NewAge, Inc. - Annual Report: 2016 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2016

or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________________ to __________________________

Commission File No. 333-193725

NEW AGE BEVERAGES CORPORATION

(Formerly, American Brewing Company, Inc., and Búcha, Inc.)

(Exact Name of Small Business Issuer as specified in its charter)

(303)-289-8655

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act:

Shares of common stock with a par value of $0.001

(Title of class)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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

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

The registrant had 27,700,895 shares of common stock outstanding as of March 24, 2017. The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2016 was $35,916,173 as computed by reference to the closing price of such common stock on the OTCQB on such date.

NEW AGE BEVERAGES COMPANY

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2016

TABLE OF CONTENTS

ITEM 1. BUSINESS

Forward-Looking Statements

This report contains forward-looking statements. Forward-looking statements are projections in respect of future events or the Company’s future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. Forward-looking statements made in an annual report on Form 10-K are based upon estimates and assumptions made by us or our officers that, although believed to be reasonable, are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially and adversely as compared to those contemplated or implied by such forward-looking statements.

All forward-looking statements involve risks, assumptions and uncertainties. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” set forth in this Annual Report on Form 10-K for the year ended December 31, 2016, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks may cause the Company’s or its industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward looking statements.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

As used in this Annual Report on Form 10-K and unless otherwise indicated, the terms “we,” “us,” “our,” or the “Company” refer to New Age Beverages Corporation, American Brewing Company, Inc, or Búcha, Inc. Unless otherwise specified, all dollar amounts are expressed in United States dollars.

Overview

We are a healthy functional beverage company engaged in the development, marketing, sales and distribution of a portfolio of Ready-to-Drink (“RTD”) better-for-you beverages including competitive entrants currently in the kombucha, RTD tea, premium bottled water, and energy drinks segments. We differentiate our brands through functional characteristics and ingredients and offer all natural and organic products, with no high-fructose corn syrup (“HFCS”), no-Genetically Modified Organisms (“GMOs”), probiotics, no preservatives, and only all natural flavors, fruits, and ingredients. We aspire to be a market leader in the development and commercialization of healthy beverage alternatives. Our target market is currently health conscious consumers, who are individuals who are becoming more interested and better educated on what is included in their diets, causing them to shift away from options perceived as less healthy such as carbonated soft drinks or other high caloric beverages, and towards alternative beverages choices.

Corporate History

New Age Beverages Corporation was formed under the laws of the State of Washington on April 26, 2010, under the name American Brewing Company, Inc. As part of a recapitalization and amendment to our articles of incorporation on September 25, 2013, we also converted its corporate entity from an “S” Corporation to a “C” Corporation.

On April 1, 2015, we acquired the Assets of B&R Liquid Adventure, which included the brand, Búcha^® Live Kombucha. Prior to acquiring the Búcha Live Kombucha® brand and business, we were a craft brewery operation. On October 1, 2015, American Brewing agreed to sell their brewery, brewery assets and its related liabilities to focus exclusively on the healthy functional beverage category and the Búcha^® brand. The assets sold consisted of accounts receivable, inventories, prepaid assets and property and equipment. We recognized the sale of our brewery and micro-brewing operations as a discontinued operation beginning in the third quarter of 2015, and ultimately concluded the transaction in May 2016. In May 2016 we changed our name to Búcha, Inc. On June 30, 2016, we acquired the combined assets of New Age Beverages, LLC, Aspen Pure, LLC, New Age Properties, and Xing Beverage, LLC, relocated the Company’s operational headquarters to Denver, Colorado, and changed our name to New Age Beverages Corporation.

We have two wholly-owned subsidiaries, NABC, Inc., and NABC Properties, LLC.

Principal products

Our core business is to market, sell, and distribute our current brands including XingTea^®, XingEnergy^®, Aspen Pure^®, and Bucha^® Live Kombucha brands, and to develop new healthy functional beverage products. We compete in the healthy functional beverage segment, which is the growth area of RTD beverages, as consumers gravitate toward better for you beverage choices and away from traditionally large beverage categories including juices and carbonated soft drinks.

XingTea^®

XingTea^® is an all-natural, non-GMO, non-HFCS, RTD tea.

XingTea^® is made with green teas, softened with black teas, and further differentiated with unique all-natural fruit flavors, with no preservatives, GMOs or HFCS. Sweetened with honey and only pure cane sugar, XingTea^® comes in 14 natural sweetened and unsweetened flavors in a range of packages from 23.5 oz cans to 16 oz Pet multipacks and gallon jugs, and is produced in New Age’s network of six manufacturers across the United States.

