PROXY STATEMENT
_______________________________
Important Notice Regarding
the Availability of Proxy Materials for the Annual Meeting of
Stockholders to be held on July 10, 2017
: This notice of
annual meeting of stockholders, the proxy statement, and our annual
report on Form 10-K for 2016 are available at
http://www.evansbrewco.com/investors/
.
The
enclosed proxy is solicited on behalf Evans Brewing Company Inc., a
Delaware corporation, by its Board of Directors (the
“Board”) for use at its 2017 Annual Meeting of
Stockholders (the “Annual Meeting”) to be held at
11:00 a.m. local time on July 10, 2017, or at any adjournments
or postponements thereof, for the purposes set forth in this proxy
statement and in the accompanying notice. The Annual Meeting will
be held at The Public House, 138 W. Commonwealth Ave., Fullerton,
CA 92832.
These
proxy materials were first sent or given on or about June 1, 2017
to all stockholders entitled to vote at the Annual Meeting.
Stockholders who owned Evans Brewing Company Inc. Common Stock at
the close of business on May 15, 2017 (the “Record
Date”) are entitled to receive notice of, attend and vote at
the Annual Meeting. On the Record Date, there were
4,784,293
shares of Common Stock outstanding.
We
will provide, without charge, additional copies of our annual
report on Form 10-K to each stockholder of record as of the
Record Date that requests a copy in writing. Any exhibits listed in
the annual report on Form 10-K report also will be furnished
upon request at the actual expense we incur in furnishing such
exhibit. Any such requests should be directed to our Corporate
Secretary at our executive offices set forth above.
References to the “Company,” “Evans Brewing
Company,” “EBC”, “our,”
“us” or “we” mean Evans Brewing Company
Inc. and our subsidiaries.
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TABLE OF CONTENTS
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Page
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VOTING AND RELATED MATTERS
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2
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EXECUTIVE OFFICERS AND DIRECTORS
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5
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EXECUTIVE COMPENSATION
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10
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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13
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CERTAIN
TRANSACTIONS
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14
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
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14
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PRINCIPAL ACCOUNTANTS
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15
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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
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16
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PROPOSAL NO. 1 ELECTION OF DIRECTORS
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17
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PROPOSAL NO. 2 RATIFICATION OF APPOINTMENT OF KEENE RUAN, CPA,
PC
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18
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OTHER BUSINESS
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19
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ANNUAL REPORT ON FORM 10-K
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19
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STOCKHOLDER PROPOSALS
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19
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VOTING AND RELATED MATTERS
Voting Procedures
As a
stockholder of Evans Brewing Company, you have a right to vote on
certain business matters affecting us. The proposals that will be
presented at the Annual Meeting and upon which you are being asked
to vote are discussed below in the “Proposals” section.
Each share of Evans Brewing Company common stock you owned as of
the Record Date entitles you to one vote on each proposal presented
at the Annual Meeting.
Methods of Voting
You may
vote over the Internet, by telephone, by mail or in person at the
Annual Meeting. Please be aware that if you vote by telephone or
over the Internet, you may incur costs such as telephone and
Internet access charges for which you will be
responsible.
Voting over the
Internet.
You can vote
via the Internet. The website address for Internet voting is
provided on your proxy card. To vote via the Internet, you will
need to use the control number appearing on your proxy
card. You can use the Internet to transmit your voting
instructions up until 11:59 p.m. Eastern Time on July 9, 2017.
Internet voting is available 24 hours a day. If you vote via
the Internet, you do not need to vote by telephone or return a
proxy card.
Voting by Telephone
. You can vote
by telephone by calling the toll-free telephone number provided on
your proxy card. You will need to use the control number
appearing on your proxy card to vote by telephone. You may
transmit your voting instructions from any touch-tone telephone up
until 11:59 p.m. Eastern Time on July 9, 2017. Telephone voting is
available 24 hours a day. If you vote by telephone, you do not need
to vote over the Internet or return a proxy card.
Voting by Mail.
You can vote by marking, dating
and signing it, and returning it in the postage-paid envelope
provided. Please promptly mail your proxy card to ensure that it is
received prior to the closing of the polls at the Annual
Meeting
.
Voting in Person at the Meeting.
If you
attend the Annual Meeting and plan to vote in person, we will
provide you with a ballot at the Annual Meeting. If your shares are
registered directly in your name, you are considered the
stockholder of record and you have the right to vote in person at
the Annual Meeting. If your shares are held in the name of your
broker or other nominee, you are considered the beneficial owner of
shares held in street name. As a beneficial owner, if you wish to
vote at the Annual Meeting, you will need to bring to the Annual
Meeting a legal proxy from your broker or other nominee authorizing
you to vote those shares.
Revoking Your Proxy
You may
revoke your proxy at any time before it is voted at the Annual
Meeting. To do this, you must:
●
enter a new vote
over the Internet or by telephone, or by signing and returning a
replacement proxy card;
●
provide written
notice of the revocation to
our
Corporate Secretary at our principal executive office, 3815 S. Main
St., Santa Ana, CA 92707
; or
●
attend the Annual
Meeting and vote in person.
Quorum and Voting
Requirements
Stockholders of
record at the close of business on May 15, 2017 (the “Record
Date”), are entitled to receive notice and vote at the
meeting. On the Record Date, there were 4,784,293 issued and
outstanding shares of our Common Stock. Each holder of Common Stock
voting at the meeting, either in person or by proxy, may cast one
vote per share of Common Stock held on the Record Date on all
matters to be voted on at the meeting. Stockholders may not
cumulate votes in the election of directors.
The
presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote constitutes
a quorum for the transaction of business at the Annual Meeting.
