual, reasonable costs associated with such disposal). The expiration or termination of the then-current term will not affect any rights or obligations of Sway or IBG that: (i) come into effect upon or after termination or expiration of the 2020 Manufacturing Agreement; or (ii) otherwise survive the expiration or earlier termination of such agreement pursuant to its terms and were incurred by the parties prior to such expiration or earlier termination. Upon the expiration or earlier termination of the 2020 Manufacturing Agreement, each party shall: (i) return to the other party all documents and tangible materials (and any copies) containing, reflecting, incorporating or based on the other party’s confidential information, and not retain any copies thereof; (ii) permanently erase all of the other party’s confidential information from its computer systems, except for copies that are maintained as archive copies on its disaster recovery and/or information technology backup systems, Sway and IBG each shall destroy any such copies upon the normal expiration of its backup files; and (iii) upon the other party’s written request, certify in writing to such other party that it has complied with the termination requirements. Termination of the 2020 Manufacturing Agreement will not constitute a waiver of any of the terminating party’s rights or remedies/either party’s rights, remedies or defenses under said agreement, at law, in equity or otherwise.
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Subject to price adjustments, including a favored nations price adjustment herein described, Sway purchases the Covered Products according to the following pricing schedule: (a) for all Covered Products, other than Cocktail Bitters, (i) IBG’s actual manufacturing cost for each of the Covered Products, plus (ii) 54% of the manufacturing cost for such Covered Products; and (b) for Cocktail Bitters, the same price per case as IBG charges to and receives from its largest customer, Coca-Cola Europacific Partners, which is equal to or less than AUD$81.75 per case. If a price adjustment is warranted (a) for Covered Products, other than Cocktail Bitters, as a result of IBG’s increased manufacturing costs, or (b) for Cocktail Bitters, as a result of IBG’s increased pricing to Coca-Cola Europacific Partners, IBG shall provide Sway with evidence, reasonably acceptable to Sway, of such increased manufacturing costs or increases prices charged to Coca-Cola Europacific Partners, as applicable. Applicable price adjustments are effective immediately for all purchase orders not yet accepted by IBG. If at any time during the then-term, either (a) Sway demonstrates to IBG that Sway is able to purchase from one or more unaffiliated third party sources similar quantities of Covered Products on similar delivery dates and delivery terms, either at lower prices or on more favorable payment terms than those earlier stated, or (b) IBG charges any other buyer of similar quantities of Covered Products on similar delivery date and delivery terms, a lower price, or agrees to payment terms that are more favorable to such buyer than those set forth in the agreement for the same Covered Products, IBG shall adjust its pricing and apply that lower price and more favorable payment terms to all same or similar Covered Products covered by 2020 Manufacturing Agreement and under applicable purchase orders, statements of work or invoices (the “Favored Nations Price Adjustment”). Sway is entitled to a Favored Nations Price Adjustment on one occasion only during each Anniversary Year (meaning the period from August 1 through July 31) and it shall apply only to sales and purchases of Covered Products in the next succeeding Anniversary Year. If IBG fails to provide Sway with a Favored Nations Price Adjustment to which it may be entitled, Sway may, at its option, in addition to all of its other rights under this Agreement or at law, terminate this Agreement without liability to IBG.
Upon termination of the 2020 Manufacturing Agreement, two licenses granted thereunder will expire: (i) IBG’s royalty-free license to Twisted Shaker to manufacture, use and sell the product throughout the world, except the U.S., its territories and possessions; and (ii) Sway’s royalty-free license to use the intellectual property rights associated with VOCO to manufacture, use and sell the brand in the U.S., its territories and possessions.
The June 2021 Amendment Agreement also terminated a Management, Supply and License Agreement between IBG and Sway dated December 31, 2020. Under the terms of such agreement. IBG obtained the sole and exclusive right to own and operate the BevMart business in Australia, including its website and the BevMart Brands.
The June 2021 Amendment Agreement also set forth the intellectual property arrangements between IBG and Sway, which are described in the chart below. The chart also reflects amendments under the October 2022 Amendment Agreement. Pursuant to the October 2022 Amendment Agreement, a purchase option previously granted by IBG to Sway whereby, within 90 days following the termination of the 2020 Manufacturing Agreement for any reason other than an automatic termination or termination by IBG for Cause as provided therein, Sway held a purchase option to acquire the formulations, but no intellectual property rights, of Australian Bitters Company for USD$2,000,000 (along with those for BitterTales). The October 2022 Amendment removed the purchase option and the exclusivity of certain licenses granted to Sway with respect to the Australian Bitters Company, BitterTales and VOCO brands.
| Australis Gin |
IBG owns the intellectual property rights, including formulations, associated with the brand Australis Gin.
|
ABS paid USD$42,500 representing 100% of the costs and expenses incurred by Elegance as at that time in developing the Australis Gin beverage and brand |
| Twisted Shaker |
IBG sold its intellectual property rights, including related formulations, associated with the Twisted Shaker brand to Sway.
Sway granted IBG a royalty-free non-exclusive license to use its intellectual property rights associated with the Twisted Shaker brand to manufacture, use and sell Twisted Shaker throughout the world, except for the U.S., its territories and possessions, which are Sway’s exclusive territories. The license expires upon termination of the 2020 Manufacturing Agreement.
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IBG received as consideration from Sway USD$10,000 for each of the formulations possessed by IBG with respect to the Twisted Shaker brand
IBG agreed with Sway to offset future royalties payable for Twisted Shaker to Sway in return for a royalty free right Sway to sell VOCO in the USA.
|
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| VOCO |
IBG granted Sway a royalty-free non-exclusive, non-transferable and non-sublicensable license to the intellectual property rights associated with the VOCO brand to make, use and sell the brand in the U.S., its territories and possessions. The license expires upon termination of the 2020 Manufacturing Agreement.
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Sway paid to IBG the paid-up sum of USD$200,000, in lieu of all current and future royalties due.
IBG agreed with Sway to offset future royalties payable for Twisted Shaker to Sway in return for a royalty-free right for Sway to sell VOCO in the U.S.
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| Australian Bitters Company |
Within Australia, CCEP owns the right to distribute the Australian Bitters Company brand and IBG has the exclusive right to manufacturer the product.
Outside Australia, IBG owns the brand and has the right to manufacture and distribute Australian Bitters Company products. With respect to the U.S., its territories and possessions, IBG has a distribution arrangement with Sway whereby Sway pays USD$60 per case.
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Elegance pays USD$60 per case of Australian Bitters Company products. |
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Cheeky Vodka and flavor variants
Coventry Estate Gin and flavor variants
Geo Liqueurs in multiple variants
Cheeky Espresso Martini in multiple variants |
IBG owns and manufactures these brands (the BevMart Brands), as well as the BevMart.com.au website and business.
|
IBG paid as consideration to Sway USD$188,630.41, which represented 100% of the fully burdened costs and expenses incurred by Sway in developing the website and developing and creating formulations for each of the brands. |
Loan Agreement between Australian Boutique Spirits Pty Ltd and Amit Beri as of June 30, 2021, as novated to Meena Beri on December 27, 2021
On June 30, 2021, ABS and Amit Beri entered into an unwritten loan agreement for the aggregate amount of AUD$2,853,105 for loans received from the Company between January 2020 through such date (the “Beri Loan”) bearing an interest rate of 4.52%. The repayment term was such that in lieu of a cash payment by Mr. Beri to ABS, ABS would offset the loan against the dividend declared for the period to June 30, 2021. In accordance with the Corporations Act (Cth), the Board declared a dividend of AUD$2,138,610 from ABS’ historical retained earnings as of June 30, 2021 and offset the dividend against the loan owing from Mr. Beri.
Subsequently on December 27, 2021, ABS, Mr. Beri and Meena Beri entered into a novation agreement (“Novation of Debt Agreement”) whereby the Beri Loan was novated to Ms. Beri such that the repayment of the remaining balance of AUD$960,759.60 was assumed by Ms. Beri, which is repayable upon demand by ABS.
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Intellectual Property
Our success and future revenue growth depend, in part, on our ability to protect our intellectual property. We sell our products under trademarks, which we own or use under license. The chart below sets forth the intellectual property we own or license.
| Brands | Summary | IP |
| Drummerboy | IBG owns this brand. | IBG owns all intellectual property rights, including formulations, associated with the brand Drummerboy. |
| Australis Gin | IBG owns this brand after repurchasing it from Sway Energy pursuant to the June 2021 Agreement. | IBG owns the intellectual property rights, including formulations, associated with the brand Australis Gin. |
| Twisted Shaker | IBG holds a royalty-free license to Twisted Shaker to manufacture, use and sell the product throughout the world, except the U.S., its territories and possessions. |
IBG previously sold its intellectual property rights, including related formulations, associated with the Twisted Shaker brand to Sway.
Sway then granted IBG a royalty-free non-exclusive license to use its intellectual property rights associated with the Twisted Shaker brand to manufacture, use and sell Twisted Shaker throughout the world, except for the U.S., its territories and possessions, which are Sway’s exclusive territories. The license expires upon termination of the 2020 Manufacturing Agreement.
|
| BitterTales |
Sway owns this brand globally, but does not own the formulations.
With respect to formulations, IBG granted Sway a license to manufacture, use and sell all formulations of BitterTales within the USA and other countries located in Sway’s territories. |
IBG granted to Elegance a non-exclusive, non-transferable and non-sublicensable license to make, use and sell all formulations with respect to the BitterTales brand of alcoholic products. |
| VOCO | IBG owns this brand and granted Sway a royalty-free license to use its intellectual property rights associated with VOCO to manufacture, use and sell the brand in the U.S., its territories and possessions. |
IBG granted Sway a royalty-free non-exclusive, non-transferable and non-sublicensable license to the intellectual property rights associated with the VOCO brand to make, use and sell the brand in the U.S., its territories and possessions. The license expires upon termination of the 2020 Manufacturing Agreement.
|
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| Australian Bitters Company |
Within Australia, CCEP owns the right to distribute the Australian Bitters Company brand and IBG has the exclusive right to manufacturer the product.
Outside Australia, IBG owns the brand and has the right to manufacture and distribute Australian Bitters Company products. With respect to the U.S., its territories and possessions, IBG has a distribution arrangement with Sway whereby Sway pays USD$60 per case. |
ABS sold its right, title and interest to all brands, line extensions, and flavor line extensions associated with the Australian Bitters Company brand to Sway for sale and distribution in the U.S., its territories and possessions.
Elegance distributes Australian Bitters Company products in the U.S. for IBG. |
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Cheeky Vodka and flavor variants
Coventry Estate Gin and flavor variants
Geo Liqueurs in multiple variants
Cheeky Espresso Martini in multiple variants |
IBG owns and manufactures these brands. |
IBG owns and manufactures these brands, as well as the BevMart.com.au website and business.
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We have trademarks registered in Australia for “Twisted Shaker” (mark no. 2231533) and “Drummerboy” (mark no. 2235565). In the United States, we have a trademark registration for “Wired for Wine”.
We expect to register our trademarks in additional markets as we expand our distribution territories to protect our business interests and ensure our competitive position in our industry. We intend to vigorously protect our intellectual property rights, but there can be no assurance that our efforts will be successful. If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, generate reduced revenue, and incur costly litigation to protect our rights. Even if our efforts are successful, we may incur significant costs in defending our rights. For further details about our intellectual property, see “Risk Factors.”
Also included in our intellectual property are our domain and social channel ownerships. We own the following domains: abspirits.com.au; australianboutiquespirits.com; beveragemart.com.au; bevmart.cn; bevmart.co.in; bevmart.co.nz; bevmart.co.uk; bevmart.com; bevmart.com.au; bevmart.in; cinderella-wine.com; cinderellawin.com; distyl.com; drinkdistyl.com; drinkpellicano.com; drinkpellicano.com.au; drinkriveria.com; drinkriveria.com.au; drummerboy.ca; drummerboy.co.uk; drummerboy.com; drummerboy.de; drummerboy.es; drummerboy.fr; innovationbev.com; lpt18.com; twistedshakercocktails.com; virginiablack.com.au; virginiablackwhiskey.com.au; winetilsoldou.com; wire4wine.com; wired4wine.com; wiredforcheese.com; wiredforcigars.com; wiredforjava.com; wiredforpot.com; wiredforspirits.com; wiredforwine.com; wiredonwine.com; wireforwine.com.
We own the following social media handles.
| ● | Instagram: www.instagram.com/wiredforwine; www.instagram.com/drinkdrummerboy; www.instagram.com/bevmartau; www.instagram.com/bevmartus; www.instagram.com/australianboutiquespirits; www.instagram.com/twistedshakercocktails; www.instagram.com/innovationbeveragegroup | |
| ● | Facebook: www.facebook.com/bevmartau; www.facebook.com/bevmartus; www.facebook.com/twistedshakercocktails; www.facebook.com/wiredforwineus; www.facebook.com/drinkdrummerboy | |
| ● | Youtube: |
| o | Drummerboy: www.youtube.com/channel/UC-z4dp67m_I2--nwU5jtB8w | |
| o | Bevmart - www.youtube.com/channel/UCDu32Yxt4OloteZZG2DrHRQ |
| ● | TikTok: www.tiktok.com/@drinkdrummerboy | |
| ● | LinkedIn: www.linkedin.com/company/australian-boutique-spirits; www.linkedin.com/company/bevmart |
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Government Regulation
Australia
The conduct of our businesses, including the production, importation, under-bond storage/warehousing, distribution, sale, display, advertising, marketing, labeling, content, quality, safety, transportation, packaging, disposal, recycling and use of our products, as well as our employment and occupational health and safety practices and protection of personal information, are subject to various laws and regulations administered by federal, state and local governmental authorities in the state of New South Wales and the country of Australia. It is our policy to abide by the laws and regulations around the world that apply to our businesses. We are in compliance with the Australian Taxation Office (ATO) which regulates the manufacture, importation, licensing, distribution within Australia, and exportation of all products which we produce. We are in compliance with the state of New South Wales which regulates the sale of our alcohol products as a wholesale producer directly to consumers over the age of 18 years. (The legal alcohol consumption age in New South Wales, Australia is 18 years of age). We are in compliance with all state and federal licenses granted to us.
United States
The conduct of our businesses, including the production, importation, under-bond storage/warehousing, distribution, sale, display, advertising, marketing, labeling, content, quality, safety, transportation, packaging, disposal, recycling and use of our products, as well as our employment and occupational health and safety practices and protection of personal information, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States. It is our policy to abide by the laws and regulations around the world that apply to our businesses. We are in compliance with the federal government (FDA and ATF-TTB) and with each state’s local regulatory requirements for the sale of wine and spirits.
In addition, certain jurisdictions have either imposed, or are considering imposing, product labeling or warning requirements or other limitations on the marketing or sale of certain of our products as a result of ingredients or substances contained in such products or the audience to whom products are marketed. These types of provisions have required that we highlight perceived concerns about a product, warn consumers to avoid consumption of certain ingredients or substances present in our products, restrict the age of consumers to whom products are marketed or sold or limit the location in which our products may be available. It is possible that similar or more restrictive requirements may be proposed or enacted in the future.
In addition, certain jurisdictions have either imposed or are considering imposing regulations designed to increase recycling rates or encourage waste reduction. These regulations vary in scope and form from deposit return systems designed to incentivize the return of beverage containers, to extended producer responsibility policies and even bans on the use of some types of single-use plastics. It is possible that similar or more restrictive requirements may be proposed or enacted in the future.
Employees
As of May 7, 2025, we had 9 full time employees located in Australia and the United States. These employees are engaged in manufacturing, sales and marketing, customer support, finance, and general management. We rely upon and engage consultants on a contract basis to provide services to assist us to carry on our technical development, administrative, shareholder communication and marketing activities. None of our employees are represented by labor unions or covered by collective bargaining agreements.
Legal Proceedings
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
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C. Organizational Structure
The legal name of our company is Innovation Beverage Group Limited and we are a public limited company incorporated under the laws of Australia. Innovation Beverage Group Limited has three wholly-owned subsidiaries, IBG USA LLC (“IBG USA”), Reg Liquors LLC (d/b/a Wired for Wine), and Innovation Beverage Group USA Inc. (“IBG USA INC”). We conduct some of our operations through our subsidiaries. IBG USA INC was formed in October 2024 for the purpose of importing, producing via co-packers, marketing and wholesaling the IBG owned portfolio of brands in the United States. IBG USA INC began these activities since October 2024 with several distribution agreements with Republic National Distribution Company (“RNDC”) in California, Hawaii, Alaska, Nevada, Ohio and Washington states and with Houston’s Inc. in Oregon. IBG USA INC also has a sales and marketing agreement with Blue Ridge Wine & Spirits Inc., which covers all 50 U.S. states. Reg Liquors LLC is an e-commerce retailer of wines and spirits, which operated its own marketplaces, www.wiredforwine.com and www.bevmart.com, until October 2024. In October of 2024, we decided to focus our efforts on building our own brands in the United States and other export markets, and as a result we have ceased retailing of certain third-party brands via our retail websites, www.wiredforwine.com and www.bevmart.com for the United States.
Investments in our securities are not purchases of equity securities of these operating subsidiaries in the United States but instead are purchases of equity securities of IBG.
D. Property, Plant and Equipment
The Company leases office space in Seven Hills, New South Wales, Australia where we lease a distillery and beverage manufacturing facility, including office space, of approximately 2,000 square meters (approximately 21,528 square feet) (“Seven Hills Lease”). In January 2025, we exercised our option to extend our lease. The Seven Hills Lease commenced on July 1, 2018 and ends on April 21, 2026.
We believe that our existing facilities are generally adequate to meet our current of future needs, but we expect to seek additional space as needed to accommodate future growth.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this annual report. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in “Cautionary Note Regarding Forward-Looking Statements” and under “Risk Factors” elsewhere in this annual report. Our discussion and analysis for the two years ended December 31, 2023 can be found in our prospectus dated September 14, 2024, filed with the SEC on September 17, 2024 (Registration No. 333-266965).
Overview
We are a developer, manufacturer and exporter of a growing portfolio of 75 formulations across 14 alcoholic and non-alcoholic brands of beverages such as Australian Bitters Company and Drummerboy. Our distribution capabilities include sales to large distributors and high-margin direct-to-consumer sales. We have partnered with Coca-Cola Europacific Partners (NASDAQ:CCEP), one of the world’s largest Coca-Cola bottlers, to exclusively distribute “Australian Bitters Company” bitters in Australia while retaining the rights throughout the rest of the world, and we are negotiating distribution to new European markets, including expansion of our new brands such as Drummerboy into Australia and Europe. We focus on direct-to-consumer (DTC) sales through our network of eCommerce platforms. We launched BevMart, a DTC marketplace, in Australia in May 2021.
We have facilities, which are FDA certified, kosher compliant and meet Coca-Cola’s stringent standards, and include the ability to engage in the process of making our products in-house, including innovation and development, maceration, blending, distillation, rectification and bottling. We believe that we currently have the capacity to increase production by 10x with minimal capital expenditures.
For more information regarding our business and operations, see “Item 4B. Business Overview” above.
Recent Offerings - Initial Public Offering - October 2024
On September 26, 2024, we closed our initial public offering of 1,350,000 ordinary shares, not including the underwriter’s over-allotment option, at a public offering price of $4.00 per share for aggregate gross proceeds of $5,400,000, prior to deducting underwriting discounts and other offering expenses.
Our ordinary shares began trading on the Nasdaq Capital Market under the ticker symbol “IBG” on September 26, 2024.
A. Operating Results
Key Components of Our Results of Operations
We consider a variety of financial and operating measures in assessing the performance of our business. The key financial performance measures we use are revenue, gross profit and gross margin. Our review of these indicators facilitates timely evaluation of the performance of our business and effective communication of results and key decisions, allowing our business to respond promptly to competitive market conditions and different demands and preferences from our customers. The key measures that we use to evaluate the performance of our business are set forth below and are discussed in greater details under “Results of Operations”.
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Revenues
Our revenues are derived primarily from the sales of bitter products to Coca-Cola Europacific Partners and overseas customers and direct-to-customer (DTC) sales through our on-line marketplaces.
Cost of Goods Sold
Cost of goods sold include the costs of direct materials and delivery costs, direct labor, import duties and other taxes, and an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of amortization of intangible assets, advertising and marketing, consultancy and other professional fees, insurance, and new product development.
Finance Costs
Finance costs consist primarily of interest expenses as a result of the accounting for leases.
Results of Operations
Comparison of the Fiscal Years Ended December 31, 2024 and 2023
Revenues for the year ended December 31, 2024, were $2,931,243 compared to revenues of $3,147,763 for the year ended December 31, 2023. The following table summarizes the results of our revenues for the years ended December 31, 2024 and 2023, respectively.
| 12 Months Ended December 31, | Increase/ | |||||||||||||||||||
| 2024 | 2023 | Decrease | ||||||||||||||||||
| Australian Bitters Company | $ | 2,883,886 | 98 | % | $ | 2,790,125 | 89 | % | 3 | % | ||||||||||
| BitterTales and others | $ | — | 0 | % | $ | — | 0 | % | — | |||||||||||
| Total Brand Products | $ | 2,883,886 | 98 | % | $ | 2,790,125 | 89 | % | 3 | % | ||||||||||
| Spirits | $ | 47,357 | 2 | % | $ | 86,126 | 3 | % | -45 | % | ||||||||||
| Wines | $ | — | 0 | % | $ | 271,512 | 9 | % | -100 | % | ||||||||||
| Total E-Commerce | $ | 47,357 | 2 | % | $ | 357,638 | 11 | % | -87 | % | ||||||||||
| Grand Total | $ | 2,931,243 | 100 | % | $ | 3,147,763 | 100 | % | -7 | % | ||||||||||
The $216,520, or approximately 7%, decrease in revenues was driven by wine sales from the Company’s American on-line marketplace, primarily caused by the Company’s re-strategizing of the eCommerce business this year by ceasing the trading of the low-margin, on-line wine sales. 3% sales increase in Australian Bitters Company mainly represent price increase with strong and stable volume sold.
We have two reportable geographic segments – Australia and the United States. All inter-segment revenues are eliminated. Revenue for fiscal year ended December 31, 2024, in Australia and the United States, were $2,931,243 and $0, respectively, compared to revenue of $2,876,251 and $271,512, for the fiscal year ended December 31, 2023. The decrease in revenue of the of U.S. geographic segment is due to the ceasing of the trading of our on-line marketplace Wired For Wine which is counted as the U.S. market.
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Summary information with respect to the IBG’s reportable geographic segments is as follows:
| 12 Months Ended December 31, | ||||||||||||||||
| Revenues | 2024 | 2023 | ||||||||||||||
| Australia | $ | 2,931,243 | 100 | % | $ | 2,876,251 | 91 | % | ||||||||
| United States | $ | 0 | 0 | % | $ | 271,512 | 9 | % | ||||||||
| Total Revenue | $ | 2,931,243 | 100 | % | $ | 3,147,763 | 100 | % | ||||||||
| 12 Months Ended December 31, | ||||||||
| Loss from operations | 2024 | 2023 | ||||||
| Australia | $ | (2,110,363 | ) | $ | (1,007,824 | ) | ||
| United States | $ | (1,086,677 | ) | $ | (1,131,254 | ) | ||
| Total loss from operations | $ | (3,197,040 | ) | $ | (2,139,078 | ) | ||
Cost of goods sold for the year ended December 31, 2024, were $699,329 compared to the cost of goods sold for the year ended December 31, 2023, of $1,093,369. The decrease in the cost of goods sold was primarily due to the decrease in sales. But IBG’s overall gross margin increased from approximately 65% in 2023 to 76% in 2024 as a result of ceased trading of the low margin wine products.
| 12 Months Ended December 31, | ||||||||||||||||
| 2024 | 2023 | |||||||||||||||
| General and administrative | $ | 1,555,190 | 29 | % | $ | 1,403,949 | 33 | % | ||||||||
| Salaries and wages | $ | 1,633,599 | 30 | % | $ | 1,674,746 | 40 | % | ||||||||
| Sales and marketing | $ | 155,371 | 3 | % | $ | 329,439 | 8 | % | ||||||||
| Contracted services | $ | 1,472,722 | 27 | % | $ | 785,338 | 19 | % | ||||||||
| Asset write-off expense | $ | 612,072 | 11 | % | $ | — | 0 | % | ||||||||
| Total Operating Expenses | $ | 5,428,954 | 100 | % | $ | 4,193,472 | 100 | % | ||||||||
Operating expenses for the year ended December 31, 2024, were $5,428,954 compared to $4,193,472 for the year ended December 31, 2023. The increase in our operating expenses was primarily a result increased expenses relating to:
| ● | Public Relation and Compliance expenses ($401,147), included in general and administrative expenses including $346,644 non-recurring expenses incurred in the Company’s IPO day; | |
| ● | Asset write-off expense ($612,072) represents once-off writing off a distributor agreement and a capex deposit that was capitalized in the previous year. | |
| ● | Contracted services ($442,866 increase) driven by the hiring of external professionals for legal, tax, audit and consulting supports during company’s IPO year. |
| 12 Months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Other | $ | 319,906 | $ | 90,720 | ||||
| Interest income | $ | 63,689 | $ | 53,763 | ||||
| Interest expense | $ | (244,166 | ) | $ | (260,473 | ) | ||
| Total other income / (expenses) | $ | 139,429 | $ | (115,990 | ) | |||
| Net loss | $ | (2,571,333 | ) | $ | (2,013,957 | ) | ||
Total other income for the year ended December 31, 2024, was $139,429 as compared to the loss of $115,990 for the year ended December 31, 2023. This is due to the $108,046 foreign exchange gains (both realized and unrealized) and $210,860 other income mainly caused by the forgiveness of loans due to settlement.
The net loss for the year ended December 31, 2024, was $2,571,333 as compared to the net loss of $2,013,957 for the year ended December 31, 2023.
B. Liquidity and Capital Resources
For the year ended December 31, 2024, we incurred a net loss of $2.57 million and used net cash of $1.58 million in our operating activities. As of December 31, 2024, we had a working capital of $0.31 million, and an accumulated deficit of approximately $8.78 million. As of December 31, 2024, our cash and cash equivalents totaled approximately $0.62 million. Additionally, we have also recognized a total of $0.85 million as receivables.
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We believe that our cash and cash equivalents will enable us to fund our operations for at least 12 months, based on our current cash and trade receivable balances and our ongoing operations. The consolidated financial statements have been prepared on the assumption that we will continue as a going concern, meaning we will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.
Through December 31, 2024, we have financed our operations primarily through (a) issuances of our equity securities in public, including in our initial public offering in September 2024. Total invested capital as of December 31, 2024 was $3.2 million, which included Ordinary Shares and a convertible note agreement dated March 10, 2024 between the Company and Hartfield Assets Inc. and (b) through sales of our products.