XingTea^® is sold in 46 states and 10 countries across multiple channels of distribution from traditional grocery to health food and specialty outlets to hypermarkets to club stores, to gas and convenience outlets. XingTea^® is the number one ranking tasting tea in North America of 250 other brands, won the North American Tea competition, and has less than one half the calories of major competitors, and is sweetened with Honey and Pure Cane Sugar vs. major competitors that predominantly use high fructose corn syrup in their products. XingTea^® competes in the RTD Tea category that according to Euromonitor International exceeded $50 Billion in annual revenue. According to the World Research Report, the RTD Tea Market has been averaging a 10.9% compound annual growth rate since 2012, and is expected to reach a combined size of $125 Billion in 2017.

XingEnergy^®

XingEnergy^® is an all-natural, non-GMO, non-HFCS, vitamin-enriched, better-for-you Energy Drink, made with all natural fruit flavors and contains the full recommended daily allowance of B-Complex vitamins.

XingEnergy^® comes in four flavors including Tangerine Dream, Grape Attack, Mad Melon, and Grapefruit Go packaged in 16 oz cans, sold individually, expanding now to additional channels. XingEnergy^® competes in the Energy Drinks category, and according to Investopedia, the global Energy Drink Market size was $49.9 Billion in 2014.

Aspen Pure^® PH and Aspen Pure^® Probiotic

Aspen Pure^® PH is a naturally PH-balanced, artesian-well sourced water from the Colorado Rocky Mountains, and Aspen Pure^® Probiotic is one of the world’s first, shelf-stable (no refrigeration required) probiotic water, with more than 12 different probiotic strains and more than 12 billion CFU’s (colony forming units (probiotics)) in every serving, and 2 years of shelf-life

Aspen Pure^® has no added minerals or electrolytes, and comes out of the ground at a natural PH-balanced level of up to 7.0. Aspen Pure^® is then purified and bottled at the source in New Age’s own manufacturing facilities. Aspen Pure^® competes in the Premium Bottled Water Category. According to Beverage Marketing Corporation, global bottled water sales reached 87 Billion Gallons in 2015 and experienced a compound annual growth rate 6.9% between 2010 and 2015. According to Transparency International the Market size for bottled water was $169.9 Billion in 2015.

Búcha^® Live Kombucha

Búcha^® Live Kombucha is a certified-organic, all-natural, non-GMO, non-HFCS, fermented Kombucha tea with more than two billion CFU’s in every serving.

Búcha^® is produced with a unique and proprietary manufacturing process that eliminates the common vinegary aftertaste associated with many other Kombuchas and provides the brand with an industry leading nine-month shelf life as compared to the typical 90-day shelf life of our competitors’ products. The production process also leads to consistency and stability with no risk of secondary fermentation, secondary alcohol production, incremental sugar production or over-carbonation, and is one of the world’s first Kombucha’s that is shelf-stable (no refrigeration required) with no degradation to flavor or the probiotics organisms in every serving.

Búcha^® is made from black teas, proprietary kombucha culture and probiotics, unique yeast strains and cultures, and all natural organic fruits and flavors. Búcha^® Live Kombucha comes in seven flavors including Raspberry Pomegranate, Blood Orange, Guava Mango, Grapefruit Sage, Elderflower Green Tea, Yuzu Lemon, and Tropical Honey Blossom Ginger packaged in 16 oz glass bottles. The brand is sold in traditional grocery and health food and specialty outlets, and is beginning to expand distribution from California across the United States in mainstream retail and down the street outlets with the support of major DSD partners. Búcha^® competes in the Kombucha Category, that according to Grand View Research reached $700 million in 2015 from $49 million in 2011, a compound annual growth rate of 69.3%.

In October of 2016, we entered into a management agreement, pursuant to which we took over the Sales, Marketing and Distribution of the Marley Beverage Company. The management agreement enabled the Company to enter into the RTD Coffee segment and Relaxation Beverages segment with the brands Marley One Drop^® and Marley Mellow Mood^®. While both companies continue to be separate entities both operationally and financially, the addition to the portfolio enables us to increase our relevance with key retailer and distributor partners with a broader portfolio of offerings, and enables the Marley Beverage Company to leverage our infrastructure, sales force and scale.

Competitive Strengths

We differentiate our brands primarily through functional points of difference between our products and those of our competitors, including the characteristics of being certified organic and/or all natural, containing no GMO and no preservatives, being sweetened with only honey or pure cane sugar, and containing fewer calories, shelf-stable or longer shelf life, and other functional benefits than our competitors’ products. In addition, we have begun to build the emotional benefit platforms behind each of our brands.