Assuming that a quorum is present:
(1)
a plurality of the
shares present in person or represented by proxy at the Annual
Meeting and entitled to vote on the election of directors will be
required to elect Board nominees; and
(2)
the ratification of
the appointment of Kenne Ruan, CPA, PC as our independent
registered accounting firm for 2017 will be approved if a majority
of the shares of common stock present in person or represented by
proxy at the Annual Meeting and entitled to vote at the Annual
Meeting are voted in favor of such ratification.
Votes
cast by proxy or in person at the Annual Meeting will be tabulated
by the election inspectors appointed for the meeting, who will
determine whether a quorum is present. The election inspectors will
treat abstentions and broker non-votes (i.e., shares held by a
broker or nominee that are represented at the Annual Meeting, but
with respect to which such broker or nominee is not instructed to
vote on a particular proposal and does not have discretionary
voting power) as shares that are present for purposes of
determining the presence of a quorum. With regard to Proposal One,
broker non-votes and votes marked “withheld” will not
be counted towards the tabulations of votes cast on such proposal
presented to the stockholders, will not have the effect of negative
votes and will not affect the outcome of the election of the
directors. With regard to Proposal Two, abstentions will be counted
towards the tabulations of votes cast on such proposal presented to
the stockholders and will have the same effect as negative votes,
whereas broker non-votes will not be counted for purposes of
determining whether such proposal has been approved and will not
have the effect of negative votes.
If your
shares are held by a bank or broker in street name, it is important
that you cast your vote if you want it to count in the election of
directors and other non-routine matters. Voting rules may prevent
your bank or broker from voting your uninstructed shares on a
discretionary basis in the election of directors and other
non-routine matters. Accordingly, if your shares are held by a bank
or broker in street name and you do not instruct your bank or
broker how to vote in the election of directors or any other
non-routine matters, no votes will be cast on your
behalf.
Voting of Proxies
When a
proxy is properly executed and returned, the shares it represents
will be voted at the Annual Meeting as directed. If no
specification is indicated, the shares will be voted:
(1)
“for”
the election of each Board nominee set forth in this proxy
statement unless the authority to vote for such directors is
withheld;
(2)
“for”
the ratification of the appointment of Kenne Ruan, CPA, PC as our
independent registered accounting firm for 2017; and
(3)
at the discretion
of your proxies on any other matter that may be properly brought
before the Annual Meeting.
Voting Results
Voting results will be announced at the Annual
Meeting and published in a Current Report on Form 8-K that will be
filed with the Securities and Exchange Commission within four
business days after the Annual Meeting.
Householding of Proxy Materials
We are
sending only one annual report and proxy statement to certain
street-name stockholders who share a single address, unless we
received contrary instructions from any stockholder at that
address. This practice, known as “householding,” is
designed to reduce our printing and postage costs. However, if you
are residing at such an address and wish to receive a separate
annual report on Form 10-K or proxy statement in the future, you
may telephone our Corporate Secretary at (949) 442-7565 or write to
him at Evans Brewing Company Inc., 3815 S. Main St., Santa Ana, CA
92707. If you are receiving multiple copies of our annual report on
Form 10-K and proxy statement, you may request householding by
contacting the Corporate Secretary in the same manner.
Proxy Solicitation
We will
bear the cost of this solicitation. In addition, we may reimburse
brokerage firms and other persons representing beneficial owners of
shares for reasonable expenses incurred in forwarding solicitation
materials to such beneficial owners. Proxies also may be solicited
by our directors, officers or employees, personally, by telephone,
facsimile, Internet or other means, without additional
compensation. We may retain a proxy solicitor to assist in the
distribution of proxies and proxy solicitation materials, and in
the solicitation of proxies. Generally, the fee for such services
is approximately $20,000 plus expenses. If we do elect to retain a
proxy solicitor, we will pay the proxy solicitor reasonable and
customary fees. Except as described above, we do not presently
intend to solicit proxies other than by mail.
Important Notice
Regarding the Availability of Proxy Materials for the Annual
Meeting of Stockholders to be held on July 10,
2017
:
The notice of annual meeting of stockholders,
this proxy statement, and our annual report on Form 10-K for 2016
are available at
http://www.evansbrewco.com/investors/
.
EXECUTIVE OFFICERS AND DIRECTORS
Our
executive officers and directors and their ages as of March 31,
2017, are as follows:
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Name
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Age
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Position(s)
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Michael
J. Rapport*
†
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60
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President, Chief
Executive Officer, and Chairman of the Board
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Evan
Rapport*
^
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30
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Vice
President and Director
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Kenneth
Wiedrich *
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70
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Chief
Financial Officer and Director
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Kyle
Leingang
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33
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Secretary
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Roy
Robertson *
+^
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55
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Director
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Mark
Lamb*
+^†
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53
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Director
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Joe
Ryan*
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51
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Director
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Kevin
Hammons*
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33
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Director and
Director of Brewing
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*
Nominee for election to Board
+
Member of the Audit Committee
^
Member of the Nominating and Governance Committee
†
Member of the Compensation Committee
Michael J. Rapport
has served as our President, Chief Executive Officer, Secretary and
Chairman of the Board since 2013. He also serves as President of
Frontier Aluminum Corporation, an aluminum extruder company, since
1990. Additionally, Mr. Rapport was a Managing Partner of Tres
Hermanos, LLC. In 2011, Mr. Rapport and his son Evan Rapport
started Evans Premium Lager, which has gained international
attention, winning 15 awards for craft lagers. He received a B.A.
degree in Psychology from Antioch West University in 1979. We
believe Mr. Rapport’s qualifications to serve on our Board
include his experience in the beer industry and with Frontier
Aluminum Corporation.
Evan Rapport
has
served as our Vice President and as a member of our Board since
2013. He also served as a Managing Partner of Tres Hermanos, LLC.
In 2011, Mr. Rapport and his father, Michael Rapport, started Evans
Premium Lager.