Fiscal Years Ended December 31, 2024, and 2023
As of December 31, 2024, we had total cash and cash equivalents of $619,944 as compared with $14,140 as of December 31, 2023. The following table summarizes our sources and uses of cash for each of the periods presented:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash from operating activities | $ | (1,575,298 | ) | $ | 57,481 | |||
| Net cash from investing activities | $ | (61,023 | ) | $ | (121,883 | ) | ||
| Net cash from financing activities | $ | 2,141,089 | $ | 25,936 | ||||
| Impact of changes in foreign currency on cash | $ | 101,036 | $ | (39,380 | ) | |||
| Net (decrease) in cash and cash equivalents | $ | 605,804 | $ | (77,846 | ) | |||
Net cash used in operating activities
Net cash used in operating activities was $1.58 million and $0.06 million for the years ended December 31, 2024 and 2023, respectively. The $1.64 million decrease was attributable primarily to higher fees of professional services providers, as a result of IPO related expenses we incurred in 2024 and lump-sum payment of outstanding balance to vendors.
Net cash used in investing activities
Net cash from investing activities was ($61,023) and ($121,883) for the years ended December 31, 2024 and 2023, respectively. The movement was due to the increased balance of related party loans.
Net cash provided by financing activities
Net cash provided by financing activities was $2.14 million and $25,936 million for the years ended December 31, 2024 and 2023, respectively. The increase was mainly due to the IPO.
Off-Balance Sheet Arrangements
There were $0 off-balance sheet arrangements for the years ended December 31, 2024 and 2023 that have or that in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operations.
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Indebtedness
On March 20, 2024, we entered into a convertible note agreement with Hartfield Assets Inc. (“Noteholder”) pursuant to which the Noteholder agreed to advance to the Company up to US$3,000,000, in individual tranches of US$250,000, and the Company shall issue to the Noteholder convertible notes (“Notes”). As of May 7, 2025, we have issued Notes in the aggregate principal amount of US$238,000. The Company shall issue a minimum of 4 requests for funding but is permitted to issue a maximum of 11 such requests before March 20, 2025, with the timing of such requests being solely in the discretion of the Company. Each issued Note bears a maturity date that is 12 months from the date of issuance. The Noteholder may convert any or all outstanding Notes into ordinary shares calculated by dividing the principal amount of the Notes by the Conversion Price, which shall be equal to the higher of (a) a 25% discount to the applicable VWAP (as defined in the Note) and (b) the Floor Price (meaning, with respect to the initial Note issued, 20% of the VWAP (as defined in the Note) as of March 20, 2024, and with respect to subsequent Notes, 20% of the VWAP (as defined in the Note) on the expiration of the calendar month during which the relevant conversion notice is delivered.
C. Research and Development, Patents and Licenses, etc.
For a description of our research and development programs and the amounts that we have incurred over the last two years pursuant to those programs, please see “Item 5. Operating and Financial Review and Prospects- A. Operating Results-Research and Development Expenses” and “Item 5. Operating and Financial Review and Prospects- A. Operating Results-Comparison of the year ended December 31, 2024 to the year ended December 31, 2023- Research and Development Expenses.”
D. Trend Information
We continue to closely monitor macro-economic conditions, including the headwinds caused by supply chain problems, inflation, increased interest rates, geopolitical events, military conflicts and other trends that have been adversely impacting economic activity. We have been assessing, on an ongoing basis, the implications of those global conditions for our operations, supply chain, liquidity, cash flow and product orders, and will act in an effort to mitigate adverse consequences as needed. To the extent inflation increases our costs and expenses, we could consider price increases to offset those cost pressures. Other than as disclosed elsewhere in this annual report, we are not currently aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2024 to the present time that are reasonably likely to have a material adverse effect on our net revenue, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition.
E. Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We evaluate our estimates on an ongoing basis, including those related to revenue recognition and income taxes. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making the judgments we make about the carrying values of our assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from the estimates.
The critical accounting policies summarized in this section are discussed in further detail in the notes to our consolidated financial statements appearing elsewhere in this annual report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
Recently-Issued Accounting Pronouncements
Certain recently-issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the financial statements included in elsewhere in this registration statement, regarding the impact of the U.S. GAAP standards as issued by the FASB that we will adopt in future periods in our financial statements.
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Emerging Growth Company Status
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
| ● | a requirement to present only two years of audited financial statements in addition to any required interim financial statements and correspondingly reduced Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure; |
| ● | to the extent that we no longer qualify as a foreign private issuer, (i) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (ii) exemptions from the requirement to hold a non-binding advisory vote on executive compensation, including golden parachute compensation; |
| ● | an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and |
| ● | an exemption from compliance with the requirement that the Public Company Accounting Oversight Board has adopted regarding a supplement to the auditor’s report providing additional information about the audit and the financial statements. |
We may take advantage of these exemptions for up to five years or until such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of: (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; (iii) the date on which we are deemed to be a large accelerated filer under the rules of the SEC; or (iv) the last day of the fiscal year following the fifth anniversary of our IPO. We may choose to take advantage of some but not all of these exemptions. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This means that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
Executive Officers and Directors
The following table sets forth information regarding our executive officers and directors, including their ages as of May 7, 2025:
| Name | Age | Position | ||
| Sahil Beri | 38 | Chief Executive Officer, Chief Operating Officer and Chairman | ||
| Eric Yu | 44 | Chief Financial Officer | ||
| Daniel Lanskey (1) (2) (3) | 63 | Independent Director | ||
| Sally Cardillo (1) (2) (3) | 71 | Independent Director | ||
| Shawn Messner (1) (2) (3) | 57 | Independent Director |
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| (1) | Independent director under applicable Nasdaq Capital Market, as affirmatively determined by our board of directors. |
| (2) | A member of our audit committee. |
| (3) | A member of our nomination and remuneration committee. |
Sahil Beri has been the Chief Executive Officer since December 27, 2024 and the Chief Operating Officer and Chairman of the Board of Directors since April 2022. From August 2018 through April 2022, Mr. Beri served as Innovation Beverage Group’s Australian Managing/Executive Director. Mr. Beri is a highly experienced executive officer, focused on operational excellence in the beverage industry with around 10 years of experience in multiple facets of the beverage industry, with a primary focus on creating and commercializing new innovative beverages. He has strong formulation, new product development, commercialization, and business development skills. Mr. Beri has in his career, across several beverage companies he has been involved in, launched a significant number of products. Prior to his role at Innovation Beverage Group, Mr. Beri was the Executive Director and Chief Technology Officer at Sway Energy Corporation between December 2019 through March 2022, where he was responsible for the creation of all beverage systems for formulations, manufacturing systems, new innovation development and commercialization for a range of alcohol and non-alcohol beverages. Between September 2016 and July 2018, Mr. Beri was the New Product Development Manager at Europa International Pty Ltd, another beverage company headquartered in Sydney, Australia. Between January 2017 till March 2020, Mr. Beri also served as a non-executive director on the board of Cannhealth Group Limited, an Australian nutraceutical company. Mr. Beri is a registered Pharmacist who completed his Master of Pharmacy in 2012 from the University of Newcastle, Australia and concurrently worked in both the beverage industry as well as the pharmaceutical industry for several years. Mr. Beri also completed his Master in Biochemistry in 2009 from Australia’s Bond University and a Bachelor of Arts and Science in 2008 from the University of Sydney, Australia.
Eric Yu has served as the Chief Financial Officer since July 2021. Mr. Yu has over 15 years of experience of working at the big four accounting firms, in large-scale management consulting companies and commercial corporations within the food and beverage industry. Mr. Yu has substantial experience in both private companies and public companies listed on the Australian Securities Exchange Ltd (ASX). He has worked in both Australia and China where he supported a wide range of businesses to manage end-to-end accounting functions and identify finance transformation, value creation and performance improvement opportunities. Before joining Innovation Beverage Group in July 2021, Mr. Yu was a Senior Manager with EY Oceania from August 2019 to July 2021 where he worked alongside advisory leaders and drew his skills in leading teams to support a diverse range of clients with their accounting needs and implementation of finance transformation initiatives. From June 2016 to February 2019, Mr. Yu was Head of Finance of the Bindaree Food Group where he lead a team that managed the full-cycle finance, internal control, capital raising, compliance and reporting of this vertically-integrated fast-moving consumer goods companies (FMCG) with an AUD$600 million annual turnover. Mr. Yu obtained his Masters of Accounting degree from the Australian National University. He is also a member of the Chartered Accountants Australia & New Zealand (CA ANZ).
Daniel Lanskey has served as a director since February 2024. Mr. Lanskey has over twenty-five (25) years of capital markets experience in Asia, Australia, Canada, and the United States. He has served as Chairman, Managing Director, and CEO of companies in the energy, mining, life science, investment services and information technology. As a serial entrepreneur, Mr Lanskey has a demonstrated history of managing day to day operations from Start Up, Seed Funding through to Initial Public Offering to exit. As an experienced public speaker, he has presented at Industry Conferences in Asia, Australia, Europe, Canada, and United States. Mr. Lanskey is a Director of Valross Capital Pty Ltd, an authorized representative of an Australian Financial Services License, and has been an integral driver of capital raising activities for both private and public companies trading on the ASX, TSXV, and OTCQX. He is the Founder of Turntable Energy Limited and has served as Chairman since 2016. He has served as a director of Timeless Capital Inc. (TSXV: TLC.P) since 2018. Mr. Lanskey has also served as Chairman of Needle Capital Corp. from 2017-2019, Managing Director and Founder of Qmines Limited (ASX:QML) from 2019-2022 and Non-Executive Director of McArthur Minerals Limited (ASX: MIO; TSX-V: MMS), among positions in other listed companies. He previously served as a member of the Queensland Police Service in Australia and qualified as a Detective and Sergeant, while completing studies in Justice Administration, Information Technology and Business at a Diploma level. He holds a post graduate business degree in Entrepreneurship and Venture Development from Griffith University, Brisbane, Australia.
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Sally Cardillo has served as a director since April 2022. Ms. Cardillo has over thirty (30) years of accounting experience having served as a Certified Public Accountant since 1988. Since her retirement in October 2016, she has provided accounting consultancy services to individuals and corporate clients. From 1988 to 2016, Ms. Cardillo was a CPA with Braund, Eiler and Vasko (“Braund Eiler”) and Herbein + Company, Inc., which acquired Braund Eiler in 2014. At the beginning of her career, Ms. Cardillo spent eleven (11) years in industrial engineering, production planning, and systems analysis for the Jones and Laughlin Steel Company in Pittsburgh, Pennsylvania. Then in 1988, she became a Certified Public Accountant and began providing accounting, consulting, and audit services for a variety of individual and corporate clients for the remainder of her career. Ms. Cardillo holds a Bachelor of Science in Mathematics from The Pennsylvania State University.
Shawn Messner has served as a director since February 2024. Mr. Messner is the Managing Director of Investment Banking at Needham & Company, a position he has held since April 2019. His responsibilities include the origination and execution of public and private financings, and mergers and acquisitions. Mr. Messner currently heads Needham’s activities related to the consumer and cannabis industries. Over his approximately twenty (20) year career, Mr. Messner has been responsible for 150+ equity financings and advisory transactions, representing over $12B+ in aggregate value. Prior to joining Needham, he was Managing Director and Head of Energy Investment Banking at Northland Capital Markets. Prior to Northland, Mr. Messner worked at Piper Jaffray. After serving in the U.S. Navy, he graduated from Augsburg College with a Bachelor’s degree in Finance and the University of Minnesota with an Masters of Business Administration in Finance.
Family Relationships
There are no family relationships among our directors and executive officers. There are no arrangements or understanding between or among our executive officers and directors pursuant to which any director or executive officer or is to be selected as a director or executive officer.
B. Compensation
The following table presents in the aggregate all compensation we paid to all of our directors and senior management as a group for the year ended December 31, 2024. The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during this period.
| Short Term Employment Benefits | Post Employment Benefits | Total | ||||||||||||||||||||||||||
| Salary & fees(4) |
Cash bonus | Non monetary benefits | Super -annuation | Retirement benefits | ||||||||||||||||||||||||
| Year | US$ | US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||||
| Directors | ||||||||||||||||||||||||||||
| Sahil Beri | 2024 | 49,677 | — | — | — | — | 49,677 | |||||||||||||||||||||
| Sally Cardillo | 2024 | 49,677 | — | — | — | — | 49,677 | |||||||||||||||||||||
| Daniel Lanskey | 2024 | 41,397 | — | — | — | — | 41,397 | |||||||||||||||||||||
| Shawn Messner | 2024 | 41,397 | — | — | — | — | 41,397 | |||||||||||||||||||||
| Sameer Sethi (1) | 2024 | 8,279 | — | — | — | — | 8,279 | |||||||||||||||||||||
| Officers | ||||||||||||||||||||||||||||
| Dean Huge (2) | 2024 | 402,234 | — | 298,925 | — | — | 701,159 | |||||||||||||||||||||
| Sahil Beri | 2024 | 248,383 | — | — | — | — | 248,383 | |||||||||||||||||||||
| Tianyi Eric Yu | 2024 | 126,682 | 33,118 | — | 4,020 | — | 163,820 | |||||||||||||||||||||
| Clive Coleman (3) | 2024 | 98,308 | — | 42,328 | 7,944 | — | 148,580 | |||||||||||||||||||||
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| (1) | Mr. Sethi resigned as a director on February 16, 2024, which took effect at such time. |
| (2) | Mr. Huge resigned as Chief Executive Officer effective December 27, 2024. |
| (3) |
Mr. Coleman resigned as Chief Commercial Officer on January 22, 2024, which became effective on April 22, 2024. |
| (4) | Represents the directors’ and senior management’s gross salary plus payment of social benefits mandatory under the laws of Australia made by the company on behalf of such persons. |
As of December 31, 2024, no options were granted to our directors and executive officers. For a description of the terms of our options and option plans, see “Item 6.E-Equity Incentive Plan” below.
For so long as we qualify as a foreign private issuer, we will not be required to comply with the proxy rules applicable to U.S. domestic companies regarding disclosure of the compensation of certain executive officers on an individual basis. Pursuant to the Companies Law, we will be required, after we become a public company, to disclose the annual compensation of our five most highly compensated officers on an individual basis. This disclosure will not be as extensive as that required of a U.S. domestic issuer.
Employment and Consulting Agreements with Executive Officers
We have entered into written employment agreements with each of our executive officers. All of these agreements contain customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law.
Directors’ Service Contracts
Other than with respect to our directors that are also executive officers, we do not have written agreements with any director that provide for benefits upon the termination of his or her employment with our company.
C. Board Practices
Term of Office
Our Directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our Constitution.
Directors’ Service Contracts
Our directors enter into Non-Executive Director’s Agreement with our company. Our directors’ terms continue until they have either resigned or are removed from the office of director, or their office as a director of the Company otherwise becomes vacant.
We are incorporated under the laws of Australia. Our governing documents consist of our Constitution and we have implemented a corporate governance framework that is guided by The Corporate Governance Principles and Recommendations (4th Edition) as published by the Australian Securities Exchange’s Corporate Governance Council.
We qualify as a “foreign private issuer” as defined in Section 405 of the Securities Act. As a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose disclosure requirements as well as procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, the members of our board of directors and senior management are not subject to short-swing profit and insider trading reporting obligations under Section 16 of the Exchange Act. They will, however, be subject to the obligations to report changes in share ownership under Section 13 of the Exchange Act and related SEC rules, to the extent applicable.
The foreign private issuer exemption also permits us to follow home country corporate governance practices or requirements instead of certain Nasdaq listing requirements required for U.S. domestic issuers, including the following:
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| ● | We rely on an exemption from the requirement that our independent directors meet regularly in executive sessions under Nasdaq listing rules. The Corporations Act does not require the independent directors of an Australian company to have such executive sessions. |
| ● | We rely on an exemption from the quorum requirements applicable to meetings of shareholders under Nasdaq listing rules. In compliance with Australian law, three shareholders present, in person or by proxy, attorney or a representative, shall constitute a quorum for a general meeting. Nasdaq listing rules require that an issuer provide for a quorum as specified in its by-laws for any meeting of the holders of ordinary shares, which quorum may not be less than 33 1/3% of the outstanding voting ordinary shares. Accordingly, because applicable Australian law and rules governing quorums at shareholder meetings differ from Nasdaq’s quorum requirements, we claim this exemption. |
| ● | We rely on an exemption from the requirement to disclose third-party director and director nominee compensation under Nasdaq listing rules. The Corporations Act does not have a similar requirement. |
Board Composition and Election of Directors
Our board of directors (“Board”) currently consists of four (4) directors. Under our Constitution, at each annual general shareholder meeting one-third of the directors, other than the Managing Director, or if their number is not a multiple of three, then the number nearest to one-third (rounded upwards in case of doubt) of the directors must retire.
Notwithstanding the above, no director, other than the Managing Director, shall hold office for a period in excess of 3 years, or until the third annual general meeting following his or her appointment, whichever is the longer, without submitting himself for re-election.
Under our Constitution, at the next shareholder annual general meeting, (i) all Board-appointed directors must present themselves for election and (ii) one third of shareholder-elected directors must present themselves for re-election. Accordingly, as each of our current directors was appointed by the Board, each stands for election at the next shareholder annual general meeting, which is anticipated to occur within five (5) months of the end of our fiscal year, December 31, 2024.
A retiring director remains in office until the relevant shareholder meeting and will be eligible for re-election at that meeting.
A director who has a material interest in a matter before our board of directors or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our board of directors or any committee on which he or she serves, such director may be required to remove himself or herself from the meeting while discussions and voting with respect to the matter are taking place.
Meetings of Directors
Our board of directors is responsible for the stewardship of the Company and providing oversight as to the management of our business and affairs, including providing guidance and strategic oversight to management by, among other things:
| ● | Developing and reviewing the Company’s strategic and operating objectives, business plans and budgets as developed by the Board and management giving consideration to any recommendations made to the Board by any committees; | |
| ● | Overseeing the Company’s process for making timely and balanced disclosure of all material information concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company’s securities | |
| ● | Reviewing and approving the Company’s financial position, systems of risk management and internal compliance and control, codes of conduct and legal compliance and ensuring the integrity and effectiveness of those systems by conducting annual internal reviews of the systems including reviewing the results of any review by the Audit Committee; |
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| ● | Annually reviewing internal and external audit reports to ensure that, where deficiencies in controls or procedures have been identified, appropriate remedial action is taken by management. | |
| ● | Appointing and removing the Chief Executive Officer; | |
| ● | Monitoring and undertaking annual performance evaluations of the Chief Executive Officer and key senior executives; | |
| ● | Ensuring that the Company has an effective corporate governance system in place which includes ensuring that policies and procedures in place are consistent with the Company’s objectives and corporate governance standards; |
Remuneration and Borrowing
The directors may receive such remuneration as our Board of Directors may determine from time to time. Each director is entitled to be repaid or prepaid for all traveling, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our Board of Directors or committees of our Board of Directors or shareholder meetings or otherwise in connection with the discharge of his or her duties as a director. The Nomination and Remuneration Committee assist the directors in reviewing and approving the compensation structure for the directors. Our Board of Directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock, and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.
Board Committees
In light of the Company’s size and nature, we believe that the current size of the board of directors is a cost effective and practical method of directing and managing the Company. As our activities develop in size, nature and scope, the size of the board, the formation of board committees and the implementation of additional corporate governance policies and structures will be reviewed.
Audit Committee
The members of our Audit Committee are Sally Cardillo, Daniel Lanskey and Shawn Messner. Our board of directors has determined that Ms. Cardillo, Mr. Lanskey and Mr. Messner satisfy the independence requirements under Nasdaq listing standards and Rule 10A-3(b)(1) of the Exchange Act. Ms. Cardillo is the chairperson of our Audit Committee. Our board of directors has determined that Ms. Cardillo is an “audit committee financial expert” within the meaning of SEC regulations. Each member of our Audit Committee can read and understand fundamental financial statements in accordance with applicable requirements. In arriving at these determinations, our board of directors has examined each member’s scope of experience and the nature of his or her employment.
The Audit Committee’s duties and responsibilities are specified in our Audit Committee Charter, and include, but not be limited to:
| ● | To (1) select and retain an independent registered public accounting firm to act as the Company’s independent auditors for the purpose of auditing the Company’s annual financial statements, books, records, accounts and internal controls over financial reporting, (2) set the compensation of the Company’s independent auditors, (3) oversee the work done by the Company’s independent auditors and (4) terminate the Company’s independent auditors, if necessary. | |
| ● | At least annually, to obtain and review a report by the Company’s independent auditors that describes (1) the accounting firm’s internal quality control procedures, (2) any material issues raised by the most recent internal quality control review, peer review or Public Company Accounting Oversight Board review or inspection of the firm or by any other inquiry or investigation by governmental or professional authorities in the past five (5) years regarding one or more audits carried out by the firm and any steps taken to deal with any such issues, and (3) all relationships between the firm and the Company or any of its subsidiaries; and to discuss with the independent auditors this report and any relationships or services that may impact the objectivity and independence of the auditors. |
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| ● | To assure the regular rotation of the lead audit partner at the Company’s independent auditors and consider regular rotation of the accounting firm serving as the Company’s independent auditors. | |
| ● | To review and discuss with the Company’s independent auditors (1) the auditors’ responsibilities under generally accepted auditing standards and the responsibilities of management in the audit process, (2) the overall audit strategy, (3) the scope and timing of the annual audit, (4) any significant risks identified during the auditors’ risk assessment procedures and (5) when completed, the results, including significant findings, of the annual audit. | |
| ● | To review and discuss with the Company’s independent auditors (1) all critical accounting policies and practices to be used in the audit; (2) all alternative treatments of financial information within generally accepted accounting principles (“GAAP”) that have been discussed with management, the ramifications of the use of such alternative treatments and the treatment preferred by the auditors; and (3) other material written communications between the auditors and management. | |
| ● | To review with management and the Company’s independent auditors: any major issues regarding accounting principles and financial statement presentation, including any significant changes in the Company’s selection or application of accounting principles; any significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including the effects of alternative GAAP methods; and the effect of regulatory and accounting initiatives and off-balance sheet structures on the Company’s financial statements. | |
| ● | To review with management and the Company’s independent auditors the adequacy and effectiveness of the Company’s financial reporting processes, internal control over financial reporting and disclosure controls and procedures, including any significant deficiencies or material weaknesses in the design or operation of, and any material changes in, the Company’s processes, controls and procedures and any special audit steps adopted in light of any material control deficiencies, and any fraud involving management or other employees with a significant role in such processes, controls and procedures, and review and discuss with management and the Company’s independent auditors disclosure relating to the Company’s financial reporting processes, internal control over financial reporting and disclosure controls and procedures, and the independent auditors’ report on the effectiveness of the Company’s internal control over financial reporting and the required management certifications to be included in or attached as exhibits to the Company’s annual report on Form 20-F. | |
| ● | To review, approve and oversee any transaction between the Company and any related person (as defined in Item 404 of Regulation S-K) and any other potential conflict of interest situations on an ongoing basis, and to develop policies and procedures for the Committee’s approval of related party transactions. |
Nomination and Remuneration Committee
Our Nomination and Remuneration Committee is comprised of our non-executive directors Sally Cardillo, Daniel Lanskey and Shawn Messner, all of whom the Board has determined to satisfy the independence requirements of our board charter. Ms. Cardillo is the chair of the Nomination and Remuneration Committee.
The Committee shall provide assistance to the Board in fulfilling its corporate governance and oversight responsibilities, however, ultimate responsibility for the Company’s nomination and remuneration practices remains with the Board. The main functions and responsibilities of the Committee include the following:
| ● | assisting the Board in examining the selection and appointment practices of the Company; | |
| ● | ensuring remuneration arrangements are equitable and transparent and enable the Company to attract and retain executives and directors (executive and non-executive) who will create sustainable value for members and other stakeholders; | |
| ● | ensuring the Board is of an effective composition, size and commitment to adequately discharge its responsibilities and duties; | |
| ● | reviewing Board succession plans and Board renewal; |
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| ● | reviewing the processes for evaluating the performance of the Board, its committees and individual directors and ensuring that a fair and responsible reward is provided to executives and directors having regard to their performance evaluation; | |
| ● | reviewing levels of diversity within the Company and Board and reporting on achievements pursuant to any diversity policy developed by the Board; | |
| ● | reviewing the Company’s remuneration, recruitment, retention and termination policies for the Board and senior executives; and | |
| ● | complying with all relevant legislation and regulations. |
Code of Conduct
We have adopted a Code of Conduct applicable to all of our directors, officers and employees. We post on our website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the Code of Conduct. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of, this annual report.
Monitoring Compliance with the Code of Business Conduct and Ethics
Our board of directors is responsible for reviewing and evaluating the Code of Conduct periodically and will make any necessary changes thereto. Our board of directors is also charged with the monitoring of compliance with the Code of Conduct and will be responsible for considering any waivers of the Code of Conduct.
Interests of Directors
A director who has a material interest in a matter before our board of directors or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our board of directors or any committee on which he or she serves, such director may be required to excuse himself or herself from the meeting while discussions and voting with respect to the matter are taking place. Directors will also be required to comply with the relevant provisions of the Corporations Act regarding conflicts of interest and any material personal interest in a matter that relates to the affairs of the Company. Under the Corporations Act, the Company may be required to obtain approval of shareholders before providing certain financial benefits to directors, unless an exemption set out in the Corporations Act applies.
In order to foster a climate of openness and honesty in which any concern or complaint pertaining to a suspected violation of the law, our Code of Conduct or any of our policies or any unethical or questionable act or behavior, the board of directors adopted a whistleblower policy that requires that our employees promptly report such violation or suspected violation. In order to ensure that violations or suspected violations can be reported without fear of retaliation, harassment or an adverse employment consequence, our whistleblower policy will contain procedures that are aimed to facilitate confidential, anonymous submissions by our employees.
D. Employees.
See “Item 4.B. Business Overview-Employees.”
E. Share Ownership.
See “Item 7.A. Major Shareholders” below.
Equity Incentive Plan - 2021 Equity Incentive Plan
Innovation Beverage Group adopted the 2022 Equity Incentive Plan (“Plan”) to provide an additional means through the grant of awards of ordinary shares and stock options to attract, motivate, retain and reward selected key employees and other eligible persons. The below is a summary of the Plan’s terms. As of the date of this prospectus, no awards have been granted under the Plan.
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As of the date of this annual report, the number of ordinary shares underlying the Plan is 7,050,240. As of the date of this annual report, no options have been awarded under the 2022 Equity Incentive Plan.
Our 2022 Incentive Plan was adopted by our board of directors on April 28, 2022. and expires the tenth (10th) anniversary of adoption. Our employees, directors, officer, consultants, advisors, suppliers and any other person or entity whose services are considered valuable to us are eligible to participate in this plan.
