The accompanying notes are an integral part
of these financial statements.
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 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.
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 $3,470,536. 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 September 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 September 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 September 30, 2017 and December 31, 2016:
|
|
Jun 30,
|
|
|
Dec 31,
|
|
|
|
2017
|
|
|
2016
|
|
Restaurant Inventory
|
|
$
|
19,927
|
|
|
$
|
25,097
|
|
Raw materials
|
|
|
33,744
|
|
|
|
38,403
|
|
Work in process
|
|
|
34,041
|
|
|
|
46,168
|
|
Finished goods
|
|
|
60,682
|
|
|
|
128,933
|
|
Keg inventory
|
|
|
22,774
|
|
|
|
18,069
|
|
Less: reserve for obsolete inventory
|
|
|
(16,500
|
)
|
|
|
(16,500
|
)
|
|
|
|
|
|
|
|
|
|
Total Inventory
|
|
$
|
154,668
|
|
|
$
|
240,170
|
|
Prepaid Expenses
For the quarter ended September 30, 2017,
prepaid expense consists of $2,000 for prepaid state income tax, $23,600 in prepaid rent for a restaurant under construction in
Huntington Beach and $500 for prepayment of food for the Food Truck. 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 September 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
As of September 30, 2017, the Company has
two liquor licenses totaling $134,368. The license for Evans Public House in Fullerton cost $50,000 and the cost of the license
for the Evans Public House in Huntington Beach, which will open soon, cost $84,368. The value of the liquor licenses is greater
than what the Company paid for them and so the costs are not being amortized.
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
|
|
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 nine months ended September 30, 2017, and September 30, 2016, was $128,024 and
$46,991, 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 September 30,
2017, and December 31, 2016, EBC had refundable deposits in the amounts of $92,658 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 September 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 September 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 nine months ended September 30, 2017, and for the nine
months ended September 30, 2016, excise taxes amounted to approximately $69,077and $90,805 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.
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.
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 September
30, 2017, and December 31, 2016:
|
|
Sep 30,
2017
|
|
|
Dec 31,
2016
|
|
|
|
|
|
|
|
|
Brewery machinery and equipment
|
|
$
|
787,596
|
|
|
$
|
757,438
|
|
Keg asset
|
|
|
311,596
|
|
|
|
311,596
|
|
Restaurant assets
|
|
|
1,041,421
|
|
|
|
821,745
|
|
Software
|
|
|
4,320
|
|
|
|
4,320
|
|
Vehicles
|
|
|
63,097
|
|
|
|
63,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,208,030
|
|
|
|
1,958,196
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
(857,078
|
)
|
|
|
(729,055
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
1,350,952
|
|
|
$
|
1,229,141
|
|
NOTE 4 - NOTE PAYABLE
Note payable balance as of September 30,
2017, was $50,132 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 September 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
|
|
$
|
50,132
|
|
|
$
|
106,531
|
|
Interest expense recorded on the note for
the nine months ended September 30, 2017, was $2,619 compared to $5,683 for the nine months ended September 30, 2016.
NOTE 5 - NOTES PAYABLE- LINE OF
CREDIT
The Company has a line of credit with City
National Bank in the amount of $300,000 with a variable interest rate that was 5.25% as of September 30, 2017. The balance on the
line of credit as of September30, 2017, was $291,041. 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 nine months ended September 30, 2017, the Company accrued $1,121 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 $4,418 as of September 30, 2017. Mr. Rapport has extended the due date of the note to December 31, 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 September 30, 2017, the Company accrued $5,323 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 $8,326. Mr. Rapport has also extended the due date
of this note to December 31, 2017, as well.
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 September 30, 2017, was $1,047. The accrued interest
on this note as of December 31, 2016, was $763. Mr. Rapport has extended the due date of this note to December 31, 2017, as well.
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 September 30, 2017, the Company accrued $7,749 of interest for this note. As of the year ended December 31, 2016, the Company
accrued $4,301 of interest on this note. Mr. Rapport has extended the due date of this note to December 31, 2017, as well.
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 nine months ended September 30, 2017, is $4,669. 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 September 30, 2017, is $400,000 and the total amount of accrued interest on the note is $5,378.