Direct Store Delivery Distribution Network

We have our own DSD distribution group in Colorado and a network of other DSD partners in major geographies throughout the United States. Our Colorado DSD group includes 24 truck routes, with a 20 person sales team, and a 20 person merchandising team, covering more than 4,500 outlets for more than 60 brands and more than 600 sku’s. The DSD arm of our business is a test bed for new products before national rollout, provides an early warning system for any new emerging competitive brands or beverage segments, and gives the group near captive control of the shelf space across the 6,000 outlets the group services. In addition to our own DSD distribution, the Company has spent the past 10 years developing a national DSD network with other major DSD regional and independent operators. The Company’s own network coupled with its national DSD partner network, represents a significant competitive advantage and barrier to entry for many other smaller beverage companies.

Beverage distributors can distribute their products directly through customer warehouses, but distribution via DSD is preferred by customers, as it substantially reduces labor and other overhead costs when distributors manage the freight, stocking and merchandising of their products directly to the retailers’ shelves. Although it is more expensive for the brand owner, the benefits of captive shelf space, merchandising at the point of sale, and penetration of a significantly greater number of smaller and independent outlets justify the added expense.

Reliance on Third Party Suppliers and Distributors

We rely on various suppliers for the raw and packaging materials, production, sale and distribution of our products. Our third party distribution providers are for certain areas of the country that are outside of our owned DSD distribution network. The material terms of these relationships are typically annually negotiated and include pricing, quality standards, delivery times and conditions, purchase orders, and payment terms. Payment terms are typically net 30, meaning that the total invoiced amount is expected to be paid in full within 30 days from when the date on which the products or services are provided. We believe that we have sufficient options for each of our raw and packaging material needs, as well as our third party distribution needs and also have long term relationships with each of our suppliers and distributors, resulting in consistency in quality and supply. We also believe that we have sufficient breadth of retail relationships with distribution in both large and small retailers and independents and across multiple channels (mass, club, pharmacies, convenience, and small and large format retailers) throughout the United States.

The contractual arrangements with all third parties, including suppliers, manufacturers, distributors and retailers are typical of the beverage industry with standard terms. We have no long-term obligations with any of the third parties nor do any of them have long-term obligations with us. The third party supplier, manufacturing and distribution agreements were entered into in the normal course of business within the guidelines of industry practices and are not deemed material and definite.

Significant Customers

For the year ended December 31, 2016 (Successor), three customers represented approximately 27.5% (14.5%, 7.5% and 5.5%) of revenue. As of December 31, 2015 (Successor), three customers represented approximately 92.8% (59.0%, 22.9% and 10.9%) of accounts receivable. For the nine months ended December 31, 2015 (Successor), three customers represented approximately 75.5% (32.7%, 24.2% and 18.6%) of revenue. For the three months ended March 31, 2015 (Predecessor), three customers represented approximately 84.5% (28.1%, 18.9% and 18.6%) of revenue.

Marketing and Consumer Connection Expertise To Next Generation Consumers

We have the marketing capability to facilitate connections with consumers, and to build awareness, drive trial, begin conversion, and develop brand preference amongst consumers, and do so in a cost effective manner. We possess significant internal marketing expertise spanning development of communication and programs across all marketing mediums. To effectively compete against major beverage companies, we focus most of our activities on in-store merchandising, experiential and event marketing, and social and digital marketing activities. Further developing these capabilities to connect with millennials and more informed and health conscious consumers will further differentiate our marketing capabilities to connect with a targeted set of consumers and do so in a cost advantaged manner.

Infrastructure, Organizational Capabilities

In addition to having an asset footprint that includes our own warehousing, our own trucks and DSD assets, our own manufacturing, and a network of other long-term manufacturing partners, we have a full scale of resources across every major function with depth in supply chain, production, procurement, shipping, finance, sales, marketing, distribution, and research and development. We define organizational capability strength as having the people, the processes, the systems, the information and the environment/culture to deliver superior, sustainable, and profitable organic growth. We are emplacing initiatives in each of the areas of organizational capabilities to strengthen the metric-driven, performance-oriented organization.

Experienced Leadership Team

Each member of our leadership team at New Age possesses 15 to 25 years of experience in the beverage industry, spanning all facets of beverage operations. The combination of operating skills from our management team with the experience of successfully leading major multi-billion dollar, multinational beverage companies gives our organization a significant strength relative to most small- and medium-sized beverage companies.

Growth Strategies

Our long-term objective is to become a major healthy functional beverage company. Based on available information, we believe we are one of the top 20 healthy beverage companies worldwide today. We intend to achieve our goal by driving organic growth behind our existing portfolio of healthy functional beverages, in all relevant packages and product formats, across all major retail channels, in all major markets, through an aligned network of retailer and distributor partners.

