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EX-32.2 - CERTIFICATION - I-ON Digital Corp.f10q0617ex32ii_evansbrewing.htm
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EX-31.2 - CERTIFICATION - I-ON Digital Corp.f10q0617ex31ii_evansbrewing.htm
EX-31.1 - CERTIFICATION - I-ON Digital Corp.f10q0617ex31i_evansbrewing.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

(Mark One)

   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended June 30, 2017

 

   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                       

 

Commission file number: 000-54995

 

 

EVANS BREWING COMPANY INC.

 

(Formerly ALPINE 3, INC.)

(Exact name of registrant as specified in its charter)

 

Delaware   46-3031328
(State or Other Jurisdiction of   (I.R.S. Employer
Incorporation or Organization)   Identification No.)

 

Evans Brewing Company Inc.    
3815 S Main Street, Santa Ana CA   92707
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (949) 442 7565

 

N/A

(Former name, former address and former fiscal year, if changed since last report) 

 

Securities registered under Section 12(b) of the Exchange Act:
None

 

Securities registered under Section 12(g) of the Exchange Act:

 

Common Stock, $0.0001 par value per share
(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No þ

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐  No þ 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 2 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ☐

 

Indicated by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes þ No ☐

 

Indicate by check mark if disclosure of delinquent filings pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer Accelerated Filer ☐ 
Non-accelerated Filer Smaller Reporting Company
(do not check if a smaller reporting company) Emerging growth company

 

If an emerging growth company, 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 13(a) of the Exchange Act. ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No þ

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2014, was $0.  For purposes of the foregoing calculation only, directors and executive officers and holders of 10% or more of the issuer’s common capital stock have been deemed affiliates. 

 

The number of shares of the Registrant’s common stock outstanding as of August 1, 2017, was 4,784,293.

 

 

 

 

 

 

Part I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

  

EVANS BREWING COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

  

   (Unaudited)     
   Jun 30,   Dec 31, 
   2017   2016 
ASSETS        
Current Assets        
Cash  $42,993   $117,997 
Accounts receivable   101,107    191,368 
Misc receivable   244,214    1,848 
Inventory   298,427    240,170 
Deposits- short term   47,203    10,300 
Prepaid expense   25,600    10,567 
Total Current Assets   759,544    572,250 
Fixed Assets          
Equipment net of depreciation   1,276,427    1,229,141 
Total Fixed Assets   1,276,427    1,229,141 
Other Assets          
Liquor License   134,368    50,000 
Deposits   67,500    72,100 
Deferred tax assets   11,668    11,668 
Total Other Assets   213,536    133,768 
Total Assets  $2,249,507   $1,935,159 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Current Liabilities          
Accounts payable   218,549    150,225 
Accrued interest   29,130    12,450 
Accrued salary   36,000    34,873 
Deferred revenue- gift cards   5,382    3,295 
Payable- credit cards   5,441    3,739 
Refundable deposits   113,223    107,567 
Auto loan- current portion   4,428    4,672 
Notes payable- current portion   68,932    75,198 
Notes payable- line of credit   229,041    43,000 
Notes payable to related party   1,213,232    604,197 
Total Current Liabilities   1,923,358    1,039,216 
           
Long Term Liabilities          
Auto loan- long term portion   -    2,092 
Notes payable – long term portion   -    31,333 
Deferred tax liability   11,668    11,668 
Total Liabilities   1,935,026    1,084,309 
           
Stockholders' Equity          
Preferred Stock, authorized 10,000,000 shares, series A, $0.0001 par value, 1,000,000 issued and outstanding as of March June 30, 2017 and 1,000,000 issued and outstanding as of December 31, 2016 respectively   100    100 
Common Stock, authorized 100,000,000 shares, $0.0001 par value, 4,784,293 issued and outstanding as of June 30, 2017, and 4,757,463 shares issued and outstanding as of December 31, 2016, respectively   479    476 
Additional Paid in Capital   3,432,308    3,412,311 
Accumulated Deficit   (3,118,406)   (2,562,037)
Total Stockholders' Equity   314,481    850,850 
Total Liabilities and Stockholders' Equity  $2,249,507   $1,935,159 

 

The accompanying notes are an integral part of these financial statements.

 

 1 

 

 

   For the Three Months Ended
Jun 30,
2017
   For the Three Months Ended
Jun 30,
2016
   For the Six Months Ended
Jun 30,
2017
   For the Six Months Ended
Jun 30,
2016
 
                 
NET REVENUES  $616,503   $383,927   $1,237,335   $841,224 
COST OF REVENUES   546,292    316,653    1,132,517    688,470 
GROSS PROFIT   70,211    67,274    104,818    152,754 
                     
COSTS AND EXPENSES                    
Professional services   65,954    119,144    146,761    162,894 
Administrative salaries   73,037    32,574    136,774    62,122 
Selling expense   91,850    65,470    161,567    125,056 
General and administrative expense   88,715    11,748    191,662    62,632 
Total Operating Expenses   319,556    228,936    636,764    412,704 
                     
(Loss) from continuing operations   (249,345)   (161,662)   (531,946)   (259,950)
                     
Other Income (Expense)                    
Other income   0    1,021    321    1,021 
Interest expense   (13,477)   (4,709)   (21,444)   (9,432)
Total other income (expenses)   (13,477)   (3,688)   (21,123)   (8,411)
                     
Net (loss) before income taxes   (262,822)   (165,350)   (553,069)   (268,361)
                     
Income taxes   800         3,300    - 
Net (Loss)  $(263,622)  $(165,350)  $(556,369)  $(268,361)
Earnings (loss) per share;                    
Basic  $(0.06)  $(0.04)  $(0.12)  $(0.06)
Weighted average number of shares outstanding   4,784,293    4,558,463    4,777,015    4,520,745 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 2 

 

 

EVANS BREWING COMPANY, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   For the Six Months Ended   For the Six Months Ended 
   Jun 30,   Jun 30, 
   2017   2016 
Cash Flows from Operating Activities:        
Net Loss  $(556,369)  $(268,362)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock based compensation   19,997    4,400 
Depreciation and amortization   83,958    28,993 
Liquor license   (84,368)   - 
Changes in Operating Assets and Liabilities:          
(Increase) Decrease in prepaid expense   (15,033)   (5,192)
(Increase) Decrease in prepaid deposits   (32,303)   - 
(Increase) Decrease in inventory   (58,257)   27,097 
(Increase) Decrease in accounts receivable   (152,105)   55,563 
Increase (decrease) in refundable deposits   5,656    (4,605)
Increase (decrease) in accounts payable   68,327    (7,202)
Increase (decrease) in accrued expenses   21,596    12,118 
Net Cash Used by Operating Activities   (698,901)   (157,190)
           
Cash Flows from Investing Activities:          
Purchase of fixed assets   (131,244)   (24,520)
Net Cash used in Investing Activities   (131,244)   (24,520)
           
Cash Flows from Financing Activities:          
Proceeds from line of credit   186,041    - 
Proceeds from notes payable        15,000 
Proceeds from Notes payable- related party   609,035    17,496 
Payment on notes payable   (39,935)   (39,875)
Net Cash Provided by Financing Activities   755,141    (7,379)
           
Net Increase (Decrease) in Cash   (75,004)   (189,089)
Cash at Beginning of Period   117,997    325,392 
Cash at End of Period  $42,993   $136,303 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Income Taxes  $3,300   $9,432 
Interest expense   4,761    - 
           
NON-CASH INVESTING AND FINANCING ACTIVITIES:          

 

The accompanying notes are an integral part of these financial statements.

 

 3 

 

 

EVANS BREWING COMPANY, INC

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2017, AND DECEMBER 31, 2016

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Evans Brewing Company Inc. (formerly ALPINE 3 Inc.) (“EBC” or the “Company”) was incorporated under the laws of the State of Delaware on June 18, 2013. Alpine 3 Inc. was set up to serve as a vehicle to effect an asset acquisition, merger, exchange of capital stock, or other business combination with a domestic or foreign business. Alpine 3 did not undertake any effort to cause a market to develop in its securities, either debt or equity, before it successfully concluded a business combination. On April 4, 2014, The Michael J. Rapport Trust (the “Trust”) purchased 10,000,000 shares of common stock, which was all of the outstanding shares of Alpine 3, from the founder of Alpine 3, and changed the name to Evans Brewing Company Inc. on May 29, 2014. On October 9, 2014, the Trust agreed to the cancellation of 9,600,000 of the shares of common stock that it had acquired and retained 400,000 shares of common stock.