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 nine
months ended September 30, 2017, the Company accrued $697 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 nine
months ended September 30, 2017, the Company accrued $4,103 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 nine months ended September 30, 2017, EBC Public House accrued interest on the note in the amount of $1,278.
On April 1, 2017, Mr. Rapport advance
EBC Public House $1,617 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 nine months ended September 30, 2017, EBC Public House accrued interest on the note in
the amount of $24.
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 nine
months ended September 30. 2017, EBC Public House drew done this note by $250,000. The accrued interest on this note for the nine
months ended September 30, 2017, is $1,502.
On August 2, 2017, Mr. Rapport’s
loaned the Company $25,000. The note is unsecured, has a term of one year and bears interest at the rate of 6% per annum. For the
nine months ended September 30, 2017, the Company accrued $242 of interest for this note.
On August 11, 2017, Mr. Rapport executed
a note in the amount of $300,000 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 nine
months ended September 30. 2017, EBC Public House drew done this note by $239,183. The accrued interest on this note for the nine
months ended September 30, 2017, is $308.
On August 24, 2017, Mr. Rapport’s
loaned the Company $40,963. The note is unsecured, has a term of one year and bears interest at the rate of 6% per annum. For the
nine months ended September 30, 2017, the Company accrued $249 of interest for this note.
On August 31, 2017, Mr. Rapport’s
loaned the Company $25,000. The note is unsecured, has a term of one year and bears interest at the rate of 6% per annum. For the
nine months ended September 30, 2017, the Company accrued $123 of interest for this note.
On September 11, 2017, Mr. Rapport’s
loaned the Company $13,000. The note is unsecured, has a term of one year and bears interest at the rate of 6% per annum. For the
nine months ended September 30, 2017, the Company accrued $40 of interest for this note.
Accrued Interest
As of the period ended September 30, 2017,
the Company has an accrued interest balance of $42,646 for the total notes due Mr. Rapport of $1,736,450. 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.
NOTE 7 - STOCKHOLDERS’ EQUITY
Preferred Stock
Preferred Stock
- During the
nine months ended September 30, 2017, the Company issued no shares of preferred stock. During the year ended December 31, 2016,
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 nine months ended September, 2017, the Company issued
16,830 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 September
30, 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 nine months ended September
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 as of September 30, 2017.
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:
|
|
Sep 30,
2017
|
|
|
Sep 30,
2016
|
|
Weighted average number of shares
|
|
|
4,779,468
|
|
|
|
4,590,833
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(908,499
|
)
|
|
$
|
(698,026
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
$
|
(0.19
|
)
|
|
$
|
(0.15
|
)
|
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 September 30, 2017, and December
31, 2016.
As of September 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 September 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.
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
September 30,
|
|
|
2017
|
|
2016
|
Sales
|
|
|
|
|
|
|
|
|
Brewery and Malt liquor operations
|
|
$
|
1,208,475
|
|
|
$
|
1329,430
|
|
Evans Public Restaurant
|
|
|
582,327
|
|
|
|
-
|
|
Corporate
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
1,790,802
|
|
|
$
|
1,329,430
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
Brewery and Malt liquor operations
|
|
$
|
135,158
|
|
|
$
|
327,027
|
|
Evans Public Restaurant
|
|
|
(21,414
|
)
|
|
|
-
|
|
Corporate
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
113,745
|
|
|
$
|
327,027
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from operations
|
|
|
|
|
|
|
|
|
Brewery and Malt liquor operations
|
|
$
|
(281,782
|
)
|
|
$
|
(427,049
|
)
|
Evans Public Restaurant
|
|
|
(462,370
|
)
|
|
|
-
|
|
Corporate
|
|
|
(96,611
|
)
|
|
|
(260,356
|
)
|
|
|
$
|
(840,762
|
)
|
|
$
|
(687,405
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
Brewery and Malt liquor operations
|
|
$
|
19,719
|
|
|
$
|
8,431
|
|
Evans Public Restaurant
|
|
|
9,710
|
|
|
|
-
|
|
Corporate
|
|
|
10,416
|
|
|
|
7,353
|
|
|
|
$
|
39,845
|
|
|
$
|
15,784
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Brewery and Malt liquor operations
|
|
$
|
321
|
|
|
$
|
5,163
|
|
Evans Public Restaurant
|
|
|
-
|
|
|
|
-
|
|
Corporate
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
321
|
|
|
$
|
5,163
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
Brewery and Malt liquor operations
|
|
$
|
(301,179
|
)
|
|
$
|
(430,317
|
)
|
Evans Public Restaurant
|
|
|
(473,679
|
)
|
|
|
-
|
|
Corporate
|
|
|
(108,727
|
)
|
|
|
(267,709
|
)
|
|
|
$
|
(883,585
|
)
|
|
$
|
(698,026
|
)
|
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 nine
months ended September 30, 2017, and the nine months ended September 30, 2016, was $52,152 and $55,041, respectively.
