Streetbrewers 2A

1.      Risk associated with the team's knowledge of the market and correctness of forecasts

Risk: The STREETBREWERS team might not have (proper) knowledge of the market and/or make incorrect forecasts, in particular an overestimation of the number of sales and the selling price.

Consequence: If the team does not have sufficient knowledge of the market, it could set incorrect targets. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy, with partial or complete loss of the invested capital.

Note: STREETBREWERS believes that its credibility has seriously increased since it became a consultant to the famous Orval Trappist brewery.

2.      Risk associated with the need for new financing

Risk: As a start-up, STREETBREWERS may experience difficulties to obtain sufficient funding for its activities and growth. It is likely that there will be a need for new financing.

Consequence: Reliance on external financing could have an impact on cash flow and financial stability. Cash flow problems could hamper day-to-day operations, delay growth plans or make the company overly dependent on external financing, exposing it to financial instability. In addition, there is the risk that the company will not find investors, which would lead to the dissolution or bankruptcy of the company, causing the investor to lose part or all of his investment. On the other hand, there is the possibility that the company will find new investors, which will lead to dilution, which will be even greater if there is a lower valuation than the one currently used.

Note: Investors will have the opportunity to re-invest in new rounds, at the then current investment terms if new investors are found. 

3.      Risk associated with the tax incentive 

Risk: Investors can obtain a personal income tax reduction of 45% on the amount invested if they invest in start-up micro-enterprises. These companies must meet a number of criteria to qualify for this fiscal measure. One of the criteria is that the activity of the company must not be the continuation of an activity previously carried out by another legal entity. STREETBREWERS’s business activities are the sale of an installation enabling restaurants, bars, etc. to brew beer "to order", using an application. To do this, STREETBREWERS uses intellectual property developed by another company (including a Cloud platform for the control of multi-site industrial processes, including water treatment) for its activities, and the intention is to acquire the intellectual property after a few years. There is a risk that the relevant local tax authorities will regard STREETBREWERS' activity as a continuation of a previously conducted business, given that it uses and takes over the intellectual property of a company that has been in existence for more than four years.

Consequence: If this risk occurs, the personal income tax reduction can either not be accepted by the competent local tax agent or be retroactively reversed, which means that the tax reduction obtained must be repaid.

Note: Whether or not there is a continuation of activity is a question of fact that can only be assessed by the competent local tax agent on the basis of all the facts and circumstances specific to the case. However, there are a number of criteria listed by the FOD Financiën/SPF Finances that may indicate a continuation of an activity previously carried out by another legal entity (such as the exercise of the same activity, the existence of the same customers and suppliers). In this case, the entrepreneurs have stated that the activities, customers, suppliers and staff of the two companies are not the same. In addition, in the unlikely event that a tax reduction is not taken into account by the FOD Financiën/SPF Finances (due to continuation of activity), STREETBREWERS will pay investors a compensation equal to the amount of the lost tax reduction. STREETBREWERS considers, however, that there is no continuation of its activities with the company whose intellectual property is used.

4.      Risk associated with reputation 

Risk: As a company promoting sustainability and innovation in brewing, any failure to meet customer expectations or environmental commitments could damage STREETBREWERS' reputation. 

Consequence: Negative publicity or ethical concerns could lead to loss of customer loyalty and market share and damage the brand.

Note: The company will maintain transparency in all operations, particularly with respect to sustainability efforts and product quality. It will engage customers through social media and events to build strong ties with the community and will continuously improve customer service and proactively address feedback.

1.      Risk associated with regulatory compliance

Risk: STREETBREWERS must comply with various regulations relating to food safety, environmental standards and alcohol production. Changes in legislation, particularly in relation to wastewater treatment and food chain safety, could require adjustments to their equipment and processes, which could slow growth and increase costs. In addition, although STREETBREWERS aims to reduce CO₂ emissions by decentralising beer production, it must remain vigilant about environmental factors that could impact operations. This includes complying with environmental regulations and adapting to potential changes in sustainability legislation.

2.      Risk associated with changes in excise legislation

Risk: There is a risk that there will be changes in excise legislation. STREETBREWERS' customers need to communicate correct information to the FOD Financiën/SPF Finances and will use the solution offered by STREETBREWERS to do so.

Consequence for both risks: If these risks materialize, STREETBREWERS would have to adapt (and -if necessary- adapt its equipment) to comply with the new legislation, which could cause STREETBREWERS to grow at a lower rate than forecast in the business plan. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. Failure to comply with regulations could result in fines, legal action or shutdowns. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy, with partial or complete loss of the invested capital.