 

On October 15, 2014, the Company entered into an Asset Purchase and Share Exchange Agreement (the “Agreement”) with Bayhawk Ales, Inc., a Delaware corporation (“Bayhawk”), subject to receiving approval of the independent Bayhawk shareholders who vote on the transaction. On September 17, 2015, the independent Bayhawk shareholders approved the agreement by a vote of 251,212 shares for and 1,600 shares against. As such, Bayhawk sold to EBC, and EBC purchased from Bayhawk, assets of Bayhawk, including but not limited to: (A) all assets, including personal property, intellectual property, inventory, contracts, websites, documents, and all other assets however delineated relating to the Bayhawk Ales label (as defined in the Agreement and discussed in more detail below); and (B) all assets, including personal property, intellectual property, inventory, contracts, websites, documents, and all other assets however delineated relating to the Evans Brands (as defined in the Agreement and discussed in more detail below) (collectively, the “Transferred Assets”). Bayhawk retained ownership of 100% of the stock in Evans Brewing Co (CA) (“Evans Brewing California”) which has the brewers license at City Brewery in Lacrosse, WI (where the non-craft brands will be brewed, with the balance of the craft brands being brewed in Irvine, California). Based on the affirmative vote by the independent Bayhawk shareholders to approve the Asset Purchase transaction, EBC proceeded with the share exchange and tender offer to the Bayhawk shareholders, pursuant to which EBC offered to exchange shares of EBC common stock for shares of Bayhawk common stock, on a one-for-one basis (the “Exchange Offer”). Bayhawk shareholders had until December 2, 2015, to tender their Bayhawk shares in the share exchange. Bayhawk shareholders also had until December 2, 2015, to rescind the exchange of shares. There also was no minimum number of shares of Bayhawk common stock that must be tendered for the Exchange Offer to close. At the close of the share exchange on December 2, 2015, Premier Stock Transfer accepted on behalf of EBC 4,033,863 Bayhawk shares and issued 4,033,863 shares of EBC common stock upon the terms and subject to the conditions set forth in the Asset Purchase and Share Exchange Agreement by and between EBC and Bayhawk, dated October 15, 2014, as amended (the “Asset Purchase Agreement”). EBC filed a copy of the Asset Purchase Agreement as an annex to a combination registration statement and proxy statement on Form S-4. The Bayhawk shares were validly tendered pursuant to the Exchange Offer and not withdrawn. The asset purchase and share exchange have been treated as business combination as both companies are controlled by the same management.

 

On September 29, 2016, Evans Brewing Company, Inc., closed the acquisition of a restaurant business located in the downtown SOCO District of Fullerton, California, through the acquisition of all the outstanding stock of EBC Public House, Inc., which the Company now operates as its first branded restaurant and taproom under the trade name “The Public House by Evans Brewing Company”. The Public House features the Company’s beers – as well as beers from other selected local Orange County, California breweries, -- food and, potentially, occasional entertainment.

 

In connection with such closing, the Company acquired 100% of the outstanding shares of EBC Public House from Mr. Rapport and issued 1,000,000 shares of the Company’s Series A Preferred Stock to Mr. Rapport. The asset purchase and share exchange have been treated as business combination as both companies are controlled by the same management.

 

 4 

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

This summary of accounting policies for EBC is presented to assist in understanding the Company’s financial statements. The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied in the preparation of the financial statements.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates. Estimates are used when accounting for allowances for bad debts, collectability of accounts receivable, amounts due to service providers, depreciation and litigation contingencies, among others.

 

Going Concern

 

The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has an accumulated deficit of $3,118,406. The financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The Company's continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company.

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. The Company has no cash equivalents as of June 30, 2017, and December 31, 2016.

 

Accounts Receivable

 

Accounts receivable are customer obligations due under normal trade terms. EBC performs continuing credit evaluations of customers and allowances are maintained for potential credit losses. EBC determined an allowance for doubtful accounts of $16,313 at June 30, 2017 and $12,791 for December 31, 2016, to be appropriate.

 

Inventories

 

Inventories are valued at the lower of cost or market. EBC regularly reviews its inventories for the presence of obsolete product attributed to age, seasonality, and quality and reduces its cost basis when its review indicates a reduction in utility below the inventory's carrying value. Inventories consisted of the following at June 30, 2017 and December 31, 2016:

 

   Jun 30,   Dec 31, 
   2017   2016 
Restaurant Inventory  $18,838   $25,097 
Raw materials   41,823    38,403 
Work in process   28,605    46,168 
Finished goods   194,388    128,933 
Keg inventory   31,273    18,069 
Less: reserve for obsolete inventory   (16,500)   (16,500)
           
Total Inventory  $298,427   $240,170 

 

 5 

 

 

Prepaid Expenses

 

For the quarter ended June 30, 2017, prepaid expense consists of $2,000 for prepaid state income tax and $23,600 in prepaid rent for a restaurant under construction. For the year ended December 31, 2016 the prepaid expense was $10,400 for prepaid state income tax and $167 in prepaid insurance

 

Deposits

 

During the quarter ended June 30, 2017, EBC had deposits of $114,703, consisting of short-term deposits of $47,203 and long-term deposits of $67,500. The long-term deposit is for a can deposit of $67,500. The short-term deposits are rent of $9,200, $1,493 utility deposits, $260 deposit with the city of Fullerton for the patio, and $250 for a software deposit. For the year ended December 31, 2016, EBC had deposits of $82,400, consisting of short-term deposits of $10,300 and long-term deposits of $72,100. This is made up of a can deposit of $67,500 for cans all of which is long term, and deposits of $14,900 for the restaurant. One half of the can deposit of $135,000 was returned during the year ended December 31, 2016, leaving a deposit balance of $67,500. The deposits that make up the $14,900 are; $9,200 deposit on the building rent which $4,600 is long term, $5,190 utility deposits, $260 deposit with the city of Fullerton for the patio, and $250 for a software deposit.

 

Liquor License

 

With the acquisition of the Evans Public House Restaurant the Company acquired a liquor license that it paid $50,000 for. The value of the liquor license has increased and if the Company wanted to sell the license it could get more for it than it paid. This is based on the fact that the Company is in the process of acquiring a liquor license for it new restaurant in Huntington Beach that will cost over $85,000. The cost of the Liquor license for the Huntington Beach restaurant is at $84,368 as of June 30, 2017, and has a market value of $90,000.

 

Property and Equipment

 

Property and equipment are stated at cost. Depreciation is computed by using the straight-line method over the estimated useful lives:

 

Building improvements    20 years 
Leasehold improvements    10 years 
Brewery equipment    3 - 20 years 
Furniture and fixtures    5 years 
Software   3 years 
Vehicles    5 - 10 years 

 

 6 

 

 

EBC capitalizes significant capital expenditures. Ordinary maintenance and repairs are charged to operations as expenses when incurred. When assets are sold or retired, the costs and related accumulated depreciation and amortization are removed from the accounts, and any resulting gain or loss is included in the income. Total depreciation expense for the six months ended June 30, 2017, and June 30, 2016, was $83,959 and $28,991, respectively.

 

Impairment of long-lived assets

 

EBC evaluates its long-lived assets by measuring the carrying amount of the asset against the estimated undiscounted future cash flows associated with them. At the time such evaluations indicate that the future undiscounted cash flows of certain long lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. No adjustment to the carrying value of the assets has been made.

 

Accounts Payable

 

Accounts payable consists of unpaid expenses incurred in the normal course of business.

 

Refundable deposits

 

EBC distributes its draft beer in kegs that are owned by the Company. When a draft beer is shipped to the customer, the Company collects a refundable deposit and records a liability. Upon return of the keg, the deposit is refunded to the customer and the liability is reduced. As of June 30, 2017, and December 31, 2016, EBC had refundable deposits in the amounts of $113,223 and $107,567, respectively. EBC accounts for the loss, breakage, and deterioration of the kegs by crediting the customer’s deposits. The deposit approximates EBC’s cost of the keg. Any additional cost incurred for the loss, breakage, or deterioration of the kegs is then billed to the customer. Management periodically reviews its refundable deposits for any loss allowance on loss, breakage, or deterioration and has determined that no allowance was necessary as of June 30, 2017 and December 31, 2016.