Shares Subject to the Equity Incentive Plan
A total of 7,050,240 shares of ordinary shares is available for the grant of awards under the Plan (the “Total Share Reserve”). Subject to adjustment as provided in the Plan, the Total Share Reserve automatically increases on January 1st of each calendar year, beginning on April 29, 2022 and ending on December 31, 2030 (each, an “Evergreen Date”) in an amount equal to 20% of the total number of shares of the Company’s ordinary shares outstanding on December 31st of the immediately preceding Evergreen Date (the “Evergreen Increase”). Notwithstanding the foregoing, the Board may act prior to the Evergreen Date of a given year to provide that there will be no Evergreen Increase for such year, or that the Evergreen Increase for such year will be a lesser number of shares of the Company’s ordinary shares than would otherwise occur pursuant to the preceding sentence. During the terms of any awards, the Company will keep available at all times the number of shares of Ordinary Shares required to satisfy such awards. Shares of ordinary shares available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Any shares of ordinary shares subject to an award that expires or is cancelled, forfeited, or terminated without issuance of the full number of shares of ordinary shares to which the award related shall again be available for issuance of awards or delivery under the Plan.
Administration of the Equity Incentive Plan
The Plan is administered by a committee of one or more directors appointed by the Board to administer the Plan (the “Committee”) or, in the Board’s sole discretion, by the Board. As stated in the Plan, the Committee has the authority to: (a) to construe and interpret the Plan and apply its provisions; (b) to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan; (c) to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan; (d) to delegate its authority to one or more officers of the Company with respect to awards that do not involve “insiders” within the meaning of Section 16 of the Exchange Act; (e) to determine when awards are to be granted under the Plan and the applicable grant date; (f) from time to time to select, subject to the limitations set forth in this Plan, those eligible award recipients to whom awards shall be granted; (g) to determine the number of shares of ordinary shares to be made subject to each award; (h) to determine whether each option grant is to be an incentive stock option or a non-qualified stock option; (i) to prescribe the terms and conditions of each award, including, without limitation, the exercise price and medium of payment and vesting provisions, and to specify the provisions of the award agreement relating to such grant; (j) to determine the target number of performance shares to be granted pursuant to a performance share award, the performance measures that will be used to establish the performance goals, the performance period(s) and the number of performance shares earned by a participant; (k) to amend any outstanding awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding award; provided, however, that if any such amendment impairs a participant’s rights or increases a participant’s obligations under his or her award or creates or increases a participant’s federal income tax liability with respect to an award, such amendment shall also be subject to the participant’s consent; (l) to determine the duration and purpose of leaves of absences which may be granted to a participant without constituting termination of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to employees under the Company’s employment policies; (m) to make decisions with respect to outstanding awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments; (n) to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or award granted under, the Plan; and (o) to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the Plan.
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Participation
Awards under the Plan may be granted to employees, directors and consultants of Innovation Beverage Group and its subsidiaries and such other individuals designated by the committee who are reasonably expected to become employees, consultants and directors after the receipt of awards.
Types of Awards
Awards that may be granted under the plan include: (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) restricted awards, (e) performance share awards, (f) cash awards, and (g) other equity-based awards.
Change in Control
In the event of a Change in Control (as defined in the Plan), (a) all outstanding options and stock appreciation rights shall become immediately exercisable with respect to 100% of the shares subject to such options or stock appreciation rights, and/or the Restricted Period (as defined in the Plan) shall expire immediately with respect to 100% of the outstanding shares of restricted stock or restricted stock units; and (b) with respect to performance share awards and cash awards, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions will be deemed met. The Committee may in its discretion and upon at least 10 days’ advance notice to the affected persons, cancel any outstanding awards and pay to the holders thereof, in cash or stock, or any combination thereof, the value of such awards based upon the price per share of ordinary shares received or to be received by other shareholders of the Company in the event. In the case of any option or stock appreciation right with an exercise price (or exercise price in the case of a stock appreciation right) that equals or exceeds the price paid for a share of ordinary shares in connection with the Change in Control (as defined in the Plan), the Committee may cancel the option or stock appreciation right without the payment of consideration therefor.
Amendment and Termination
The Board at any time, and from time to time, may amend or terminate the Plan. However, except as provided in the Plan relating to adjustments upon changes in ordinary shares, no amendment shall be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy any applicable laws. At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on shareholder approval.
F. Disclosure of a registrant’s action to recover erroneously awarded compensation.
There has been no erroneously awarded compensation that has required an accounting restatement, recovery of such compensation, nor has there been an outstanding balance of erroneously awarded compensation to be recovered for fiscal year 2024.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of May 7, 2025 by:
| ● | each person or entity known by us to own beneficially 5% or more of our outstanding Ordinary shares; |
| ● | each of our directors and executive officers individually; and |
| ● | all of our directors and executive officers as a group. |
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The beneficial ownership of our ordinary shares is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power, or the right to receive the economic benefit of ownership. For purposes of the table below, we deem ordinary shares issuable pursuant to options that are currently exercisable or exercisable within 60 days from May 7, 2025 to be outstanding and to be beneficially owned by the person holding the options for the purposes of computing the percentage ownership of that person, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned is based on ordinary shares issued and outstanding as of May 7, 2025.
Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power or the power to receive the economic benefit with respect to all ordinary shares that they beneficially own, subject to applicable community property laws. All shareholders listed below have equal voting rights of one vote per share. None of the shareholders listed in the table are a broker-dealer or an affiliate of a broker dealer.
All of our shareholders, including the shareholders listed below, have the same voting rights attached to their ordinary shares, and neither our principal shareholders nor our directors and executive officers have different or special voting rights with respect to their ordinary shares. A description of any material relationship that our principal shareholders have had with us or any of our predecessors or affiliates within the past three years is included under “Item 7.A Major Shareholders
Applicable percentage ownership prior to the offering is based on 9,281,135 ordinary shares outstanding at May 7, 2025. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Innovation Beverage Group Limited, 29 Anvil Road, Seven Hills, New South Wales 2147, Australia.
| 5% or greater shareholders: | Ordinary Shares beneficially owned |
Percentage of Ordinary Shares beneficially owned | ||||||
| Meena Beri | 851,137 | 9.17 | % | |||||
| Sahil Beri, Chief Executive Officer, Chief Operating Officer and Director (1) | 729,784 | 7.86 | % | |||||
| 114 Assets Inc. (3) | 1,243,828 | 13.40 | % | |||||
| Directors and executive officers: | ||||||||
| Sahil Beri, Chief Executive Officer, Chief Operating Officer and Director (1) | 729,784 | 7.86 | % | |||||
| Tianyi Eric Yu, Chief Financial Officer | 19,597 | *% | ||||||
| Sally Cardillo, Director | — | — | ||||||
| Daniel Lanskey, Director | — | — | ||||||
| Shawn Messner, Director | — | — | ||||||
| All directors and executive officers as a group (11 persons) | 749,381 | 8.01 | % | |||||
| * | Indicates beneficial ownership of less than 1% of the total Ordinary Shares outstanding. |
| (1) | Includes 112,500 ordinary shares issued to Beri Beverage Pty Ltd, which is owned and controlled by Sahil Beri, in lieu of accrued cash compensation owed to Mr. Beri for his service as the Chief Operating Officer of the Company. The business address of Beri Beverage Pty Ltd is 1 Doris Hirst Place, West Pennant Hills, NSW 2125, Sydney, Australia. |
| (2) | Samstock/SZRT is 100% owned by the Samuel Zell Trust, and Chai Trust is the trustee of the Samuel Zell Trust. In such capacities, each of the Samuel Zell Trust and Chai Trust may be deemed to indirectly beneficially own the Ordinary Shares held directly by Samstock/SZRT. The Samuel Zell Trust has a business address of Two North Riverside Plaza, Suite 600, Chicago, Illinois 60654. |
| (3) | The ordinary shares are indirectly held by 114 Trust, which is administered by Poonam Arora as Trustee who has full voting power over all trust assets. The beneficial owners of this trust are Elizabeth Lee Beri (50%) and Rohan Anil Beri (50%). The business address of 114 Assets Inc. is Lennox Paxton Chambers, 3 Bayside Executive Park, West Bay Street and Blake Road, Nassau, Bahamas. |
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| (4) | Anil Beri has voting and dispositive power over the shares held by Anil Beri Holdings Inc. Mr. Beri lives in Australia. |
| (5) | Sant Parkash has voting and dispositive power over the shares held by Hartfield Assets Inc. Mr. Parkash lives in Australia. |
Except as otherwise disclosed in the table above, to our knowledge the company is not directly or indirectly owned or controlled by another corporation(s), any foreign government, or by any other natural or legal person(s) severally or jointly.
To our knowledge, there are no arrangements why by their operation may at a subsequent date result in a change in control of the company
Record Holders
Based upon a review of the information provided to us by our transfer agent, as of May 7, 2025, there were 33 holders of record of our ordinary shares, out of which one holder of record had a registered address in the United States, holding approximately 57.08% of our outstanding ordinary shares, that had a registered address in the United States. This number is not representative of the number of beneficial holders of our shares, nor is it representative of where such beneficial holders reside, because all of these shares held of record in the United States were held through Cede & Co., the nominee company of the Depository Trust Company, on behalf of brokers or other nominees in the United States, who in turn hold such shares on behalf of their clients and customers.
We are not controlled by another corporation, by any foreign government or by any natural or legal persons. There are no arrangements known to us which would result in a change in control of our company at a subsequent date.
B. Related Party Transactions
In addition to the director and officer compensation arrangements discussed in “Compensation,” we describe below the related party transactions of our company and our subsidiaries that occurred beginning on January 1, 2024 through April 18, 2025.
Treasury Stock Deed between Innovation Beverage Group Limited, Meena Beri and 114 Assets Inc. dated as of March 18, 2024
On March 18, 2024, Meena Beri, 114 Assets Inc. and the Company entered into a Stock Transfer Deed whereby each shareholder transferred 500,000 ordinary shares to a nominee of the Company to be held by such nominee as treasury stock for the Company until their cancellation upon consummation of the initial public offering and obtaining shareholder approval, and upon such cancellation, neither will have any further rights to the ordinary shares. Such ordinary shares will return to each shareholder if the initial public offering and obtaining shareholder approval do not consummate.
Restated and Amended Treasury Stock Deed between Innovation Beverage Group Limited, Meena Beri and 114 Assets Inc. dated as of August 3, 2024
On August 3, 2024, Meena Beri, 114 Assets Inc. and the Company entered into a Restated and Amended Stock Transfer Deed whereby Meena Beri transferred 650,000 ordinary shares and114 Assets Inc. transferred 750,000 ordinary shares to a nominee of the Company to be held by such nominee as treasury stock for the Company until their cancellation upon consummation of the initial public offering and obtaining shareholder approval, and upon such cancellation, neither will have any further rights to the ordinary shares. Such ordinary shares will return to each shareholder if the initial public offering and obtaining shareholder approval do not consummate. The Company determined that it is desirable to further alter its capital structure for its potential Nasdaq listing such that the current number of existing issued shares is effectively reduced by a total of 1.4 million shares (rather than the 1 million shares pursuant to the terms of the initial treasury stock deed).
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Agreements and Arrangements With, and Compensation of, Directors and Executive Officers
We have entered into written employment and consulting agreements with each of our executive officers. All of these agreements contain customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law. In addition, we have entered into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them up to a certain amount and to the extent that these liabilities are not covered by directors and officers insurance.
C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION.
A. Consolidated Statements and Other Financial Information.
See “Item 18. Financial Statements.”
Legal Proceedings
See “Item 4.B. Business Overview-Legal Proceedings.”
Dividend Policy
The holders of our ordinary shares are entitled to dividends out of funds legally available when and as declared by our Board of Directors subject to the Australian Corporations Act 2001 (Cth). On June 30, 2021, our Board declared a dividend in the amount of AUD$2,138,610 based on the Company’s historical retained earnings as of June 30, 2021 and in accordance with Section 254T of the Corporations Act 2001 (Cth). Other than the foregoing dividends, our Board has never declared a dividend and does not anticipate declaring a dividend in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
Should we decide in the future to pay dividends, our ability to do so and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiary and other holdings and investments. In addition, our operating company may, from time to time, be subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions.
B. Significant Changes
Other than as otherwise described in this Annual Report on Form 20-F and as set forth below, no significant change has occurred in our operations since the date of our financial statements included in this Annual Report on Form 20-F.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Our ordinary shares are currently traded on the Nasdaq Capital Market under the symbol “IBG”.
B. Plan of Distribution
Not applicable.
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C. Markets
Our ordinary shares are listed on the Nasdaq Capital Market.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Constitution
A copy of our Constitution is attached as Exhibit 1.1 to this Annual Report. Other than as disclosed below, the information called for by this Item is set forth in Exhibit 1.1 to this Annual Report and is incorporated by reference into this Annual Report.
C. Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those described in Item 4. “Information on Our Company,” Item 7B “Major Shareholders and Related Party Transactions - Related Party Transactions” or elsewhere in this Annual Report.
D. Exchange Controls
There are currently no exchange control regulations in Australia applicable to us or our shareholders.
E. Taxation.
The following summary contains a description of certain Australian and U.S. federal income tax consequences of the acquisition, ownership and disposition of our Ordinary Shares, but it is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our Ordinary Shares that may be relevant to a decision to purchase our Ordinary Shares. The summary is based upon the tax laws of Australia and regulations thereunder and on the tax laws of the United States and regulations thereunder as of the date hereof, which are subject to change. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Australian, or other taxing jurisdiction.
This summary does not address the effects of U.S. federal estate and gift tax laws, the alternative minimum tax, or any state and local tax considerations within the United States, and is not a comprehensive description of all U.S. federal or Australian income tax considerations that may be relevant to a decision to acquire or dispose of ordinary shares. Furthermore, this summary does not address U.S. federal or Australian income tax considerations relevant to holders subject to taxing jurisdictions other than, or in addition to, the United States and Australia, and does not address all possible categories of holders, some of which may be subject to special tax rules.
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WE URGE POTENTIAL PURCHASERS OF OUR SECURITIES TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR SECURITIES.
United States Federal Income Taxation
The following discussion describes certain U.S. federal income tax consequences of the purchase, ownership and disposition of our securities as of the date hereof. This discussion applies only to U.S. Holders (as defined below) that hold our securities as capital assets and that have the U.S. dollar as their functional currency. This discussion is based upon provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions thereunder as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those summarized below. The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of our securities and you are, for U.S. federal income tax purposes, any of the following:
| ● | an individual citizen or resident of the United States, | |
| ● | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia, | |
| ● | an estate the income of which is subject to U.S. federal income taxation regardless of its source, or | |
| ● | a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
The following does not represent a detailed description of the U.S. federal income tax consequences applicable to any particular investor or to persons subject to special tax treatment under the U.S. federal income tax laws, such as:
| ● | banks, | |
| ● | financial institutions, | |
| ● | insurance companies, | |
| ● | regulated investment companies, | |
| ● | real estate investment trusts, | |
| ● | broker-dealers, | |
| ● | traders that elect to mark to market, | |
| ● | U.S. expatriates, | |
| ● | tax-exempt entities, | |
| ● | persons liable for alternative minimum tax, | |
| ● | persons holding our securities as part of a straddle, hedging, conversion or integrated transaction or constructive sale, |
| ● | persons that actually or constructively own 10% or more of our securities by vote or value, |
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| ● | persons required to accelerate the recognition of any item of gross income with respect to our securities as a result of such income being recognized on an “applicable financial statement” (as defined by the Code), | |
| ● | persons who acquired our securities pursuant to the exercise of any employee ordinary share option or otherwise as consideration for services, or | |
| ● | persons holding our securities through partnerships or other pass-through entities for U.S. federal income tax purposes. |
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds our securities, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Prospective purchasers that are partners of a partnership holding our securities should consult their tax advisors.
This discussion does not contain a detailed description of all the U.S. federal income tax consequences to a prospective purchaser in light of his, her or its particular circumstances and does not address the Medicare contribution tax on net investment income, foreign currency gains or losses, U.S. federal estate and gift taxes, or the effects of any state, local or non-U.S. tax laws. Prospective purchasers are urged to consult their tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our securities.
Taxation of Dividends and Other Distributions on our Securities
Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us to you with respect to the securities (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date actually or constructively received by you, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits as determined under U.S. federal income tax principles As a general rule, to the extent that the amount of the distribution exceeds our current and accumulated earnings and profits as determined under U.S. federal income tax principles, it will be treated first as a tax-free return of your tax basis in your securities, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain.. However, we do not intend to calculate our earnings and profits in accordance with U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will generally be treated as a dividend. Such dividends will not be eligible for the dividends-received deduction allowed to corporations under the Code.
With respect to non-corporate U.S. Holders, including individual U.S. Holders, certain dividends received from a qualified foreign corporation may be subject to reduced rates of taxation. A foreign corporation will be treated as a qualified foreign corporation for this purpose if (i) such corporation is eligible for the benefits of a comprehensive income tax treaty with the United States or (ii) the dividends are paid on securities that are readily tradable on an established securities market in the United States. The Internal Revenue Service has determined that the U.S. – Australian tax treaty is a comprehensive tax treaty and we believe that we are eligible for benefits under it. Moreover, we will apply to list our securities on the Nasdaq Capital Market, and U.S. Treasury Department guidance indicates that securities that are so listed will be treated as readily tradable on an established securities market in the United States. Therefore, we believe that dividends paid by us will be subject to reduced rates of taxation. Non-corporate holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our securities.
In addition, notwithstanding the foregoing, non-corporate U.S. Holders will not be eligible for reduced rates of taxation on any dividends received from us if we are a passive foreign investment company (a “PFIC”) in the taxable year in which such dividends are paid or in the preceding taxable year. As discussed under “— Passive Foreign Investment Company” below, we do not believe we were a PFIC for our most recent taxable year, and we do not expect to become a PFIC in the current taxable year or in the foreseeable future, although there can be no assurance in this regard.
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A U.S. Holder may be subject to Australian withholding taxes on dividends paid on our securities. Subject to certain conditions and limitations (including a minimum holding period requirement), any withholding taxes on dividends may be treated as foreign taxes eligible for credit against your U.S. federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid on our securities will be treated as income from sources outside the United States and will generally constitute passive category income. The rules governing the foreign tax credit are complex. You are urged to consult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances.
Taxation of Dispositions of Securities
For U.S. federal income tax purposes, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of our securities in an amount equal to the difference between the amount realized (in U.S. dollars) and your tax basis (in U.S. dollars) in the securities. Subject to the passive foreign investment company rules discussed below, such gain or loss will generally be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the securities for more than one year, you will be eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source gain or loss for foreign tax credit limitation purposes.
For U.S. federal income tax purposes, each holder of our securities must allocate the purchase price paid by the holder for such securities based on the relative fair market value of each at the time of issuance. Under U.S. federal income tax law, each investor must make his or her own determination of such value based on all the relevant facts and circumstances. Therefore, we strongly urge you to consult your tax adviser regarding the determination of value for these purposes. The price properly allocated to each ordinary share will be your tax basis in such share and any gain or loss on a disposition of an ordinary share will be the difference between the amount realized on the disposition and your tax basis in the property disposed of. Any disposition of a security (ordinary share) should be treated for U.S. federal income tax purposes as a disposition of the ordinary shares, and the amount realized on such disposition will be allocated between the ordinary shares based on their respective relative fair market values at the time of disposition (as determined by you based on all relevant facts and circumstances).
Passive Foreign Investment Company
Based on the past and projected composition of our income and assets, and the valuation of our assets, we do not believe we were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our most recent taxable year, and we do not expect to become a PFIC in the current taxable year or in the foreseeable future, although there can be no assurance in this regard. In general, we will be a PFIC for any taxable year in which:
| ● | at least 75% of our gross income is passive income, or | |
| ● | at least 50% of the value of our assets (based on an average of the quarterly values of our assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”). |
For this purpose, passive income generally includes dividends, interest, income equivalent to interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person). Cash is treated as an asset that produces or is held for the production of passive income. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock.
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The determination of whether we are a PFIC is made annually after the close of each taxable year. As a result, we may become a PFIC in the current or any future taxable year due to changes in our asset or income composition. In particular, because we have valued our goodwill based on the market price of our ordinary shares, our PFIC status will depend in large part on the market price of our ordinary shares. Accordingly, fluctuations in the market price of the securities may cause us to become a PFIC. In addition, composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in this offering. Although the determination of whether we are a PFIC is made annually, if we are a PFIC for any taxable year in which you hold our securities, you will generally continue to be subject to the special rules described below for all succeeding years during which you hold our securities (even if we do not qualify as a PFIC in such subsequent years). However, if we cease to be a PFIC, you may avoid the continuing impact of the PFIC rules by making a special election to recognize gain as if your securities had been sold on the last day of the last taxable year during which we were a PFIC. You are urged to consult your own tax advisor about this election.
If we are a PFIC for any taxable year during which you hold our securities, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the securities, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the securities will be treated as an excess distribution. Under these special tax rules:
| ● | the excess distribution or gain will be allocated ratably over your holding period for the securities, | |
| ● | the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and | |
| ● | the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. The tax liability for amounts allocated to such years cannot be offset by any net operating losses for such years, and gains realized on the sale of the securities cannot be treated as capital, even if you hold the securities as capital assets. |
A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the special tax rules discussed above. If you make an effective mark-to-market election for the ordinary shares, for each taxable year that we are a PFIC you will include in income an amount equal to the excess, if any, of the fair market value of the ordinary shares as of the close of the taxable year over your adjusted basis in such ordinary shares. You are allowed a deduction for the excess, if any, of your adjusted basis in the ordinary shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of the net amount previously included in income as a result of the mark-to-market election. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ordinary shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ordinary shares, as well as to any loss realized on the actual sale or disposition of the ordinary shares, to the extent that the amount of such loss does not exceed the net amount of previously included income as a result of the mark-to-market election. Your basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations that are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under “Taxation of Dividends and Other Distributions on our Ordinary shares” generally would not apply.
The mark-to-market election is available only for “marketable stock”, which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations), which includes the Nasdaq Capital Market. If the ordinary shares are regularly traded on the Nasdaq Capital Market and if you are a holder of ordinary shares, the mark-to-market election would be available to you were we to be or become a PFIC. However, there can be no assurance that the ordinary shares will be traded in sufficient volumes to be considered “regularly traded” for purposes of the mark-to-market election. If you make a mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ordinary shares are no longer regularly traded on a qualified exchange or other market, or the Service consents to the revocation of the election. You are urged to consult your tax advisor about the availability of the mark-to-market election, and whether making the election would be advisable in your particular circumstances.
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Alternatively, a U.S. Holder of stock in a PFIC may make a “qualified electing fund” election with respect to such PFIC to avoid the special tax rules discussed above. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election.
If we are a PFIC for any taxable year during which you hold our securities and any of our non-U.S. subsidiaries is also a PFIC, you will be treated as owning a proportionate amount (by value) of the securities of the lower-tier PFIC for purposes of the application of the PFIC rules. You will not be able to make the mark-to-market election described above in respect of any lower-tier PFIC. You are urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.
If you hold our securities in any year in which we are a PFIC, you will generally be required to file U.S. Internal Revenue Service Form 8621. You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in our securities and the elections discussed above.
Information Reporting and Backup Withholding
Dividend payments with respect to our securities and proceeds from the sale, exchange or other disposition of our securities that are paid to you within the United States (and in certain cases, outside the United States) will be subject to information reporting to the U.S. Internal Revenue Service, unless you are an exempt recipient. A backup withholding tax may apply to such payments if you fail to provide a taxpayer identification number or certification of exempt status or fail to report in full dividend or interest income.
Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information.
Certain U.S. Holders are required to report information relating to our securities, subject to certain exceptions, by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold our securities.
Australian Taxation
In this section, we discuss the material Australian income tax, stamp (or transfer) duty and goods and services tax considerations related to the acquisition, ownership and disposal of ordinary shares in Innovation Beverage Group Ltd. It is based upon existing Australian tax law as of the date of this registration statement, which is subject to change, possibly retrospectively. This discussion does not address all aspects of Australian tax law which may be important to particular investors in light of their individual investment circumstances, such as shares held by investors subject to special tax rules (for example, financial institutions, insurance companies or tax-exempt organizations) or shares /options held on revenue account or as trading stock.
This section is purposely general in nature and prospective investors are urged to consult their tax advisors regarding the Australian and non-Australian income and other tax considerations of the acquisition, ownership and disposition of the ordinary shares. This summary is based upon the assumption that the holder is not an Australian resident for tax purposes and is not carrying on business in Australia through a permanent establishment (referred to as a “Non-Australian Holder” in this summary). It does not consider any other factual scenarios. In addition, this summary does not discuss any non-Australian or Australian state tax considerations, other than transfer duty.
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This summary is of a general nature only and is not, and is not intended to be, legal or tax advice for any particular shareholder, and no representations with respect to the income tax consequences for any particular shareholder are made or may be relied upon by an investor or potential investor. This summary is not exhaustive of all Australian Federal/Commonwealth income tax issues. Accordingly, you should consult your own tax advisor with respect to your particular circumstances.
Non- resident for Australian tax purposes may be liable to pay Australian tax on income derived from Australian sources. One mechanism by which that tax can be paid (for non-residents who have no permanent establishment or fixed base in Australia or where the income is not connected with a permanent establishment or fixed base) is known as withholding tax.
Dividends paid by an Australian tax resident company to a shareholder that is resident of the United States of America who is entitled to the benefits of the Australia/U.S. Double Tax Agreement (DTA) and is beneficially entitled to the dividends are subject to withholding tax at the rate of 15% to the extent the dividends are “unfranked”. This assumes that:
| ● | no shareholder beneficially entitled to the dividends: |
| o | holds directly at least 10 percent of the voting power in the Company paying the dividends; or |
| o | has owned shares representing 80 per cent or more of the voting power of the Company paying the dividends for a 12 month period ending on the date the dividend is declared; or |
| ● | the Company is not a Regulated Investment Company or a Real Estate Investment Trust or a Listed Australian Property Trust (as those terms are defined for the purpose of the DTA). |
To the extent that dividends paid by an Australia tax resident company to non-residents have been franked, such dividends are not subject to withholding tax.
“Franked dividends” refers to dividends that have been paid out of profits which have been taxed at company level and where that tax has been allocated to the dividend.
Accordingly, an Australian tax resident company paying a fully franked dividend to a non-resident is not required to deduct any withholding tax. Dividends on which withholding tax has been paid are generally not subject to any further Australian tax. In other words, the withholding tax should represent the final Australian tax liability in relation to those dividends.
To the extent that the dividend is partially franked, dividend withholding tax will apply to the unfranked portion in the manner outlined above.
The 15% dividend withholding tax rate does not apply to dividends derived by a resident of the United States of America who has a permanent establishment or fixed base in Australia, if the holding giving rise to the dividends is effectively connected with that permanent establishment or fixed base. Such dividends may be taxed and included in assessable income as business income or independent personal services income as the case may be.