We
believe Mr. Rapport’s qualifications to serve on our Board
include his experience in the beer industry and knowledge of the
Company's day-to-day operations.
Kenneth Wiedrich
has
served on our Board and as our Chief Financial Officer since 2016.
Mr. Wiedrich is a Senior level Executive with extensive hands-on
experience in management, operational accounting, reporting for
public companies, finance functions and in dealing with boards of
directors, banks, attorneys, audit firms and the SEC. He has been
the CFO of a number of small public companies, some of which were
start-up companies, which he helped through the start-up phase of
their operation. He also has experience with government cost
accounting methods and all related government acquisition
regulations.
We
believe Mr. Wiedrich’s qualifications to serve on our Board
include his private and public company finance, accounting and
audit expertise.
Kyle
Leingang
has served as our secretary since 2016. Mr.
Leingang is a corporate lawyer with Stradling Yocca Carlson and
Rauth, P.C. and has knowledge and experience with numerous clients
and transactions in the craft beer industry.
Roy Robertson
has
served on our Board since 2013 and was on the Board of Bayhawk Ales
from 1994 to 2013. Mr. Robertson is a professional engineer in the
land development industry. He manages real estate development
projects and has held senior management positions at several public
and private businesses that serve the land development industry. He
is a post-graduate of development, real estate, investment, finance
and strategic planning and management of technical professionals
from the University of California, Irvine. He received his BS from
Texas A&M University, in civic engineering, in 1982. He became
a registered civil engineer in the State of California in 1989. Roy
was a founding member of Bayhawk Ales in 1994. He has extensive
corporate start up experience in the Southern California region and
has also accomplished many real estate projects that include homes,
golf courses, schools, churches, hospitals, offices, bridges,
tunnels, habitat restoration flood control, water supply as well as
for corporate companies such as Space X and Virgin Galactic.
We believe Mr.
Robertson’s qualifications to serve on our Board include his
extensive business experience in the region and knowledge of the
Company’s financial condition.
Mark Lamb
has served
on our Board since 2013. Mr. Lamb is a vice president of Double
Diamond Financial a firm engaged in individual and business
planning, where he has worked since February, 2003. Prior to his
employment at Double Diamond Financial, Mr. Lamb was a registered
representative with The Robert Driver Company, a financial services
firm since October 1999. From October 1996 to October 1999, he was
an account specialist with Liberty Mutual Group and from May 1994
to October 1996 he was an account executive with Paine Webber Inc.
He began his career in financial services in June 1988 as an
investment counselor with Western Financial Planning Corporation.
Mr. Lamb holds a Series 7, Series 66, Series 63, and Series 6
licenses with FINRA. He also holds property, casualty, life, health
and disability insurance licenses. Mr. Lamb attended San Diego
State University.
We believe Mr. Lamb’s
qualifications to serve on our Board include his experience with
financial statements, financial services, insurance and business
planning.
Joe Ryan
has served
on our Board since 2013. Mr. Ryan is responsible for business
development, sales, marketing, and account management at the
company he founded, Graphic Industries, a print and interactive
production company providing end-to-end solutions for the marketing
and communications industry. Mr. Ryan also founded Accomplice, a
brand packing, logo design, website merchandising design, apparel,
social marketing firm that provides expertise to clients such as
Verizon Wireless, Grand Canyon Brewing Company, Los Angeles
Dodgers, Warner Brothers Entertainment, and Kawasaki. From 2000 to
present, Mr. Ryan is a founding partner and current sole proprietor
of The Academy of Fine Beers, where he co-created and developed as
well as marketed the Josef BIERBITZCH Golden Pilsner, Wing Man
American Lager, Birra Bella and Shenanigans Irish Lager. Ryan
recently conceived of and developed a Brewer Series titled Hail to
Rock, which the Company will produce.
We believe Mr. Ryan’s
qualifications to serve on our Board include his knowledge and
experience with marketing and design practices, including in the
beer industry, as well as knowledge and experience with recipe
development in the beer industry.
Kevin Hammons
was appointed to our Board
in January of 2017. Mr. Hammons is the Director of Brewing at Evans
Brewing Company.
Mr. Hammons
brings to the company over 7 years’ experience in the craft
beer business, specifically the successful management of brewing,
brewery operations and associated duties. Mr. Hammons is
responsible for supervising and managing our brewery team of up to
11 employees in all phases of the brewery operation. Mr.
Hammons’ experience also includes operation of a barrel aging
program and ensuring the quality of all beers produced at a craft
brewing facility in his previous position. Mr. Hammons addition to
the Board adds to the overall craft beer experience of the
Board.
Directors and
officers are elected on an annual basis. The term of each
director’s service expires at our next annual meeting of
stockholders and at such time as his or her successor is duly
elected and qualified. Officers serve at the discretion of the
Board.
Michael
J. Rapport, the Company’s President, Chief Executive Officer,
and Chairman of the Board, is the father of Evan Rapport, the
Company’s Vice-President and a member of the Board. Other
than this relationship, there are no family relationships between
any of our director nominees or executive officers and any other of
our director nominees or executive officers.
BOARD OF DIRECTORS
Overview
Our
Bylaws provide that the size of our Board is to be determined from
time to time by resolution of the Board. Our Board has fixed the
exact number of directors at seven and one of those positions is
currently vacant. At each annual meeting of stockholders, members
of our Board are elected to serve until the next annual meeting and
until their successors are duly elected and qualified. If the
nominees named in this proxy statement are elected, the Board will
consist of six persons and there will be one vacancy on the
Board.
The
Board has nominated Michael J. Rapport, Evan Rapport, Roy
Robertson, Mark Lamb, Joe Ryan, Kenneth Wiedrich and Kevin Hammons
for election at the annual meeting based on the recommendation of
our Nominating and Governance Committee. The nominees have agreed
to serve if elected, and management has no reason to believe that
the nominees will be unavailable for service. If any nominee is
unable or declines to serve as a director at the time of the Annual
Meeting or any adjournment or postponement thereof, the proxies
will be voted for such other nominees as may be designated by the
present Board.