 

Revenue Recognition

 

Revenue from product sales, are recognized when the products are picked up by individual customers or shipped to wholesale customers. The following criteria are met before revenue is recognized: persuasive evidence of an arrangement exists, shipment of product or pickup has occurred, selling price is fixed or determinable and collection is reasonably assured. Product returns are allowed, but are rare according to historical records for past years. EBC continuously monitors and evaluates product returns. There was no allowance for product returns as of June 30, 2017, and December 31, 2016.

 

Sales Tax

 

EBC excludes from its sales all sales taxes assessed to its customers. Sales taxes assessed are recorded as accrued liabilities on the balance sheet until remitted to the state agencies.

 

Excise Tax

 

The federal government levies excise taxes on the sale of alcoholic beverages, including beer. For brewers producing fewer than two million barrels of beer per calendar year, the federal excise tax is $7 per barrel on the first 60,000 barrels of beer removed for consumption or sale during the calendar year. The state of California imposes excise taxes on the sale and distribution of beer at a rate of $0.20 per gallon. Excise taxes due to federal and state agencies are not collected from customers. For the Six months ended June 30, 2017, and for the Six months ended June 30, 2016, excise taxes amounted to approximately $47,818 and $44,669 respectively, which is treated as a Cost of Goods sold.

 

Uncertain Tax Positions

 

EBC utilizes the asset and liability method of accounting for income taxes in accordance with the provisions of the “Expenses – Income Taxes Topic” of the FASB ASC. Under the asset and liability method, deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The Company considers certain tax planning strategies in its assessment as to the recoverability of its tax assets. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in earnings in the period that the tax rate changes. EBC recognizes, in its financial statements, the impact of a tax position, if that position is more likely than not to be sustained on audit, based on technical merits of the position. There are no material unrecognized tax positions in the financial statements.

 

 7 

 

 

EBC accounts for uncertain tax positions in accordance with FASB ASC 740 (formerly Financial Accounting Standards Boards Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109). FASB ASC 740 prescribes a recognition threshold and measurement process for financial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. The interpretation also provides guidance on recognition, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted the provisions of FASB ASC 740 and there was no impact on total liabilities or stockholder's equity as a result of the adoption of FASB ASC 740.

 

For federal tax purposes the Company’s 2013 through 2016 tax years remain open for examination by the tax authorities under normal three-year statute of limitations. Generally, for state tax purposes, the Company’s 2012 through 2016 tax years remain open for examination by the tax authorities under a four-year statute of limitations.

 

Fair Value of Financial Instruments

 

Fair value of certain of the Company’s financial instruments including cash, account payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.

 

Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.

 

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

 

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

 

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity and that are significant to the fair values.

 

Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.

 

Basic Loss Per Share

 

Basic income (loss) per share is calculated by dividing the Company's net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company's net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.

 

 8 

 

 

The Company has no dilutive debt instruments.

 

New Authoritative Accounting Guidance

 

The FASB issued ASU 2016-09 in March 2016, to provide guidance to entities that issue share-based payment awards to their employees as part of its Simplification Initiative. The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification in this Update were identified through outreach for the Simplification Initiative and involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash.

 

The FASB issued ASU 2015-11 in July, 2015, to provide guidance on how an entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this Update more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this Update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period.

 

The Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-15 on August 27, 2014, providing guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if “conditions or events raise substantial doubt about [the] entity’s ability to continue as a going concern.” The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted.

 

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3 - PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following at June 30, 2017, and December 31, 2016:

 

   Mar 31,
2017
   Dec 31,
2016
 
         
Brewery machinery and equipment  $787,596   $757,438 
Keg asset   311,596    311,596 
Restaurant assets   922,831    821,745 
Software   4,320    4,320 
Vehicles   63,097    63,097 
           
    2,089,440    1,958,196 
           
Accumulated depreciation   (813,013)   (729,055)
           
Property and equipment, net  $1,276,427   $1,229,141 

 

NOTE 4 - NOTE PAYABLE

 

Note payable balance as of June 30, 2017, was $68,932 all of which is a short-term obligation. The note balance as of December 31, 2016, was $106,531, with $75,198 being the current obligation and $31,333 being the long-term obligation. The breakdown of the notes for June 30, 2017, and December 31, 2016, is as follows:

 

   Jun 30,
2017
   Dec 31,
2016
 
Note payable for the acquisition of 4300 kegs with the monthly principal payment amount due of $6,267  $68,932   $106,531 
           

 

Interest expense recorded on the note for the six months ended June 30, 2017, was $2,182 compared to $4,010 for the six months ended June 30, 2016.

 

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NOTE 5 – NOTES PAYABLE- LINE OF CREDIT

 

The Company has a line of credit with City National Bank in the amount of $250,000 with a variable interest rate that was 5.25% as of June 30, 2017. The balance on the line of credit as of June 30, 2017, was $229,041. The balance on the line of credit as of the year ended December 31, 2016, $43,000.

 

NOTE 6 - NOTES PAYABLE- RELATED PARTY

 

On July 21, 2014, Michael J. Rapport the Chief Executive Officer, sole director and controlling shareholder of the Company, advanced the Company a $100,000 long term unsecured loan with a 1.5% interest rate per annum, due no later than July 21, 2017. The loan is convertible into common shares of the Company at any time after the second year’s anniversary at a price based upon either: a) The price of its most recent private placement offering, closest to the time of conversion, b) If publicly-traded, then the bid price of its common stock on the closing day of the conversion. For the six months ended June 30, 2017, the Company accrued $744 of interest on this note. For the year ended December 31, 2016, the Company had a total accrual of 1,504 on this same note, which brings the total interest accrued on the note to $4,040 as of June 30, 2017.

 

Michael J. Rapport also advanced the Company $10,000 on April 21, 2014; $8,000 on June 13, 2014; $20,000 on June 2, 2015; $30,000 on July 2, 2015; and $40,000 on August 25, 2015, for a total amount advanced of $108,000. All of these payments are secured by 8% interest bearing notes that are due on April 21, 2015, June 13, 2015, June 2, 2016, July 2, 2016, and August 25, 2016, respectively. As of June 30, 2016, four of the five notes totaling $108,000 were past due. On July 30, 2016, Michael J. Rapport exchanged the 5 notes, 4 of which were past due, for a single note. The 5 notes total $108,000 and are replaced by a single note for $118,603, which includes the original principal of $108,000 plus $10,603 of accrued interest. The new note has a term of one year and will bear interest at per annum rate of 6% instead of the 8% per annum rate on the old notes. For the period ended June 30, 2017, the Company accrued $3,529 of interest for this note. For the period ended December 31, 2016, the Company had an accrued balance of $3,002 interest for the notes due Mr. Rapport. The total accrued interest on this note after the consolidation of the notes is $6,532.

 

In addition to these notes Michael J. Rapport also paid for a new piece of equipment for the brewery on June 15, 2016, in the amount of $17,496. A separate 8% interest bearing note was drawn up for this amount and accrued interest for the period ended June 30, 2017, was $694. The accrued interest on this note as of December 31, 2016, was $763.

 

On July 27, 2016, Mr. Rapport’s loaned the Company $250,000. The note is unsecured, has a term of one year and bears interest at the rate of 4% per annum. For the period ended June 30, 2017, the Company accrued $4,959 of interest for this note. As of the year ended December 31, 2016, the Company accrued $4,301 of interest on this note.

 

On October 1, 2016, Mr. Rapport executed a note in the amount of $400,000 with EBC Public House. The note is unsecured, and has a one-year term and bears interest at the rate of 3% per annum. The note is an installment note to provide working capital as needed for EBC Public House. During the six months ended June 30. 2017, EBC Public House drew done the note by $281,902 bringing the total amount drawn on the note to $400,000. The accrued interest for the six months ended June 30, 2017, is $1,644. During the year ended December 31, 2016, EBC Public House had 5 different draws against the note for a total of $118,098 and recorded $709 in accrued interest. The balance of the note as of June 30, 2017, is $400,000 and the total amount of accrued interest on the note is $3,004.