Note for both risks: STREETBREWERS will keep abreast of relevant regulations through industry associations and will engage with policy makers and participate in industry advocacy to keep abreast of potential changes.

3.      Risk associated with operations specific to the craft beer sector

Risk: The brewing industry involves complex processes that require precise control to ensure product quality and safety. 

Consequence: Equipment breakdowns, supply chain interruptions or scalability issues could compromise product quality, delay production or increase costs. If these risks materialize, STREETBREWERS' solution would have to be updated to comply with the new legislation, which could cause STREETBREWERS to grow at a lower rate than forecast in the business plan. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned.

Note: The implementation of robust quality control measures is essential to mitigate these risks.

4.      Risk associated with competition

Risk: The craft beer sector is competitive, with many players competing for market share. There is a risk that a competitor will develop a solution similar to that of STREETBREWERS.

Consequence: The inability to differentiate or adapt to market trends could lead to a reduction in market share, a loss of revenue, or even the impossibility of entering the craft beer sector. If this risk materializes, STREETBREWERS' expected market share could be lower than anticipated. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy, with partial or complete loss of the invested capital.

Note: STREETBREWERS must rise to the challenge of differentiating itself and conquering part of the market by focusing on the development of breweries. To achieve this, STREETBREWERS intends in particular to establish partnerships with local businesses and events in order to increase the brand's visibility, to invest in a strong brand image and unique product offerings to stand out in the competitive craft beer market and to monitor consumer trends and develop in fashionable niches (for example, low-alcohol beers, alcohol-free beers or flavoured beers).

5.      Risk associated with technology

Risk: The company's reliance on advanced technologies for its connected breweries introduces risks associated with system failures, cyber security threats and technological obsolescence. Ensuring the ongoing development and security of the cloud infrastructure is essential to maintaining operational integrity and customer confidence.

Consequence: System outages or cyber security breaches could disrupt operations and damage customer confidence. Falling behind technological advances could make the company less competitive.

Note: STREETBREWERS will regularly update and maintain cloud infrastructure and connected brewery systems. It will invest in cyber security measures including encryption, regular penetration testing and employee training. It will monitor industry trends and work with technical partners to stay at the forefront of brewing technology. Finally, it will build a strong IT support team to manage and resolve systems issues quickly.

Risk: The risk of insolvency means that STREETBREWERS does not have sufficient funds to meet its payment deadlines (cessation of payments). 

Consequence: If the company does not find alternative financing (shocked credit), it may go bankrupt. The insolvency or bankruptcy of STREETBREWERS may lead to lower or non-existent returns and in the worst case to a partial or total loss of the invested capital. 

1.      Risk associated with the lack of guarantees

Risk: Neither the shares of STREETBREWERS nor the Participatory Notes of the STREETBREWERS 2A compartment of Spreds Finance provide guarantees of a return or repayment of the invested capital. 

2.      Risk associated with the lack of a fixed return

Risk: Participatory Notes do not offer a fixed return. The return of the Participatory Notes depends solely on the performance of the Underlying Asset, namely the shares of STREETBREWERS. 

Consequence for both risks: If the project owner's predictions do not come true (within the predetermined timing), there is a risk of lower or non-existent returns and, in the worst case, partial or complete loss of the invested capital. 

Note for the above-mentionned risks: Investors in Participatory Notes bear the same economic risk as if they were investing directly as shareholders of STREETBREWERS.

Risk: Although each Spreds Finance compartment is ‘bankruptcy remote’ (meaning that no other creditor can claim a right on or against this compartment) in relation to the others and in relation to the ‘general’ liabilities of Spreds Finance itself, as a result of (i) the terms and conditions of the Notes, (ii) the articles of association of Spreds Finance and (iii)  Article 4 of the Law of 18 December 2016 on crowdfunding; there is a subsidiary risk of  insolvency of Spreds Finance. 

Consequence: Should such insolvency occur, Noteholders may be exposed to the risk of a significant delay in the recovery of their investment.