On June 30, 2021, our Board declared a dividend in the amount of AUD$2,138,610 based on the Company’s historical retained earnings as of June 30, 2021 and in accordance with Section 254T of the Corporations Act 2001 (Cth). Other than the foregoing dividends, we have not paid any cash dividends since our inception and we do not anticipate the payment of cash dividends in the foreseeable future. See “Item 8.A. Financial Statements and Other Financial Information–Dividend Policy.”
A Non-Australian Holder will not be subject to capital gains tax in Australia on the disposal of shares in an Australian tax resident company unless the Non-Australian Holder disposes of an “indirect Australian real property interest”.
An “indirect Australian real property interest” includes a membership interest held by an entity (known as the holding entity) in another entity (known as the test entity) if:
| ● | at that time or throughout a 12 month period that begins no earlier than 24 months before that time and ends no later than that time, the interest passes the ”non-portfolio interest test”; and | |
| ● | the interest passes the ”principal asset test”. |
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The non-portfolio test is satisfied where the sum of the “direct participation interests” held by the holding entity and its associates is 10 per cent or more.
The principal asset test is effectively satisfied where more than 50% of the market value of the test entity’s assets is attributable to taxable Australian real property.
Dual Residency
If an investor is a tax resident of both Australia and the United States, that investor may be subject to tax as an Australian resident. If, however, the shareholder is determined to be a United States resident for the purposes of the DTA, the Australian tax applicable would be limited by the DTA. Shareholders should obtain specialist taxation advice in these circumstances.
Transfer Duty
Any transfer of shares through trading on the Nasdaq should not be subject to transfer duty.
Inheritance and Estate Taxes in Australia
Australia does not have estate or death duties. Generally, no capital gains tax liability is realized upon the inheritance of a deceased person’s shares. The disposal of inherited shares by beneficiaries, may, however, give rise to a capital gains tax liability.
Goods and Services Tax
The issue or transfer of shares will not incur Australian goods and services tax and does not require a stockholder to register for Australian goods and services tax purposes.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY AND IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT RELATING TO THE PURCHASE, OWNERSHIP, AND DISPOSITION OF ORDINARY SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements will file reports with the SEC. The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our filings with the SEC will also be available to the public through the SEC’s website at www.sec.gov.
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As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm, and may submit to the SEC, on a Form 6-K, unaudited quarterly financial information.
I. Subsidiary Information.
Not applicable.
J. Annual Report to Security Holders
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk
Liquidity Risk
Liquidity risk is the risk that we will encounter difficulty in meeting the obligations associated with our financial liabilities that are settled in cash. We monitor forecasts of our liquidity requirements to ensure we have sufficient cash to meet operational needs. We may be reliant on our ability to raise additional investment capital from the issuance of both debt and equity securities to fund our business operating plans and future obligations.
Credit risk
Credit risk is the risk of financial loss to us if a debtor or counterparty to a financial instrument fails to meet its contractual obligations, and arises mainly from our receivables. We restrict exposure to credit risk in the course of our operations by investing only in bank deposits.
Equity price risk
As we have not invested substantial amounts in securities riskier than short-term bank deposits, we do not believe that changes in equity prices pose a material risk to our holdings. However, decreases in the market price of our Ordinary Shares could make it more difficult for us to raise additional funds in the future or require us to raise funds at terms unfavorable to us.
Inflation risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations in the reporting period. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through hedging transactions. Our inability or failure to do so could harm our business, financial condition and results of operations.
Foreign Currency Exchange Risk
Currency fluctuations could affect us through increased or decreased costs, mainly for goods and services acquired outside of Australia. Currency fluctuations did not have a material effect on our results of operations during the years ended December 31, 2024 and 2023.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities.
Not applicable.
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B. Warrants and rights.
Not applicable.
C. Other Securities.
Not applicable.
D. American Depositary Shares
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
| A. | Material Modifications to Instruments |
There are no material modifications any instruments defining the rights of our security holders.
| B. | Material Modifications to Qualified Rights |
There have been no material modifications or qualifications of the rights evidenced by any class of our securities by issuing or modifying any other class of securities.
| C. | Withdrawn or Substituted Assets |
There has been no withdrawal or substitution of a material amount of the assets securing any class of our securities.
| D. | Trustees or Paying Agents |
We have no changed any trustees or paying agents during the last financial year.
| E. | Use of Proceeds |
Our registration statement on Form F-1, as amended, file no. 333-266965, was declared effective on September 25, 2024, and our initial public offering commenced on September 26, 2024. Our underwriter was The Benchmark Company, LLC. We registered for sale 1,350,000 ordinary shares, not including the underwriters’ over-allotment option, at the initial public offering price of $4.00 per share, for an aggregate price of $5,400,000, less underwriting discounts and commissions, costs, and fees. We sold 1,350,000 ordinary shares, not including an underwriters’ over-allotment option, for aggregate net proceeds of $4,274,085.06, less underwriting discounts and commissions, costs, and fees. The total amount of our fees and expenses was $525,914.94.
Between September 25, 2024 and December 31, 2024, we used the net proceeds:$0.35m for the repayment of indebtedness; $2.51m for working capital; and $0.43m for other purposes. The foregoing are reasonable estimates of the use of proceeds. Of these amounts, $0.3m was paid, directly or indirectly, to directors, officers, our general partners or their associates, persons owning 10% or more of any class of our equity securities; and to our affiliates and $3.0m was paid, directly or indirectly, to others.
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ITEM 15. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2024, or the Evaluation Date. Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are not effective in recording, processing, summarizing and reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated and communicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting
This annual report does not include a report of management’s assessment regarding internal control over financial reporting due to a transition period established by rules of the SEC for newly public companies.
(c) Attestation Report of the Registered Public Accounting Firm
This Annual Report on Form 20-F does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to an exemption for emerging growth companies provided in the JOBS Act.
(d) Changes in Internal Control over Financial Reporting
During the year ended December 31, 2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16. [RESERVED]
Not applicable.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The members of our Audit Committee are Sally Cardillo, Daniel Lanskey and Shawn Messner. Our board of directors has determined that Ms. Cardillo, Mr. Lanskey and Mr. Messner satisfy the independence requirements under Nasdaq listing standards and Rule 10A-3(b)(1) of the Exchange Act. Ms. Cardillo is the chairperson of our Audit Committee. Our board of directors has determined that Ms. Cardillo is an “audit committee financial expert” within the meaning of SEC regulations. Ms. Cardillo is independent as defined in 17 CFR 240.10A-3. Each member of our Audit Committee can read and understand fundamental financial statements in accordance with applicable requirements. In arriving at these determinations, our board of directors has examined each member’s scope of experience and the nature of his or her employment.
ITEM 16B. CODE OF ETHICS
Our Board has adopted a Code of Business Conduct and Ethics applicable to all of our directors, officers and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similar functions, which is a “code of ethics” as defined in Item 16B of Form 20-F promulgated by the SEC. The full text of our code of business conduct and ethics is available under the Governance section of our website at https://investors.innovationbev.com/governance-documents. In addition, we intend to post on our website all disclosures that are required by law or the Nasdaq Rules concerning any amendments to, or waivers from, any provision of the code. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this Annual Report on Form 20-F.
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ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Astra Audit & Advisory LLC, an independent registered public accounting firm, has served as our principal independent registered public accounting firm for the years ended December 31, 2024 and 2023. Our previous independent registered public accounting firm, Accell Audit & Compliance, P.A., served as our auditor from 2021 through December 10, 2024.
The following table sets forth the aggregate fees by categories specified below in connection with services rendered by our principal external auditors for the periods indicated.
| Year Ended December 31, | ||||||||
| (Dollars) | 2024 | 2023 | ||||||
| Audit fees (1) | $ | 90,341 | $ | 102,377 | ||||
| Audit-related fees (2) | — | — | ||||||
| Tax fees (3) | 32,944 | 36,240 | ||||||
| All other fees | — | — | ||||||
| Total | 123,285 | 138,617 | ||||||
| (1) | Audit fees consist of professional services provided in connection with the audit of our annual financial statements. |
| (2) | Audit-related fees in 2023 and 2024 consist of services in connection with our initial public offering. |
| (3) | Tax fees consist of fees for professional services for tax compliance and tax advice |
The policy of our Audit Committee is to pre-approve all audit and non-audit services provided by our principal auditors, including audit services, audit-related services, and other services as described above, other than those for de minimis services which are approved by the Audit Committee or our Board of Directors prior to the completion of the services.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
There have been no share repurchases made by or on behalf of the Company or any “affiliated purchaser” of ordinary shares registered pursuant to Section 12 of the Exchange Act.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
On December 12, 2024, we engaged Astra Audit & Advisory LLC (“Astra”) as our independent registered public accounting firm to audit the Company’s financial statements for the fiscal years ended December 31, 2024 and 2023, following approval by the Company’s Board of Directors and Audit Committee.
Astra replaces Accell Audit & Compliance, P.A. (“Accell”), which was dismissed on December 10, 2024. Accell’s audit reports on the Company’s financial statements for the fiscal years ended December 31, 2023 and 2022 did not contain an adverse opinion, disclaimer of opinion, or qualification. During the Company’s two most recent fiscal years and the interim period through Accell’s dismissal, there were no disagreements with Accell on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures. Prior to engaging Astra, the Company did not consult with Astra regarding any matters involving accounting principles, the type of audit opinion that might be rendered, or any reportable events.
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ITEM 16G. CORPORATE GOVERNANCE
The Sarbanes-Oxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with various corporate governance practices. In addition, following the listing of our ordinary shares on the Nasdaq Capital Market, we are required to comply with the Nasdaq Stock Market rules. Under those rules, we may elect to follow certain corporate governance practices permitted under the applicable laws in Australia and the Corporations Act in lieu of compliance with corresponding corporate governance requirements otherwise imposed by the Nasdaq Stock Market rules for U.S. domestic issuers.
In accordance with Australian law and practice and subject to the exemption set forth in Rule 5615 of the Nasdaq Stock Market rules, we have elected to follow the provisions of the applicable Australian law, rather than the Nasdaq Stock Market rules, with respect to the following requirements:
The Nasdaq listing rules allow for a foreign private issuer, such as us, to follow its home country practices in lieu of certain of the Nasdaq’s corporate governance standards. In connection with our Nasdaq Listing Application, we expect to rely on exemptions from certain corporate governance standards that are contrary to the laws, rules, regulations or generally accepted business practices in Australia. These exemptions being sought are described below:
| ● | We rely on an exemption from the requirement that our independent directors meet regularly in executive sessions under Nasdaq listing rules. The Corporations Act does not require the independent directors of an Australian company to have such executive sessions, accordingly, we seek to claim this exemption. |
| ● |
We rely on an exemption from the quorum requirements applicable to meetings of shareholders under Nasdaq listing rules. In compliance with Australian law, three shareholders present, in person or by proxy, attorney or a representative, shall constitute a quorum for a general meeting. Nasdaq listing rules require that an issuer provide for a quorum as specified in its by-laws for any meeting of the holders of ordinary shares, which quorum may not be less than 33 1/3% of the outstanding voting ordinary shares. Accordingly, because applicable Australian law and rules governing quorums at shareholder meetings differ from Nasdaq’s quorum requirements, we seek to claim this exemption.
We rely on an exemption from the requirement to disclose third-party director and director nominee compensation under Nasdaq listing rules. The Corporations Act does not have a similar requirement, accordingly, we seek to claim this exemption |
| ● |
We rely on an exemption from the requirement prescribed by Nasdaq Listing Rules that issuers obtain shareholder approval prior to the issuance of securities in connection with certain acquisitions, private placements of securities, or the establishment or amendment of certain stock option, purchase or other compensation plans. Applicable Australian law provides for restrictions on us, as an Australian public company, issuing securities to related parties (including directors and their associates) other than in certain exceptions which include issues with shareholder approval, issues as reasonable remuneration or issues which are on arm’s length (or terms worse for the related party than arm’s length terms). We are also prohibited from issuing securities to investors without disclosure (by way of a prospectus or other Australian offer document under which disclosure is made in accordance with Australian law) unless an exemption applies to that investor or class of investors as provided for under Australian law (the exemptions included exceptions for defined professional and sophisticated investors). As we have more than 50 shareholders, an investor and their associates also must not acquire a relevant interest in 20% or more of our issued voting shares unless an exception applies under Australian law, which exceptions include shareholder approval and a regulated takeover offer. Due to differences between Australian law and rules and the Nasdaq shareholder approval requirements, we seek to claim this exemption. |
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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ITEM 16J. INSIDER TRADING POLICIES
We have adopted a statement of trading policies that governs the trading in our securities by our directors, officers and certain other covered persons, and which is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and any listing standards applicable to the Company. A copy of the Insider Trading Compliance Policy is included as Exhibit 11.2 to this annual report. In addition, with regard to any trading in our own securities, it is our policy to comply with the federal securities laws and the applicable exchange listing requirements.
ITEM 16K. CYBERSECURITY
Our cybersecurity risk management process has been integrated into our overall risk management system, policy and process, and is solely internally managed. Management is responsible for identifying risks that threaten achievement of the control activities stated in the management’s description of the services organizations systems. Management has implemented a process for identifying relevant risks that could affect the organization’s ability to provide secure and reliable service to its users. The risk assessment occurs annually, or as business needs change, and covers identification of risks that could act against our objectives as well as specific risks related to a compromise to the security of data.
The level of each identified risk is determined by considering the impact of the risk itself and the likelihood of the risk materializing, and high level risks are actioned upon. Risks are analyzed to determine whether the risk meets Company risk acceptance criteria to be accepted or whether a mitigation plan will be applied. Mitigation plans include both the individual or department responsible for the plan and may include budget considerations. The oversight of cybersecurity threats is undertaken by our Board of Directors and our Interim Chief Executive Officer who is responsible for cybersecurity monitoring risk.
As of the date of this report, we have not, to our knowledge, experienced any material IT system failures or any material cybersecurity attacks, and we are not aware of any material risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Governance
Our board of directors is responsible for overseeing our cybersecurity risk management. Our board of directors shall review, approve and maintain oversight of the disclosure (i) on Form 6-K for material cybersecurity incidents (if any) and (ii) related to cybersecurity matters in the periodic reports (including annual report on Form 20-F) of our Company.
At management level, our Interim Chief Executive Officer is responsible for assessing, identifying and managing material risks from cybersecurity threats to our Company and monitoring the prevention, detection, mitigation and remediation of material cybersecurity incident. Our Interim Chief Executive Officer meets with the board of directors (i) in connection with each current report to furnish information concerning any material cybersecurity incident, report the status of any material cybersecurity incidents or material risks from cybersecurity threats to our Company, if any, and the relevant disclosure issue, and (ii) in connection with each annual report, will present the disclosure concerning cybersecurity matters in Form 20-F.
If a cybersecurity incident occurs, our executive officers will promptly organize relevant personnel for internal assessment and if it is determined that the incident could potentially be a material cybersecurity event, our executive officers will promptly report the incident and assessment results to our board of directors and external legal counsel, to the extent appropriate. Our executive officers shall prepare disclosure material on the cybersecurity incident for review and approval by the board of directors, and external legal counsel (if necessary), before it is disseminated to the public.
As of the date of this report, we are not aware of any material risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
80
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements and related information pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The financial statements and the related notes required by this Item are included in this Annual Report on Form 20-F beginning on page F-1.
81
ITEM 19. EXHIBITS.
82
| * | Filed herewith. |
| ^ | Portions of this exhibit (indicated by asterisks) have been omitted under rules of the U.S. Securities and Exchange Commission permitting the confidential treatment of select information. |
83
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on Form 20-F filed on its behalf.
| INNOVATION BEVERAGE GROUP LIMITED | ||
| Date: May 15, 2025 | By: | |
| Sahil Beri | ||
| Chief Executive Officer | ||
84
Innovation Beverage Group Limited
CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended
December 31, 2024 and 2023
F-1
INNOVATION BEVERAGE GROUP LIMITED FOR THE YEARS ENDED DECEMBER 31, 2024 and 2023
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-2
Report of Independent Registered Public Accounting Firm
To
the Board of Directors and
Stockholders of Innovation Beverage Group Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Innovation Beverage Group Limited (the Company) as of December 31, 2024 and 2023 and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 | |
|
|
| We have served as the Company’s auditor since 2025. | |
| May 15, 2025 | |
3702 W. Spruce Street #1430 ● Tampa, Florida 33607 ● +1.813.441.9707
F-3
INNOVATION BEVERAGE GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
| December 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Capitalized IPO cost | ||||||||
| Inventory, at cost | ||||||||
| Prepaid expenses | ||||||||
| Current portion of loan to shareholders | ||||||||
| Total current assets | ||||||||
| Deposits | ||||||||
| Finance right of use asset, net | ||||||||
| Operating right of use asset, net | ||||||||
| Non-current portion of loan to shareholders | ||||||||
| Equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Prepaid distribution cost | ||||||||
| Deferred tax asset | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Deferred revenue | ||||||||
| Related party notes payable | ||||||||
| Notes payable | ||||||||
| Current portion of operating lease liability | ||||||||
| Other liabilities | ||||||||
| Total current liabilities | ||||||||
| Accrued employee benefits, non-current | ||||||||
| Operating lease liability, less current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (note 9) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Ordinary shares, par value; no authorization limit; and shares issued and outstanding at December 31, 2024 and 2023, respectively | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
INNOVATION BEVERAGE GROUP LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For the years ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Revenues, net | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| General and administrative | ||||||||
| Salaries and wages | ||||||||
| Sales and marketing | ||||||||
| Contracted services | ||||||||
| Loss on asset write-off | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Other | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expenses) | ( | ) | ||||||
| Loss before taxes | ( | ) | ( | ) | ||||
| Income tax benefit | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Other comprehensive loss: | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted loss per share | $ | ) | $ | ) | ||||
| Weighted average shares outstanding - basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
INNOVATION BEVERAGE GROUP LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
| Ordinary | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total | |||||||||||||||||
| Shares | Amount | |||||||||||||||||||
| Balance December 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||
| Sale of ordinary share, net of issuance costs | ||||||||||||||||||||
| Issuance of ordinary shares for services | ||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance December 31, 2023 | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||
| Sale of ordinary share, net of issuance costs | ||||||||||||||||||||
| Share cancellation | ( | ) | ||||||||||||||||||
| Issuance of ordinary shares for services | ||||||||||||||||||||
| Warrants issued for services | — | |||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | ( | ) | |||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance December 31, 2024 | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
INNOVATION BEVERAGE GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the years ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock compensation | ||||||||
| Share issuance for services | ||||||||
| Loss on write-off of assets | ||||||||
| Allowance for doubtful accounts | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable, net | ( | ) | ||||||
| Inventory, at cost | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Right-of-use liabilities | ( | ) | ( | ) | ||||
| Deposits | ( | ) | ||||||
| Deferred tax asset | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Accrued employee benefits, non-current | ( | ) | ||||||
| Net cash from operating activities | ( | ) | ||||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Purchase of intangibles | ( | ) | ||||||
| Net activity on due from related parties | ( | ) | ( | ) | ||||
| Net cash from investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Issuance of ordinary share, net of issuance costs | ||||||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Net cash from financing activities | ||||||||
| Impact of changes in foreign currency on cash | ( | ) | ||||||
| Change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
INNOVATION BEVERAGE GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of operations
Innovation Beverage Group Limited (“IBG” or the “Company”) is a developer, manufacturer and exporter of a growing portfolio of alcoholic and non-alcoholic brands of beverages. Its distribution capabilities include sales to large distributors and high-margin direct-to-consumer sales. IBG is located in Seven Hills, New South Wales, Australia.
IBG has partnered with Coca Cola Europacific Partners (CCEP), the world’s largest Coca-Cola bottler, to exclusively distribute IBG Bitters in Australia, while retaining the rights throughout the rest of the world.
IBG focuses on direct-to-consumer (DTC) sales through its network of technology-focused retail marketplaces and established BevMart, a DTC marketplace, in Australia in May 2021 and in the United States in November 2021. On November 3, 2021, IBG acquired 100% of the outstanding equity interests in REG Liquors, LLC d/b/a Wired for Wine (“W4W”), located in Stockton, New Jersey. W4W and BevMart USA, LLC are wholly owned subsidiaries of IBG.
IBG
successfully closed its initial public offering (IPO) on September 27, 2024, raising $
2. Summary of significant accounting policies
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Basis of Presentation and Principles of Consolidation
The consolidated financial statements, which include the accounts of IBG, and its subsidiaries, BevMart USA LLC and W4W (collectively, the “Group”) are prepared in conformity with U.S. GAAP. All significant intercompany balances and transactions have been eliminated. The consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements have been prepared using the accrual basis of accounting and presented in U.S. dollars. The year end is December 31.
Concentration of Credit Risk
Financial instruments that potentially subject the Group to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Group places its cash in what it believes to be credit-worthy financial institutions. The Group controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Group routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, therefore, believes that its accounts receivable credit risk exposure beyond such allowance is limited.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from management’s estimates and assumptions due to inherent uncertainties.
F-8
Revenue Recognition
The Group recognizes revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, “Revenue from contracts with customers,” (Topic 606). Revenue is recognized upon the Group’s satisfaction of a single performance obligation when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Group expects to receive in exchange for those goods. The Group applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Group satisfies each performance obligation. The Group’s main revenue stream is from sales of products. The Group recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Group’s performance obligations are transferred to customers at a point in time, typically upon delivery.
Revenue is measured as the amount of consideration the Group expects to receive in exchange for transferring goods. The amount of consideration the Group receives and revenue the Group recognizes varies with changes in the customer incentives the Group offers to its customers. These incentives and discounts include cash discounts, price allowance, volume-based rebates, product placement fees and other financial support items such as trade promotions, displays, new products, consumer incentives and advertising assistance. Sales tax and other similar taxes are excluded from revenue. Cost associated with shipping and handling activities are included in general and administrative expenses as revenue is recognized. The Group estimates the amount of variable consideration by using the “expected value” method, which considers factors such as experiences with products, predictability of market conditions and competition, the current stage in the product life cycle and historical, current, and projected demand. The Group evaluated those factors and concluded that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and no constraint was necessary on the variable consideration as of December 31, 2024 and 2023. The Group has extensive historical experience with producing and delivering standard products to its contracted customers at a pre-determined price. The Group performs similar analysis on variable consideration and the related constraint (or lack thereof) at each reporting period.
The Group’s revenue stream is mainly from (1) Creating, marketing and scaling lifestyle focused beverage brands with a focus on Bitters, Non-Alcohol Spirits, Bottles cocktails and other high margin innovative products exclusively developed at IBG and sold via large distribution partners in Australia and around the globe and (2) Sales of wine and spirits via IBG’s owned on-line marketplaces namely wiredforwine.com, bevmart.com and bevmart.com.au. The Group has 21 day payment terms for brand products sales. E-commerce sales are direct-to-consumers. The Group typically provides warranties for general replacement of defects that existed at the time of sale, as required by law. Based on historical information, management does not believe a sales return or warranty allowance is necessary and no allowance for either has been recorded on December 31, 2024 or December 31, 2023.
Deferred
revenue was
F-9
Fair Value Measurements
Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements, clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3: Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The estimated fair value of certain financial instruments, including all current liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
Fair Value of Financial Instruments
ASC subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities as reflected in the consolidated balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Group are either recognized or disclosed in the consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.
Cash and Cash Equivalents
The
Group considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Group had
Intangible Assets
The Group’s intangible assets consisted of customer contracts, software development costs, a liquor license and contract services. The customer contracts and liquor license were acquired in a business combination. The useful lives of intangible assets are determined after considering the specific facts and circumstances related to each intangible asset. Factors that will be considered when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the long-term strategy for using the asset, any laws or other local regulations that could impact the asset, the historical performance of the asset, the long-term strategy for using the asset, any laws or other local regulations that could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Indefinite life intangibles are reviewed for impairment when circumstances suggest there could be an impairment, but at least annually.
A summary of the estimated useful lives applied to the Group’s intangible assets is as follows:
| Schedule of estimated useful lives of intangible assets | ||||
| Customer contracts | Liquor license | Software Development costs | Contracted services | |
| Useful lives | Finite
( |
Finite
( |
Finite
( |
Finite
( |
F-10
Prepaid Distribution Cost
In
2023, the Company recognized distribution costs that consist of shares of stock issued to distributors to market the Company’s
products. The shares were valued at $ and amortized over the 60-month term from the distribution agreement with a commencement
on October 9, 2023. On November 18, 2024, the Company terminated the agreement with one of the distributors and wrote off $
Amortization
expense was $
Sales and Marketing
The
Group follows the policy of charging the costs of advertising, marketing, and public relations to expenses as incurred. The Group has
recognized $
Stock-Based Compensation Expense
Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the requisite service period. For stock-based awards to employees, non-employees and directors, the Company calculates the fair value of the award on the date of grant using the Black-Scholes option pricing model, which includes variables such as the expected volatility of the Company’s share price, the exercise behavior of its grantees, interest rates, and dividend yields. These variables are projected based on the Company’s historical data, experience, and other factors. In the case of awards with multiple vesting periods, the Company has elected to use the graded vesting attribution method, which recognizes compensation cost on a straight-line basis over each separately vesting portion of the award as if the award was, in substance, multiple awards.
Equipment
Equipment
is carried at historical cost. Depreciation is calculated on the straight-line method over the estimated useful lives of
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Group recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Group records interest and penalties related to unrecognized tax benefits as a component of general and administrative expenses. Our federal tax return and any state tax returns are not currently under examination.
F-11
The Group has adopted FASB ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Inventory
Raw materials and finished goods are stated at the lower of cost and net realizable value on a ‘first in first out’ basis. Cost comprises of direct materials and delivery costs, direct labor, import duties and other taxes, and an appropriate allocation of variable and fixed overhead expenditure based on normal operating capacity. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable.
Cost comprises purchase and delivery costs, net of rebates and discounts received or receivable. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
Accounts Receivable
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Account balances deemed to be uncollectible are charged to bad debt expense and included in the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
The Group calculates earnings per ordinary share in accordance with the requirements of Financial Accounting Standards Board
(“FASB”) ASC Topic 260, Earnings Per Share, which mandates the dual presentation of both basic and diluted earnings per share.
- Basic earnings per ordinary share is determined by dividing net income or net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the reporting period.
- Diluted earnings per ordinary share is calculated by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the reporting period, adjusted for the potential dilutive effect of ordinary shares that may be issued from the exercise of stock options, warrants, or other convertible instruments.
Comprehensive Income (loss)
ASC Topic 220 (SFAS No. 130) establishes standards for reporting comprehensive income and its components. Comprehensive income or loss is defined as the change in equity during a period from transactions and other events from non-owner sources.