 

On March 2, 2017 Mr. Rapport’s loaned the Company $20,000. The note is unsecured, has a term of one year and bears interest at the rate of 6% per annum. For the period ended June 30, 2017, the Company accrued $395 of interest for this note.

 

On March 6, 2017, Mr. Rapport’s loaned the Company $120,000. The note is unsecured, has a term of one year and bears interest at the rate of 6% per annum. For the period ended June 30, 2017, the Company accrued $2,288 of interest for this note.

 

On April 1, 2017, Mr. Rapport executed a note in the amount of $85,000 with EBC Public House for the advance of funds to purchase a Food Truck with the EBC Public House brand on it. The note has a three-year term and will be secured by the truck and bear interest at the rate of 3% per annum. As of the six months ended June 30, 2017, EBC Public House accrued interest on the note in the amount of $635.

 

On April 1, 2017, Mr. Rapport advance EBC Public House $1,617.34 to purchase equipment for the Food Truck. The note is unsecured, and has a one-year term and bears interest at the rate of 3% per annum. As of the six months ended June 30, 2017, EBC Public House accrued interest on the note in the amount of $12.

 

On June 26, 2017, Mr. Rapport executed a note in the amount of $250,000 with EBC Public House. The note is unsecured, and has a one-year term and bears interest at the rate of 3% per annum. The note is an installment note to provide working capital as needed for EBC Public House. During the six months ended June 30. 2017, EBC Public House drew done this note by $69,968. The accrued interest on this note for the six months ended June 30, 2017, is $23.

 

Accrued Interest

 

As of the period ended June 30, 2017, the Company has an accrued interest balance of $29,130 for the total notes due Mr. Rapport of $1,213,232. As of the year ended December 31, 2016, the Company had an accrued interest balance of $12,450 pertaining to notes in the amount of $604,197.

 

 10 

 

 

NOTE 7 - STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

Preferred Stock – During the quarter ended March 31, 2017, the Company issued no shares of preferred stock. During the year ended December 31, 2017, the Company issued 1,000,000 shares of preferred Series A stock to Michael J. Rapport on September 29, 2016, in exchange for 100% of the outstanding shares of EBC Public House. The acquisition gives the Company its first branded restaurant and taproom under the trade name “The Public House by Evans Brewing Company” which will feature the Company’s beers and provides an inventive gastropub menu. The asset purchase and share exchange have been treated as business combination as both companies are controlled by the same management. For the year ended December 31, 2016, the Company had 1,000,000 shares of preferred shares outstanding. During the fiscal year ended December 31, 2015, the Company amended the certificate of incorporation authorizing the Company to issue 10,000,000 shares of $.0001 par value preferred stock.

 

Common Stock

 

Common Stock - The Company is authorized to issue 100,000,000 shares of $.0001 par value common stock. During the three months ended March 31, 2017, the Company issued 16,803 shares of common stock to redeem shares that were cancelled in the share exchange of December 2, 2015. These shares had been submitted for exchange at that time but were lost by the transfer agent that the Company had at point during the exchange process. The Company also issued 10,000 for professional services, bringing the total of shares outstanding to 4,784,293 on March 31, 2017. During the year ended December 31, 2016, the Company issued 287,600 shares for cash and services giving a total of 4,757,463 shares issued and outstanding.

 

Upon formation of the Company on June 18, 2013, the Board of Directors issued 10,000,000 shares of common stock for $1,000 in services to the founding shareholder of the Company. In addition, the founding shareholder made a contribution of $3,050 in 2014 to the Company, which was recorded as additional paid-in capital.

 

On April 4 2014, the founding shareholder entered into a Share Purchase Agreement pursuant to which he sold an aggregate of 10,000,000 shares of EBC’s common stock to The Michael J. Rapport Trust (the “Trust”) for a purchase price of $40,000. Pursuant to the Share Purchase Agreement, The Trust became the sole shareholder of EBC, owning 100% of the issued and outstanding shares of EBC’s common stock. On September 22, 2014, the Company cancelled 9,600,000 shares of common stock for no consideration. On September 23, 2014, the Company issued 6,000 shares of common stock to directors of the Company for services valued at $600 ($0.10 per share). On September 23, 2014, the Company issued 30,000 shares of common stock for services to Tech Associates Inc., a company controlled by Richard Chiang, a director of the Company, valued at $3,000 ($0.10 per share) bringing the total shares outstanding to 436,000 shares of common.

  

Based on the completion of the asset purchase agreement and share exchange agreement by and between EBC and Bayhawk, on December 2, 2015, Premier Stock Transfer accepted on behalf of EBC 4,033,863 Bayhawk shares and issued 4,033,863 shares of EBC common stock upon the terms and subject to the conditions set forth in the Asset Purchase and Share Exchange Agreement by and between EBC and Bayhawk, dated October 15, 2014, as amended (the “Asset Purchase Agreement”). EBC filed a copy of the Asset Purchase Agreement as an annex to a combination registration statement and proxy statement on Form S-4. The Bayhawk shares were validly tendered pursuant to the Exchange Offer and not withdrawn.

 

The 4,033,863 shares exchanged per the agreement along with the 436,000 shares that Evans Brewing Company held brought the total outstanding to 4,469,863 as of December 31, 2015. Bayhawk had a total of 4,884,624 shares of its common stock outstanding as of December 31, 2014, and as of the closing of the Share Exchange, but 414,761 shares were not tendered in the Share Exchange, so the total shares outstanding shares of EBC common stock at December 31, 2015, was 4,469,863. During the year ended December 31, 2016, the Company added 287,600 shares for cash and services, bringing the total shares outstanding as of December 31, 2016, to 4,757,463. During the Six months ended June 30, 2017, the cancelled shares were adjusted by issuing 16,830 shares based on finding shares that had been exchanged originally but lost in the process of the exchange. The Company also issued an additional 10,000 shares for professional services bringing the total shares issued and outstanding to 4,784,293.  

 

NOTE 8 - EARNINGS PER SHARE

 

Basic net income (loss) per share was computed using the weighted-average number of shares of common stock outstanding during the period. The following summarized the earnings per share:

 

   June 30,
2017
   June 30,
2016
 
Weighted average number of shares   4,777,015    4,520,745 
           
Net income (loss)  $(556,369)  $(268,361)
           
Net income (loss) per share  $(0.12)  $(0.06)

 

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NOTE 9 - INCOME TAXES

 

Deferred income taxes are provided for the temporary differences between the carrying values of the Company’s assets and liabilities for financial reporting purposes and their corresponding income tax basis. The temporary differences give rise to either a deferred tax asset or liability in the consolidated financial statements, which is computed by applying current statutory tax rates to taxable and deductible temporary differences based upon the classification (i.e. current or non-current) of the asset or liability in the consolidated financial statements which relates to the particular temporary difference. Deferred taxes related to differences which are not attributable to a specific asset or liability are classified in accordance with the future period in which they are expected to reverse and be recognized for income tax purposes. The long-term deferred tax assets are fully valued as of June 30, 2017, and December 31, 2016.

 

As of June 30, 2017, and December 31, 2016, the components of the Company’s deferred tax assets and liabilities primarily consist of temporary differences attributable to differing methods of depreciation, insurance claim receivables, net operating losses, allowances for obsolete inventory, and reserves for bad debt.

  

EBC’s management used 34% to calculate the deferred tax assets and the current tax provision.  Because of the startup costs of EBC and the net operating losses earned by Bayhawk during the first few years in operation, the Company has had to pay very little federal income tax.  In 2016, the Company paid no federal income tax and received a refund in in the amount of $8,000 based on an overpayment in 2015. The Company has a prepaid tax in the amount of $2,000 on the books from the overpayment of the 2015 state taxes. The Company has not incurred a federal tax obligation as of the period ended June 30, 2017, and EBC management expects that the Company will not pay any federal income tax in 2017, due to its significant net operating losses.

 

NOTE 10 – ACQUISITION OF EVANS PUBLIC HOUSE

 

On September 29, 2016, Evans Brewing Company, Inc., closed the acquisition of a restaurant business located in the downtown SOCO District of Fullerton, California, through the acquisition of all the outstanding stock of EBC Public House, Inc., in exchange for 100% of the outstanding shares of EBC Public House from Mr. Rapport and issued 1,000,000 shares of the Company’s Series A Preferred Stock to Mr. Rapport. Mr. Rapport is also the CEO of Evans Brewing Company and so the asset purchase and share exchange have been treated as business combination as both companies are controlled by the same management.