Our key growth strategies include the following:

Recent Developments

On January 10, 2017, our wholly owned subsidiary, NABC Properties, LLC, entered into a Purchase and Sale Agreement with an unaffiliated third party. Pursuant to the agreement, NABC Properties, LLC entered into a commitment to sell the property located at 1700 E 68^th Avenue, Denver, CO 80229 for a purchase price of $8,900,000. $100,000 of the purchase price was paid upon execution of the agreement, with the balance of $8,800,000 to be paid on or before March 31, 2017. The agreement contains a lease back provision, whereby NABC Properties, LLC shall lease the property for an initial term of ten years, with an option to extend for two successive five year periods. The lease cost is $52,000 per month for the initial year, with two percent annual increases.

Sales and Marketing

We currently have an in-house sales and merchandising team consisting of approximately 75 individuals throughout the United States, whose compensation is highly variable and highly performance-based. Each sales person has individual targets for increasing “base” volume through distribution expansion, and “incremental” volume through promotions and other in-store merchandising and display activity. As distribution to new major customers, new major channels, or new major markets increases, we will expand the sales and marketing team on a variable basis.

We market our products using a range of marketing mediums including in-store merchandising and promotions, experiential marketing, events, and sponsorships, digital marketing and social media, direct marketing, and traditional media including print, radio, outdoor, and TV.

Distribution

Our products are currently distributed in 10 countries internationally, and in 46 states domestically through a hybrid of four routes to market including our own direct store distribution (“DSD”) system that reaches more than 6,000 outlets, and to more than 20,000 other outlets throughout the United States directly through customer’s warehouses, through our network of DSD partners, and through our network of brokers and natural product distributors. Our products are sold through multiple channels including major grocery retail, natural food retail, specialty outlets, hypermarkets, club stores, pharmacies, convenience stores and gas stations.

Our sales strategy is to distribute our products worldwide through a series of distributors to retail consumers. We are relying on distribution relationships to grow and maintain revenues. Presently, we have several distribution agreements in place for our products in the United States, as well as internationally.

We do not obtain commitments from our distributors to purchase or sell a minimum amount of our products or to purchase or sell such products at a minimum price. Because our sales may be concentrated with a few customers, our results of operations may be materially adversely affected if one of these customers significantly reduces the volume of its purchases or demands a reduction in price, which may occur at any time due to the absence of such purchase commitments.

Research and Development Activities

Our research and development efforts are focused on two primary paths. The first is to continually review our existing formulas and production processes and structure to evaluate opportunities for cost of goods sold improvements, without degrading the quality or fundamentally changing the consumer appeal taste profile of our existing products. The second major research and development effort is in the development of new flavors or adding in new trending functional characteristics to our existing products, and to develop new beverage types based on consumer insights and trends. The Company’s mission to only provide healthy functional beverages governs our development efforts.

Seasonality

We experience some seasonality whereby the peak summer months show a higher level of sales and consumption. However, the structure of our business and range of products in our portfolio mitigate any major fluctuations. Our revenue during the peak summer months have historically been approximately 20% greater than the peak winter months, and as our portfolio and geographic penetration have further expanded, the level of seasonal peaks has diminished.

Competition

The beverage industry, specifically the healthy beverage industry, is highly competitive. We face intense competition from very large, international corporations, as well as from local and national companies. In addition, we face competition from well-known companies that have large market share.

The intensity of competition in the future is expected to increase and no assurance can be provided that we can sustain our market position or expand our business.

Many of our current and potential competitors are well established and have longer operating histories, significantly greater financial and operational resources, and name recognition than we have. However, we believe that with our diverse product line, consisting of kombucha tea, green tea, water and energy beverages, it will give us the ability to obtain a large market share, and continue to generate sales and compete in the industry.

Patents and Trademarks

We hold United States trademarks, Serial Numbers 86694956 and 85087186 for Bucha®. We also hold United States trademarks, Serial Numbers 85025636 and 76438612 for Aspen Pure®, Serial Number 85347345 for Just Pure Water^®, Serial Number 77312629 for XingEnergy^®, Serial Number 77050595 for XingTea^®, and Serial Number 77312679 for Xing Soda^®, all of which were acquired in our acquisition of Xing. Any encroachment upon our proprietary information, including the unauthorized use of our brand name, the use of a similar name by a competing company or a lawsuit initiated either by us or against us for infringement upon proprietary information or improper use of a trademark, may affect our ability to create brand name recognition, cause customer confusion and/or have a detrimental effect on our business due to the cost of defending any potential litigation related to infringement. Litigation or proceedings before the U.S. or International Patent and Trademark Offices may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets and/or to determine the validity and scope of the proprietary rights of others. Any such litigation or adverse proceeding could result in substantial costs and diversion of resources and could seriously harm our business operations and/or results of operations.