Our
common stock is listed on The OTCQB Market and, accordingly, we are
subject to the requirement that at least two of our directors be
independent, as defined in Section 7 of the OTCQB Corporate
Governance Eligibility Standards. Current nominees Messrs. Joe
Ryan, Mark Lamb and Roy Roberson are non-employee directors, do not
have any relationship that would disqualify them as independent
directors under Section 7 of the OTCQB Corporate Governance
Eligibility Standards and, in the judgment of the Board, do not
have any other relationship that would interfere with their
exercise of independent judgment in carrying out their
responsibilities as directors. Therefore, the Board believes that
Messrs. Joe Ryan, Mark Lamb and Roy Roberson are “independent
directors” as defined in Section 7 of the OTCQB Corporate
Governance Eligibility Standards.
We are
subject to a number of regulatory, product, legal and other types
of risks. The Board and its constituent committees are responsible
for overseeing these risks, and we employ a number of procedures to
help them carry out that duty. For example, Board members regularly
consult with executive management about pending issues and expected
challenges, and at each Board meeting directors receive updates
from, and have an opportunity to interview and ask questions of,
key personnel and management.
The
Board does not have a policy regarding the separation of the roles
of the Chief Executive Officer and Chairman of the Board as the
Board believes it is in the best interest of the Company to make
that determination based on the position and direction of the
Company and the membership of the Board from time to time. The
Board has determined that having the Company’s current Chief
Executive Officer serve as the Chairman is currently in the best
interest of the Company as this structure provides leadership
continuity, makes the best use of the Chairman’s extensive
knowledge of the Company and its industry, and fosters greater
communication between the Company’s management and the Board,
while facilitating robust director, Board, and CEO evaluation
processes.
In
determining that we are best served by having Mr. Rapport serve as
Chairman of the Board, our board considered the benefits of having
the current Chief Executive Officer serve as a bridge between
management and our board, ensuring that both groups act with a
common purpose. Our board also considered Mr. Rapport’s
knowledge regarding our operations and the industries and markets
in which we compete and his ability to promote communication, to
synchronize activities between our board and our senior management
and to provide consistent leadership to both our Board and our
Company in coordinating the strategic objectives of both
groups.
Committees of the Board of Directors
The
Board has established an Audit Committee, a Compensation Committee
and a Nominating and Governance Committee. Each committee operates
pursuant to a charter that may be viewed on our website at
www.evansbrewco.com/investors
. The
inclusion of our website address in this proxy statement does not
include or incorporate by reference the information on our website
into this proxy statement.
Audit Committee.
Our Audit Committee
oversees our accounting and financial reporting processes and is
responsible for (i) retaining, evaluating and, if appropriate,
recommending the termination of our independent registered public
accounting firm, (ii) approving the services performed by our
independent registered public accounting firm and (iii) for
reviewing and evaluating our accounting principles,
financialreporting practices, and system of internal accounting
controls. The Audit Committee is also responsible for maintaining
communication between the Board and our independent registered
public accounting firm, and has established procedures for the
receipt,retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters, and for the
confidential, anonymous submission by our employees of concerns
regarding questionable accounting or auditing matters. In addition,
all related person transactions are reviewed and approved by the
Audit Committee.
Our
Audit Committee was established on May 10, 2016 and, as of the date
of this proxy statement, our Audit Committee consists of Roy
Robertson (the committee’s Chairman), Joe Ryan and Mark Lamb.
The Board has determined that all of the members of our Audit
Committee are independent under the listing standards of the OTCQB
U.S. Market and the rules of the Securities and Exchange
Commission, and that Mr. Lamb qualifies as an “audit
committee financial expert,” as defined by the rules of the
Securities and Exchange Commission.
Compensation Committee.
Our
Compensation Committee assists our Board in determining the
compensation of our executive officers and directors. The
Compensation Committee is responsible for approving the
compensation package of each executive officer and recommending
each executive officer’s compensation to the Board. The
Compensation Committee also administers our Stock and Option Plan.
The Compensation Committee may form and delegate any of its
responsibilities to subcommittees when appropriate.
Our
Compensation Committee was established on May 10, 2016 and, as of
the date of this proxy statement, our Compensation Committee
consists of Michael J. Rapport (Chairman) Mark Lamb, and Kenneth
Wiedrich.
Nominating and Governance
Committee
.
Our
Nominating and Governance Committee assists our Board by
identifying and recommending individuals qualified to become
members of our Board (subject to legal rights, if any, of third
parties to nominate or appoint directors), and establishing,
evaluating and overseeing our corporate governance processes and
guidelines.
Our
Nominating and Governance Committee was established on May 10, 2016
and, as of the date of this proxy statement, our Nominating and
Governance Committee consists of Evan M. Rapport (the
committee’s Chairman), Roy Robertson and Mark
Lamb.
The
Nominating and Governance Committee will consider candidates
recommended by stockholders. To recommend director candidates,
stockholders should submit their suggestions in writing to the
Corporate Secretary, providing the proposed nominee’s name,
biographical data and other information about the proposed nominee
and the nominating stockholder(s) as required by our Bylaws,
together with a consent from the proposed nominee to serve on the
Board if nominated and elected.