F-12
Foreign Currencies
The Group determined that its functional currency is the U.S. dollar since the U.S. dollar is the currency of the environment in which the Group primarily generates and expends cash. Foreign currency transaction gains and losses represent gains and losses resulting from transactions entered in a currency other than the functional currency of the Group. These transaction gains and losses are included in results of operations.
Leases
Operating lease right of use (“ROU”) assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Group uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is presented on the consolidated statements of operations and comprehensive loss.
Finance lease right of use assets represents the right to use the leased asset for the lease term and finance lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The initial liability for a finance lease will subsequently be adjusted to reflect interest expense incurred (increase of the liability), and lease payments made (decrease of the liability). Interest should be recognized as equal to an amount that produces a constant periodic discount rate on the remaining balance of the liability during the lease term (i.e., the effective interest method). The ROU asset should be amortized on a straight-line basis from the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term. If, however, ownership of the ROU asset is transferred to the lessee at the end of the lease term or it is reasonably certain the lessee will exercise a purchase option for the ROU asset, then the lessee should amortize the ROU asset from commencement of the lease to the end of the useful life of the ROU asset.
Recent Accounting Pronouncements
During the years ended December 31, 2024, and 2023, there were new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, including Accounting Standards Updates (“ASU”) 2023-7, Segment Reporting, has been or will be adopted by the Group. Please see Note 11, Reportable segment. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Group’s consolidated financial statements.
The Group has considered all the other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its consolidated financial statements.
3. Inventories
The composition of the Group’s inventories at December 31, 2024 and 2023 are as follows:
| Schedule of inventories | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Inventories, at cost | $ | $ | ||||||
F-13
4. Equipment
Equipment consisted of the following at December 31, 2024 and 2023:
| Schedule of Equipment | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Equipment | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Equipment, net | $ | $ | ||||||
Depreciation
expenses were $
5. Intangible assets
Intangible assets consisted of the following at December 31, 2024 and December 31, 2023:
| Schedule of Intangible assets | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Contract rights | $ | $ | ||||||
| Software development costs | ||||||||
| Liquor license | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets – net | $ | $ | ||||||
Amortization
expenses were $
6. Lease right-of-use assets and lease liabilities
Operating leases
The
Group leases office space in Australia (“Seven Hills”) and in New Jersey (“Highland Cross”). The Seven Hills
lease commenced on July 1, 2018 and ends on June 30, 2024, with monthly lease payments of $
Operating
lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement
date. The interest rate used to determine the present value is the Company’s incremental borrowing rate, estimated to be
F-14
Operating right of use assets are summarized below:
| Schedule of operating right of use assets | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Office Lease | $ | $ | ||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||
| Operating right of use asset | $ | $ | ||||||
Operating lease liabilities are summarized below:
| Schedule of operating lease liabilities | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Office Lease | $ | $ | ||||||
| Less current portion | ( | ) | ( | ) | ||||
| Long term portion | $ | $ | ||||||
Operating lease liabilities are summarized below:
| Total | ||||
| 12-month period ending December 31, 2025 | $ | |||
| 12-month period ending December 31, 2026 | ||||
| Total future minimum lease payments | ||||
| Less imputed interest | ( | ) | ||
| PV of payments | $ | |||
Finance leases
The Group holds three pieces of equipment under finance leases. Two leases, with terms of 33 months and 48 months respectively, matured in December 2022, while the third lease, with a term of 48 months, matured in December 2023. The associated right-of-use assets remain subject to amortization, as detailed below.
| Schedule of Finance lease | ||||||||
| As of December 31, 2024 | As of December 31, 2023 | |||||||
| Equipment lease | $ | $ | ||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||
| Finance right of use asset | $ | $ | ||||||
Amortization
expense was $
F-15
7. Notes payable
Notes payable are summarized below:
| Schedule of Notes payable | ||||||||
| As of | As of | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Notes payable | ||||||||
| Loan 1 (a) | $ | $ | ||||||
| Loan 2 (b) | ||||||||
| Loan 3 (c) | ||||||||
| Total notes payable | $ | $ | ||||||
(a) Loan 1
During
the year ended December 31, 2024, the Group entered an unsecured insurance financing arrangement with a face value of $
During
the year ended December 31, 2023, the Group entered an unsecured insurance financing arrangement with a face value of $
(b) Loan 2
On
November 3, 2021, IBG acquired 100% of the outstanding equity interests in W4W in exchange for $
(c) Loan 3
During
the year ended December 31, 2023, the Group entered six loans from 3rd parties with the total face value and interests accrued is $
8. Other liabilities
| Schedule of Other liabilities | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Liability for shares to be issued | $ | $ | ||||||
| Other | ||||||||
| Total other liabilities | $ | $ | ||||||
F-16
9. Commitments and contingencies
During the normal course of business, the Group may be exposed to litigation. When the Group becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Group evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Group determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of December 31, 2024, the Group is not aware of any contingent liabilities that should be reflected in the consolidated financial statements.
10. Income taxes
A reconciliation of the effective tax rate to the statutory rate is shown below:
| Schedule of reconciliation of effective tax rate | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Australian loss before taxes | $ | ( | ) | $ | ( | ) | ||
| United States loss before taxes | ( | ) | ( | ) | ||||
| Income / (loss) before taxes | $ | ( | ) | $ | ( | ) | ||
| Expected Australian income tax expense / (benefits) at statutory rate of 25% (December 31, 2023: 25%) | $ | ( | ) | $ | ( | ) | ||
| Expected United States income tax expense / (benefits) at statutory rate of 21% | ( | ) | ( | ) | ||||
| Increase (decrease) in income taxes resulting from: | ||||||||
| Unrecognized deferred tax assets - tax losses | ||||||||
| Employee shared based payment | ||||||||
| Other items(DTA / DTL adjustment etc), net | ( | ) | ( | ) | ||||
| Income tax benefits | $ | ( | ) | $ | ( | ) | ||
The tax effects of temporary differences that gave rise to the deferred tax assets and liabilities are as follows:
| Schedule of deferred tax assets | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Deferred tax assets (liabilities): | ||||||||
| AL and LSL provision | $ | $ | ||||||
| Accrued Expenses | ||||||||
| Provision for inventory obsolescence | ||||||||
| Superannuation payable | ||||||||
| Foreign Exchange Loss | ( | ) | ( | ) | ||||
| Prepayments | ( | ) | ( | ) | ||||
| Differences in depreciation - aggregated | ||||||||
| Difference between leases (depreciation + int vs payments) - aggregated | ( | ) | ||||||
| Differences in amortisation - CCA Contract | ||||||||
| Differences in amortisation - Software | ( | ) | ( | ) | ||||
| Differences in amortisation - Sales | ||||||||
| Differences in Employee SB Payment Expense | ||||||||
| Capital IPO Cost | ||||||||
| Capital Losses - Intangible Items | ||||||||
| Carried forward Taxation Loss | ||||||||
| Other items | ( | ) | ||||||
| Total | $ | $ | ||||||
F-17
11. Reportable segments
a. The Group currently has two reportable geographic segments – Australia and United States. All inter-segment revenues are eliminated.
Summary information with respect to the Group’s geographic operating segments is as follows:
| Schedule of geographic operating segments | ||||||||
| The Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Revenue | ||||||||
| Australia | $ | $ | ||||||
| United States | ||||||||
| Total revenue | $ | $ | ||||||
| The Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Loss from operations | ||||||||
| Australia | $ | ( | ) | $ | ( | ) | ||
| United States | ( | ) | ( | ) | ||||
| Total loss from operations | $ | ( | ) | $ | ( | ) | ||
A reconciliation of the Group’s geographic segment operating income to consolidated earnings before income taxes is as follows:
| Schedule of reconciliation geographic segment operating income | ||||||||
| The Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | ||
| Other | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax benefits | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| The Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Depreciation and Amortization | ||||||||
| Australia | $ | $ | ||||||
| United States | ||||||||
| Total | $ | $ | ||||||
F-18
| The Year Ended | ||||||||
| Capital Expenditures | December 31, 2024 | December 31, 2023 | ||||||
| Australia | $ | $ | ||||||
| United States | ||||||||
| Total | $ | $ | ||||||
| The Year Ended | ||||||||
| Total Assets | December 31, 2024 | December 31, 2023 | ||||||
| Australia | $ | $ | ||||||
| United States | ||||||||
| Eliminations | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
b. Set out below is the disaggregation of the Group’s revenue based on the two distribution channels, brand products and e-commerce products1.
| Schedule of disaggregation of revenue | ||||||||
| The Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Revenue | ||||||||
| Brand products – Australia | $ | $ | ||||||
| Brand products – United States | ||||||||
| Total brand products | ||||||||
| E-commerce - Australia | ||||||||
| E-commerce - United States | ||||||||
| Total e-commerce products | ||||||||
| Total revenue | $ | $ | ||||||
12. Customer Concentration
During
the year ended December 31, 2024, the Group had net sales to one major customer that constituted in excess of
1 This is based on the geographical segment of reporting entity’s operation, rather than sales destination.
F-19
13. Related party disclosures
At
December 31, 2024, the Company had accounts receivable and accounts payable balances with a related company in the amounts of $
All loans to and from related parties at the period end are unsecured and settlement generally occurs in cash. Details are as follows:
| Schedule of related party | ||||
| Loan A issuance, interest, and repayment schedule in AUD (Receivable, interest 8.77%) | ||||
| Opening balance December 2023 | $ | |||
| Loan issued: | ||||
| Interest income accrued | ||||
| Total repayment by December 2024 | ||||
| Closing balance December 2024 | $ | |||
| Loan B issuance, interest, and repayment schedule in AUD (Payable, interest 12%) | ||||
| Opening balance December 2023 | $ | |||
| Loan issued: | ||||
| Interest income accrued | ||||
| Total repayment by December 2024 | ( | ) | ||
| Closing balance December 2024 | $ | |||
| Loan C issuance, interest, and repayment schedule in AUD (Payable, interest 12%) | ||||
| Opening balance December 2023 | $ | |||
| Loan issued: | ||||
| Interest income accrued | ||||
| Total repayment by December 2024 | ( | ) | ||
| Closing balance December 2024 | $ | |||
| Loan D issuance, interest, and repayment schedule in USD (Payable, interest 12%) | ||||
| Opening balance December 2023 | $ | |||
| Loan issued: | ||||
| Interest income accrued | ||||
| Total repayment by December 2024 | ( | ) | ||
| Closing balance December 2024 | $ | |||
On September 27, 2024, Meena Beri cancelled ordinary shares held by her. 114 Assets Inc., a related party of the Company cancelled ordinary shares held by this entity.
From
2020 to 2022, IBG sold a significant quantity (in the total of AUD$
F-20
Directors
The
Group pays the directors a fixed fee of $
14. Warrants
The Group applied fair value accounting for all share-based payments awards. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model.
Warrant Activities
The assumptions used for warrants granted during the twelve months ended December 31, 2024, and 2023, are follows:
| Schedule of warrants assumptions | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Exercise Price | AUD$ | AUD$ | ||||||
| Expected dividends | % | % | ||||||
| Expected volatility | % | % | ||||||
| Rist free interest rate | % - % | % | ||||||
| Expected life of warrants | years | years | ||||||
The following is a summary of the Group’s warrant activity:
| Schedule of warrant activity | ||||||||
| Warrant | Weighted Average Exercise Price | |||||||
| Balance - December 31, 2022 - outstanding | AUD$ | |||||||
| Forfeited/Cancelled | ( | ) | AUD$ | |||||
| Balance - December 31, 2023 - outstanding | AUD$ | |||||||
| Granted | AUD$ | |||||||
| Forfeited/Cancelled | ( | ) | AUD$ | |||||
| Balance - December 31, 2024 - outstanding | AUD$ | |||||||
| Balance - December 31, 2024 - exercisable | AUD$8 | |||||||
| Schedule of warrants outstanding | |||||
| Warrants Outstanding | Warrants Exercisable | ||||
| Weighted average exercise price | Number outstanding | Weighted
average remaining expected life (in years) |
Weighted average exercise price | Number exercisable | Weighted
average remaining expected life (in years) |
| AUD | AUD | ||||
During the year ended December 31, 2024, the Group granted two new directors warrants with a fair value of $106,460, vesting over three years in equal tranche.
F-21
15. Subsequent events
On
January 6, 2025, Innovation Beverage Group Limited (“the Company”) engaged with PBG consulting Partners LLC (“the Consultant”)
for various services in connection with the Company’s worldwide sales and distribution of its manufactured spirits. The consultant
is responsible for developing sales partnerships and orchestrating strategic initiatives with distributors and national chains of all
products on behalf of the Company. The consultant compensation is $
On
February 28, 2025, Innovation Beverage Group Limited (“the Company”) acquired
In accordance with ASC 855-10, Subsequent Events, the Group has analyzed its operations subsequent to December 31, 2024, through the date when the consolidated financial statements were available to be issued and has determined that it does not have any other additional material subsequent events to disclosure in these financial statements.
F-22
Exhibit 2.1
DESCRIPTION OF SECURITIES
REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT
The following description of fully paid ordinary shares of Innovation Beverage Group Limited (“Ordinary Shares”) is a summary only. We encourage you to read our Constitution, which is incorporated by reference as an exhibit to our Annual Report on Form 20-F (“Constitution”). The “Company,” “we,” “us,” or “our” refer to Innovation Beverage Group and its consolidated subsidiaries.
We are an Australian public company limited by shares registered under the Corporations Act 2000 Cth (“Corporations Act”) by the Australian Securities and Investments Commission (“ASIC”). Our corporate affairs are principally governed by our Constitution, the common law applicable in Australia and the Corporations Act.
In general, our Constitution addresses similar matters to those typically addressed in a U.S. company’s charter documents. Notably, however, we do not have a limit on our authorized share capital, the concept of par value is not recognized under Australian law.
Subject to restrictions on the issue of securities in our Constitution and the Corporations Act and any other applicable law, we may at any time issue shares and grant options or warrants on any terms, with the rights and restrictions and for the consideration that our board of directors determine.
The rights and restrictions attaching to ordinary shares are derived through a combination of our Constitution, the common law applicable to Australia and the Corporations Act and other applicable law. A general summary of some of the rights and restrictions attaching to our ordinary shares are summarized below. Each ordinary shareholder is entitled to receive notice of, and to be present, vote and speak at, general meetings.
Types and Class of Securities
Our outstanding share capital consists of only Ordinary Shares. As noted above, Ordinary Shares are of no par value.
The rights attaching to our Ordinary Shares are detailed in our Constitution. Our Constitution provides that our directors may issue shares with preferred, deferred or other special rights, or special restrictions, whether with regard to dividend, voting, return of capital, participation in the property of the Company on a winding up or otherwise, as the directors think fit.. Subject to any approval which is required from our shareholders under the Corporations Act (see “Item 16G—Corporate Governance”), any rights and restrictions attached to a class of shares, we may issue further shares on such terms and conditions as our board of directors resolve. Subject to our Constitution, the Corporations Act, and the rules governing the listing of our securities on the Nasdaq Capital Market, our directors are entitled to issue shares in our capital, grant options over unissued shares, and settle the manner in which fractions of a share are to be dealt with. The directors may decide the persons to whom, and the terms on which, shares are issued or options are granted as well as the rights and restrictions that attach to those shares or options subject to our Constitution, the Corporations Act 2001 (Cth) and the rules governing the listing of our securities on the Nasdaq Capital Market.
Our Constitution provides that the directors may issue, allot or grant options in respect of, or otherwise dispose of, shares to such persons, for such price, on such conditions, at such times and with such preferred, deferred or other special rights or special restrictions, whether in relation to dividends, voting, return of capital, participation in the property of the Company on a winding up or otherwise.
Subject to the Corporations Act, any rights and restrictions attached to a class of shares, the Company may issue further shares on such terms and conditions as the shareholders resolve.
Currently, our outstanding share capital consists of only one class of ordinary shares.
Pre-emptive rights
Ordinary Shares and ordinary shareholders do not have pre-emptive rights.
Transfer
There are no inherent restrictions on the transfer of Ordinary Shares.
Dividend rights
Subject to the Corporations Act, the Company’s Board may from time to time determine to pay any interim, special or final dividends to shareholders, fix the amount of dividend, the record date for determining entitlements to, and for payment of, a dividend and the method of payment of a dividend.
Holders of our ordinary shares are entitled to receive such dividends as may be declared by the directors, subject to and in accordance with the Corporations Act. The directors may declare and pay such interim and final dividends as, in their judgment, the financial position of the Company justifies and may fix the time for payment. The directors when declaring a dividend may pay any dividend required to be paid under the terms of issue of a share.
Voting rights
Under our Constitution, and subject to any voting prohibitions imposed under the Corporations Act (which typically exclude parties from voting on resolutions in which they have an interest), holders of our ordinary shares are entitled to receive notice of and to be present to vote and participate at general meetings. Subject to the Constitution and to any rights or restrictions attached to any shares, at a general meeting, on a show of hands, every holder present has one vote; and on a poll, each holder present has (i) one vote for each fully paid share held and a fraction of a vote for each partly paid share held equivalent to the proportion to which the share is paid up. Voting may be in person or by proxy, attorney or representative.
No business may be transacted at any general meeting, except the election of a chairperson and the adjournment of the meeting, unless a quorum is present when the meeting proceeds to business. Three or more holders present personally or separately represented by proxy representative or attorney shall be a quorum for a general meeting.
Shareholders may vote in person or by proxy, attorney or proxy representative. Under Australian law, shareholders of a public company are not permitted to approve corporate matters by written consent. Our Constitution does not provide for cumulative voting.
Under Australian law, an ordinary resolution is passed if a majority of the votes cast on the resolution (in person or by proxy) by members entitled to vote on the resolution are in favor of the resolution. Under Australian law, a special resolution is passed if at least 75% of the votes cast on the resolution (in person or by proxy) are in favor of the resolution.
Rights to share in our profits
Subject to any rights or restrictions attached to any shares or class of shares, the directors may capitalize and distribute among such of the shareholders as would be entitled to receive dividends and in the same proportions, any amount forming part of the undivided profits of the Company, representing profits arising from an ascertained accretion to capital or from a revaluation of the assets of the Company, arising from the realization of any assets of the Company or otherwise available for distribution as a dividend. The directors may resolve that all or any part of the capitalized amount is to be applied in paying up in full at a price determined by the resolution any unissued shares in or other securities of the Company or in paying up any amounts unpaid on shares or other securities held by the shareholders.
Surplus in the event of liquidation
Subject to this Constitution and to the rights or restrictions attached to any shares or class of shares if the Company is wound up and the property of the Company available for distribution among the shareholders is more than sufficient to pay all of the debts and liabilities of the Company and the costs, charges and expenses of the winding up, the excess must be divided among the shareholders in proportion to the shares held by them, irrespective of the amounts paid or credited as paid on the shares. If the Company is wound up, the liquidator may, with the sanction of a special resolution, divide among the shareholders the whole or any part of the property of the Company and determine how the division is to be carried out as between the shareholders or different classes of shareholders.
No Redemption Provision for Ordinary Shares
There are no redemption provisions in our Constitution in relation to ordinary shares. Under our Constitution and subject to the Corporations Act, any preference shares may be issued on the terms that they are, or may at our option be, liable to be redeemed.
No sinking fund provisions
There are no sinking fund provisions in our Constitution in relation to Ordinary Shares.
Variation or Cancellation of Share Rights
All or any of the rights or privileges attached to the class of share may be varied, whether or not the Company is being wound up, only with the consent in writing of the holders of three quarters of the issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of the issued shares of that class.
Directors May Make Calls
The directors may make any calls from time to time upon shareholders in respect of all monies unpaid on partly-paid shares (if any), subject to the terms upon which any of the partly-paid shares have been issued. Each shareholder is liable to pay the amount of each call in the manner, at the time, and at the place specified by the directors. Calls may be made payable by instalment. Failure to pay a call will result in interest becoming payable on the unpaid amount and ultimately, forfeiture of those shares. As of the date of this prospectus, all of our issued shares are fully paid.
General Meetings of Shareholders
The directors may, whenever they think fit, convene a general meeting. Subject to the Constitution and to the rights or restrictions attached to any shares or class of shares at least 28 days’ notice of a general meeting must be given to each person who is at the date of the notice a shareholder, a director or an auditor of the Company and the Securities Exchange. Section 249D of the Corporations Act also provides other mechanisms for the call of a meeting.
We must hold an annual general meeting within five months of the end of each fiscal year. Our end of fiscal year is currently 31 December each year. At the annual general meeting, shareholders typically consider the annual financial report, directors’ report and auditor’s report and vote on matters, including the election of directors. We may also hold other meetings of shareholders from time to time. The annual general meeting must be held in addition to any other meetings which we may hold.
Limitations on Rights to own Shares
There are no limitations on the rights to own securities imposed by our Constitution. However, acquisitions and proposed acquisitions of shares in Australian companies may be subject to review and approval by the Australian Federal Treasurer under the Foreign Acquisitions and Takeovers Act 1975, or the FATA, which generally applies to acquisitions or proposed acquisitions by a foreign person (as defined in the FATA) or associated foreign persons that would result in such persons having an interest in 20% or more of the issued shares of, or control of 20% or more of the voting power in, an Australian company and by non-associated foreign persons that would result in such foreign person having an interest in 40% or more of the issued shares of, or control of 40% or more of the voting power in, an Australian company. The Company is currently not classified as a foreign person or an Australian land corporation for the purposes of the FATA.
Whether prior approval of the Australian Federal Treasurer is required for an investor to be issued shares in the Company is an assessment which must be undertaken by each investor, as compliance with the FATA in those circumstances is the investor’s obligation. Separate and stricter rules apply for foreign government investors (defined by the FATA).
Generally, foreign government investors must seek prior FIRB approval where they acquire a direct interest in an entity or business. The term ‘direct interest’ has a very broad meaning under the Foreign Acquisitions and Takeovers Regulations 2015 and ranges from a 10% interest in an entity to an interest of any percentage in an entity which gives the foreign government investor the ability to influence or participate in the central management and control of the entity or business or determine its policy.
The Australian Federal Treasurer may prevent a proposed acquisition in the above categories or impose conditions on such acquisition if the Treasurer is satisfied that the acquisition would be contrary to the national interest. If a foreign person acquires shares or an interest in shares in an Australian company in contravention of the FATA, the Australian Federal Treasurer may take a number of actions including imposing civil or criminal penalties or ordering the divestiture of such person’s shares or interest in shares in the Company. The Australian Federal Treasurer may order divestiture pursuant to the FATA if he determines that the acquisition has resulted in that foreign person, either alone or together with other non-associated or associated foreign persons, controlling the Company and that such control is contrary to the national interest.
The above should be considered an overview only. The application of the FATA is complex and requires an assessment of the circumstances and nature of a particular investment. For example, varying rules exist for acquisitions in agricultural land or businesses deemed to be ‘sensitive businesses’.
As a public company under the Australian Corporations Act with more than 50 shareholders – the Australian Corporations Act (subject to certain exceptions) restricts the acquisition by any person (irrespective of jurisdiction) of a “relevant interest” in a “voting share” of the Company where, because of a transaction, that person or someone else’s percentage “voting power” in the Company increases above 20% of the total voting shares or, where the person’s voting power was already above 20% and below 90%, increases more than 3% in any six month period.
Provision affecting any change of control
Subject to our Constitution, the Corporations Act, and any other applicable law, we may at any time issue shares and grant options or warrants on any terms, with preferred, deferred or other special rights and restrictions and for the consideration and other terms that the directors determine. Our constitution does not contain any provisions preventing any change of control
Subject to the requirements of our Constitution, the Corporations Act, and any other applicable law, including relevant shareholder approvals, we may consolidate or divide our share capital into a larger or smaller number by resolution, reduce our share capital (provided that the reduction is fair and reasonable to our shareholders as a whole and does not materially prejudice our ability to pay creditors) or buy back our ordinary shares whether under an equal access buy-back or on a selective basis.
Change of Control
Takeovers of listed Australian public companies, such as Innovation Beverage Group Limited are regulated by the Corporations Act, which prohibits the acquisition of a “relevant interest” in issued voting shares in a listed company if the acquisition will lead to that person’s or someone else’s voting power in Innovation Beverage Group Limited (when aggregated with their “associates”) increasing from 20% or below to more than 20% or increasing from a starting point that is above 20% and below 90%, subject to a range of exceptions.
Generally, a person will have a relevant interest in securities if the person:
| ● | is the holder of the securities; |
| ● | has power to exercise, or control the exercise of, a right to vote attached to the securities; or |
| ● | has the power to dispose of, or control the exercise of a power to dispose of, the securities, including any indirect or direct power or control. |
If, at a particular time, a person has a relevant interest in issued securities and the person:
| ● | has entered or enters into an agreement with another person with respect to the securities; |
| ● | has given or gives another person an enforceable right, or has been or is given an enforceable right by another person, in relation to the securities (whether the right is enforceable presently or in the future and whether or not on the fulfillment of a condition); |
| ● | has granted or grants an option to, or has been or is granted an option by, another person with respect to the securities; or |
| ● | the other person would have a relevant interest in the securities if the agreement were performed, the right enforced or the option exercised; the other person is taken to already have a relevant interest in the securities. |
There are a number of exceptions to the above prohibition on acquiring a relevant interest in issued voting shares above 20%. In general terms, some of the more significant exceptions include:
| ● | when the acquisition results from the acceptance of an offer under a formal takeover bid; |
| ● | when the acquisition is conducted on market by or on behalf of the bidder under a takeover bid, the acquisition occurs during the bid period, the bid is for all the voting shares in a bid class and the bid is unconditional or only conditioned on prescribed matters set out in the Corporations Act; |
| ● | when shareholders of Innovation Beverage Group Limited approve the takeover by resolution passed at general meeting; |
| ● | an acquisition by a person if, throughout the six months before the acquisition, that person or any other person has had voting power in Innovation Beverage Group Limited of at least 19% and, as a result of the acquisition, none of the relevant persons would have voting power in Innovation Beverage Group Limited more than three percentage points higher than they had six months before the acquisition; |
| ● | when the acquisition results from the issue of securities under a rights issue; |
| ● | when the acquisition results from the issue of securities under dividend reinvestment schemes; |
| ● | when the acquisition results from the issue of securities under underwriting arrangements; |
| ● | when the acquisition results from the issue of securities through operation of law; |
| ● | an acquisition that arises through the acquisition of a relevant interest in another listed company which is listed on a prescribed financial market or a financial market approved by ASIC; |
| ● | an acquisition arising from an auction of forfeited shares conducted on-market; or |
| ● | an acquisition arising through a compromise, arrangement, liquidation or buy-back. |
Breaches of the takeovers provisions of the Corporations Act are criminal offenses. ASIC and the Australian Takeover Panel have a wide range of powers relating to breaches of takeover provisions, including the ability to make orders canceling contracts, freezing transfers of, and rights attached to, securities, and forcing a party to dispose of securities. There are certain defenses to breaches of the takeover provisions provided in the Corporations Act.