Government and Industry Regulation

We are subject to a variety of federal, state and local laws and regulations in the U.S. These laws and regulations apply to many aspects of our business including the manufacture, safety, labeling, transportation, advertising and sale of our products. Violations of these laws or regulations in the manufacture, safety, labeling, transportation and advertising of our products could damage our reputation and/or result in regulatory actions with substantial penalties. For example, changes in recycling and bottle deposit laws or special taxes on our beverages and our ingredients could increase our costs. Regulatory focus on the health, safety and marketing of beverage products is increasing. Certain federal or state regulations or laws affecting the labeling of our products, such as California’s “Prop 65,” which requires warnings on any product with substances that the state lists as potentially causing cancer or birth defects, are or could become applicable to our products. At this time, our products do not require government approval, but as federal or state laws change, the manufacture or quality of our products may become subject to additional regulation.

We are also subject to the Securities Act, the Securities and Exchange Act of 1934, and Washington and Colorado Corporation Law. We will also be subject to common business and tax rules and regulations pertaining to the operation of our business, such as the United States Internal Revenue Tax Code and the Washington and Colorado State Tax Codes, as well as international tax codes and shipping tariffs. We will also be subject to proprietary regulations such as United States Trademark and Patent Law as it applies to the intellectual property of third parties. We believe that the effects of existing or probable governmental regulations will be additional responsibilities of management to ensure that we are in compliance with securities regulations as they apply to our products as well as ensuring that we do not infringe on any proprietary rights of others with respect to our products. We will also need to maintain accurate financial records in order to remain compliant with securities regulations as well as any corporate tax liability we incur.

Employees

As of the date of this prospectus, we have 130 fulltime employees. Our activities are managed by our officers and directors.

Property

Our operations, packaging and distribution are currently being conducted out of the offices located at 1700 E. 68^th Avenue, Denver, CO 80229. We hold a note that is collateralized by the building on our Colorado property (until the planned sale on March 31, 2017), for which we pay $26,000 per month in principal and interest. We consider the current space to be adequate and will reassess our needs based upon future growth. Our manufacturing facilities are located in Alamosa, Colorado for our Aspen Pure product.

ITEM 1A. RISK FACTORS

Any investment in our securities involves a high degree of risk. Investors should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to purchase our common stock. Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this prospectus.

Risks Related to our Financial Condition

We have incurred losses to date and may continue to incur losses.

We have incurred net losses since we commenced operations. For the year ended December 31, 2016, our net operating loss was $3,633,079. On a pro forma basis, after giving effect to our acquisition of Xing, we generated pro forma net loss from operations of $3,329,841 for the year ended December 31, 2016. We have incurred net losses in each fiscal year since our inception. We had net losses of $1,031,311 for the nine months ended December 31, 2015 (Successor) and $72,022 for the three months ended March 31, 2015 (Predecessor) on the previous standalone Bucha operation.

We had an accumulated deficit of $6,964,957 as of December 31, 2016. As of December 31, 2015, we had an accumulated deficit of $3,331,878. These losses have had, and likely will continue to have, an adverse effect on our working capital, assets, and equity. In order to achieve and sustain such revenue growth in the future, we must significantly expand our market presence and revenues from existing and new customers. We may continue to incur losses in the future and may never generate revenues sufficient to become profitable or to sustain profitability. Continuing losses may impair our ability to raise the additional capital required to continue and expand our operations.

Until the acquisition of New Age Beverages, our auditors expressed doubt about our ability to continue as a going concern.

The Report of our Independent Registered Public Accounting Firm with respect to our December 31, 2015 (Successor) financial statements, which do not take into account our acquisition of Xing, which occurred on June 30, 2016. Our Annual Report Form 10-K filed on April 7, 2016 includes an explanatory paragraph stating that the recurring losses, an accumulated deficit and a working capital deficit at December 31, 2015 raise substantial doubt about our ability to continue as a going concern for the previous standalone company (Successor).

We are an “emerging growth company,” and the reduced disclosure requirements applicable to “emerging growth companies” could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of $1,000,000,000 or more; (ii) the last date of the fiscal year following the fifth anniversary of the date of the first sale of common stock under this registration statement; (iii) the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non-convertible debt; and (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. We will be deemed a large accelerated filer on the first day of the fiscal year after the market value of our common equity held by non-affiliates exceeds $700,000,000, measured on January 1.

We cannot predict if investors will find our common stock less attractive to the extent we rely on the exemptions available to emerging growth companies. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

A Company that elects to be treated as an emerging growth company shall continue to be deemed an emerging growth company until the earliest of (i) the last day of the fiscal year during which it had total annual gross revenues of $1,000,000,000 (as indexed for inflation), (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common stock under this registration statement; (iii) the date on which it has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (iv) the date on which is deemed to be a ‘large accelerated filer’ as defined by the SEC, which would generally occur upon it attaining a public float of at least $700,000,000.