Note: The probability of this risk occurring is extremely low given the structure and organization of Spreds Finance, in particular the compartmentalization mechanism and the "bankruptcy-remoteness" described above. Each participation taken or loan granted to a project owner is recorded in a separate compartment and is appropriately accounted for in the accounts, taking into account the fact that the accounts are kept by compartment. As a result of (i) the conditions attached to the issue of Participatory Notes, (ii) the articles of association of Spreds Finance and (iii) article 10 of the law regulating the recognition and delimitation of crowdfunding and containing various provisions relating to finance and notwithstanding articles 7 and 8 of the Mortgage Law of 16 December 1851, the assets of a particular compartment serve exclusively to guarantee the rights of investors with respect to this compartment.

1.      Risk associated with the absence of an organized exchange market for Participatory Notes

Risk: Neither the project owner nor Spreds Finance organizes an exchange market for Participatory Notes. It is thus up to the investor himself to find a buyer for his Participating Notes. Given the absence of an exchange market for Participatory Notes, there is no way to adequately establish a comparative pricing methodology for Participatory Notes.

Consequence: A holder of Participatory Notes may not be able to find a buyer for the Participatory Notes it wishes to sell (at the price at which it wishes to sell).

Note: The intention is not to sell the Participatory Notes but to sell the Underlying Asset, often on the occasion of the sale of the Underlying Company itself.

2.      Risk associated with the vote by the general meeting of holders of Participatory Notes to sell

Risk: Any decision by Spreds Finance to sell shares of STREETBREWERS is subject to the approval of the holders of Participatory Notes representing at least 75% of the outstanding Participatory Notes, unless Spreds Finance is required to sell them under a contractual or statutory provision. 

Consequence: Investors thus bear the risk that the general meeting of the holders of Participatory Notes may refuse to approve the sale of the participation, in which case all investors are bound by this decision and thus must wait to obtain redemption of the Participatory Notes.

3.      Risk associated with an investment in a young company

Risk: Investing in shares of young companies entails the risk that a buyer for the shares will not be found, or not at a fair price yielding a market return, or that a buyer will not be found within a reasonable period of time. 

Consequence: If no buyer is found for the holding, redemption of the Participatory Notes is not possible.

Note: Spreds Finance will make every effort within its powers to obtain the best possible price.

1.      Risk associated with the absence of an analysis by Spreds Finance

Risk: Spreds Finance has not conducted an analysis of the proposed project or of the financial situation of the Underlying Company.

Consequence: Any investor considering subscribing to Participatory Notes should make its own analysis of STREETBREWERS's solvency, activity, financial situation and prospects.

Note: Any decision to invest in Participatory Notes should be based on a comprehensive analysis of the project and of this sheet of essential investment information. Spreds Finance's model does not provide for the presentation of analyzed projects to investors but allows investors to invest based on the information made available to them, after making their own analyses.

2.      Risk associated with the absence of a verification of the key financial figures and ratios

Risk: The first annual accounts have not yet been published. As a result, the key financial figures and ratios cannot be verified by the crowdfunding service provider.

Consequence: As the financial figures have not yet been approved by the shareholders of STREETBREWERS, there is a limited risk that these figures will be changed. This could potentially affect investor analysis.

Note: These figures come directly from STREETBREWERS' accountant.

3.      Risk associated with the lack of (periodic) reporting

Risk: There is no obligation for periodic reporting in unlisted companies (except for the cases provided by law, such as the annual general meeting of shareholders and an alarm bell procedure). While some entrepreneurs proactively communicate good and bad news (with a certain periodicity), others do not. As a (minority) shareholder, one cannot enforce reporting (other than in cases provided by law).

Consequence: If an entrepreneur does not do (periodic) reporting, there can be long periods during which investors have no insight into the (financial) state of the company. The lack of reporting does not in itself change the (financial) state of the company but can create a sense of unease among investors. If at some point a company has to file a procedure of judicial reorganization or bankruptcy, this can be a (big) surprise for the investor. 

Note: Investors in Participatory Notes bear the same risk as if they invested directly in STREETBREWERS and became shareholders. However, Spreds, as a crowdfunding service provider, tries to encourage each project owner to report at least 2x per year.

4.      Risk associated with the tax treatment of capital gains - government tax on capital gains

Risk: Investors are not currently subject to capital gains tax. However, such a tax has been proposed by the federal coalition agreement.

Consequence: If this tax is in force when investors realise a capital gain, it is possible that this capital gain will be taxed at the rate provided for by the new law.

Note: The date of entry into force of this measure is uncertain. Capital gains existing prior to the entry into force of this measure will not be taken into account. An exemption of €10,000 could be taken into account (this amount would be indexed each year in line with inflation).

To the best of the project owner's knowledge, there are no other material risks associated with its activities.