Ownership threshold
There are no provisions in the Constitution that require a shareholder to disclose ownership above a certain threshold. Section 671B(1) of the Corporations Act provides that a person who obtains a “substantial holding” being five percent (5 %) in a listed public company to disclose the interest to the company within two (2) days of acquiring the interest and serve a copy of the disclosure on the relevant market operator.
As a public company under the Australian Corporations Act with more than 50 shareholders – the Australian Corporations Act (subject to certain exceptions) restricts the acquisition by any person (irrespective of jurisdiction) of a “relevant interest” in a “voting share” of the Company where, because of a transaction, that person or someone else’s percentage “voting power” in the Company increases above 20% of the total voting shares or, where the person’s voting power was already above 20% and below 90%, increases more than 3% in any six month period.
Differences between the Law of Different Jurisdictions
See “Rights of the Shares” above. The Australian law applicable to our Constitution is not significantly different than a U.S. company’s charter documents except we do not have a limit on our authorized share capital, the concept of par value is not recognized under Australian law.
Issues of Shares and Changes in Capital
Subject to our Constitution, the Corporations Act, and any other applicable law, we may at any time issue shares and grant options or warrants on any terms, with preferred, deferred or other special rights and restrictions and for the consideration and other terms that the directors determine.
Subject to the requirements of our Constitution, the Corporations Act, and any other applicable law, including relevant shareholder approvals, we may consolidate or divide our share capital into a larger or smaller number by resolution, reduce our share capital (provided that the reduction is fair and reasonable to our shareholders as a whole and does not materially prejudice our ability to pay creditors), cancel shares that at the date of the passing of the resolution, have not been taken or agreed to be taken by any person or which have been forfeited and reduce the Company’s share capital by such amount, or buy back our ordinary shares in any manner permitted by the Corporations Act. The Company may, by resolution, reclassify or convert shares from one class to another. The Company may with members’ approval as required by the Act reduce its share capital.
EXHIBIT 4.1
Convertible Note Agreement
Innovation Beverage Group Limited
ACN 625 701 420
and
Hartfield Assets Inc.
Convertible Note Agreement
Dated 20/3/24
Parties
| 1. | Innovation Beverage Group Limited ACN 625 701 420 of 29 Anvil Road, Seven Hills NSW 2147 Australia (Company)) |
| 2. | Hartfield Assets Inc. of 1 Bayview Street, Nassau, The Bahamas (Noteholder) |
Background
The Company has resolved to issue the Notes and the Noteholder has agreed to advance to the Company in tranches between $1,250,000 and $3,000,000 in subscription for between 1,250,000 and 3,000,000 Notes on the terms of this Agreement.
Operative Provisions
| 1. | Definitions and interpretation |
| 1.1 | Definitions |
In this Agreement:
Advance means a cash advance by the Noteholder to the Company of one or more tranches of $250,000 pursuant to the terms of this Agreement, in return for each such tranche the Company shall issue the Noteholder 250,000 Notes;
Advance Request means a written notice by the Company giving the Noteholder at least 15 Business Days notice of the date the Company requires a further Advance;
Agreement Date means the date of this Agreement;
Business Day means a day which is not a Saturday, Sunday, public holiday or bank holiday in Sydney, Australia;
Conversion Shares has the meaning ascribed to that term in the Note Terms;
Corporations Act means the Corporations Act 2001;
Agreement or Note Agreement means this Agreement including the recitals, any schedules and any annexures;
Duty means any stamp, transaction or registration duty or similar charge imposed by a Government Agency and includes any interest, fine, penalty, charge or other amount imposed in respect of the above but excludes Tax;
Event of Default has the meaning ascribed to that term in the Note Terms;
Face Value, in respect of each Note, means the face value of that Note, being $1.00 each;
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Facility Limit means the amount in aggregate of up to $3,000,000 to be raised pursuant to the Notes;
Government Agency means any government or any governmental, semi-governmental, administrative or fiscal body, court or other judicial body, department, commission, authority, agency or entity, including any self-regulatory organisation established under statute and any stock exchange;
Initial Advance has the meaning as provided in clause 2.1(a);
Material Adverse Change means:
| (a) | the Company’s revenues for any period in a financial year being less than 50%of its revenuefor that same period in the prior 12 months(as set out in its financial statements s published on Nasdaq); |
| (b) | a material adverse effect on the Company’s ability to carry on the Business in substantially the same manner as it has in the time since it listed its Shares on Nasdaq; |
Nominated Account means Bank Account that IBG will Nominate;
Notes means convertible notes convertible into Shares, to be issued by the Company to the Noteholder in accordance with clause 2 and on the terms and conditions set out in these Note Terms;
Note Certificate means a certificate for the Notes in the form set out in Schedule 1;
Note Terms means the terms and conditions of issue of the Notes as set out in Schedule 2;
Principal Amount means, in respect of the Notes, the aggregate of the Face Value of each of the Notes which remains outstanding (from time to time) and not Converted;
Redeem means repayment of the Principal Amount, in part or in full, and Redemption will be interpreted accordingly;
Shares means fully paid ordinary shares in the capital of the Company;
Shareholders means the holders of all of the issued Shares;
Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding which is assessed, levied, imposed or collected by any Government Agency;
Subsequent Advance means each Tranche issued after the Initial Advance;
Tranche means the amount of $250,000 advanced in return for 250,000 Notes to be issued by the Company.
| 1.2 | Interpretation |
In this Agreement, unless the context requires otherwise:
| (a) | the singular includes the plural and vice versa and a gender includes the other genders; |
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| (b) | the headings are used for convenience only and do not affect the interpretation of this Agreement; |
| (c) | other grammatical forms of defined words or expressions have corresponding meanings; |
| (d) | a reference to a document includes the document as modified from time to time and any document replacing it; |
| (e) | if something is to be or may be done on a day that is not a Business Day then it must be done on the next Business Day; |
| (f) | the word “person” includes a natural person and any body or entity whether incorporated or not; |
| (g) | the word “month” means calendar month and the word “year” means 12 months; |
| (h) | the words “in writing” include any communication sent by letter or email transmission in accordance with the terms of this Note Agreement; |
| (i) | a reference to a thing includes a part of that thing; |
| (j) | a reference to all or any part of a statute, rule, regulation or ordinance (statute) includes that statute as amended, consolidated, re-enacted or replaced from time to time; |
| (k) | wherever “include” or any form of that word is used, it must be construed as if it were followed by “(without being limited to)”; |
| (l) | money amounts are stated in United States currency (US$) unless otherwise specified; |
| (m) | a reference to any agency or body, if that agency or body ceases to exist or is reconstituted, renamed or replaced or has its powers or functions removed (defunct body), means the agency or body which performs most closely the functions of the defunct body, and |
| (n) | terms defined in the Note Terms have the same meaning in this Agreement. |
| 2. | Subscription for Notes |
| 2.1 | Notes Issues |
It is agreed by the Parties that:
| (a) | on the Agreement Date the Noteholder shall advance the Company an amount of $250,000 and as consideration for the advance the Company shall issue the Noteholder 250,000 Notes (Initial Advance); |
| (b) | the Company may also provide from time to time to the Noteholder an Advance Request specifying a further advance by the Noteholder for subscription of additional Notes; |
| (c) | within 21 Days of delivery of the Advance Request the Noteholder shall pay or cause the transfer to the Company’s Nominated Account an amount equal to the Advance specified in each Advance Request in cleared funds in return for which the Company shall at the time of receipt of those cleared funds issue the Noteholder with 250,000 Notes for each Advance Request provided; |
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| (d) | the Company shall issue a minimum of 4 but is permitted to issue a maximum of 11 Advance Requests within 12 months of the Agreement Date, with the timing of such Advance Requests being solely in the discretion of the Company; |
| (e) | unless agreed otherwise by the Noteholder, the Company shall not be able to serve an Advance Request whilst there subsists a Material Adverse Change; |
| (f) | on the provision by the Noteholder of the funds pursuant to an Advance Request the Company must: |
| (i) | pay the Noteholder $2,000 towards the Noteholders legal and compliance fees for that Advance; and |
| (ii) | file a Form 6-K with sufficient disclosure (as determined by the Company) that cleanses the Noteholder of any information deemed to be Material Non- Public Information. |
| 3. | Warranties by the Company |
The Company represents and warrants to the Noteholder that on the date of this Agreement:
| (a) | it is a corporation, having limited liability, registered and validly existing under the Corporations Act; |
| (b) | it has full power and authority to enter into and perform its obligations under this Agreement; |
| (c) | it has taken all necessary action to authorise the execution, delivery and performance of this Agreement and the Notes according to their terms; |
| (d) | this Agreement and the Notes constitute legal, valid and binding obligations of the Company which, subject to any necessary stamping, are enforceable according to their terms; |
| (e) | until all Notes have been Converted or Redeemed the Company shall not without the prior consent of the Noteholder (which consent is not to be unreasonably withheld or delayed) enter any transaction that involves the issue of any securities at a price that varies with the trading price of the Shares on Nasdaq. This clause does not restrict the Company from issuing securities at a fixed price, or securities pursuant to any employee incentive scheme, |
| 4. | Warranties by the Noteholder |
The Noteholder represents and warrants to and for the benefit of, the Company and its directors, officers, employees, agents and advisors (for whom it accepts the benefit of this clause as agent and trustee), that the Noteholder:
| (a) | is either a sophisticated investor or professional investor for the purposes of sections 708(8) and 708(11) respectively of the Corporations Act or equivalent provisions in the local jurisdiction of the Noteholder and the Company is permitted at law to offer and issue the Convertible Notes to the Noteholder without the Company being required under any laws to provide the Noteholder with a disclosure document / prospectus with respect to the offer or issue of the Convertible Notes; |
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| (b) | is aware and acknowledges that no disclosure document / prospectus has been prepared in connection with the offer or issue of the Convertible Notes and that no person is authorised to give any information or make any representations in respect of the Notes or the Conversion Shares or the Company and, if given or made, such information or representations will not be relied on as having been authorised by the Company, or any other person associated with the Company, nor will any such person have any liability or responsibility for them; |
| (c) | has made and has relied on its own searches, investigations and enquiries in respect of the Company, the Convertible Notes, the Company’s accounts, financial performance, assets, liabilities, cash-flow, risks, prospects, threats, opportunities and business and has, after seeking appropriate professional advice, made an evaluation of the foregoing and any other information or material concerning the Company; |
| (d) | has had access to all information that it has requested concerning the Company, the Convertible Notes and its investment decision to provide the advances and apply for the Convertible Notes, has verified this information and is satisfied in all respects with it; |
| (e) | acknowledges neither the Company nor any person associated with it has made any securities recommendation or provided any financial product advice with respect to Convertible Notes, the Shares or an investment in the Company and that the Company has not had regard to, and you have had regard to, your own personal objectives, financial situation and needs; |
| (f) | in respect of any Shares issued on conversion of a Note, agrees to be bound by the constitution of the Company as amended from time to time; |
| (g) | is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D as promulgated under the U.S. Securities Act of 1933, as amended (US Securities Act); |
| (h) | understands that the Notes, and Conversion Shares thereunder, are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws, that the offer and sale of the Notes, and Conversion Shares thereunder, are intended to be exempt from the registration requirements of the US Securities Act pursuant to Rule 903 of Regulation S as promulgated under the US Securities Act, and that the Company is relying in part upon the truth and accuracy of, and Noteholder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Noteholder set forth herein in order to determine the availability of such exemptions and the eligibility of Noteholder to acquire the Notes, and Conversion Shares thereunder; |
| (i) | acknowledges and agrees that, pursuant to the provisions of Regulation S under the US Securities Act, the Notes, and Conversion Shares thereunder, cannot be sold, assigned, transferred, conveyed, pledged or otherwise disposed of to any U.S. Person or within the United States of America or its territories or possessions, unless such the Notes, and Conversion Shares thereunder, are registered for sale in the United States pursuant to an effective registration statement under the US Securities Act or another exemption from such registration is available. Without limiting the foregoing, Noteholder understands and agrees that: |
| (i) | the Notes, and Conversion Shares thereunder, have not been registered under the US Securities Act or any state securities laws in the United States, and may not be offered for sale, sold, assigned, transferred, conveyed or pledged unless |
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| (A) | subsequently registered under the US Securities Act and applicable states securities laws, |
| (B) | the sale, assignment or transfer is made outside the United States to a non-U.S. Person in accordance with the requirements of Rule 904 of Regulation S and in compliance with applicable local laws and regulations, |
| (C) | such Notes, and Conversion Shares thereunder, to be sold, assigned or transferred may be sold, assigned or transferred pursuant to any other exemption from registration under the US Securities Act and applicable state securities laws in the United States, or |
| (D) | the Notes, and Conversion Shares thereunder, are sold, assigned or transferred pursuant to Rule 144A promulgated under the US Securities Act (or a successor rule thereto) (collectively, “Rule 144A”); and |
| (ii) | any sale of the Notes, and Conversion Shares thereunder, made in reliance on Rule 144A may be made only in accordance with the terms of Rule 144A, and further, if Rule 144A is not applicable, any resale of the Notes, and Conversion Shares thereunder, under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the US Securities Act) may require compliance with some other exemption under the US Securities Act or the rules and regulations of the SEC promulgated thereunder; and |
| (j) | acknowledges and agrees that: |
| (i) | it is not in the United States and is not a “U.S. Person” as defined in Rule 902 of Regulation S promulgated under the US Securities Act (a “U.S. Person”); |
| (ii) | the Notes, and Conversion Shares thereunder, were not offered to the Noteholder in the United States and at the time of purchase was outside the United States; |
| (iii) | this Agreement was delivered to, completed, executed and delivered by, the Noteholder outside the United States; |
| (iv) | the Noteholder is not a “distributor” of securities, as that term is defined in Regulation S under the US Securities Act, nor a dealer in securities, and is not purchasing the Notes, and Conversion Shares thereunder, for the account or benefit of, directly or indirectly, any U.S. Person; |
| (v) | the current structure of this transaction and all transactions and activities contemplated hereunder is not a scheme to evade the registration requirements of the US Securities Act; and |
| (vi) | it has not purchased the Notes, and Conversion Shares thereunder, as a result of any form of “directed selling efforts” (as such term is used in Regulation S under the US Securities Act) or “general solicitation” or “general advertising” (as such terms are used under Rule 502(c) of Regulation D promulgated under the US Securities Act), including, but not limited to, any advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or on the Internet or broadcast over radio, television or the Internet, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising. |
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| 5. | GST |
| 5.1 | Definitions |
In this clause 4:
| (a) | the expressions Consideration, GST, Input Tax Credit, Recipient, Supply, Tax Invoice and Taxable Supply have the meanings given to those expressions in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act); and |
| (b) | Supplier means any party treated by the GST Act as making a Supply under this Agreement. |
| 5.2 | Consideration is GST exclusive |
Unless otherwise expressly stated, all prices or other sums payable or Consideration to be provided under or in accordance with this Agreement are exclusive of GST, provided that nothing in this clause 4 imposes any deduction from the amount payable to the Noteholder under this Agreement and/or the Note Terms including but not limited to Redemption or Conversion.
| 5.3 | Payment of GST |
| (a) | If GST is imposed on any Supply made under or in accordance with this Agreement, the Recipient of the Taxable Supply must pay to the Supplier an additional amount equal to the GST payable on or for the Taxable Supply, subject to the Recipient receiving a valid Tax Invoice in respect of the Supply at or before the time of payment. |
| (b) | Payment of the additional amount must be made at the same time and in the same way as payment for the Taxable Supply is required to be made in accordance with this Agreement. |
| 5.4 | Reimbursement of expenses |
If this Agreement requires a party (the First Party) to pay for, reimburse, set off or contribute to any expense, loss or outgoing (Reimbursable Expense) suffered or incurred by the other party (the Other Party), the amount required to be paid, reimbursed, set off or contributed by the First Party will be the sum of:
| (a) | the amount of the Reimbursable Expense net of Input Tax Credits (if any) to which the Other Party is entitled in respect of the Reimbursable Expense (Net Amount); and |
| (b) | if the Other Party’s recovery from the First Party is a Taxable Supply, any GST payable in respect of that Supply, such that after the Other Party meets the GST liability, it retains the Net Amount. |
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| 6. | General |
| 6.1 | Entire understanding |
This Agreement contains the entire understanding between the parties concerning the subject matter of the agreement between them concerning the Convertible Notes and supersedes all prior communications between the parties.
| 6.2 | No adverse construction |
This Agreement is not to be construed to the disadvantage of a party because that party was responsible for its preparation.
| 6.3 | Further assurances |
A party, at its own expense and within a reasonable time of being requested by another party to do so, must do all things and execute all documents that are reasonably necessary to give full effect to this Agreement.
| 6.4 | No waiver |
A failure, delay, relaxation or indulgence by a party in exercising any power or right conferred on the party by this Agreement does not operate as a waiver of the power or right. A single or partial exercise of the power or right does not preclude a further exercise of it or the exercise of any other power or right under this Agreement. A waiver of a breach does not operate as a waiver of any other breach.
| 6.5 | Severability |
If any provision of this Agreement offends any law applicable to it and is as a consequence illegal, invalid or unenforceable then:
| (a) | where the offending provision can be read down so as to give it a valid and enforceable operation of a partial nature, it must be read down to the minimum extent necessary to achieve that result; and |
| (b) | in any other case the offending provision must be severed from this Agreement, in which event the remaining provisions of the Agreement operate as if the severed provision had not been included. |
| 6.6 | No Assignment |
Neither Party may assign, transfer or otherwise deal with its rights, interests or obligations under this Agreement without the prior written approval of the other Party.
| 6.7 | Consents and approvals |
Where anything depends on the consent or approval of the Noteholder then, unless this Agreement provides otherwise, that consent or approval may be given conditionally or unconditionally or withheld, in the absolute discretion of the Noteholder.
| 6.8 | No variation |
This Agreement cannot be amended or varied except in writing signed by the parties.
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| 6.9 | Costs |
The Company agrees to pay the Noteholder a total of $10,000 towards the legal fees of the Noteholder of and incidental to the preparation, negotiation and completion of this Agreement, upon the basis that that amount is deducted from the amount that is otherwise to be advanced to the Company by the Noteholder as the Initial Advance.
| 6.10 | Duty |
Any Duty payable in respect of this Agreement or any instrument created in connection with it must be paid by the Company.
| 6.11 | Governing law and jurisdiction |
This Agreement is governed by and must be construed in accordance with the laws in force in the State of New South Wales, Australia. The parties submit to the exclusive jurisdiction of the courts of that State in respect of all matters arising out of or relating to this Agreement, its performance or subject matter.
| 6.12 | Notices |
Any notice or other communication to or by a party to this Agreement:
| (a) | may be given by personal service, registered post or email; |
| (b) | must be in writing, legible and in English addressed as shown below: |
| (i) | If to the Company: |
Address: 29, Anvil Road, Seven Hills, NSW Australia,
2147
Attention: The Directors
Email address: sahil@innovationbev.com
####
| (ii) | If to the Noteholder: |
Address: 3 Bayside Executive Park, West Bay St &
Blake Rd,
Nassau, The Bahamas, N-4875
Attention: Sant Prakash- Hartfield assets Inc
###
Email address: Sanjuarora1@yahoo.com
###
or to any other address last notified by the party to the sender by notice given in accordance with this clause;
| (c) | in the case of a corporation, must be signed by an officer or authorised representative of the sender; |
| (d) | is deemed to be given by the sender and received by the addressee: |
| (iii) | if delivered in person (including by courier), when delivered to the addressee; |
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| (iv) | if sent by registered post, 2 Business Days (or 6 Business Days, if addressed or posted outside Australia) after the date of posting to the addressee or such other day as is confirmed by the postal service via which the registered mail is delivered; or |
| (v) | if sent by email transmission, on the date and time shown on the sender’s email account as the date and time the email was delivered in its entirety to the email address of the addressee notified to the other party for the purposes of this clause, but if the delivery or receipt is on a day which is not a Business Day or is after 4.00 pm (addressee’s time), it is deemed to have been received at 9.00 am on the next Business Day. |
| 6.13 | Counterparts |
If this Agreement consists of a number of signed counterparts, each is an original and all of the counterparts together constitute the same document.
| 6.14 | Conflicting provisions |
If there is any conflict between the main body of this Agreement and any schedules or annexures comprising it, then the provisions of the main body of this Agreement prevail.
| 6.15 | Non merger |
A term or condition of, or act done in connection with, this Agreement does not operate as a merger of any of the rights or remedies of the parties under this Agreement and those rights and remedies continue unchanged.
| 6.16 | Relationship of parties |
Unless this Agreement expressly provides otherwise, nothing in this Agreement may be construed as creating a relationship of partnership, of principal and agent or of trustee and beneficiary.
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Executed as a Agreement
| Executed by Innovation Beverage Group | ) | |
| Limited ACN 625 701 420 in accordance with | ) | |
| section 127(1) of the Corporations Act 2001 | ) | |
| (Cth): | ) | |
| /s/ Sahil Beri | /s/ Deniel Lanskey | |
| Signature of director | Signature of director or company secretary* | |
| *delete whichever does not apply | ||
| Sahil Beri | Deniel Lanskey | |
| Name (please print) | Name (please print) |
| Executed by Hartfield Assets Inc. by its | ) | |
| authorised representative in the presence of: | ) | |
| ) | ||
| ) | ||
| Signature of witness | Signature of authorised representative | |
| Name (please print) | Name (please print) |
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Executed as a Agreement
| Executed by Innovation Beverage Group | ) | |
| Limited ACN 625 701 420 in accordance with | ) | |
| section 127(1) of the Corporations Act 2001 | ) | |
| (Cth): | ) | |
| /s/ Sahil Beri | ||
| Signature of director | Signature of director or company secretary* | |
| *delete whichever does not apply | ||
| Sahil Beri | ||
| Name (please print) | Name (please print) |
| Executed by Hartfield Assets Inc. by its | ) | |
| authorised representative in the presence of: | ) | |
| ) | ||
| ) | ||
| /s/ Jatin Arora | /s/ Sant Parkash | |
| Signature of witness | Signature of authorised representative | |
| Jatin Arora | Sant Parkash | |
| Name (please print) | Name (please print) |
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Schedule 1: Note Certificate
Innovation Beverage Group Limited
CONVERTIBLE NOTE
Certificate No. ___________
This is to certify that Hartfield Assets Inc. ( Noteholder) is the registered holder of 250,000 Notes with an aggregate Face Value for this Certificate of USD$250,000.
The Notes comprised in this Note Certificate are issued in consideration of an advance by the Noteholder to Innovation Beverage Group Limited ACN 625 701 420 (the Company) of USD$250,000 pursuant to the terms of the Convertible Note Agreement dated 20/3/24 (Convertible Note Agreement) and are held by the Noteholder subject to and with the benefit of the Note Terms endorsed on this Note Certificate.
Dated: 20/3/24
| Executed by Innovation Beverage Group | ) | |
| Limited ACN 625 701 420 in accordance with | ) | |
| section 127(1) of the Corporations Act 2001 | ) | |
| (Cth): | ) | |
| /s/ Sahil Beri | /s/ Deniel Lanskey | |
| Signature of director | Signature of director or company secretary* | |
| *delete whichever does not apply | ||
| Sahil Beri | Deniel Lanskey | |
| Name (please print) | Name (please print) |
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Schedule 2 – Terms of issue of Note
| 1. | Definitions and interpretation |
| 1.1 | Definitions |
In these Note Terms, unless the context otherwise requires:
Allotment Date means the date the Conversion Shares are allotted following a Conversion, being 5 Business Days after the applicable Conversion Date;
Business Day means a day which is not a Saturday, Sunday, a public holiday or a bank holiday in Sydney, Australia;
Company means Innovation Beverage Group Limited ACN 625 701 420; Constitution means the Constitution of the Company in force at the time; Controller means in relation to an entity’s property:
| (a) | a receiver or receiver and manager of that property, or |
| (b) | anyone else who (whether or not as agent for that entity) is in possession, or has control, of that property for the purposes of enforcing a Security Interest; |
Conversion means the conversion of the Notes into the Conversion Number of Conversion Shares on the Conversion Date as provided in these Note Terms, and Convert and Converted will be interpreted accordingly;
Conversion Date means the date a Conversion Notice is served by the Noteholder on the Company;
Conversion Event means the occurrence of an event described in paragraph 3 of these Note Terms;
Conversion Notice has the meaning given in paragraph 3 of these Note Terms;
Conversion Number means the number of Conversion Shares into which the Notes being Converted will Convert upon a Conversion Event, being the Principal Amount of the Notes being Converted divided by the Conversion Price - provided that where there is a reconstruction (consolidation or division) of the capital structure of the Company after the issue of any Notes (Reconstruction), the Conversion Number and Conversion Price for the Notes issued prior to the Reconstruction shall be adjusted in the same proportion so that the Noteholder is no worse off after the reconstruction as it would have been with a Conversion based on the prices and number of Conversion Shares on issue as at the date of this Agreement;
Conversion Price means the amount equal to the higher of:
| (a) | a 25% discount to the applicable VWAP ; and |
| (b) | the Floor Price; |
Conversion Shares has the meaning as provided in paragraph 2.1(b);
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Corporations Act means the Corporations Act 2001;
Default Rate means an interest rate equivalent to an annual rate of 18%;
Default Redemption Notice has the meaning as provided in paragraph 7(b);
Default Redemption Price means the Principal Amount of all of the Notes being Redeemed, together with interest upon those Notes, which interest is deemed to accrue at the Default Rate on that Principal Amount since the service of a Default Redemption Notice until Redemption of the relevant Notes is complete;
Dollars and $ means the currency of the United States, unless stated otherwise;
Duty means any stamp, transaction or registration duty or similar charge imposed by a Government Agency and includes any interest, fine, penalty, charge or other amount imposed in respect of the above;
Event of Default has the meaning as provided in paragraph 8;
Face Value in respect of the Notes, means the loan amount specified in the Note Certificate for that Note, being $1.00 for each Note;
Facility Limit means the amount in aggregate of up to USD$3,000,000 to be raised pursuant to the Notes;
Floor Price means with respect to:
| (a) | the Initial Advance, 20% of the VWAP applicable on the Agreement Date; and |
| (b) | each Subsequent Advance, 20% of the VWAP applicable on the expiry of the calendar month during which the relevant Conversion Notice is provided, |
subject to the Company, in its discretion, nominating another price lower than that described in (a) and (b) above.