Risks Related to our Business

Growth of operations will depend on the acceptance of our products and consumer discretionary spending.

The acceptance of our healthy functional beverage products, including our newly acquired tea, energy drink and bottled water products, by our customers is critically important to our success. Shifts in user preferences away from our products, our inability to develop effective healthy beverage products that appeal to consumers, or changes in our products that eliminate items popular with some consumers could harm our business. Also, our success depends to a significant extent on discretionary user spending, which is influenced by general economic conditions and the availability of discretionary income. Accordingly, we may experience an inability to generate revenue during economic downturns or during periods of uncertainty, where users may decide to purchase beverage products that are cheaper or to forego purchasing any type of healthy beverage products, due to a lack of available capital. Any material decline in the amount of discretionary spending could have a material adverse effect on our sales, results of operations, business and financial condition.

We cannot be certain that the products that we offer will become, or continue to be, appealing and as a result there may not be any demand for these products and our sales could decrease, which would result in a loss of revenue. Additionally, there is no guarantee that interest in our products will continue, which could adversely affect our business and revenues.

Demand for products which we sell depends on many factors, including:

All of these factors could result in immediate and longer term declines in the demand for the products we plan to offer, which could adversely affect our sales, cash flows and overall financial condition. An investor could lose his or her entire investment as a result.

We have limited management resources and are dependent on key executives.

We are currently relying on key individuals to continue our business and operations and, in particular, the professional expertise and services of Mr. Brent Willis, Chief Executive Officer, as well as key members of our executive management team and others in key management positions. In addition, our future success depends in large part on the continued service of Mr. Willis. We have entered into an employment agreement with Mr. Willis, but the existence of an employment agreement does not guarantee retention of Mr. Willis and we may not be able to retain Mr. Willis for the duration of or beyond the end of his term. If our officers and directors chose not to serve or if they are unable to perform their duties, and we are unable to retain a replacement qualified individual or individuals, this could have an adverse effect on our business operations, financial condition and operating results if we are unable to replace the current officers and directors with other qualified individuals.

Failure to achieve and maintain effective internal controls could have a material adverse effect on our business.

If we cannot provide reliable financial reports, our operating results could be harmed. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Based on our evaluation, our management concluded that there was a material weakness in our internal control over financial reporting for the year ended December 31, 2015. The material weakness identified did not result in the restatement of any previously reported financial statements or any related financial disclosure, nor does management believe that it had any effect on the accuracy of our financial statements for the year ended December 31, 2015. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Prior to our acquisition of Xing, all of our financial reporting was carried out by external accounting personnel. We believe that the lack of internal accounting staff resulted in a lack of segregation of duties and the accounting technical expertise necessary for an effective system of internal control. Because of the material weakness described above, management concluded that, as of December 31, 2015, our internal control over financial reporting was not effective. While we continue to evaluate and improve our internal controls and have acquired an internal cost accounting team as part of the acquisition of Xing, we cannot be certain that these measures will ensure adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Failure to achieve and maintain an effective internal control environment could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price. Failure to comply with Section 404 could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. With the addition of the financial resources from the acquisition of Xing, we believe that the weaknesses identified above have been remediated to a significant degree, and have not had any material affect on our financial results. In addition, we have hired a new controller, with public company accounting experience in order to provide for the appropriate segregation of duties. We also believe that with the additional financial resources, and external support, which were added during the third quarter, that multiple levels of supervision and review now exist over period end financial disclosure and reporting processes. As a result, management believes that our material weakness have been effectively remediated.

Competition that we face is varied and strong.

Our products and industry as a whole are subject to competition. There is no guarantee that we can develop or sustain a market position or expand our business. We anticipate that the intensity of competition in the future will increase.

We compete with a number of entities in providing products to our customers. Such competitor entities include: (1) a variety of large multinational corporations engaged in the beverage and healthy beverage industries, including but not limited to companies that have established loyal customer bases over several decades; (2) healthy beverage companies that have an established customer base, and have the same or a similar business plan as we do and may be looking to expand nationwide; and (3) a variety of other local and national healthy beverage companies with which we either currently or may, in the future, compete.

Many of our current and potential competitors are well established and have longer operating histories, significantly greater financial and operational resources, and greater name and brand recognition than we have. As a result, these competitors may have greater credibility with both existing and potential customers. They also may be able to offer more products and more aggressively promote and sell their products. Our competitors may also be able to support more aggressive pricing than we will be able to, which could adversely affect sales, cause us to decrease our prices to remain competitive, or otherwise reduce the overall gross profit earned on our products.