There
are no specific minimum qualifications that the Nominating and
Governance Committee requires to be met by a director nominee
recommended for a position on the Board, nor are there any specific
qualities or skills that are necessary for one or more members of
our Board to possess, other than as are necessary to meet the
requirements of the rules and regulations applicable to us. The
Nominating and Governance Committee considers a potential
candidate’s experience, areas of expertise, and other factors
relative to the overall composition of the Board, including the
following characteristics:
●
broad experience in
business, finance or administration;
●
the independence
requirements imposed by the Securities and Exchange Commission
(“SEC”) and the OTCQB U.S. Market;
●
a background that
provides a portfolio of experience and knowledge relevant to our
industry;
●
the ability to read
and understand financial statements;
●
attained 21 years
of age;
●
no material
conflict, whether personal, financial or otherwise, associated with
being on the Board;
●
satisfaction of the
requirements for regulatory approval; and
●
adequate time to
devote to Board activities.
The
specific qualities or skills that the Nominating and Governance
Committee believes are necessary for one or more of our directors
to possess are:
●
the ability to
offer advice and guidance to our Chief Executive Officer based on
relevant expertise and experience;
●
attributes of
independence or financial expertise as required by SEC
regulations;
●
skills, experience
and background complementary to those of other directors;
and
●
the ability to
maintain a constructive working relationship with other
directors.
Although the Board
does not maintain a specific policy with respect to Board
diversity, the Board believes that, whenever feasible, the Board
should be a diverse body, and the Nominating and Governance
Committee considers a broad range of backgrounds and experiences.
In making determinations regarding nominations of directors, the
Nominating and Governance Committee may take into account the
benefits of diverse viewpoints. The Nominating and Governance
Committee also considers these and other factors as it oversees the
annual Board and committee evaluations.
The
Nominating and Governance Committee has the following policy with
regard to the consideration of any director candidates recommended
by security holders for the 2018 annual meeting of stockholders
(subject to legal rights, if any, of third parties to nominate or
appoint directors):
●
A stockholder
wishing to nominate a candidate for election to the Board at the
next annual meeting is required to give written notice addressed to
Evans Brewing Company, 3815 S. Main St., Santa Ana, CA 92707, Attn:
Corporate Secretary, of his or her intention to make such a
nomination. The notice of nomination must be received by the
Corporate Secretary at this address within the timeframe required
by our Bylaws, in order to be considered for nomination at the next
annual meeting.
●
The notice of
nomination should include information regarding the recommended
candidate relevant to a determination of whether the recommended
candidate would be barred from being considered independent under
OTCQB U.S. Market’s Listing Qualifications or, alternatively,
a statement that the recommended candidate would not be so barred.
The notice of nomination also must include the nominee’s
name, age, business address, residence address, principal
occupation or employment, and any other information required by our
Bylaws or by applicable laws or regulations. A nomination that does
not comply with these requirements will not be
considered.
The
Nominating and Governance Committee also considers director
candidates that are suggested by its members, the Board or
management. The Nominating and Governance Committee may, in the
future, retain a third-party executive search firm to identify
candidates on terms and conditions acceptable to the Nominating and
Governance Committee, in its sole discretion. The process used by
the Nominating and Governance Committee for identifying and
evaluating nominees for director, including nominees recommended by
stockholders, involves (with or without the assistance of a
retained search firm) compiling names of potentially eligible
candidates, conducting background and reference checks, conducting
interviews with the candidate and others (as schedules permit),
meeting to consider and approve the final candidates and, as
appropriate, preparing and presenting to the full Board an analysis
with regard to particular recommended candidates. The Nominating
and Governance Committee endeavors to identify director nominees
who have the highest personal and professional integrity, have
demonstrated exceptional ability and judgment, and, together with
other director nominees and members, are expected to serve the
long-term interest of our stockholders and contribute to our
overall corporate goals. Candidates proposed by stockholders will
be evaluated by the Nominating and Governance Committee using the
same criteria as for all other candidates.
Number of Meetings
The
Board held a total of three meetings during 2016. No director
attended fewer than 66% of the total number of meetings of the
Board during 2016. Directors are encouraged to attend the Annual
Meeting of Stockholders. Any director who missed a meeting of the
Board received information regarding the applicable meeting and
provided input through subsequent Board meetings as well as
communications with management.
Board Member Attendance at Annual Stockholder Meetings
Although we do not
have a formal policy regarding director attendance at annual
stockholder meetings, directors are expected to attend these annual
meetings absent extenuating circumstances. The directors who served
at the time of our annual meeting of stockholders in 2016 attended
our annual meeting of stockholders in 2016.
EXECUTIVE COMPENSATION
Summary Compensation Table
The
following Summary Compensation Table sets forth certain information
regarding the compensation, for services rendered in all capacities
to us during 2016 and 2015, of our current principal executive
officer and our other most highly compensated executive officer at
the end of 2016 (together, the “named executive
officers”). We did not have any other executive officers
during 2016.
|
Names and Principal
Position
|
|
Year
|
|
|
|
|
All Other
Compensation ($)
|
|
|
Michael J.
Rapport
|
|
2016
|
—
|
—
|
—
|
14,130
|
—
|
14,130
|
|
President and Chief Executive
Officer
|
|
2015
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
|
|
|
|
|
|
|
|
Evan Rapport
|
|
2016
|
84,000
|
—
|
62,500
|
—
|
—
|
146,500
|
|
Vice President
|
|
2015
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Ken Wiedrich
|
|
2016
|
24,000
|
—
|
25,400
|
—
|
—
|
49,000
|
|
Chief Financial
Officer
|
|
2015
|
20,000
|
—
|
—
|
—
|
—
|
20,000
|
The
objective of our executive compensation program is to attract,
motivate and retain talented executives with related technical and
business expertise in the competitive beer industry. We hope to
retain our executives over the long term to provide continuity from
year-to-year. Consequently, we have chosen to compensate our
executives with a salary and, in some cases, anticipate
compensating executives with stock awards, stock options, RSU
awards and bonuses.