 

When Mr. Rapport originally acquired the restaurant, he incurred goodwill of $165,000. As part of the acquisition, Evans Brewing Company wrote off the goodwill recognizing a loss of $165,000 on Evans Public House books. The note on the Evans Public House books due to Mr. Rapport for money spent in building out the restaurant was forgiven with the offsetting entry going to additional paid in capital in the amount of $1,173,270.

 

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NOTE 11 – SEGMENT REPORTING

 

ASC Topic 280, Segment Reporting, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company has two reportable segments: Evans brewery and malt liquor operations and Evans Public House restaurant. The restaurant operation was just added with the acquisition of Evans Public House restaurant. Below is a table summarizing the Company’s segment information:

 

   For the Quarter Ended
June 30,
 
   2017   2016 
Sales        
Brewery and Malt liquor operations  $835,876   $841,224 
Evans Public Restaurant   401,459    - 
Corporate   -    - 
   $1,237,335   $841,224 
           
Gross Profit          
Brewery and Malt liquor operations  $112,839   $152,754 
Evans Public Restaurant   (8,021)   - 
Corporate   -    - 
   $104,818   $152,754 
           
Income (Loss) from operations          
Brewery and Malt liquor operations  $(169,720)  $(234,306)
Evans Public Restaurant   (284,283)   - 
Corporate   (77,983)   (25,644)
   $(540,818)  $(259,950)
           
Interest expense          
Brewery and Malt liquor operations  $13,160   $4,376 
Evans Public Restaurant   4,012    - 
Corporate   4,273    5,056 
   $21,444   $9,432 
           
Other income (expense)          
Brewery and Malt liquor operations  $321   $1,021 
Evans Public Restaurant   -    - 
Corporate   -    - 
   $321   $1,021 
           
Net income (loss)          
Brewery and Malt liquor operations  $(182,558)  $(237,662)
Evans Public Restaurant   (289,855)   - 
Corporate   (83,956)   (30,700)
   $(556,369)  $(268,362)

 

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NOTE 12 - COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

The Company operates out of three buildings in Irvine, California, and Santa Ana, California, under non-cancelable leases expiring between July 31, 2017, and January 31, 2019.

 

Total lease expense paid during the six months ended June 30, 2017, and the six months ended June 30, 2016, was $46,215 and $46,756, respectively.

 

Minimum future lease payments are as follows:

 

2017   21,800 
2018   33,889 
2019   2,824 
      
Total  $57,513 

 

With the acquisition of EBC Public House, the Company acquired another lease. The lease for the Restaurant in Fullerton is for 5 years with 5-year options. The lease began on August 1, 2015 and expires on July 31, 2020.

 

Total lease expense paid during the six months ended June 30, 2017, and the six months ended June 30, 2016, was $27,600 and $27,600, respectively.

 

Minimum future lease payments are as follows:

 

2017   27,600 
2018   55,200 
2019   55,200 
2020   32,200 
      
   $170,200 

 

EBC Public House is in the process of adding another restaurant in Huntington Beach and has acquired another lease as a result. The lease for the Restaurant in Huntington Beach is for 5 years with 5-year options. The lease began on January 1, 2017 and expires on December 31, 2021.

 

Total lease expense paid during the six months ended June 30, 2017, and the six months ended June 30, 2016, was $27,600 and $0, respectively.

 

Minimum future lease payments are as follows:

 

2017   27,600 
2018   55,200 
2019   55,200 
2020   55,200 
2021   55,200 
      
   $238,400 

 

Notes payable commitment:

 

The Company purchased 4300 kegs that it had previously leased on a note payable with City National Bank.

 

Minimum future payments for keg assets note are as follows:

 

2017   37,599 
2018   31,333 
      
   $68,932 

 

The Company purchased a truck for the business that was financed through an auto loan with Ford Motors financing.

 

Minimum future payments for the auto loan are as follows:

 

2017   3,681 
2018   747 
      
   $4,428 

 

Litigation

 

The Company may be subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of Company Management the ultimate outcome of the claims and litigation, if any, will not have a material adverse effect on the Company’s financial position.

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NOTE 13 – CONCENTRATIONS

 

Cash

 

The Company maintains cash balances at financial institutions insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC insures cash balances up to $250,000 per institution. As of June 30, 2017, the Company had no bank account that exceeded the insured amount. The Company normally has no problem with uninsured balances as its deposits are separated across financial institutions.

 

Accounts Receivable

 

At June 30, 2017, three customers accounted for approximately 37%, 17%, and 16%, respectively, of the Company’s accounts receivable. At December 31, 2016, three customers accounted for approximately 44%, 28%, and 9%, respectively, of the Company's accounts receivable.

 

Accounts Payable

 

At June 30, 2017, five vendors accounted for approximately 26%, 9%, 6%, 5% and 5%, respectively, of the Company’s accounts payable. At December 31, 2016, five vendors accounted for approximately 32%, 12%, 7%, 6%, and 3%, respectively, of the Company's accounts payable. For the quarter ended June 30, 2017, three vendors accounted for approximately 39%, 4% and 4% of total purchases. For the year ended December 31, 2016, two vendors accounted for approximately 44% and 8% of total purchases.

 

Sales

 

At June 30, 2017, four customers accounted for approximately 28%, 17%, 7%, and 4%, respectively, of the Company’s sales. For year ended December 31, 2016, three customers accounted for approximately 34%, 25%, and 16%, respectively, of the Company's sales.

 

NOTE 14 - SUBSEQUENT EVENT

 

Subsequent events have been evaluated through June 30, 2017, which is the date the financial statements were available to be issued.

 

1. Subsequent to June 30, 2017, on July 10, 2017, Kevin Hammons resigned as Director of Brewing and resigned as a member of the board of directors.  

 

2. Subsequent to June 30, 2017, on August 2, 2017, Kenneth Wiedrich resigned from the board of directors.  

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion and analysis provides information which management of the Company believes to be relevant to an assessment and understanding of the Company’s results of operations and financial condition. This discussion should be read together with the Company’s financial statements and the notes to the financial statements, which are included in this report.

 

Forward-Looking Statements

 

This Report contains forward-looking statements that relate to future events or our future financial performance. Some discussions in this report may contain forward-looking statements that involve risk and uncertainty. A number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us in this Report. Forward-looking statements are often identified by words like “believe,” “expect,” “estimate,” “anticipate,” “intend,” “project” and similar words or expressions that, by their nature, refer to future events.

 

In some cases, you can also identify forward-looking statements by terminology such as “may,” “will,” “should,” “plans,” “predicts,” “potential,” or “continue,” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements in an effort to conform these statements to actual results.

 

Business History of Company

 

Evans Brewing Company, Inc. (formerly ALPINE 3 Inc.) was incorporated under the laws of the State of Delaware on June 18, 2013. Alpine 3 Inc. was set up to serve as a vehicle to effect an asset acquisition, merger, exchange of capital stock or other business combination with a domestic or foreign business. ALPINE 3 did not undertake any effort to cause a market to develop in its securities, either debt or equity, before it successfully concluded a business combination. On April 4, 2014, The Michael J. Rapport Trust (the “Trust”) purchased 10,000,000 shares of common stock which was all of the outstanding shares of Alpine 3, Inc., and subsequently changed the name to Evans Brewing Company Inc. (“EBC”) on May 29, 2014. On October 9, 2014, the Trust agreed to the cancellation of 9,600,000 of the shares of common stock that it had acquired and retained 400,000 shares of common stock. From April 2014 through December 2015, EBC has been in the process of acquiring the Bayhawk brands and related assets, as discussed in more detail below.

 

Bayhawk Ales, Inc. (formerly Orange County Brewing Company) (“Bayhawk”) was formed in February 1994 for the purpose of developing and operating one or more breweries in California for the production of high quality, hand-crafted ales for sale in bottle and draft. The Company built a 17-barrel showcase brewery (the "Southern California Brewery") in a leased building in the McCormick & Schmick’s Seafood Restaurant in Irvine, California. The Southern California Brewery, located in the central business district of Irvine near John Wayne International Airport, began brewing beer in January 1995. Irvine is south of Los Angeles and is adjacent to Newport Beach. It is a suburban city of the greater Los Angeles metropolitan area and the location of numerous businesses. At the time of the construction of the Southern California Brewery, the Los Angeles metropolitan area was the largest single market for beer in the United States. The products produced by Bayhawk were 90% private labeled.