Our industry requires the attraction and retention of talented employees.

Success in the beverage industry, specifically as it relates to our healthy functional beverage products, does and will continue to require the acquisition and retention of highly talented and experienced individuals. Due to the growth in the market segment targeted, such individuals and the talent and experience they possess is in high demand. There is no guarantee that we will be able to attract and maintain access to such individuals. If we fail to attract, train, motivate and retain talented personnel, our business, financial condition, and operating results may be materially and adversely impacted, which could result in the loss of your entire investment.

We depend on a limited number of suppliers of raw and packaging materials.

We rely upon a limited number of suppliers for raw and packaging materials used to make and package our products. Our success will depend in part upon our ability to successfully secure such materials from suppliers that are delivered with consistency and at a quality that meets our requirements. The price and availability of these materials are subject to market conditions. Increases in the price of our products due to the increase in the cost of raw materials could have a negative effect on our business.

If we are unable to obtain sufficient quantities of raw and packaging materials, delays or reductions in product shipments could occur which would have a material adverse effect on our business, financial condition and results of operations. The supply and price of raw materials used to produce our products can be affected by a number of factors beyond our control, such as frosts, droughts, other weather conditions, economic factors affecting growing decisions, and various plant diseases and pests. If any of the foregoing were to occur, no assurance can be given that such condition would not have a material adverse effect on our business, financial condition and results of operations. In addition, our results of operations are dependent upon our ability to accurately forecast our requirements of raw materials. Any failure by us to accurately forecast its demand for raw materials could result in an inability to meet higher than anticipated demand for products or producing excess inventory, either of which may adversely affect our results of operations.

We depend on a small number of large retailers for a significant portion of our sales.

Food and beverage retailers in the U.S. and other markets have been consolidating, resulting in large, sophisticated retailers with increased buying power. They are in a better position to resist our price increases and demand lower prices. They also have leverage to require us to provide larger, more tailored promotional and product delivery programs. If we and our bottlers and distributors do not successfully provide appropriate marketing, product, packaging, pricing and service to these retailers, our product availability, sales and margins could suffer. Certain retailers make up a significant percentage of our products’ retail volume, including volume sold by our bottlers and distributors. Some retailers also offer their own private label products that compete with some of our brands. The loss of sales of any of our products by a major retailer could have a material adverse effect on our business and financial performance.

We depend on third party manufacturers for a portion of our business.

A portion of our sales revenue is dependent on third party manufacturers that we do not control. The majority of these manufacturers’ business comes from producing and/or selling either their own products or our competitors’ products. As independent companies, these manufacturers make their own business decisions. They may have the right to determine whether, and to what extent, they manufacture our products, our competitors’ products and their own products. They may devote more resources to other products or take other actions detrimental to our brands. In most cases, they are able to terminate their manufacturing arrangements with us without cause. We may need to increase support for our brands in their territories and may not be able to pass on price increases to them. Their financial condition could also be adversely affected by conditions beyond our control, and our business could suffer as a result. Deteriorating economic conditions could negatively impact the financial viability of third party manufacturers. Any of these factors could negatively affect our business and financial performance.

Failure of third-party distributors upon which we rely could adversely affect our business.

We rely heavily on third party distributors for the sale of our products to retailers. The loss of a significant distributor could have a material adverse effect on our business, financial condition and results of operations. Our distributors may also provide distribution services to competing brands, as well as larger, national or international brands, and may be to varying degrees influenced by their continued business relationships with other larger beverage, and specifically, healthy beverage companies. Our independent distributors may be influenced by a large competitor if they rely on that competitor for a significant portion of their sales. There can be no assurance that our distributors will continue to effectively market and distribute our products. The loss of any distributor or the inability to replace a poorly performing distributor in a timely fashion could have a material adverse effect on our business, financial condition and results of operations. Furthermore, no assurance can be given that we will successfully attract new distributors as they increase their presence in their existing markets or expand into new markets.

Substantial disruption to production at our manufacturing and distribution facilities could occur.

A disruption in production at our beverage manufacturing facility could have a material adverse effect on our business. In addition, a disruption could occur at any of our other facilities or those of our suppliers, bottlers or distributors. The disruption could occur for many reasons, including fire, natural disasters, weather, water scarcity, manufacturing problems, disease, strikes, transportation or supply interruption, government regulation, cybersecurity attacks or terrorism. Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more or may take a significant time to start production, each of which could negatively affect our business and financial performance.

We are subject to seasonality related to sales of our products.