Insolvency Event means the occurrence of any one or more of the following events in relation to the Company (other than as part of a solvent restructure):
| (c) | an order of a Court is made that it be wound up, declared bankrupt or that a provisional liquidator or receiver or receiver and manager be appointed, and the application is not withdrawn, struck out or dismissed within 21 days of being made; |
| (d) | a liquidator or provisional liquidator is appointed; |
| (e) | an administrator or a controller is appointed to all or substantially all of its assets; |
| (f) | it proposes a winding-up or dissolution or reorganisation, moratorium, Agreement of company arrangement or other administration involving one or more of its creditors; |
| (g) | it states that it is insolvent, or |
| (h) | it becomes an insolvent under administration or action is taken which could result in that event; |
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Maturity Date for a particular Note means the day being 12 months following the issue date of that Note;
Note(s) means between 1,250,000 and 3,000,000 notes (convertible into Conversion Shares) issued by the Company to the Noteholder pursuant to the terms of the Note Agreement for an aggregate Face Value of up to the Facility Limit;
Note Certificate means a certificate for the Notes in the form set out in Schedule 2;
Note Agreement means the convertible note Agreement executed by the Company and the Noteholder on or around 21stMarch 2025, to which these Note Terms form Schedule 2;
Noteholder means the registered holder of the Notes, namely Hartfield Assets Inc.;
Note Terms means these terms and conditions;
Principal Amount means, in respect of the Notes, the sum of the Face Value of each of the relevant Notes (which remains outstanding and not Converted or Redeemed);
Redeem means repay the Principal Amount in full, and Redemption and Redeemed will be interpreted accordingly;
Regulation S means Regulation S of the U.S. Securities Act of 1933, as amended.;
Rule 144 means Rule 144 of the U.S. Securities Act of 1933, as amended;
Securities includes shares, debentures, debenture stock, the Notes and any options or rights to subscribe for any of them;
Security Interest means:
| (a) | a mortgage, pledge, lien, charge, assignment by way of security, hypothecation, secured interest, preferential right, trust arrangement or other arrangement (including, without limitation, any set-off or “flawed-asset” arrangement) having the same or equivalent commercial effect as a grant of security; or |
| (b) | an agreement to grant or create any of the above; |
Share means a fully paid ordinary share in the capital of the Company;
Shareholder means the registered holder of Shares;
VWAP means the volume weighted average price of the Shares (excluding crossings executed outside the open session state, special crossings, overseas trades and trades pursuant to exercise of options or other convertible securities), as determined by the Company as traded on Nasdaq:
| (a) | with respect to the Initial Advance, for the 2 trading days immediately prior to the Agreement Date; or |
| (b) | with respect to each Subsequent Advance, for the 2 trading days immediately prior to the service of the corresponding Conversion Notice. |
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| 1.2 | Interpretation |
In these Note Terms, unless the context requires otherwise:
| (a) | the singular includes the plural and vice versa and a gender includes the other genders; |
| (b) | the headings are used for convenience only and do not affect the interpretation of these Note Terms; |
| (c) | other grammatical forms of defined words or expressions have corresponding meanings; |
| (d) | no rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of these Note Terms or any part of them; |
| (e) | if something is to be or may be done on a day that is not a Business Day then it must be done on the next Business Day; |
| (f) | the word “person” includes a natural person and any body or entity whether incorporated or not; |
| (g) | the word “month” means calendar month and the word “year” means 12 months; |
| (h) | the words “in writing” include any communication sent by letter or email transmission in accordance with the terms of the Note Agreement; |
| (i) | a reference to all or any part of a statute, rule, regulation or ordinance (statute) includes that statute as amended, consolidated, re-enacted or replaced from time to time; |
| (j) | wherever “include” or any form of that word is used, it must be construed as if it were followed by “(without being limited to)”; |
| (k) | money amounts are stated in United States currency unless otherwise specified; |
| (l) | defined terms appearing in the Note Agreement to which these Note Terms are attached have the same meaning in these Note Terms, and |
| (m) | reference to a “paragraph” means a paragraph of these Note Terms. |
| 2. | The terms of issue of Note |
| 2.1 | Terms of issue |
The Notes:
| (a) | each have a Face Value of $1.00; |
| (b) | if Converted from time to time, Convert into that number of Shares being equal to the Conversion Number at the Conversion Date (Conversion Shares); and |
| (c) | are certificated and unlisted. |
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| 2.2 | Cancellation |
To the extent the Notes are Redeemed, or Converted, the Notes Redeemed or Converted are automatically cancelled and may not be re-issued.
| 2.3 | Legends |
Noteholder understands that the Notes have been issued (or will be issued in the case of the Conversion Shares) pursuant to an exemption from registration or qualification under the US Securities Act and applicable state securities laws in the United States, and except as set forth below, the Notes and any Conversion Shares shall bear any legend as required by the securities laws of the United States and a restrictive legend in substantially the following form:
THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATIONS UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”). ACCORDINGLY, NONE OF THE SECURITIES TO WHICH THIS CERTIFICATE RELATES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE] HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED HEREIN OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.
| 3. | Conversion |
It is agreed that
| (a) | Subject to Paragraph 3(b), the Noteholder may Convert any or all of the Notes then on issue into the Conversion Number of Conversion Shares at any time before the respective Maturity Date of the Notes being Converted, by the service of written notice (Conversion Notice) by the Noteholder upon the Company (Conversion Event). |
| (b) | The Noteholder shall not be able to Convert any Notes to the extent that the Conversion results in the Noteholder: |
| (i) | beneficially owning more than 9.99% of the issued Share capital of the Company as at the time of Conversion; or |
| (ii) | otherwise exceeding any other ownership limitation imposed by Nasdaq. |
| 4. | Upon Conversion |
| (a) | On Conversion and or cancellation of any Notes: |
| (i) | the Noteholder will be deemed from that Conversion to have accepted the Conversion Shares on the terms of and be bound by the Constitution; and |
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| (ii) | all amounts owing under any Advances applicable to the Notes Converted are deemed repaid in full. |
| (b) | The Conversion of the Notes shall be regarded as an application for Shares (and provision of the applicable consideration) in compliance with the Constitution. |
| (c) | Certificates evidencing the Conversion Shares shall not be required to contain the legend set forth in paragraph 2.3 above or any other legend: |
(i) while a registration statement covering the resale of such Conversion Shares is effective under the 1933 Act (provided that Noteholder provides the Company with any certificates from Noteholder or its broker reasonably required by the Company’s transfer agent),
(ii) following any sale of such Conversion Shares pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company), or a registration statement, or if such Conversion Shares are sold, assigned or transferred outside the United States to a non-U.S. Person in accordance with the requirements of Rule 904 of Regulation S and in compliance with applicable local laws and regulations,
(iii) if such Conversion Shares are eligible to be sold, assigned or transferred under Rule 144 without current public information being available and without volume and manner of sale limitations (provided that Noteholder provides the Company with reasonable assurances that such Conversion Shares are eligible for sale, assignment or transfer under Rule 144, which shall not include an opinion of counsel, but which may include any certificates from Noteholder or its broker reasonably required by the Company’s transfer agent),
(iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that Noteholder provides the Company with an opinion of counsel from reputable counsel to the effect that such sale, assignment or transfer of the Conversion Shares may be made without registration under the applicable requirements of the 1933 Act or
(v) if such legend is not required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC).
| (d) | If a legend is not required pursuant to paragraph 4(c), the Company shall no later than five (5) Trading Days following either |
(x) the delivery by Noteholder to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Conversion Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), or
(y) the delivery by Noteholder to the Company of a notice of conversion together with any other deliveries from Noteholder as may be required above in paragraph 4(c),
as directed by Noteholder, credit the aggregate number of Conversion Shares to which Buyer shall be entitled to Noteholder’s balance account with DTC through its Deposit/Withdrawal at Custodian system (the date by which such credit is so required to be made to the balance account of Noteholder’s or Noteholder’s nominee with DTC pursuant to the foregoing is referred to herein as the Required
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Delivery Date). If the Company fails to issue and credit (or cause to be credited) by the Required Delivery Date to the balance account of Noteholder’s or Noteholder’s nominee with DTC for such number of Conversion Shares so required to be delivered by the Company, then the Noteholder shall have a right to have such Conversion Shares registered as soon as practicable, which shall be at the discretion of the Company.
| 5. | Allotment and ranking |
| (a) | The Company must, on the Allotment Date, allot the Conversion Shares to which the Noteholder is entitled on Conversion and provide the Noteholder with a holding statement evidencing allotment of the Conversion Shares (Holding Statement). |
| (b) | The Conversion Shares allotted following Conversion of the Note rank equally and forms the same class with the Shares on issue as at the Allotment Date. |
| 6. | Reconstructions and new issues |
| 6.1 | Note Reconstructions |
If, at any time after the Agreement Date but before the date the whole of the Principal Amount has been Converted, there occurs any capital reduction, repayment by way of capital reduction, consolidation, cancellation or division of the issued capital of the Company, dividend from capital, share buy-back (or a binding agreement to do so is entered) (each a Restructuring), then the entitlement of the Noteholder to Convert the Notes must be proportionately adjusted in the same proportion (and be subject to the same provisions) and as otherwise necessary to ensure that the Noteholder is not prejudiced by the Restructuring.
| 6.2 | Notes to survive merger |
| (a) | If the Company Merges with another entity (third party), or the Company enters into an arrangement (in whatever form) under which its operations alone or with those of another company are disposed of to another company (third party), then the Company must ensure that it is a condition of that Merger or arrangement that the right to Convert in relation to the Company is transferred to a right to Convert into shares in the third party at the Conversion Price which would put the Noteholder in the same position after the Merger or arrangement that it was in before the Merger or arrangement relative to the remaining holders of Shares , at that time. |
| (b) | For the purposes of this paragraph 6.2, a “Merger” and “Merges” include the disposal by shareholders of their Shares in the Company, or a disposal by the Company of its main undertaking. |
| 7. | Redemption and Cancellation |
| a) | Subject to paragraph 7(b), the Company may elect at any time prior to the respective Maturity Dates to redeem some or all of the Notes by the service of written notice upon the Noteholder (Company Redemption Notice). If any Notes are not Converted (or a Conversion Notice is not served upon the Company) on or prior to their respective Maturity Date, the Company shall redeem the applicable Notes on their respective Maturity Date. For clarity, interest does not accrue upon the Notes redeemed pursuant to this paragraph 7(a), but does accrue if the Notes are redeemed pursuant to paragraph 7(b). To redeem the Notes pursuant to this paragraph 7(a), the Company shall pay the Noteholder the Principal Amount of the Notes being redeemed. |
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| b) | If an Event of Default is subsisting after the Company has received 14 days written notice (from the Noteholder) outlining the Event of Default and requiring it to be remedied, a Noteholder may, by further written notice to the Company (Default Redemption Notice) require the Company to repay all of the Notes then outstanding within a further 14 days by paying the Noteholder the Default Redemption Price. |
Upon payment pursuant to paragraphs 7(a) or 7(b) the relevant Notes redeemed will be deemed to have been repaid in full and cancelled.
| 8. | Events of Default |
An event of default (Event of Default) occurs if any one or more of the following occurs with respect to the Company and is subsisting and not remedied within 14 days of the Company being notified in writing by a Noteholder of the occurrence of the event:
| (a) | an Insolvency Event occurs; |
| (b) | failure by the Company to issue the Conversion Shares in accordance with paragraph 5; or |
| (c) | a judgement is entered against the Company by a Court of competent jurisdiction for an amount in excess of US$500,000 and steps are not taken to appeal or otherwise challenge that judgement within 30 days; |
| (c) | the Company breaches any material term or any of its material obligations to a Noteholder under the Note Agreement. |
| 9. | Replacement of Note Certificates |
(a) If a Note Certificate becomes worn out or defaced, on production and delivery of that Note Certificate to the Company, the Note Certificate must be cancelled and a new Note Certificate must be issued in place of the worn out or defaced Note Certificate within 5 Business Days.
(a) If a Note Certificate is lost or destroyed then a new Note Certificate will be given to the person entitled to that lost or destroyed Note Certificate within 5 Business Days.
| 10. | Register |
The Company must establish and maintain a Note register and enter on that register the name and address of the Noteholder and the date of issue of the Notes. If any change of name and address of the Noteholder is notified in writing to the Company, all registers must be altered accordingly.
| 11. | Notices |
| (a) | Any notice or other communication including, but not limited to, any request, demand, consent or approval, to or by a party to this Agreement: |
| (i) | must be in writing, in English and delivered in person or sent by pre-paid post or email to an address as shown below: |
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| (A) | if to the Company: |
Address: 29 Anvil Road, Seven Hills, NSW,
Australia, 2147
Attention: The Directors
Email Address: sahil@innovationbev.com
| (B) | if to the Noteholder: |
Address: 3 Bayside Executive Park, West Bay St & Blake Rd, Nassau, The Bahamas, N-4875
Attention:
Sant Prakash- Hartfield Assets Inc
Email Address: sanjuarora1@yahoo.com
or to any other address last notified by the party to the sender by notice given in accordance with this paragraph;
| (ii) | where the sender is a company, must be signed by an officer or authorised representative of the sender; |
| (iii) | is deemed to be given by the sender and received by the addressee: |
| (A) | if delivered in person (including by courier), when delivered to the addressee; or |
| (B) | if sent by registered post, 2 Business Days (or 6 Business Days, if addressed or posted outside Australia) after the date of posting to the addressee or such other day as is confirmed by the postal service via which the registered mail is delivered; or |
| (C) | if sent by email transmission, on the date and time shown on the sender’s email account as the date and time the email was delivered in its entirety to the email address of the addressee notified to the other party for the purposes of this paragraph, |
| (iv) | can be relied upon by the addressee and the addressee is not liable to any other person for any consequences of that reliance if the addressee reasonably believes it to be genuine, correct and authorised by the sender. |
| (b) | In this paragraph 11, reference to an addressee includes a reference to an addressee’s officers, agents or employees or any person reasonably believed by the sender to be an officer, agent or employee of the addressee. |
| 12. | General |
| 12.1 | Waiver |
The non-exercise of or delay in exercising any power or right of the Noteholder does not operate as a waiver of that power or right, nor does any single exercise of a power or right preclude any other or further exercise of it or the exercise of any other power or right. A power or right may only be waived in writing, signed by the Noteholder.
| 12.2 | Rights cumulative |
The rights and remedies of the Noteholder provided in the Note Agreement (including these Note Terms) are cumulative and do not exclude any rights or remedies provided by law.
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| 12.3 | Severability |
Any provision in the Note Agreement (including these Note Terms) which is invalid or unenforceable in any jurisdiction is to be read down for the purposes of that jurisdiction, if possible, so as to be valid and enforceable, and is otherwise capable of being severed to the extent of the invalidity or unenforceability, without affecting the remaining provisions of the Note Agreement and these Note Terms or affecting the validity or enforceability of that provision in any other jurisdiction.
| 12.4 | Further assurance |
The Company must do all things necessary to give full effect to the Note Agreement (including these Note Terms) and the transactions contemplated by the Note Agreement.
| 12.5 | Duty |
The Company must bear any Duty payable upon or in connection with the execution of this Agreement, the issue of the Notes and the issue of any securities upon Conversion.
| 12.6 | No Transfers |
The Noteholder may not transfer its interest or rights under the Note Agreement.
| 12.7 | Governing law and jurisdiction |
This Agreement is governed by and must be construed in accordance with the laws in force in the New South Whales, Australia. The parties submit to the exclusive jurisdiction of the courts of state in respect of all matters arising out of or relating to this Agreement, its performance or subject matter.
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EXHIBIT 4.2
Exhibit 8 - Subsidiaries
Entity Name (100% ownership unless stated otherwise) |
Jurisdiction of Incorporation | |
| Innovation Beverage Group USA Inc. | Delaware | |
| Reg Liquors LLC (d/b/a Wired For Wine) | New Jersey | |
| IBG USA, LLC | Delaware |
EXHIBIT 11.2
Innovation Beverage Group Limited
29 Anvil Road
SEVEN HILLS NSW 2147 Ph: 02 9620 4574
ABN: 44 625 701 420
INSIDER TRADING COMPLIANCE POLICY
Innovation Beverage Group Limited, a public limited company registered in Australia (the “Company”) prohibits:
| ● | insider trading in the Company’s securities (“Securities”)1; and |
| ● | the unauthorized disclosure of the Company’s confidential information that might enable others to engage in insider trading in the Securities. |
The Company adopted this Insider Trading Compliance Policy (this “Insider Trading Compliance Policy”) to prevent insider trading. In this Insider Trading Compliance Policy, we will discuss how you must comply with the laws against insider trading to avoid the serious penalties that could accompany a violation. We also seek to fulfill our obligation to educate and reasonably supervise the activities of employees, officers, directors and consultants who own or trade in the Company’s stock as part of our corporate compliance program. There are severe civil and criminal penalties associated with violations by you, your colleagues or the Company under insider trading laws. It is your obligation to review, understand and comply with this Insider Trading Compliance Policy. Please take the time to become familiar with its content. If you have questions about the Policy or your stock ownership or trading, please speak with the Chairman, or his designee (such officer or designee, the “Compliance Officer”).
PART I. OVERVIEW
| A. | To Whom does this Insider Trading Compliance Policy Apply? |
This Insider Trading Compliance Policy applies to all of us, i.e., the Company’s board of directors (the “Board”), officers, employees and consultants, as well as our Affiliates (as defined below), and to multiple methods of trading in the Securities, such as purchases or sales of stock, options or other forms of equity. This Insider Trading Compliance Policy applies not only to you but also to your “Affiliates” (as defined by the securities laws), which include:
| ● | your spouse, child, parent, significant other or other family member, in each case, living in the same household; |
| ● | all trusts, family partnerships and other types of entities formed for your benefit or for the benefit of a member of your family over which you have the ability to influence or direct investment decisions concerning securities; |
| ● | all persons who execute trades on your behalf, e.g., your stockbroker; and |
1 The law defines “securities” broadly to include ordinary shares, options to purchase ordinary shares, any other type of securities that the Company may issue (such as preferred shares, convertible debentures, warrants, exchange-traded options or other derivative securities), and any derivative securities that provide the economic equivalent of ownership of any of the Company’s securities or an opportunity, direct or indirect, to profit from any change in the value of the Company’s securities.
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| ● | all investment funds, trusts, retirement plans, partnerships, corporations and other types of entities for which you have the ability to influence or direct investment decisions concerning securities. Please note that the Insider Trading Procedures (as defined below) do not apply to entities that engage in the investment of securities in the ordinary course of its business (e.g., mutual funds, an investment fund or partnership) if such entity has established its own insider trading controls and procedures in compliance with applicable securities laws and an Insider has hereby represented to the Company that such Insider’s affiliated entities: (a) engage in the investment of securities in the ordinary course of their respective businesses; (b) have established insider trading controls and procedures in compliance with applicable securities laws; and (c) are aware such securities laws prohibit any person or entity who has material, nonpublic information concerning the Company from purchasing or selling securities of the Company or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities. |
You are responsible for ensuring compliance with this Insider Trading Compliance Policy, including the Insider Trading Procedures contained herein, by all of your Affiliates. We recommend you obtain advice from your legal and financial advisors regarding trading in Company Securities by your Affiliates.
Special Procedures for Persons with Regular Access to Inside Information:
Members of our Board and our executive officers are deemed to have access to all “inside information” under insider trading laws. Other officers, employees and consultants may also require regular access to “inside information” in performing their work. For this reason and for their protection, additional trading procedures apply to these directors, officers, employees and consultants. We will notify all members of the Board, officers and designated employees and consultants (collectively, and solely for the purpose of this Insider Trading Compliance Policy, “Insiders”) that they are subject to these additional trading procedures (the “Insider Trading Procedures”), which are set forth in Part II of this memorandum. All Insiders must comply with these Insider Trading Procedures.
These Insider Trading Procedures establish trading blackout period restrictions, trading window periods, and pre-clearance requirements. Insiders covered by the Insider Trading Procedures will be restricted from trading in the Securities during blackout periods. Additionally, Insiders covered by the Insider Trading Procedures will be required to pre-clear all transactions in the Securities. You will be notified if you are an Insider and required to comply with the Insider Trading Procedures.
Post-Termination Responsibilities:
In the event that you leave the Company for any reason, this Insider Trading Compliance Policy, including, if applicable, the Insider Trading Procedures, will continue to apply to you and your Affiliates until the completion of one full trading day after any material nonpublic information known to you has become public or is no longer material.
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| B. | What is Prohibited by this Insider Trading Compliance Policy? |
It is generally illegal for you to trade in the Securities of the Company, whether for your account or for the account of another, while in the possession of material, nonpublic information about the Company or its business activities. It is also generally illegal for you to disclose material, nonpublic information about the Company or its business to others who may trade on the basis of that information. In addition, if we receive material, non-public information from collaborators or from other companies that do business with the Company, then these same prohibitions would apply to trading in the securities of these other companies’ securities. These illegal activities are commonly referred to as “insider trading.”
When you are in possession of material, nonpublic information about the Company, whether positive or negative, you are prohibited from the following activities:
| ● | trading (whether for your account of for the account of another) in Securities, except for trades made in compliance with a valid Rule 10b5-1 trading plan2; |
| ● | giving trading advice of any kind about the Company; and |
| ● | disclosing such material, nonpublic information about the Company, whether positive or negative, to anyone else (commonly known as “tipping”). |
The Insider Trading Compliance Policy prohibitions on insider trading do not apply to:
| (1) | an exercise of an employee stock option when payment of the exercise price is made solely in cash to the Company; or |
| (2) | the withholding by the Company of shares of stock upon vesting of restricted stock or upon settlement of restricted stock units to satisfy applicable tax withholding requirements if (a) such withholding is required by the applicable plan or award agreement or (b) the election to exercise such tax withholding right was made by the Insider in compliance with the Insider Trading Procedures. |
The Insider Trading Compliance Policy prohibitions on insider trading do apply to:
| (1) | the sale of Securities on or after the exercise of an employee stock option; |
| (2) | the use of outstanding Securities to pay part or all of the exercise price of an option; and |
2 Under Rule 10b5-1 of the Exchange Act, you are permitted to enter a written binding plan with your stock broker to trade in the Securities before you knew or had possession of material, nonpublic information and certain other conditions are satisfied.
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| (3) | any sale of stock as part of a broker-assisted cashless exercise of an option or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option. |
The above discussion is a summary; please read further below for additional details on the precise circumstances under which this Insider Trading Compliance Policy applies. These prohibitions continue whenever and for as long as you know or are in possession of material, nonpublic information. Remember, anyone scrutinizing your transactions will be doing so after the fact, with the benefit of hindsight, and often with access to stock trading records and your communications regarding the transactions. As a practical matter, before engaging in any transaction, you should carefully consider how enforcement authorities and others might view the transaction in hindsight.
| C. | What is Material, Nonpublic Information? |
This Insider Trading Compliance Policy prohibits you from trading in the Company’s Securities if you are in possession of information about the Company or its business that is both “material” and “nonpublic.” If you have a question whether certain information you are aware of is material or has been made public, you are encouraged to consult with the Compliance Officer.
“Material” Information
Information about the Company is “material” if it could reasonably be expected to affect the investment or voting decisions of a stockholder or investor. Similarly, information about the Company is “material” if its disclosure could reasonably be expected to significantly alter the total mix of information in the marketplace about the Company and affect investor views. In simple terms, material information is any type of information that could reasonably be expected to affect the price of the Securities. Both positive and negative information may be material. While it is not possible to identify all information that would be deemed “material,” the following items are types of information that should be considered carefully to determine whether they are material:
| ● | program developments, regulatory or clinical status or updates, including communications with regulatory authorities, prior to issuance of a press release or public update; |
| ● | significant developments regarding collaborations, products, customers, suppliers, orders, contracts or financing sources (e.g., the acquisition or loss of a contract); |
| ● | potential collaboration discussions or information about an unannounced new collaboration, financing or other similar deals; |
| ● | projections of future earnings or losses, or other earnings guidance; |
| ● | earnings or revenue that are inconsistent with the consensus expectations of the investment community; |
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| ● | potential restatements of the Company’s financial statements, changes in auditors or auditor notification that the Company may no longer rely on an auditor’s audit report; |
| ● | pending or proposed corporate mergers, acquisitions, tender offers, joint ventures or dispositions of significant assets; |
| ● | changes in senior management or the Board; |
| ● | significant actual or threatened litigation or governmental investigations or major developments in such matters; |
| ● | a cybersecurity incident; |
| ● | changes in dividend policy, declarations of stock splits, or public or private sales of additional securities; |
| ● | potential defaults under the Company’s credit agreements or indentures, or the existence of material liquidity deficiencies; and |
| ● | bankruptcies or receiverships. |
In some situations, the above events may not be material and in others, consultation with the Compliance Officer may help you determine that it has been publicly disclosed. In each situation, you should carefully consider and seek advice to determine their materiality (although some determinations will be reached more easily than others). For example, some new products or contracts may clearly be material to one company and not to a much larger company with multiple products; yet that does not mean that all product developments or contracts will be material. This demonstrates, in our view, why no “bright-line” standard or list of items can adequately address the range of situations that may arise. Furthermore, the Company cannot create an exclusive list of events and information that have a higher probability of being considered material. You can look to our public press releases on the Company’s website (https://www.[ ]) to confirm recent disclosures.
The SEC has stated that there is no fixed quantitative threshold amount for determining materiality, and that even very small quantitative changes can be qualitatively material if they would result in a movement in the price of the Securities.
“Nonpublic” Information
Material information is “nonpublic” when it is not generally available to investors. The rationale is to provide all investors with an equal opportunity to access material information when making investment decisions. To claim information is “public,” we have to be able to point to some fact that establishes that the information has become publicly available, such as the filing of a report with the SEC, the distribution of a press release through a widely disseminated news or wire service, or by other means (such as a pre- announced webcast presentation) that are reasonably designed to provide broad public access.
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Information is not considered public at the moment it is disclosed. Before a person who possesses material, nonpublic information can trade, there also must be adequate time for the market as a whole to access and absorb the information that has been disclosed. For the purposes of this Insider Trading Compliance Policy, information will be considered public one full trading day after the close of the stock market following the Company’s public release of the information.
For example, if the Company announces material nonpublic information of which you are aware before trading begins on a Tuesday, the first time you can buy or sell Company Securities is the opening of the market on Wednesday. However, if the Company announces this material information after trading begins on that Tuesday, the first time that you can buy or sell Company Securities is the opening of the market on Thursday.
| D. | What are the Penalties for Insider Trading and Noncompliance with this Insider Trading Compliance Policy? |
Both the SEC and Nasdaq, through the Financial Industry Regulatory Authority (“FINRA”), investigate and are very effective at detecting insider trading. They have direct access to examine all trades and typically request names of employees and Insiders from Companies following a public announcement (positive or negative) that impacts a company’s stock price to determine whether suspect insider trading has occurred. The SEC, together with the U.S. Attorneys, pursue insider trading violations vigorously. For instance, cases have been successfully prosecuted against trading by employees in foreign accounts, trading by family members and friends, and trading involving only a small number of shares.