   

On October 15, 2014, Bayhawk and EBC entered into an Asset Purchase and Share Exchange Agreement (the “Agreement”), subject to receiving approval of the independent Bayhawk shareholders who voted on the transaction. On September 17, 2015, the independent Bayhawk shareholders approved the agreement by a vote of 251,212 shares for and 1,600 shares against. As such, Bayhawk sold to EBC, and EBC purchased from Bayhawk, assets of Bayhawk, including but not limited to: (A) all assets, including personal property, intellectual property, inventory, contracts, websites, documents, and all other assets however delineated relating to the Bayhawk Ales label (as defined in the Agreement and discussed in more detail below); and (B) all assets, including personal property, intellectual property, inventory, contracts, websites, documents, and all other assets however delineated relating to the Evans Brands (as defined in the Agreement and discussed in more detail below) (collectively, the “Transferred Assets”). Bayhawk retained ownership of 100% of the stock in Evans Brewing Co. (CA) (“Evans Brewing California”) which has the brewers license at City Brewery in Lacrosse, WI (where the non-craft brands will be brewed, with the balance of the craft brands being brewed in Irvine, California). Based on the affirmative vote by the independent Bayhawk shareholders to approve the Asset Purchase transaction, EBC proceeded with the share exchange and tender offer to the Bayhawk shareholders, pursuant to which EBC offered to exchange shares of EBC common stock for shares of Bayhawk common stock, on a one-for-one basis (the “Exchange Offer”). Bayhawk shareholders had until December 2, 2015, to tender their Bayhawk shares in the share exchange. Bayhawk shareholders also had until December 2, 2015, to rescind the exchange of shares. There was no minimum number of shares of Bayhawk common stock that must be tendered for the Exchange Offer to close. At the close of the share exchange on December 2, 2015, Premier Stock Transfer accepted on behalf of EBC 4,033,863 Bayhawk shares and issued 4,033,863 shares of EBC common stock upon the terms and subject to the conditions set forth in the Asset Purchase and Share Exchange Agreement by and between EBC and Bayhawk, dated October 15, 2014, as amended (the “Asset Purchase Agreement”). EBC filed a copy of the Asset Purchase Agreement as an annex to a combination registration statement and proxy statement on Form S-4. The Bayhawk shares were validly tendered pursuant to the Exchange Offer and not withdrawn. The asset purchase and share exchange has been treated as a business combination as both companies are controlled by the same management. As such, on December 10, 2015, in connection with this acquisition, EBC ceased to be a shell company as defined in Rule 12b-2, in that it had assets consisting of more than cash and cash equivalents, and has a business plan and operations.

   

 16 

 

On September 29, 2016, Evans Brewing Company, Inc., closed the acquisition of a restaurant business located in the downtown SOCO District of Fullerton, California, through the acquisition of all the outstanding stock of EBC Public House, Inc., which the Company now operates as its first branded restaurant and taproom under the trade name “The Public House by Evans Brewing Company”. The Public House features the Company’s beers – as well as beers from other selected local Orange County, California breweries, -- food and, occasional entertainment.

 

In connection with such closing, the Company acquired 100% of the outstanding shares of EBC Public House from Mr. Rapport and issued 1,000,000 shares of the Company’s Series A Preferred Stock to Mr. Rapport. The asset purchase and share exchange have been treated as business combination as both companies are controlled by the same management.

 

Overview

 

The brewery continued to operate under the Bayhawk Ales, Inc. name as it transitioned the licensing and branding over to Evans Brewing Company, Inc. That process has been completed and all future activities will be under the Evans Brewing Company banner. Bayhawk Ales Inc. has been dissolved and all of its history will become that of Evans Brewing Company, Inc.

 

Evans Brewing Company is a craft brewery based on Orange County, California that produces and sells premium craft beers, including a variety of ales and lagers. EBC’s beers are currently produced in its 17-barrel brewery in Irvine, California, the oldest continuously operating brewing facility in Orange County and one of the oldest in all of Southern California. This facility has been producing craft beers since January 1995. The brewery is located in a leased building in the McCormick & Schmick’s Seafood Restaurant.

 

EBC products include four beers that are packaged year-round (Pollen Nation Honey Blonde Ale, The KrHOPen India Pale Ale, Oaklore Brown Ale, and ChocōLatté Chocolate Porter), various draft-only offerings (which include The Joaquin Dead Mexican Red Ale, OC Pale Ale, Son of a Beach Blonde Ale), and seasonal beers (which include Approachable Bastard Session IPA, Stout at the Devil Russian Imperial Stout, crHOP Dust Hefeweizen, and Oktoberfest). EBC’s labels for its year round packaging were approved in 2016 and the beers are currently being sold with these labels. EBC has the exclusive rights to make, manufacture, produce, market, sell, and distribute original beers, lagers, and ales known as Evans Lager Original, Evans Lager Black, Evans Lager Light, Bad Kat Ice, and Dead Presidents. EBC also owns the assets of Pig’s Eye Brewing Company, LLC, (the “EBC Malt Assets”) including the intellectual property and trademarks relating to original beers, lagers, and ales, including Milwaukee Select and Pig’s Eye (the “EBC Malt Brands”). EBC’s products are distributed to restaurants and other retail outlets in nine states. EBC also produces and packages kegged beer on a private label basis for restaurants and other customers, with the names for such products determined collaboratively with such customer and each product co-branded with the phrase “by Evans Brewing Company”.

 

In addition to manufacturing and selling the products above, EBC also produces and packages beers for other craft breweries in Southern California on a contract-basis. Further, in addition to beer production and sales generally, EBC also produces and offers for sale certain “Evans Brewing Company” branded merchandise including apparel, glassware and other beer accessories.

 

Evans Brewing Company, Inc., also operates a restaurant business located in the downtown SOCO District of Fullerton, California, which is the Company’s first branded restaurant and taproom operating under the trade name “The Public House by Evans Brewing Company”. The Public House features the Company’s beers – as well as beers from other selected local Orange County, California breweries, -- food and, occasional entertainment.

 

EBC Public House, Inc. has also added a Food Truck to its brand which was put into service on June 20, 2017. The Food Truck’s menu is very similar to the restaurant’s menu and has the Public House branded logo on its side.

 

EBC Public House, Inc. is also in the process of adding another restaurant in Huntington Beach, CA. This restaurant will be a little larger than the one in Fullerton and is anticipated to open sometime in September, 2017.

  

Principal Products

 

EBC products include four packaged year-round beers: Pollen Nation Honey Blonde Ale, The KrHOPen India Pale Ale, Oaklore Brown Ale, and ChocōLatté Chocolate Porter; draft-only offerings include The Joaquin Dead Mexican Red Ale, OC Pale Ale, Son of a Beach Blonde Ale; and seasonals include Approachable Bastard Session IPA, Stout at the Devil Russian Imperial Stout, crHOP Dust Hefeweizen, and Oktoberfest.

 

EBC also produces malt liquor at a third-party site in Lacrosse, Wisconsin. By way of background, in August 2013, Evans Brewing California had acquired from City Brewing Company, LLC (“City Brewing”) the assets of Pig’s Eye Brewing Company, LLC, (the “Pig’s Eye Assets”) including the intellectual property and trademarks relating to original beers, lagers, and ales, including Milwaukee Select and Pig’s Eye (the “Pig’s Eye Brands”). Additionally, Evans Brewing California had the exclusive rights to make, manufacture, produce, market, sell, and distribute original beers, lagers, and ales known as Evans Lager Original, Evans Lager Black, Evans Lager Light, Bad Kat Ice, and Dead Presidents.

 

RECENT DEVELOPMENTS

 

Public House Stock Purchase Agreement

 

On September 29, 2016, the Company acquired 100% of the outstanding shares of EBC Public House from Mr. Rapport and issued 1,000,000 shares of the Company’s Series A Preferred Stock to Mr. Rapport. The close of the restaurant was based on the agreement entered into on December 10, 2015, wherein, EBC entered into a Stock Purchase Agreement (the “Public House SPA”) with Michael J. Rapport, as the sole shareholder of EBC Public House, Inc., a California corporation (“Public House”), for the purchase by EBC of 100% of the outstanding shares of Public House from Mr. Rapport, with the transaction closing on September 29, 2016.

