Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
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The
following discussion provides information which management believes is relevant to an assessment and understanding of our results
of operations and financial condition for the quarter ended March 31, 2016. The discussion should be read along with our financial
statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking
statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations
and plans discussed in these forward-looking statements. See “Cautionary Statement On Forward-Looking Information.”
Business
Overview
ABV
Consulting, Inc. is in the business of providing merchandising and consulting services to craft beer brewers and distributors,
as well as providing additional marketing support within the craft beer industry to retailers and other organizations as needed.
While we do not directly produce alcoholic beverages, we provide services to help businesses in the industry improve their marketing,
sales and operations. The Company was founded by Andrew Gavrin, a seasoned businessman who has worked in the alcoholic beverage
field for the past 5 years after working as a strategy consultant for consumer product and other companies. Mr. Gavrin recognized
the opportunity for a robust independent third party company that could help craft brewers and distributors create and implement
marketing, promotional and merchandising plans while working in the industry following 3 years as a strategy consultant.
In
March 2016, we entered into an agreement with one of the country’s oldest craft brewers to assist in the brewery’s
marketing strategy. Our efforts during the first quarter of 2016 were primarily focused on securing this engagement, and once
signed, providing exceptional work for our client, in order to ensure continuing engagements with the client and referrals to
other craft brewers. In addition, we have focused our efforts on social media engagement. We now have almost 11,400 Twitter followers
and almost 700 Facebook fans. Through social media, we are continuing to push our message that we are in perfect position to provide
marketing support to the growing craft beer industry. We are showcasing our expertise in the industry by highlighting and providing
input on key industry issues, offering marketing and sales support ideas, and networking with key opinion makers.
In
the first quarter of 2016, we have also maintained our relationship with a start-up cidery in Philadelphia which is expected to
commence operations in the back half of 2016. We have held discussions regarding supporting a large festival in the third quarter
of 2017, and have continued to hold discussions with breweries and retailers across the country. In May 2016, we will be attending
the national Craft Brewers Conference in Philadelphia with the hope of building relationships with additional craft breweries.
We will continue delivering for our client under our engagement, will look to expand this relationship and use this as a reference
for additional clients, and will continue our aggressive social media campaign.
Despite our efforts to implement our business
plan, we have not generated any revenue since inception. As a result, we consider acquiring a business which is either a company
that has recently commenced its operations and is seeking to develop a new product or service, or is an established business which
may be experiencing financial or operating difficulties and is in need of additional capital or is seeking to expand into new
markets. Alternatively, a business combination may involve the acquisition of or merger with, a company which does not need substantial
additional capital but desires to establish a public trading market for its shares while avoiding, among other things, the time
delays, significant expense, and loss of voting control which may occur in an initial public offering.
Critical
Accounting Policies and Estimates
Use
of Estimates in Financial Statements
The
presentation of financial statements in conformity with accounting principles generally accepted in the United States of America
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 financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Significant estimates during the period covered
by these financial statements include the valuation of deferred tax asset and imputed compensation costs.
Emerging
Growth Company
We
are not currently required to comply with the SEC rules that implement Sections 302 and 404 of the Sarbanes-Oxley Act, and are
therefore not required to make a formal assessment of the effectiveness of our internal controls over financial reporting for
that purpose. Upon becoming a public company, we will be required to comply with certain of these rules, which will require management
to certify financial and other information in our quarterly and annual reports and provide an annual management report on the
effectiveness of our internal control over financial reporting. Though we will be required to disclose changes made in our internal
control procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over
financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC.
We
will remain an “emerging growth company” for up to five years, although if the market value of our common stock that
is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth
company” as of the following December 31, or if we issue more than $1 billion in non-convertible debt in a three-year period,
we would cease to be an “emerging growth company” immediately.
Our
independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control
over financial reporting until the later of the year following our first annual report required to be filed with the SEC, or the
date we are no longer an “emerging growth company.” At such time, our independent registered public accounting firm
may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed
or operating.
Fair
value measurements and Fair value of Financial Instruments
The
Company adopted ASC Topic 820, Fair Value Measurements. ASC Topic 820 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
Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance
with ASC Topic 820.
Due
to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the
balance sheet date.
Revenue
Recognition
The
Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”. In all
cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the
service is performed and collectability of the resulting receivable is reasonably assured.
The
Company recognized revenues from two primary sources:
1.
Consulting Services: The marketing and pro bono efforts actively taken by the Company to date have been with the goal of securing
clients who will be paying the Company to perform consulting services for them. These clients are expected to be brewers, distributors
and retailers.
a.