Minimum future lease payments are as follows:
2017
|
|
|
8,472
|
|
2018
|
|
|
33,889
|
|
2019
|
|
|
2,824
|
|
|
|
|
|
|
Total
|
|
$
|
45,185
|
|
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 nine
months ended September 30, 2017, and the nine months ended September 30, 2016, was $41,400 and $41,400, respectively.
Minimum future lease payments are as follows:
2017
|
|
|
13,800
|
|
2018
|
|
|
55,200
|
|
2019
|
|
|
55,200
|
|
2020
|
|
|
32,200
|
|
|
|
|
|
|
|
|
$
|
156,400
|
|
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 nine
months ended September 30, 2017, and the nine months ended September 30, 2016, was $41,400 and $0, respectively.
Minimum future lease payments are as follows:
2017
|
|
|
13,800
|
|
2018
|
|
|
55,200
|
|
2019
|
|
|
55,200
|
|
2020
|
|
|
55,200
|
|
2021
|
|
|
55,200
|
|
|
|
|
|
|
|
|
$
|
234,600
|
|
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
|
|
|
18,800
|
|
2018
|
|
|
31,333
|
|
|
|
|
|
|
|
|
$
|
50,133
|
|
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
|
|
|
1840
|
|
2018
|
|
|
747
|
|
|
|
|
|
|
|
|
$
|
2,587
|
|
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.
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 September 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 September 30, 2017, three customers
accounted for approximately 46%, 41%, and 11%, 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 September 30, 2017, five vendors accounted
for approximately 13%, 7%, 6%, 5% and 1%, 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 nine months ended
September 30, 2017, five vendors accounted for approximately 38%, 4%, 2%, 2% and 2% of total purchases. For the year ended December
31, 2016, two vendors accounted for approximately 44% and 8% of total purchases.
Sales
At September 30, 2017, four customers
accounted for approximately 29%, 16%, 5%, 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 – RESTATEMENT
The
financial statements for the quarter ended September 30, 2017, have been restated to correct payroll expense. The payroll accrual
was reduced, and other income was adjusted. Payroll expense was reduced by adjusting the payroll accrual by $25,629 and payroll
expense was increased by 11,075 by moving a prior year payroll adjustment to other income and taking the credit out of payroll.
EVANS
BREWING COMPANY, INC.
RESTATED
CONSOLIDATED BALANCE SHEETS
September
30, 2017
|
|
Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
As Restated
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Accounts receivable
|
|
|
162,962
|
|
|
|
-
|
|
|
|
162,962
|
|
Misc receivable
|
|
|
400,000
|
|
|
|
-
|
|
|
|
400,000
|
|
Inventory
|
|
|
154,668
|
|
|
|
-
|
|
|
|
154,668
|
|
Deposits- short term
|
|
|
47,203
|
|
|
|
-
|
|
|
|
47,203
|
|
Prepaid expense
|
|
|
26,100
|
|
|
|
-
|
|
|
|
26,100
|
|
Total Current Assets
|
|
|
790,933
|
|
|
|
-
|
|
|
|
790,933
|
|
Fixed Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment net of depreciation
|
|
|
1,350,952
|
|
|
|
-
|
|
|
|
1,350,952
|
|
Total Fixed Assets
|
|
|
1,350,952
|
|
|
|
-
|
|
|
|
1,350,952
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquor License
|
|
|
134,368
|
|
|
|
-
|
|
|
|
134.568
|
|
Deposits
|
|
|
67,500
|
|
|
|
-
|
|
|
|
67.500
|
|
Deferred tax assets
|
|
|
11,668
|
|
|
|
-
|
|
|
|
11.668
|
|
Total Other Assets
|
|
|
213,536
|
|
|
|
-
|
|
|
|
213.536
|
|