 

By way of background, Mr. Rapport formed Public House to purchase a restaurant business located in Fullerton, California (previously operated as Steamers Jazz Club). At the completion of the renovation and remodel of the restaurant on September 29,2016, the agreement was closed. Mr. Rapport was the sole shareholder of Public House.

  

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During the quarter ended June 30, 2017, EBC Public House started operating a Food Truck under the Pubic House brand. EBC Public House is also in the process of opening another restaurant in Huntington Beach with the anticipated opening being sometime in September of 2017.

 

Results of Operations for the six months ended June 30, 2017 and the six months ended June 30, 2016.

 

Our operating results are summarized as follows:

  

   Six Months Ended
Jun 31,
2017
   Six Months Ended
Jun 31,
2016
 
Revenue  $1,237,335   $841,224 
Cost of sales  $1,132,517   $688,470 
Operating expenses  $636,764   $412,704 
Other income (expenses)  $(21,123)  $(8,411)
Net loss  $(556,369)  $(268,361)

 

Revenues

 

During the quarter ended June 30, 2017, the Company had sales of $616,503 compared to $383,927, for the quarter ended June 30, 2016. The increase in sales for the current quarter compared to the quarter ended June 30, 2016, is due to the addition of the restaurant. There was no restaurant in the same quarter last year and comparing the sales excluding the restaurant there was a slight increase in sales for the quarter ended June 30, 2017, compared to the quarter ended June 30, 2016. During the six months ended June 30, 2017, the Company had sales of $1,237,335 compared to $841,224, for the six months ended June 30, 2016. Again, this increase is due to the addition of the restaurant which did not exist for the same six-month period last year. If the restaurant sales are deducted for this same period then there was a slight decrease in sales for the six months ended June 30, 2017, compared to the six months ended June 30, 2016.

 

Operating Expenses

 

The operating expenses for the quarter ended June 30, 2017, were $319,556 compared to $228,936 for the quarter ended June 30, 2016. The increase in operating expenses for the quarter ended June 30, 2017, compared to the quarter ended June 30, 2016, is due to the addition of the restaurant. There was no restaurant in the same quarter last year and comparing the operating expenses without the restaurant there was a decrease of $48,375 in expenses for the quarter ended June 30, 2017, compared to the quarter ended June 30, 2016. The operating expenses for the six months ended June 30, 2017, were $636,764 compared to $412,704 for the six months ended June 30, 2016. The increase in operating expenses for the six months ended June 30, 2017, compared to the six months ended June 30, 2016, again, is due to the addition of the restaurant. Taking the restaurant out of the equation there would have been a decrease in operating expenses of $52,162 for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

 

Net Loss from Operations:

 

The net loss from operations for the quarter ended June 30, 2017, was $249,345 compared to a net loss from operations of $161,662 for the quarter ended June 30, 2016. The increase in the net loss from operations for current quarter compared to the same quarter last year is due to the addition of the restaurant. The Net Operating Loss for the restaurant operations for the quarter ended June 30, 2017, is $160,902 which when deducted from the total loss for the quarter leaves a net operating loss of $88,443 for the non-restaurant operations. Based on the fact there was no restaurant last year for this same quarter means there was a decrease in the net loss from operations of $73,219 when the restaurant is excluded for the quarter ended June 30, 2017, compared to the quarter ended June 30, 2016. The net loss from operations for the six months ended June 30, 2017, was $531,946 compared to a net loss from operations of $259,950 for the six months ended June 30, 2016. The loss from the restaurant operations for the six months ended June 30, 2017, is $284,244. Again, there was no restaurant for the comparative 6-month period last year so by excluding this loss from the net loss this year there would be a slight decrease in the net loss from operations for the six months ended June 30, 2017, compared to the six months ended June 30, 2016.

 

Interest Expense:

 

Interest expense for the quarter ended June 30, 2017, was $13,477, compared to $4,709, for the quarter ended June 30, 2016. The amount of this interest that is associated with related party interest is $10,263 for the quarter ended June 30, 2017, and $2,528 for the quarter ended June 30, 2016. Interest expense for the six months ended June 30, 2017, was $21,444, compared to $9,432, for the six months ended June 30, 2016. The amount of this interest that is associated with related party interest is $16,722 for the six months ended June 30, 2017, and $5,656 for the six months ended June 30, 2016.

  

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Net Loss:

 

Net loss before taxes for the quarter ended June 30, 2017, was $262,822, compared to a loss of $165,350 for the quarter ended June 30, 2016. The larger loss for current quarter compared to the same quarter last year is due to the addition of the restaurant. The loss for the restaurant for the quarter ended June 30, 2017, is $163,978 which when deducted from the total loss for the quarter ended June 30, 2017, leaves a loss of $98,844. The $98,844 is $66,508 less than the quarter ended June 30, 2016, loss of $165,350, which also did not include the restaurant. Net loss before taxes for the six months ended June 30, 2017, was $553,069 compared to a net loss before income tax of $268,361 for the six months ended June 30, 2016. Again, the restaurant which was not open in 2016, comprised $288,255 of the loss for the six months ended June 30, 2017, which when deducted from the loss for the six months ended June 30, 2017, leaves a loss slightly lower than the loss for the six months ended June 30, 2016.

 

Taxes:

 

Taxes for the quarter ended June 30, 2017, are $800 compared to taxes of $0 for the quarter ended June 30, 2016. Taxes for the current quarter are State taxes paid to the State of California. Taxes for the six months ended June 30, 2017, are $3,300 compared to taxes of $0 for the six months ended June 30, 2016. Taxes for the six months ended June 30, 2017, are State taxes paid to the State of California

 

Net Loss after taxes:

 

Net loss after taxes for the quarter ended June 30, 2017, are $263,622 compared to a loss of $165,350 for the quarter ended June 30, 2016. Net loss after taxes for the six months ended June 30, 2017, are $556,369 compared to a loss of $268,361 for the six months ended June 30, 2016.

  

Liquidity and Capital Resources

 

Working Capital

 

   Jun 30,
2017
   Dec 31,
2016
 
Current Assets  $759,544   $572,250 
Current Liabilities  $1,923,358   $1,039,216 
Working Capital (Deficit)  $(1,163,814)  $(466,966)

  

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Cash Flows

 

  

For the
six months ended
Jun 30,
2017

  

For the
six months ended
Jun 30,
2016

 
Cash used (in) by Operating Activities  $(698,901)  $(157,190)
Cash provided in Investing Activities  $(131,244)  $(24,520)
Cash provided in Financing Activities  $755,141   $(7,379)
Increase (Decrease) in Cash  $(75,004)  $(189,089)

 

Cash Used In Operating Activities

 

Our net loss for the period ended June 30, 2017, of $556,369 along with the increase in receivables o $152,105 was the main contributing factor for our negative operating activities.

 

Cash from Financing Activities

 

During the quarter ended June 30, 2017, cash provided by financing activities was $755,141 compared to cash used in financing activities of $7,379 for the quarter ended June 30, 2016. During the quarter ended June 30, 2017, the Company received cash of $609,035 from related party notes, $186,041 from a line of credit and paid back notes payable in the amount of $39,935. During the quarter ended June 30, 2016, the Company received cash of $17,496 from related party notes, $15,000 from notes payable and paid back $39,875 in notes payable.

 

Off-Balance Sheet Arrangements

 

There are no off-balance sheet arrangements between the Company and any other entity that have, or are reasonably likely to have, a current or future effect on the financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. 

 

Going Concern

 

The accompanying annual financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of June 30, 2017, the Company has an accumulated deficit of $3,118,406. The Company requires capital for its contemplated operational and marketing activities. The Company’s ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties

  

Impact of Inflation

 

The business will have to absorb any inflationary increases on development costs in the short-term, with the expectation that it will be able to pass inflationary increases on costs on to customers through price increases hence management does not expect inflation to be a significant factor in our business.

 

Critical Accounting Policies

 

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

  

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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.  Some of the critical accounting estimates are detailed below.