In
determining the total amount and mixture of the compensation for
each of our named executive officers, our Board and, starting in
2016, our Compensation Committee subjectively evaluates each named
executive in light of numerous factors including title and role,
individual performance (including past and expected future
contribution to our business objectives) and our long term business
needs and goals (including the need to attract and retain key
management personnel). Our Board and our Compensation Committee
reviews the performance of each named executive officer annually
and determines whether the named executive officer should receive
an increase in base salary and/or receive an equity award based on
such evaluation.
AT THE
2016 ANNUAL MEETING, THE STOCKHOLDERS APPROVED, ON AN ADVISORY
BASIS, THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE OFFICER
COMPENSATION.
Under
the Dodd-Frank Act, public companies are generally required to
include in their proxy solicitations at least once every six years
an advisory vote on whether an advisory vote on named executive
officer compensation (such as the say-on-pay proposal that is
included in this proxy statement) should occur every one, two or
three years. At the 2016 Annual Board Meeting, the advisory vote
interval of 3 years was passed.
We
continue to believe that we have effective executive compensation
practices. Our Board believes that providing our stockholders with
an advisory vote on named executive officer compensation every
three years encourages a long-term approach to evaluating our
executive compensation policies and practices. In contrast,
focusing on executive compensation over an annual or biennial
period would focus on short-term results rather than long-term
value creation, which is inconsistent with our compensation
philosophy, and could be detrimental to us, our employees and our
financial results.
Moreover, our Board
does not believe that a short review cycle will allow for a
meaningful evaluation of our performance against our compensation
practices, as any adjustment in pay practices would take time to
implement and to be reflected in our financial performance and in
the price of our Common Stock. As a result, an advisory vote on
executive compensation more frequently than every three years would
not, in our judgment, allow stockholders to compare executive
compensation to our performance, and at the annual meeting in 2016,
the stockholders agreed.
Lastly,
we believe that conducting an advisory vote on executive
compensation every three years would allow us adequate time to
compile meaningful input from stockholders on our pay practices and
respond appropriately. This would be more difficult to do on an
annual or biennial basis, and we believe that both we and our
stockholders would benefit from having more time for a thoughtful
and constructive analysis and review of our compensation
policies.
For the
above reasons, the stockholders approved holding an advisory vote
on named executive officer compensation every three years. The next
advisory vote will take place at the annual meeting in
2019.
2015 Stock Option and Stock Award Plan
Our
2015 Stock Option and Stock Award Plan (the “Stock and Option
Plan”) was approved by the Company’s Board and
stockholders in October 2015. The Stock and Option Plan provides
for the grant of incentive or non-statutory stock options and other
stock awards to our employees, directors and consultants. The Stock
and Option Plan authorizes the issuance of 2,000,000 shares. As of
December 31, 2016, the Company has granted 229,000 shares and
options to purchase 20,000 shares under the Stock and Option Plan,
leaving 1,751,000 shares available for grant.
The
Stock and Option Plan is administered by our Compensation
Committee. Subject to the provisions of the Stock and Option Plan,
the Compensation Committee determines who will receive the stock,
options or other incentive awards permitted under the Stock and
Option Plan, the number of shares of stock and the number of
options granted, and the manner of exercise and the exercise price
of the options. The term of incentive stock options granted under
the Stock and Option Plan may not exceed ten years, or five years
for options granted to an optionee owning more than 10% of our
voting stock. The exercise price of any stock option granted under
the Stock and Option Plan must be equal to or greater than the fair
market value of the shares of our common stock on the date the
option is granted. However, an incentive stock option granted to an
optionee owning more than 10% of our voting stock must have an
exercise price equal to or greater than 110% of the fair market
value of our common stock on the date the option is granted.
The
Company prepared and filed a Registration Statement in accordance
with the requirements of Form S-8 under the Securities Act of 1933,
as amended (the “Securities Act”), to register the
issuance of up to 2,000,000 shares of Common Stock that are
reserved for issuance with respect to awards to be granted under
the Company’s Stock and Option Plan. Our Board and
stockholders approved the adoption of the Stock and Option Plan in
October 2015.
Equity Awards Made Fiscal Year-End 2016
As of
December 31, 2016, 229,000 shares of Common Stock have been granted
under the 2015 Stock Option and Stock Award Plan, 91,000 of which
were granted to Jeromy Roush for services in 2015 as the
Company’s VP of Sales, 50,000 shares issued to Evan Rapport
for services in 2015, 8,000 shares to Kenneth Wiedrich for services
performed as the Chief Financial Officer in 2015, and 20,000 shares
issued to Kenneth Wiedrich for services performed as director.
There were also 20,000 shares each granted to Joe Ryan, Mark Lamb
and Roy Roberson for services performed as director. Options to
purchase 20,000 shares were also granted to Michael Rapport for
services as a director. There was also a grant of 5,000 shares
total to our three non-employee directors for services in 2015 and
3,000 shares to Maryse Benjamin. All of these grants have been made
in the fiscal year ended December 31, 2016.
Subsequent Awards
Subsequent to
December 31, 2016, 10,000 shares of Common Stock were personally
gifted from Michael J Rapport to Kevin Hammons.