Total Assets
|
|
$
|
2,355,421
|
|
|
$
|
-
|
|
|
|
2.355.421
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdraft
|
|
|
15,451
|
|
|
|
-
|
|
|
|
15,451
|
|
Accounts payable
|
|
|
98,435
|
|
|
|
716
|
|
|
|
99,151
|
|
Accrued interest
|
|
|
42,646
|
|
|
|
-
|
|
|
|
42,646
|
|
Accrued salary
|
|
|
43,435
|
|
|
|
(25,629
|
)
|
|
|
17,806
|
|
Deferred revenue- gift cards
|
|
|
7,045
|
|
|
|
-
|
|
|
|
7,045
|
|
Payable- credit cards
|
|
|
849
|
|
|
|
-
|
|
|
|
849
|
|
Refundable deposits
|
|
|
92,658
|
|
|
|
-
|
|
|
|
92,658
|
|
Auto loan- current portion
|
|
|
3,260
|
|
|
|
-
|
|
|
|
3,260
|
|
Notes payable- current portion
|
|
|
50,132
|
|
|
|
-
|
|
|
|
50,132
|
|
Notes payable- line of credit
|
|
|
291,041
|
|
|
|
-
|
|
|
|
291,041
|
|
Notes payable to related party
|
|
|
1,736,450
|
|
|
|
-
|
|
|
|
1,736,450
|
|
Total Current Liabilities
|
|
|
2,381,402
|
|
|
|
(24,913
|
)
|
|
|
2,356,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto loan- long term portion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Notes payable – long term portion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Deferred tax liability
|
|
|
11,668
|
|
|
|
-
|
|
|
|
11,668
|
|
Total Liabilities
|
|
|
2,393,070
|
|
|
|
(24,913
|
)
|
|
|
2,368,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, authorized 10,000,000 shares, series
A, $0.0001 par value, 1,000,000 issued and outstanding as of September 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 September 30, 2017, and 4,757,463 shares issued and outstanding as of December 31,
2016, respectively
|
|
|
479
|
|
|
|
-
|
|
|
|
479
|
|
Additional Paid in Capital
|
|
|
3,432,308
|
|
|
|
-
|
|
|
|
3,432,308
|
|
Accumulated Deficit
|
|
|
(3,470,538
|
)
|
|
|
24,913
|
|
|
|
(3,445,623
|
)
|
Total Stockholders’ Equity
|
|
|
(37,649
|
)
|
|
|
24,913
|
|
|
|
(12,736
|
)
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
2,355,421
|
|
|
$
|
-
|
|
|
|
2,355,421
|
|
EVANS
BREWING COMPANY, INC.
RESTATED
CONSOLIDATED STATEMENTS OF OPERATIONS
September
30, 2017
|
|
Previously
Reported
|
|
|
Adjustments
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
NET REVENUES
|
|
$
|
1,790,802
|
|
|
$
|
-
|
|
|
$
|
1,790,802
|
|
COST OF REVENUES
|
|
|
1,693,908
|
|
|
|
(68,851
|
)
|
|
|
1,677,057
|
|
GROSS PROFIT
|
|
|
96,894
|
|
|
|
16,851
|
|
|
|
113,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional services
|
|
|
202,028
|
|
|
|
-
|
|
|
|
202,028
|
|
Administrative salaries
|
|
|
228,244
|
|
|
|
(7,947
|
)
|
|
|
220,297
|
|
Selling expense
|
|
|
238,909
|
|
|
|
(144
|
)
|
|
|
238,765
|
|
General and administrative expense
|
|
|
293,389
|
|
|
|
27
|
|
|
|
293,416
|
|
Total Operating Expenses
|
|
|
962,570
|
|
|
|
(8,064
|
)
|
|
|
954,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) from continuing operations
|
|
|
(865,676
|
)
|
|
|
24,914
|
|
|
|
(840,762
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
321
|
|
|
|
-
|
|
|
|
321
|
|
Interest expense
|
|
|
(39,845
|
)
|
|
|
-
|
|
|
|
(39,845
|
)
|
Total other income (expenses)
|
|
|
(39,523
|
)
|
|
|
-
|
|
|
|
(39,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) before income taxes
|
|
|
(905,199
|
)
|
|
|
24,914
|
|
|
|
(880,285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
3,300
|
|
|
|
-
|
|
|
|
3,300
|
|
Net (Loss)
|
|
$
|
(908,499
|
)
|
|
$
|
24,914
|
|
|
$
|
(883,585
|
)
|