The Company is actively promoting its ability to assist potential clients in a range of services in their marketing, promotion,
merchandising and sales efforts. These can include everything from developing a brand from scratch to creating a cohesive marketing
strategy to developing a one-off promotion or merchandising concept for a client to executing a series of samplings or promotions.
b.
The revenue generated will be dependent on the type of work performed. For a larger strategy project, the Company anticipates
charging a client by the hour, whereas for a one-off promotion, a set price will likely be the pricing structure. To provide staffing
for implementation of an idea, the Company expects a per event cost structure.
2.
Proprietary Events: Based on the success of the charitable beer festival which the Company developed, managed and executed early
in 2014, we believe that there is an opportunity to create proprietary events which could generate revenue for the Company. The
Company would manage all of the aspects of the event - from the theme to the logistics to the marketing to the staffing and execution,
and in turn, would receive all of the revenue from such events.
In
addition to the two primary sources of expected revenue outlined above, the Company believes that there will be additional sources,
though currently unplanned for, opportunities for revenue. These could include online advertising revenue from other
companies looking to attract a similar customer base, providing training on Craft beer to the general public, and licensing
custom merchandising pieces for breweries, as well as other opportunities that are yet unforeseen.
In
August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements
Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”.
Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial
doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments
in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of
footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by
incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments
(1) provide a definition of the term
substantial doubt,
(2) require an evaluation every reporting period including
interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain
disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express
statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year
after the date that the financial statements are issued (or available to be issued).
The
amendments in this Update are effective for public entities for annual periods ending after December 15, 2016. Early adoption
is permitted. The effect of adoption of this standard is not expected to have a material effect on the Company.
Recent
Accounting Pronouncements
Accounting
standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have
a material impact on the financial statements upon adoption.
Results
of Operations
For
the Three Months Ended March 31, 2016 as Compared to the Three Months Ended March 31, 2015
We
have conducted minimal operations during the three months ended March 31, 2016, and we have not generated revenues
during this period. We had net losses from operating of $16,160 for the three months ended March 31, 2016 as compared
to $17,247 for the three months ended March 31, 2015.
During
the three months ended March 31, 2016, we experienced general and administrative expenses of $3,171 and professional fees of $12,989
for total expenses of $16,160. These expenses consist of professional fees for Legal and Accounting fees. For the three months
ended March 31, 2015, we experienced general and administrative expenses of $3,175 and professional fees of $14,072 for total expenses
of $17,247.
Liquidity
and Capital Resources
Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise
operate on an ongoing basis. We have been funding our operations through the sale of our common stock.
Our
primary uses of cash have been for legal, accounting and audit fees. The following trends are reasonably likely to result in a
material decrease in our liquidity in the near term:
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Development
of a Company website
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Exploration
of potential marketing and advertising opportunities, and
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The
cost of being a public company
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Our
net revenues are not sufficient to fund our operating expenses. At March 31, 2016, we had a cash balance of $ 2,365. Since
inception, we raised $68,300 from the sale of common stock and $35,000 in notes from our President and CEO to fund our operating
expenses, pay our obligations, and grow our company. We currently have no material commitments for capital expenditures. We may
be required to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations. We
estimate that based on current plans and assumptions, that our available cash will not be sufficient to satisfy our cash requirements
under our present operating expectations, without further financing, for up to 12 months. Other than working capital, we presently
have no other alternative source of working capital. We may not have sufficient working capital to fund the expansion of our operations
and to provide working capital necessary for our ongoing operations and obligations. We may need to raise significant additional
capital to fund our operating expenses, pay our obligations, and grow our company. We do not anticipate we will be profitable
in 2016. Therefore, our future operations may be dependent on our ability to secure additional financing. Financing
transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.
However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult
to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is
possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash
requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities,
stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior
to those of existing holders of our common stock. The inability to obtain additional capital will restrict our ability to grow
and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will
likely be required to curtail our marketing and development plans and possibly cease our operations.
We
anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future.
Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
Our
liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs
associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002
and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations
to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.
Going
Concern
As
of March 31, 2016, the Company had an accumulated deficit of $128,405 and used cash in operations of $6,148 for the three month
ended March 31, 2016. Losses have principally occurred as a result of the substantial resources required for professional fees
and general and administrative expenses associated with our operations.
These
conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements
do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the
amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the
actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company
to continue as a going concern.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements.
Contractual
Obligations
We
do not have any contractual obligations at this time.