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table sets forth information as of December 31, 2016
relating to all of our equity compensation plans:
|
Plan
Category
|
(a) Number of
securities to be issued upon exercise of outstanding options and
rights
|
(b) Weighted
average exercise price of outstanding options and
rights
|
(c) Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a))
(2)
|
|
|
|
|
|
|
Equity compensation
plans approved by security holders:
|
|
|
|
|
2015 Stock Option
and Stock Award Plan (1)
|
20,000
|
$
1.25
|
1,751,000
|
|
Equity compensation
plans not approved by security holders:
|
|
|
|
|
None
|
—
|
—
|
—
|
|
TOTAL
|
20,000
|
$
1.25
|
1,751,000
|
|
(1)
|
Consists
of our 2015 Stock Option and Award Plan, which allows for the
granting of stock options and other awards to eligible individuals,
which generally includes directors, officers, employees and
consultants.
|
|
|
|
|
(2)
|
Consists
of shares available for future issuance under our 2015 Stock Option
and Award Plan as of December 31, 2016. The 2015 Stock Option and
Award Plan authorizes the issuance of 2,000,000 shares. Of such
authorized amount, 229,000 shares and options to purchase 20,000
shares have been granted as of December 31, 2016.
|
Compliance with Code Section 162(m)
Section 162(m)
of the Code (“Section 162(m)”) generally disallows a
tax deduction to a publicly traded company for compensation in
excess of $1 million paid to each of that company’s chief
executive officer and four other most highly compensated executive
officers. Qualifying performance-based compensation is not subject
to the deduction limit if certain requirements are met. In the year
ended December 31, 2016, none of our executive officers received
compensation in excess of $1 million.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table shows information regarding the beneficial
ownership of our common stock as of May 18, 2017 by (a) each
stockholder, or group of affiliated stockholders, that we know owns
more than 5% of our outstanding common stock; (b) each of our named
executive officers; (c) each of our directors; and (d) all of our
current directors and executive officers as a group. The table is
based upon information supplied by directors, executive officers
and principal stockholders, and Schedules 13D and 13G filed with
the Securities and Exchange Commission.
Percentage
ownership in the table below is based on 4,784,293 shares of common
stock outstanding as of May 18, 2017. Beneficial ownership is
determined in accordance with the rules of the Securities and
Exchange Commission, and generally includes voting power and/or
investment power with respect to the securities held. Any
securities not outstanding but which are subject to options or
warrants exercisable within 60 days of May 18, 2017 are deemed
outstanding and beneficially owned for the purpose of computing the
percentage of outstanding common stock beneficially owned by the
stockholder holding such options or warrants, but are not deemed
outstanding for the purpose of computing the percentage of common
stock beneficially owned by any other stockholder.
Unless
otherwise indicated, each of the stockholders listed below has sole
voting and investment power with respect to the shares beneficially
owned. The address for each director or named executive officer is
c/o Evans Brewing Company, 3815 S. Main St, Santa Ana, CA
92707.
|
Name of Beneficial Owner
|
|
No. of
Shares Beneficially Owned
|
|
Percentage(1)
|
|
|
|
|
|
|
|
|
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
Michael
J. Rapport(2)
|
|
3,107,986
|
|
64.7%
|
|
|
Evan M.
Rapport
|
|
671,458
|
|
14.0%
|
|
|
Kenneth
Wiedrich, Chief Financial Officer
|
|
28,000
|
|
*
|
|
|
Roy
Robertson
|
|
21,506
|
|
*
|
|
|
Mark
Lamb
|
|
23,000
|
|
*
|
|
|
Joe
Ryan
|
|
135,583
|
|
2.8%
|
|
|
Kevin
Hammons
|
|
10,000
|
|
*
|
|
|
All
current directors and executive officers as a group (7
persons)
|
|
3,997,533
|
|
83.2%
|
|
*
Less than 1.0%.
(1)
Percentage of
ownership is based on the 4,784,293 issued and outstanding shares
of common stock as of May 18, 2017.
(2)
Mr. Rapport owns
and holds 3,087,986 shares through The Michael J. Rapport Trust,
for which Michael J. Rapport is the Trustee and holds voting and
dispositive power over such shares. Mr. Rapport also owns options
to purchase 20,000 shares of common stock, which are currently
outstanding and exercisable within 60 days.
CERTAIN TRANSACTIONS
Since
January 1, 2016, there has not been, nor has there been proposed,
any transaction, arrangement or relationship or series of similar
transactions, arrangements or relationships, including those
involving indebtedness not in the ordinary course of business, to
which we or our subsidiaries were or are a party, or in which we or
our subsidiaries were or are a participant, in which the amount
involved exceeded or exceeds the lesser of $120,000 or 1% of the
average of our total assets at year-end for the last two completed
fiscal years and in which any of our directors, nominees for
director, executive officers, beneficial owners of more than 5% of
any class of our voting securities or any member of the immediate
family of any of the foregoing persons, had or will have a direct
or indirect material interest, other than as described above under
the heading “Executive Compensation” and other than the
transactions described below. Each of the transactions described
below was reviewed and approved or ratified by our Audit
Committee.
Future
transactions with our officers, directors or greater than five
percent stockholders will be on terms no less favorable to us than
could be obtained from independent third parties, and all such
transactions will be reviewed and subject to approval by members of
our Audit Committee.
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.
Pursuant to the
Public House SPA, EBC agreed to issue 1,000,000 shares of its
Series A Preferred Stock (in exchange for 100% of the outstanding
stock of Public House (the “Public House
Shares”).
Additional Exchanged Shares
Subsequent to the
year ended December 31, 2016, additional shares in the amount
16,830 were added to the exchanged shares related to acquisition of
Bayhawk's assets. These shares had been lost by the transfer agent
during the original share exchange and subsequently found, so the
Company, in good faith has included these shares as part of the
original exchange bringing the total shares exchanged to
4,050,693.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), requires our directors, officers, and
persons that own more than 10 percent of a registered class of
our equity securities to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than
10 percent stockholders are required by SEC regulations to
furnish us with copies of all Section 16(a) forms they
file.
Based
solely upon our review of the copies of such forms received by us
during the year ended December 31, 2015, and December 31, 2016, we
believe that each person who, at any time during such year, was a
director, officer, or beneficial owner of more than 10% of our
common stock met the filing requirements during such
year.
PRINCIPAL ACCOUNTANTS
Principal Accountant Fees and Services
January 2015 Dismissal of Kenne Ruan, CPA, P.C.; Engagement of
Anton & Chia, LLP
On
January 21, 2015, EBC’s board of directors dismissed Kenne
Ruan, CPA, P.C. (“KR”) as EBC’s independent
registered public accounting firm effective
immediately.