The penalties for violating insider trading or tipping rules can be severe and include:
| ● | disgorgement of the profit gained or loss avoided by the trading; |
| ● | payment of the loss suffered by the persons who purchased or sold, as applicable, securities of the same class at prices impacted by the insider trading; |
| ● | payment of criminal penalties of up to $5,000,000; |
| ● | payment of civil penalties of up to three times the profit made or loss avoided; and |
| ● | imprisonment for up to 20 years. |
The Company and/or the supervisors of the person engaged in insider trading may also be required to pay civil penalties of up to the greater of $1,525,000 or three times the profit made or loss avoided, as well as criminal penalties of up to $25,000,000, and could under certain circumstances be subject to private lawsuits.
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Violation of this Insider Trading Compliance Policy or any federal or state insider trading laws may subject the person violating such policy or laws to disciplinary action by the Company up to and including termination. The Company reserves the right to determine, in its own discretion and on the basis of the information available to it, whether this Insider Trading Compliance Policy has been violated. The Company may determine that specific conduct violates this Insider Trading Compliance Policy, whether or not the conduct also violates the law. It is not necessary for the Company to await the filing or conclusion of a civil or criminal action against the alleged violator before taking disciplinary action.
| E. | How Do You Report a Violation of this Insider Trading Compliance Policy? |
If you have a question about this Insider Trading Compliance Policy, including whether certain information you are aware of is material or has been made public, you are encouraged to consult with the Compliance Officer. In addition, if you violate this Insider Trading Compliance Policy or any federal or state laws governing insider trading, or know of any such violation by any director, officer or employee of the Company, you should report the violation immediately to the Compliance Officer.
PART II. INSIDER TRADING PROCEDURES FOR INSIDERS
| A. | Special Trading Restrictions Applicable to Insiders |
In addition to the restrictions on trading in Company Securities set forth above, Insiders and their Affiliates are subject to the following special trading restrictions:
| 1. | Prohibited Transactions At Any Time. |
| ● | No Short Sales. No Insider may at any time sell any Securities of the Company that are not owned by such Insider at the time of the sale (a “short sale”). |
| ● | No Purchases or Sales of Derivative Securities or Hedging Transactions. No Insider may buy or sell puts, calls, other derivative securities of the Company or any derivative securities that provide the economic equivalent of ownership of any of the Company’s Securities or an opportunity, direct or indirect, to profit from any change in the value of the Company’s Securities or engage in any other hedging transaction with respect to the Company’s Securities, at any time. |
| ● | No Company Securities Subject to Margin Calls. No Insider may use the Company’s Securities as collateral in a margin account. |
| ● | No Pledges. No Insider may pledge Company Securities as collateral for a loan (or modify an existing pledge). |
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| 2. | Gifts. |
No Insider may give or make any other transfer of Company Securities without consideration (e.g., a gift or limited partner distribution, in the case of a fund) during a period when the Insider is not permitted to trade unless the donee agrees not to sell the shares until such time as the Insider can sell.
| 3. | No Trading During Retirement Plan Blackout Periods. |
If the Company adopts a policy to allow ownership of Company stock in the Company’s 401(k) or other retirement plan, then no Insider may trade in any Company Securities, which were acquired in connection with such Insider’s service or employment with the Company, during a retirement plan “blackout period” except as specifically permitted below. A blackout period includes any period of more than three (3) consecutive business days during which at least fifty percent (50%) of all participants and beneficiaries under all of the individual account plans maintained by the Company and members of its controlled group are prohibited from trading in Company Securities through their plan accounts. Insiders will receive advance notice of any such blackout period from the Compliance Officer.
| 4. | Special Blackout Periods |
There are times when the Company or certain members of its Board or senior management or other team members may be aware of a material, nonpublic development. Although an Insider may not know the specifics of such development, if an Insider engages in a trade before such development is disclosed to the public or resolved, such Insider and the Company might be exposed to a charge of insider trading that could be costly and difficult to refute. In addition, a trade by an Insider during such period could result in adverse publicity for the Company.
Therefore, Insiders may not trade in Company Securities if they are notified that the trading window is closed because of the existence of a material, nonpublic development. The Compliance Officer will subsequently notify the Insiders once the material nonpublic development is disclosed to the public or resolved and that, as a result, the trading window is again open. While the Compliance Officer will undertake reasonable efforts to notify the Insiders that material, nonpublic events have developed, or are soon likely to develop, it is each Insider’s individual duty to ensure that they do not make any trade in Company Securities when material, nonpublic information exists, regardless of whether such Insider is aware of such development.
| B. | Pre-Clearance Procedures |
No Insider may trade in Company Securities unless the trade has been approved by the Compliance Officer in accordance with the procedures set forth below. The Compliance Officer will review and either approve or prohibit all proposed trades by Insiders in accordance with the procedures set forth below. The Compliance Officer may consult with the Company’s other officers and/or outside legal counsel and will receive approval for his/her own trades from each other.
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| 1. | Procedures. No Insider may trade in Company Securities until: |
| ● | The Insider has notified the Compliance Officer of the amount and nature of the proposed trade(s) using the Stock Transaction Request form attached to this Insider Trading Compliance Policy. In order to provide adequate time for the preparation of any required reports under Section 16 of the Securities and Exchange Act, as amended (“Exchange Act”), a Stock Transaction Request form should, if practicable, be received by the Compliance Officer at least two (2) business days prior to the intended trade date; |
| ● | The Insider has certified to the Compliance Officer in writing prior to the proposed trade(s) that the Insider is not in possession of material, nonpublic information concerning the Company; |
| ● | The Insider has informed the Compliance Officer, using the Stock Transaction Request form attached hereto, whether, to the Insider’s best knowledge, (a) the Insider has (or is deemed to have) engaged in any opposite way transactions within the previous six months that were not exempt from Section 16(b) of the Exchange Act and (b) if the transaction involves a sale by an “affiliate” of the Company or of “restricted securities” (as such terms are defined under Rule 144 under the Securities Act of 1933, as amended (“Rule 144”)), whether the transaction meets all of the applicable conditions of Rule 144; and |
| ● | The Compliance Officer has approved the trade(s) and has certified such approval in writing. Such certification may be made via digitally-signed electronic mail. |
The Compliance Officer do not assume the responsibility for, and approval from the Compliance Officer does not protect the Insider from, the consequences of prohibited insider trading.
| 2. | Additional Information. |
Insiders shall provide to the Compliance Officer any documentation reasonably requested by him or her in furtherance of the foregoing procedures. Any failure to provide such requested information will be grounds for denial of approval by the Compliance Officer.
| 3. | No Obligation to Approve Trades. |
The existence of the foregoing approval procedures does not in any way obligate the Compliance Officer to approve any trade requested by an Insider. The Compliance Officer may reject any trading request at his or her sole discretion.
From time to time, an event may occur that is material to the Company and is known by only a few directors or executives. Insiders may not trade in Company Securities if they are notified by the Compliance Officer that a proposed trade has not been cleared because of the existence of a material, nonpublic development. Even if that particular Insider is not aware of the material, nonpublic
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development involving the Company, if any Insider engages in a trade before a material, nonpublic development is disclosed to the public or resolved, the Insider and the Company might be exposed to a charge of insider trading that could be costly and difficult to refute even if the Insider was unaware of the development. So long as the event remains material and nonpublic, the Compliance Officer may determine not to approve any transactions in the Company’s Securities. The Compliance Officer will subsequently notify the Insider once the material, nonpublic development is disclosed to the public or resolved. If an Insider requests clearance to trade in the Company’s Securities during the pendency of such an event, the Compliance may reject the trading request without disclosing the reason.
| 4. | Completion of Trades. |
After receiving written clearance to engage in a trade signed by the Compliance Officer, an Insider must complete the proposed trade within two (2) business days or make a new trading request.
| 5. | Post-Trade Reporting. |
Any transactions in the Company’s Securities by an Insider (including transactions effected pursuant to a Rule 10b5-1 Plan) must be reported to the Compliance Officer by completing the “Confirmation of Transaction” section of the Stock Transaction Request form attached to this Insider Trading Compliance Policy on the same day in which such a transaction occurs. Each report an Insider makes to the Compliance Officer should include the date of the transaction, quantity of shares, price and broker-dealer through which the transaction was effected. This reporting requirement may be satisfied by sending (or having such Insider’s broker send) duplicate confirmations of trades to the Compliance Officer if such information is received by the Compliance Officer on or before the required date. Compliance by directors and executive officers with this provision is imperative given the requirement of Section 16 of the Exchange Act that these persons generally must report changes in ownership of the Securities within two business days. The sanctions for noncompliance with this reporting deadline include mandatory disclosure in the Company’s proxy statement for the next annual meeting of stockholders, as well as possible civil or criminal sanctions for chronic or egregious violators.
PART IV. EXEMPTIONS FROM INSIDER
TRADING RESTRICTIONS (ALL DIRECTORS, OFFICERS,
EMPLOYEES AND CONSULTANTS)
| A. | Pre-Approved Rule 10b5-1 Plan. |
The securities law permits establishment of trading plans under Rule 10b5-1 of the Exchange Act that allow for persons to authorize future trading when they are not in possession of material, nonpublic information. Under a 10b5-1 Plan, a trade will not be subject to the Company’s trading windows, retirement plan blackout periods or pre-clearance procedures, and Insiders are not required to complete a Stock Transaction Request form for such transactions.
If an Insider intends to trade pursuant to a Rule 10b5-1 Plan, such plan, arrangement or instruction must:
| ● | satisfy the requirements of Rule 10b5-1; |
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| ● | be documented in writing; |
| ● | be established during a trading window when such Insider does not possess material, nonpublic information; and |
| ● | be pre-approved by the Compliance Officer. |
Any deviation from, or alteration to, the specifications of an approved Rule 10b5-1 Plan (including, without limitation, the amount, price or timing of a purchase or sale) must be reported immediately to the Compliance Officer. Any transaction pursuant to a Rule 10b5-1 Plan must be timely reported following the transaction in accordance with the procedures set forth above.
The Compliance Officer may refuse to approve a Rule 10b5-1 Plan as he or she deems appropriate including, without limitation, if he or she determines that such plan does not satisfy the requirements of Rule 10b5-1.
Any modification of an Insider’s prior Rule 10b5-1 Plan requires pre-approval by the Compliance Officer. A modification must occur during a trading window and while such Insider is not aware of material, nonpublic information.
| B. | Employee Benefit Plans. |
Exercise of Stock Options. The trading prohibitions and Insider Trading Procedures do not apply to the exercise of a stock option to purchase securities of the Company when payment of the exercise price is solely made in cash and the Securities are held, not sold. The trading prohibitions and Insider Trading Procedures do apply to:
| ● | the same day or subsequent sale of the Securities acquired on the exercise of a stock option; |
| ● | the use of outstanding Securities to pay part or all of the exercise price of an option; |
| ● | any net option exercise; |
| ● | any exercise of a stock appreciation right; |
| ● | share withholding; |
| ● | any sale of stock as part of a broker-assisted cashless exercise of an option; or |
| ● | any other market sale for the purpose of generating the cash needed to pay the exercise price of an option. |
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For directors and executive officers subject to the requirements of Section 16 of the Exchange Act, the exercise of an option to purchase securities of the Company (and any subsequent sale) each triggers the obligation to file a Form 4 within two days. For this reason, Insiders must comply with the post-trade reporting requirement described in Section C above for any such transaction.
Tax Withholding on Restricted Stock/Units. The trading prohibitions and restrictions set forth in the Insider Trading Procedures do not apply to the withholding by the Company of shares of stock upon vesting of restricted stock or upon settlement of restricted stock units to satisfy applicable tax withholding requirements if (a) such withholding is required by the applicable plan or award agreement or (b) the election to exercise such tax withholding right was made by the director, officer or employee in compliance with the Insider Trading Procedures.
Retirement Plan. The trading prohibitions and restrictions set forth in the Insider Trading Procedures do not apply to purchases of Securities in any 401(k) Plan of the Company (the “Retirement Plan”) resulting from periodic contributions by Insiders to the Retirement Plan pursuant to payroll deduction elections. Such prohibitions and restrictions do apply, however, to certain elections Insiders may make under the Retirement Plan, including: (a) an election to increase or decrease the percentage of periodic contributions that will be allocated to the Company stock fund; (b) an election to make an intra-plan transfer of an existing account balance into or out of the Company stock fund; (c) an election to borrow money against or receive a distribution from such Insider’s Retirement Plan account if the loan or distribution will result in a liquidation of some or all of such Insider’s Company stock fund balance; and
(d) an election to pre-pay a plan loan if the pre-payment will result in an allocation of loan proceeds to the Company stock fund.
PART V. APPLICATION UNDER AUSTRALIAN LAW
The Corporations Act 2001 (Cth) (Corporations Act) imposes severe penalties (both criminal and civil) on persons who conduct insider trading activities. Any perception of improper conduct by employees of the Company also has the potential to substantially damage reputation of the Company.
It is illegal for anybody to deal in any securities of a body corporate (including the Company), when in possession of information that the person knows, or ought reasonably to know:
| (i) | is not generally available (including information that the Company has not disclosed to the market in accordance with Continuous Disclosure Policy of the Company); and |
| (ii) | might have material effect on the price or value of those securities if it was generally available, |
(Inside Information).
This prohibition extends to procuring another person to deal, and, in the case of securities of listed entities, extends to communicating the inside information to another person, if the person knows, or ought reasonably to know, that the other person would, or would be likely to, deal in the securities in question or procure another person to do so.
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To communicate Inside Information to another person is also an offence which carries both civil and criminal penalties.
An employee or officer in possession of Inside Information about the Company has a duty to keep that information confidential and must not in any way disclose or communicate that information to any person.
An employee or officer may be exposed to others outside the Company such as security analysts, institutional investors and journalists. It is important that all directors, executives and employees be aware that selective disclosure of non-public information may result in a breach of the insider trading rules. The mere fact of conveyance of the material non-public information that gives rise to liability, not the manner in which it is conveyed.
It is possible to convey information in breach of this Insider Trading Policy and the Corporations Act by expressing subjective attitudes about performance of the Company or by calling attention to selective information not available as an aggregate to the general public. It is essential to avoid the indirect conveyance of information by any means whatsoever.
If during the course of a discussion with any analyst, journalist or other outsider, material non-public information concerning the Company is disclosed, inadvertently or otherwise, the recipient of the information should be informed of its non-public nature and cautioned against its use unless and until the Company has made full public disclosure of the information. The Company Secretary should be notified of the situation immediately so that a decision can be made regarding disclosure of the information.
No public comments should be made regarding any previously undisclosed operating results or other developments unless authorised by the Company.
PART VI. WAIVERS
A waiver of any provision of this Insider Trading Compliance Policy, or the Insider Trading Procedures contained herein, in a specific instance may be authorized in writing by either the Compliance Officer or the Audit Committee of the Board, and any such waiver shall be reported to the such committee or the Board.
PART VII. ACKNOWLEDGEMENT
This Insider Trading Compliance Policy will be delivered to all current Insiders and to all directors, officers, and employees and consultants following its adoption or thereafter at the start of their employment or relationship with the Company. Each individual must acknowledge that he or she has received a copy and agrees to comply with the terms of this Insider Trading Compliance Policy under the Company’s electronic training record system, and, if applicable, the Insider Trading Procedures contained herein. Directors and consultants that do not have access to the electronic training system will furnish a written acknowledgement of acceptance. A form of Acknowledgement is attached as Exhibit B.
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All directors, officers, and employees and consultants will be required upon the Company’s request to re- acknowledge and agree to comply with the Insider Trading Compliance Policy (including any amendments
or modifications). For such purpose, an individual will be deemed to have acknowledged and agreed to comply with the Insider Trading Compliance Policy, as amended from time to time, when copies of such items have been delivered by regular or electronic mail (or other delivery option used by the Company) by the Compliance Officer.
* * *
Questions regarding this Insider Trading Compliance Policy are encouraged and may be directed to the Compliance Officer.
ADOPTED: [●], 2022
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EXHIBIT A
STOCK TRANSACTION REQUEST
Pursuant to the Insider Trading Compliance Policy of Innovation Beverage Group Limited (the “Company”), I hereby notify the Company of my intent to trade the securities of the Company as indicated below:
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| ☐ | None of the above. |
| CERTIFICATION |
| I hereby certify that I am not (1) in possession of any material, nonpublic information concerning the Company, as defined in the Company’s Insider Trading Compliance Policy and (2) purchasing any securities of the Company on margin in contravention of the Company’s Insider Trading Procedures. I understand that, if I trade while possessing such information or in violation of such trading restrictions, I may be subject to severe civil and/or criminal penalties, and may be subject to discipline by the Company including termination. |
| Insider’s Signature | Date | ||
| AUTHORIZED APPROVAL | |||
Signature of Compliance Officer(or designee) |
Date | ||
*NOTE: Multiple lots must be listed on separate forms or broken out herein.
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EXHIBIT B
ACKNOWLEDGMENT
I hereby acknowledge that I have read, that I understand, and that I agree to comply with, the Insider Trading Compliance Policy of Innovation Beverage Group Limited, a public limited company registered in Australia (the “Company”). I further acknowledge and agree that I am responsible for ensuring compliance with the Insider Trading Compliance Policy and the Insider Trading Procedures included therein by all of my “Affiliates”. I also understand and agree that I will be subject to sanctions, including termination of employment, that may be imposed by the Company, in its sole discretion, for violation of the Insider Trading Compliance Policy, and that the Company may give stop-transfer and other instructions to the Company’s transfer agent against the transfer of any Securities in a transaction that the Company considers to be in contravention of the Insider Trading Compliance Policy.
| Date: | Signature: | |||
| Name: | ||||
| Title: | ||||
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Exhibit 12.1
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) or 15d-14(a)
I, Sahil Beri, certify that:
| 1. | I have reviewed this annual report on Form 20–F of Innovation Beverage Group Limited (the “Company”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
| 4. | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [language omitted in accordance with Exchange Act Rule 13a-14(a)] for the Company and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | [paragraph omitted in accordance with Exchange Act Rule 13a-14(a)]; |
| c. | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
| Date: May 15, 2025 | /s/ Sahil Beri |
| Sahil Beri | |
| Chief Executive Officer |
Exhibit 12.2
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) or 15d-14(a)
I, Tianyi Eric Yu, certify that:
| 1. | I have reviewed this annual report on Form 20–F of Innovation Beverage Group Limited (the “Company”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
| 4. | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [language omitted in accordance with Exchange Act Rule 13a-14(a)] for the Company and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | [paragraph omitted in accordance with Exchange Act Rule 13a-14(a)]; |
| c. | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
| Date: May 15, 2025 | /s/ Eric Yu |
| Tianyi Eric Yu | |
| Chief Financial Officer |
Exhibit 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
In connection with the filing of the Annual Report on Form 20-F for the period ended December 31, 2024 (the “Report”) by Innovation Beverage Group Limited (the “Company”), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: May 15, 2025 | /s/ Sahil Beri |
| Sahil Beri | |
| Chief Executive Officer |
Exhibit 13.2
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
In connection with the filing of the Annual Report on Form 20-F for the period ended December 31, 2024 (the “Report”) by Innovation Beverage Group Limited (the “Company”), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: May 15, 2025 | /s/ Tianyi Eric Yu |
| Tianyi Eric Yu | |
| Chief Financial Officer |
EXHIBIT 97.1
INNOVATION BEVERAGE GROUP LIMITED
COMPENSATION RECOVERY POLICY
Introduction
The Board of Directors (“Board”) of Innovation Beverage Group Limited (the “Company”) believes that it is in the best interests of the Company and its stockholders to adopt this policy which provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws (the “Policy”). This Policy is designed to comply with Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rule 10D-1 promulgated under the Exchange Act (“Rule 10D-1”), and Listing Rule 5608 of The Nasdaq Stock Market LLC (“Nasdaq”).
Administration
This Policy shall be administered by the Board or, if so designated by the Board, the Nomination and Remuneration Committee of the Board (the “Compensation Committee”) or the Audit Committee of the Board (the “Audit Committee”), or any special committee comprised of members of the Compensation Committee or Audit Committee (the “Administrator”). Any determinations made by the Administrator shall be final and binding on all affected individuals. Subject to any limitation at applicable law, the Administrator may authorize and empower any officer or employee of the Company to take any and all actions necessary or appropriate to carry out the purpose and intent of this Policy (other than with respect to any recovery under this Policy involving such officer or employee).
Covered Executives
This Policy applies to the Company’s current and former executive officers, as determined by the Administrator in accordance with Section 10D of the Exchange Act and the listing standards of the national securities exchange on which the Company’s securities are listed, and such other senior executives/employees who may from time to time be deemed subject to the Policy by the Administrator (each, a “Covered Executive”).
For the purposes of this Policy, “executive officers” shall include persons subject to reporting and short-swing liability provisions of Section 16 under the Exchange Act. This shall include the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice president in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the Company and any person identified under Regulation S-K Item 401(b) in the Company’s annual reports and proxy statements. Executive officers of a parent or subsidiary are deemed executive officers of the listed company if they perform such policy-making functions for the listed company or such parent or subsidiary. The policy-making function is not intended to include policy-making functions that are not significant.
Recoupment; Accounting Restatement
In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, the Administrator will require, as promptly as it reasonably can, reimbursement or forfeiture of any Incentive Compensation, as defined below, received by any Covered Executive during the three (3) completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement (the “Restatement Date”), so long as the Incentive Compensation received by such Covered Executive is in excess of what would have been awarded or vested after giving effect to the accounting restatement. The amount to be recovered will be the excess of Incentive Compensation paid to the Covered Executive based on the erroneous data in the original financial statements over the Incentive Compensation that would have been paid to the Covered Executive had it been based on the restated results, without respect to any taxes paid.
The Restatement Date is defined as the earlier of (i) the date the Board, a Board committee, or management (if no Board action is required) concludes, or reasonably should have concluded, that the Company is required to prepare an accounting restatement or (ii) the date a court, regulator, or other legally authorized body directs the Company to prepare an accounting restatement.
Incentive Compensation
For purposes of this Policy, “Incentive Compensation” means any of the following; provided that, such compensation is granted, earned, or vested based wholly or in part on the attainment of a financial reporting measure:
| ● | Annual bonuses and other short- and long-term cash incentives. |
| ● | Stock options. |
| ● | Stock appreciation rights. |
| ● | Restricted stock. |
| ● | Restricted stock units. |
| ● | Performance shares. |
| ● | Performance units. |
| ● | Non-equity incentive plan awards. |
Financial reporting measures include any measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measure that is derived wholly or in-part from such measure. The following examples (and any measures derived therefrom) are non-exhaustive:
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| ● | Company stock price. |
| ● | Total shareholder return. |
| ● | Revenues. |
| ● | Net income. |
| ● | Operating income. |
| ● | Earnings before interest, taxes, depreciation, and amortization (EBITDA). |
| ● | Funds from operations and adjusted funds from operations. |
| ● | Liquidity measures such as working capital or operating cash flow. |
| ● | Return measures such as return on invested capital or return on assets. |
| ● | Earnings measures such as earnings per share. |
| ● | Profitability of one or more reportable segments. |
| ● | Financial ratios such as accounts receivable turnover. |
| ● | Cost per employee, where cost is subject to any accounting restatement. |
| ● | Any of such financial reporting measures relative to a peer group, where the Company’s financial reporting measure is subject to an accounting restatement and tax basis income. |
| ● | Capital raised through debt or equity financing. |
| ● | Reductions in accounts receivables. |
For the avoidance of doubt, Incentive Compensation does not include annual salary, compensation awarded based on completion of a specified period of service, or compensation awarded based on subjective standards, strategic measures, or operational measures.
Incentive Compensation includes incentive-based compensation received by a person:
| ● | after beginning service as an executive officer; |
| ● | who serves as an executive officer at any time during the performance period for the incentive-based compensation; |
| ● | who served as an executive officer while the Company has a class of securities listed on a national securities exchange; and |
| ● | who serves as an executive officer during the three (3) fiscal years preceding the Restatement Date. |
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For the avoidance of doubt, subsequent changes in a Covered Executive’s employment status, including retirement or termination of employment, do not affect the Company’s rights to recover incentive-based compensation pursuant to this Policy.
Excess Incentive Compensation: Amount Subject to Recovery
The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the erroneous data over the Incentive Compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined by the Administrator. Incentive Compensation is deemed “received” during the fiscal period during which the financial reporting measure specified in the incentive-based compensation award is attained, even if payment or grant of the Incentive Compensation occurs after the end of the period.
If the Administrator cannot determine the amount of excess Incentive Compensation received by the Covered Executive directly from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect of the accounting restatement.
Method of Recoupment
The Administrator will determine, in its sole discretion, the method for recouping excess Incentive Compensation hereunder, which may include, without limitation:
| ● | requiring reimbursement of cash Incentive Compensation previously paid; |
| ● | seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards; |
| ● | offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive; |
| ● | canceling outstanding vested or unvested equity awards; and/or |
| ● | taking any other remedial and recovery action permitted by law, as determined by the Administrator. |
No Indemnification of Covered Executives
The Company shall not indemnify any current or former Covered Executive against the loss of any incorrectly awarded Incentive Compensation, and shall not pay, or reimburse any Covered Executive for premiums for any insurance policy to fund such executive’s potential recovery obligations.
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Indemnification of the Administrator
Any members of the Administrator who assist in the administration of this Policy, shall not be personally liable for any action, determination, or interpretation made with respect to this Policy and shall be fully indemnified by the Company to the fullest extent under applicable law and Company policy with respect to any such action, determination, or interpretation. The foregoing sentence shall not limit any other rights to indemnification of the Administrator under applicable law or Company policy.
Interpretation
The Administrator is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act, Rule 10D-1, Nasdaq Listing Rule 5608, and any other applicable rules or standards adopted by the Securities and Exchange Commission or any national securities exchange on which the Company’s securities are then listed.
Effective Date
This Policy shall be effective as of the date it is adopted by the Administrator (the “Effective Date”) and shall apply to Incentive Compensation that is approved, awarded, or granted to any Covered Executive on or after that date.
Amendment; Termination
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect final regulations adopted by the Securities and Exchange Commission under Section 10D of the Exchange Act, Rule 10D-1, and Nasdaq Listing Rule 5608 and to comply with any other rules or standards adopted by a national securities exchange on which the Company’s securities are then listed. The Board may terminate this Policy at any time.
Other Recoupment Rights
The Administrator intends that this Policy will be applied to the fullest extent of the law. The Administrator may require that any employment agreement, equity award agreement, or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.
Impracticability
The Administrator shall recover any excess Incentive Compensation in accordance with this Policy unless such recovery would be impracticable, as determined by the Administrator in accordance with Rule 10D-1 of the Exchange Act and the listing standards of the national securities exchange on which the Company’s securities are listed.
Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators, or other legal representatives.
Exhibit Filing Requirement
A copy of this Policy and any amendments thereto shall be posted on the Company’s website and filed as an exhibit to the Company’s Annual Report on Form 20-F.
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