 

Critical Accounting Estimates and New Accounting Pronouncements

 

Critical Accounting Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements.  Management considers an accounting estimate to be critical if:

 

  it requires assumptions to be made that were uncertain at the time the estimate was made, and

 

  changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.

 

The Company bases its estimates and judgments on our experience, our current knowledge, and our beliefs of what could occur in the future, our observation of trends in the industry, information provided by our customers and information available from other sources. Actual results may differ from these estimates under different assumptions or conditions.  We have identified the following accounting policies and estimates as those that we believe are most critical to our financial condition and results of operations and that require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties: share-based compensation expense, income taxes, and derivative financial instruments. 

 

Share-Based Compensation Expense.  The Company plans to calculate share-based compensation expense for option awards and warrant issuances ("Share-based Awards") based on the estimated grant/issue-date fair value using the Black-Scholes-Merton option pricing model ("Black-Sholes Model"), and recognize the expense on a straight-line basis over the vesting period, net of estimated forfeitures.   The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the vesting period of the Share-based Award in determining the fair value of Share-based Awards.  Although we believe our assumptions used to calculate share-based compensation expense are reasonable, these assumptions can involve complex judgments about future events, which are open to interpretation and inherent uncertainty.  In addition, significant changes to our assumptions could significantly impact the amount of expense recorded in a given period.

 

Income Taxes. As part of the process of preparing our financial statements, the Company will be required to estimate income taxes in each of the jurisdictions in which we operate. Our provision for income taxes is determined using the asset and liability approach to account for income taxes. A current liability is recorded for the estimated taxes payable for the current year. Deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which the timing differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates or tax laws are recognized in the provision for income taxes in the period that includes the enactment date.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount more-likely-than-not to be realized.  Changes in valuation allowances will flow through the statement of operations unless related to deferred tax assets that expire unutilized or are modified through translation, in which case both the deferred tax asset and related valuation allowance are similarly adjusted. Where a valuation allowance was established through purchase accounting for acquired deferred tax assets, any future change will be credited or charged to income tax expense.

 

The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws.  In the ordinary course of our business, there are transactions and calculations for which the ultimate tax determination is uncertain.  In spite of our belief that we have appropriate support for all the positions taken on our tax returns, we acknowledge that certain positions may be successfully challenged by the taxing authorities.  We determine the tax benefits more likely than not to be recognized with respect to uncertain tax positions.  Although we believe our recorded tax assets and liabilities are reasonable, tax laws and regulations are subject to interpretation and inherent uncertainty; therefore, our assessments can involve both a series of complex judgments about future events and rely on estimates and assumptions.  Although we believe these estimates and assumptions are reasonable, the final determination could be materially different than that which is reflected in our provision for income taxes and recorded tax assets and liabilities.

  

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New Accounting Pronouncements

 

The FASB issued ASU 2016-09 in March 2016, to provide guidance to entities that issue share-based payment awards to their employees as part of its Simplification Initiative. The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification in this Update were identified through outreach for the Simplification Initiative and involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

 

The FASB issued ASU 2015-11 in July, 2015, to provide guidance on how an entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this Update more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this Update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period.

 

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders' equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company adopted ASU 2014-10 during the quarter ended December 31, 2014, thereby no longer presenting or disclosing any information required by Topic 915.

 

Management does not believe there would be a material effect on the accompanying financial statements had any other recently issued but not yet effective accounting standards been adopted in the current period.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, and as discussed in greater detail below, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, disclosure controls and procedures were effective:

 

  to give reasonable assurance that the information required to be disclosed in reports that are file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and
     
  to ensure that information required to be disclosed in the reports that are file or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our CEO and our Treasurer, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting. There are no changes in internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

  

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None

 

ITEM 1A. RISK FACTORS

 

Not applicable.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Based on the completion of the asset purchase agreement and share exchange agreement by and between EBC and Bayhawk, on December 2, 2015, Premier Stock Transfer accepted on behalf of EBC 4,033,863 Bayhawk shares and issued 4,033,863 shares of EBC common stock upon the terms and subject to the conditions set forth in the Asset Purchase and Share Exchange Agreement by and between EBC and Bayhawk, dated October 15, 2014, as amended (the “Asset Purchase Agreement”). EBC filed a copy of the Asset Purchase Agreement as an annex to a combination registration statement and proxy statement on Form S-4. The Bayhawk shares were validly tendered pursuant to the Exchange Offer and not withdrawn.

 

The 4,033,863 shares exchanged per the agreement along with the 436,000 shares that Evans Brewing Company held brings the total outstanding to 4,469,863. Bayhawk had a total of 4,884,624 shares of its common stock outstanding as of December 31, 2014, and as of the closing of the Share Exchange, but 414,761 shares were not tendered in the Share Exchange, so the total shares outstanding shares of EBC common stock at December 31, 2015, was 4,469,863. During the year ended December 31, 2016, the Company added 287,600 shares for cash and services, bringing the total shares outstanding as of December 31, 2016, to 4,757,463. During the six months ended June 30, 2017, the cancelled shares were adjusted by issuing 16,830 shares based on finding shares that had been exchanged originally but lost in the process of the exchange by the transfer agent. The total shares issued and outstanding as of June 30, 2017, are 4,784,293.  

 

ITEM 3. DEFAULTS UPON SENIOR DEBT

 

None

 

ITEM 4. [Removed and Reserved]

 

None

 

ITEM 5. OTHER INFORMATION

 

On July 10, 2017, Kevin Hammons resigned his position as Director of Brewing of Evans Brewing Company. Kevin also resigned his position on the board of directors at the same time. On August 2, 2017, Kenneth Wiedrich resigned his position on the board of directors. 

 

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PART III

 

ITEM 1. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

EXHIBIT INDEX

 

Exhibit
Number
  Description    
         
2.1   Asset Purchase and Share Exchange Agreement (included as Annex A to the proxy statement/registration statement forming part of this registration statement).   (1)
         
3.1   Certificate of Incorporation of Evans Brewing Company Inc. (incorporated by reference to Exhibit 3.1 to EBC’s Registration Statement on Form 10, filed July 3, 2013).   (1)
         
3.2   Certificate of Amendment to Certificate of Incorporation, dated April 15, 2014 (incorporated by reference to Exhibit 3.3 to EBC’s Current Report on Form 8-K filed April 22, 2014).   (1)
         
3.3   By-Laws of EBC (incorporated by reference to Exhibit 3.2 to EBC’s Registration Statement on Form 10, filed July 3, 2013).   (1)
         
4.1   Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to EBC’s Registration Statement on Form 10, filed July 3, 2013).   (1)
         
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   Filed herewith
         
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   Filed herewith
         
32.1   Certification of Chief Executive pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   Filed herewith
         
32.2   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   Filed herewith
         
101.INS*    XBRL Instance Document   Filed herewith
         
101.SCH*    XBRL Taxonomy Extension Schema Document   Filed herewith
         
101.CAL*    XBRL Taxonomy Extension Calculation Linkbase Document   Filed herewith
         
101.LAB*    XBRL Taxonomy Extension Label Linkbase Document   Filed herewith
         
101.PRE*    XBRL Taxonomy Extension Presentation Linkbase Document   Filed herewith
         
101.DEF*    XBRL Taxonomy Extension Definition Linkbase Definition   Filed herewith

 

(1) Incorporated by reference from Evans Brewing Company’s Annual Report on Form 10-K for Fiscal Year Ended December 31, 2015 filed on April 19, 2016.  

 

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SIGNATURES

 

Pursuant to the requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  EVANS BREWING COMPANY INC.
     
Dated: August 14, 2017 By:  /s/ Michael J. Rapport
  Name: Michael J. Rapport
  Title: Chief Executive Officer (Principal Executive Officer) and Chairman of the Board of Directors
     
  By: /s/ Kenneth C. Wiedrich
  Name: Kenneth C. Wiedrich
  Title: Chief Financial Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ Michael J. Rapport   Chief Executive Officer, Chairman of the Board   August 14, 2017
Michael J. Rapport         
         
/s/ Evan Rapport   Vice President   August 14, 2017
Evan Rapport         
         
/s/ Mark Lamb   Director   August 14, 2017
Mark Lamb         
         
/s/ Roy Roberson   Director   August 14, 2017
Roy Roberson         
         
/s/ Joseph Ryan   Director   August 14, 2017
Joseph Ryan        

   

 

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