Other
than an explanatory paragraph included in audit report of KR for
the Company's fiscal year ended December 31, 2013, relating to the
uncertainty of the Company's ability to continue as a going
concern, the audit report of KR on the Company's financial
statements for the fiscal year ended December 31, 2013, and through
January 21, 2015, did not contain an adverse opinion or a
disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles.
During
the Company's 2013 and 2014 fiscal year and through the date of
this proxy, (1) there were no disagreements with KR on any matter
of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved
to the satisfaction of KR, would have caused KR to make reference
to the subject matter of the disagreements in connection with their
report, and (2) there were no “reportable events” as
that term is defined in Item 304(a)(1)(v) of Regulation
S-K.
Also on
January 21, 2015, upon approval of EBC’s Board of Directors,
EBC engaged Anton & Chia, LLP (“A&C”), as
EBC’s independent registered public accounting firm to audit
EBC’s financial statements and to perform reviews of interim
financial statements. During the fiscal year ended December 31,
2013, through January 21, 2015, neither EBC nor anyone acting on
its behalf consulted with A&C regarding (i) either the
application of any accounting principles to a specific completed or
contemplated transaction of the Company, or the type of audit
opinion that might be rendered by A&C on the Company's
financial statements; or (ii) any matter that was either the
subject of a disagreement with KR or a reportable event with
respect to KR; (iii) the type of audit opinion that might be
rendered on the Company’s financial statements, and none of
the following was provided to the Company: (a) a written report, or
(b) oral advice that A&C concluded was an important factor
considered by the Company in reaching a decision as to accounting,
auditing or financial reporting issue; or (iv) Any matter that was
the subject of a disagreement, as that term is defined in Item
304(a)(1)(iv) of Regulation S-K.
September 2015 Resignation of Anton & Chia; Engagement of Kenne
Ruan, CPA, P.C.
On
September 4, 2015, EBC’s Board of Directors accepted the
resignation of A&C, dated the same date, from their engagement
to be EBC’s independent certifying accountant. Other than an
explanatory paragraph included in A&C’s audit report for
EBC’s fiscal year ended December 31, 2014, relating to the
uncertainty of BC’s ability to continue as a going concern,
the audit report for fiscal year ended December 31, 2014, did not
contain an adverse opinion or a disclaimer of opinion, nor was it
qualified or modified as to uncertainty, audit scope or accounting
principles. As described below, the change in independent public
accounting firms is not the result of any disagreement with
A&C. The Board of Directors approved the acceptance of
A&C’s resignation.
As
noted above, A&C was appointed by the Board of Directors to be
the auditor on January 21, 2015. There were no disagreements with
A&C on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of A&C, would have
caused A&C to make reference to the subject matter of the
disagreements in connection with their report, and (2) there were
no “reportable events” as that term is defined in Item
304(a)(1)(v) of Regulation S-K.
On
September 4, 2015, EBC’s Board of Directors approved the
engagement of KR, as EBC’s independent registered public
accounting firm.
By way
of background, KR was the independent certifying accountant for EBC
from its inception in June 2013, and provided an audit report dated
July 3, 2013, with respect to EBC’s financial statements as
of June 30, 2013; and an audit report dated February 7, 2014, for
EBC’s financial statements as of December 31, 2013.
Additionally, KR reviewed EBC’s financial statements provided
in EBC’s quarterly reports for the quarters ended March 31,
June 30, and September 30, 2014 (collectively, the “Prior
Services”). EBC previously dismissed KR on January 21, 2015,
in connection with the appointment of A&C noted
above.
Other
than with respect to the Prior Services outlined above, EBC has not
consulted with KR during its two most recent fiscal years or during
any subsequent interim period prior to its re-appointment as
EBC’s auditor with respect to the application of accounting
principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on
EBC’s consolidated financial statements, or any other matters
or reportable events as defined in Items 304(a)(2)(i) and (ii) of
Regulation S-K.
Audit and Audit-Related Fees.
KR was
the Company’s independent registered public accounting firm
from inception through 2014, and through January 21, 2015. The fees
for the audit and review services billed and to be billed by KR for
the period from January 1, 2014, to December 31, 2014 were $2,100.
A&C was the Company’s independent registered public
accounting firm from January 21, 2015 through September 4, 2015.
The fees for the audit review services billed by A&C for the
fiscal year ended January 21, 2015, through September 4, 2015, were
$100,000. On September 4, 2015, EBC’s Board of Directors
accepted the resignation of A&C, dated the same date, from
their engagement to be EBC’s independent certifying
accountant. On September 4, 2015, EBC’s Board of Directors
approved the engagement of KR, as EBC’s independent
registered public accounting firm. The audit fees paid to KR for
the period September 4, 2015 through December 31, 2015 were
$8,500.
Tax Fees; All Other Fees.
We were not
billed for any tax fees or for any other fees from our principal
accountants in 2015 or 2016.
Audit Committee Pre-Approval Policies and Procedures
The
Audit Committee charter provides that the Audit Committee will
pre-approve all audit services and non-audit services to be
provided by our independent auditors before the accountant is
engaged to render these services. The Audit Committee may consult
with management in the decision-making process but may not delegate
this authority to management. The Audit Committee may delegate its
authority to pre-approve services to one or more committee members,
provided that the designees present the pre-approvals to the full
committee at the next committee meeting. All audit and non-audit
services performed by our independent accountants will be
pre-approved by our Audit Committee to assure that such services do
not impair the auditors’ independence from us.
Determination of Independence
There
were no fees billed by our principal accounts for non-audit
services.
Attendance at Annual Meeting
Representatives
from KR are expected to be present at the annual meeting, will have
the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate
questions.