Earnings (loss) per share;
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.19
|
)
|
|
$
|
-
|
|
|
$
|
8
|
)
|
Weighted average number of shares outstanding
|
|
|
4,779,468
|
|
|
|
-
|
|
|
|
4,779,468
|
|
EVANS
BREWING COMPANY, INC
RESTATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
September
30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(908,499
|
)
|
|
$
|
24,914
|
|
|
$
|
(883,585
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
19,997
|
|
|
|
-
|
|
|
|
19,997
|
|
Depreciation and amortization
|
|
|
128,023
|
|
|
|
-
|
|
|
|
128,023
|
|
Liquor license
|
|
|
(84,368
|
)
|
|
|
-
|
|
|
|
(84,368
|
)
|
EBC Public House acquisition- prior year retained earnings
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Preferred shares issued for EBC Public House
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Changes in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease in prepaid expense
|
|
|
(15,533
|
)
|
|
|
-
|
|
|
|
(15,533
|
)
|
(Increase) Decrease in prepaid deposits
|
|
|
(32,303
|
)
|
|
|
-
|
|
|
|
(32,303
|
)
|
(Increase) Decrease in inventory
|
|
|
85,502
|
|
|
|
-
|
|
|
|
85,502
|
|
(Increase) Decrease in accounts receivable
|
|
|
(369,746
|
)
|
|
|
-
|
|
|
|
(369,746
|
)
|
Increase (decrease) in refundable deposits
|
|
|
(14,909
|
)
|
|
|
-
|
|
|
|
(14,909
|
)
|
Increase (decrease) in accounts payable
|
|
|
(51,787
|
)
|
|
|
716
|
|
|
|
(51,071
|
)
|
Increase (decrease) in accrued expenses
|
|
|
39,618
|
|
|
|
(25,630
|
)
|
|
|
13,988
|
|
Net Cash Used by Operating Activities
|
|
|
(1,204,005
|
)
|
|
|
-
|
|
|
|
(1,204,005
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of fixed assets
|
|
|
(249,834
|
)
|
|
|
-
|
|
|
|
(249,834
|
)
|
Net Cash used in Investing Activities
|
|
|
(249,834
|
)
|
|
|
-
|
|
|
|
(249,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ban overdrafts
|
|
|
15,451
|
|
|
|
-
|
|
|
|
15,451
|
|
Proceeds from line of credit
|
|
|
248,041
|
|
|
|
-
|
|
|
|
248,041
|
|
Additional contributions from shareholders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from Notes payable- related party
|
|
|
1,132,253
|
|
|
|
-
|
|
|
|
1,132,253
|
|
Payment on notes payable
|
|
|
(59,903
|
)
|
|
|
-
|
|
|
|
(59,903
|
)
|
Net Cash Provided by Financing Activities
|
|
|
1,335,842
|
|
|
|
-
|
|
|
|
1,335,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
(117,997
|
)
|
|
|
-
|
|
|
|
(117,997
|
)
|
Cash at Beginning of Period
|
|
|
117,997
|
|
|
|
-
|
|
|
|
117,997
|
|
Cash at End of Period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
NOTE
15 - SUBSEQUENT EVENT
Subsequent
events have been evaluated through December 26, 2017, which is the date the financial statements were available to be issued.
|
1.
|
Subsequent
to September 30, 2017, the Company issued 115,707 shares of common stock for services.
|
|
2.
|
Subsequent
to September 30, 2017, the Company entered into a material definitive agreement with
I-OPN Communications, Ltd, wherein, based on the Agreement and Plan of Merger and Reorganization,
I-On Communications Ltd will become the successor Company for accounting and reporting
purposes. Subsequent to the closing of the merger Michael Rapport will take control of
the Evans Brewing Companies in exchange for the assumption of all outstanding liabilities
of the Company and the cancellation of the debt owed by the Company to Mr. Rapport.
|