Our business is subject to substantial seasonal fluctuations. Historically, a significant portion of our net sales and net earnings has been realized during the period from May through September. Accordingly, our operating results may vary significantly from quarter to quarter. We reported an operating loss for the twelve-month period ended December 31, 2016 (Successor) and December 31, 2015 (Successor). Our operating results for any particular quarter are not necessarily indicative of any other results. If for any reason our sales were to be substantially below seasonal norms, our annual revenues and earnings could be materially and adversely affected.

We may fail to comply with applicable government laws and regulations.

We are subject to a variety of federal, state and local laws and regulations in the U.S. These laws and regulations apply to many aspects of our business including the manufacture, safety, labeling, transportation, advertising and sale of our products. Violations of these laws or regulations in the manufacture, safety, labeling, transportation and advertising of our products could damage our reputation and/or result in regulatory actions with substantial penalties. In addition, any significant change in such laws or regulations or their interpretation, or the introduction of higher standards or more stringent laws or regulations, could result in increased compliance costs or capital expenditures. For example, changes in recycling and bottle deposit laws or special taxes on our beverages and our ingredients could increase our costs. Regulatory focus on the health, safety and marketing of beverage products is increasing. Certain federal or state regulations or laws affecting the labeling of our products, such as California’s “Prop 65,” which requires warnings on any product with substances that the state lists as potentially causing cancer or birth defects, are or could become applicable to our products.

We face various operating hazards that could result in the reduction of our operations.

Our operations are subject to certain hazards and liability risks faced by beverage companies that manufacture and distribute water, tea and energy drink products, such as defective products, contaminated products and damaged products. The occurrence of such a problem could result in a costly product recall and serious damage to our reputation for product quality, as well as potential lawsuits. Although we maintain insurance against certain risks under various general liability and product liability insurance policies, no assurance can be given that our insurance will be adequate to fully cover any incidents of product contamination or injuries resulting from our operations and our products. We cannot assure you that we will be able to continue to maintain insurance with adequate coverage for liabilities or risks arising from our business operations on acceptable terms. Even if the insurance is adequate, insurance premiums could increase significantly which could result in higher costs to us.

Litigation and publicity concerning product quality, health and other issues could adversely affect our results of operations, business and financial condition.

Our business could be adversely affected by litigation and complaints from customers or government authorities resulting from product defects or product contamination. Adverse publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by discouraging customers from buying our products. We could also incur significant liabilities, if a lawsuit or claim results in a decision against us, or litigation costs, regardless of the result. Further, any litigation may cause our key employees to expend resources and time normally devoted to the operations of our business.

Risks Related to our Intellectual Property

It is difficult and costly to protect our proprietary rights.

Our commercial success will depend in part on obtaining and maintaining trademark protection and trade secret protection of our products and brands, as well as successfully defending these trademarks against third-party challenges. We will only be able to protect our intellectual property related to our trademarks and brands to the extent that we have rights under valid and enforceable trademarks or trade secrets that cover our products and brands. Changes in either the trademark laws or in interpretations of trademark laws in the U.S. and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our issued trademarks or in third-party patents. The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.

We may face intellectual property infringement claims that could be time-consuming and costly to defend, and could result in our loss of significant rights and the assessment of treble damages.

From time to time we may face intellectual property infringement, misappropriation, or invalidity/non-infringement claims from third parties. Some of these claims may lead to litigation. The outcome of any such litigation can never be guaranteed, and an adverse outcome could affect us negatively. For example, were a third party to succeed on an infringement claim against us, we may be required to pay substantial damages (including up to treble damages if such infringement were found to be willful). In addition, we could face an injunction, barring us from conducting the allegedly infringing activity. The outcome of the litigation could require us to enter into a license agreement which may not be under acceptable, commercially reasonable, or practical terms or we may be precluded from obtaining a license at all. It is also possible that an adverse finding of infringement against us may require us to dedicate substantial resources and time in developing non-infringing alternatives, which may or may not be possible. In the case of diagnostic tests, we would also need to include non-infringing technologies which would require us to re-validate our tests. Any such re-validation, in addition to being costly and time consuming, may be unsuccessful.

Finally, we may initiate claims to assert or defend our own intellectual property against third parties. Any intellectual property litigation, irrespective of whether we are the plaintiff or the defendant, and regardless of the outcome, is expensive and time-consuming, and could divert our management’s attention from our business and negatively affect our operating results or financial condition.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Although we try to ensure that we, our employees, and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we, our employees, or independent contractors have used or disclosed intellectual property in violation of others’ rights. These claims may cover a range of matters, such as challenges to our trademarks, as well as claims that our employees or independent contractors are using trade secrets or other proprietary information of any such employee’s former employer or independent contractors. As a result, we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.

Risks Related to our Common Stock and this Offering

The market price of our common stock may be volatile and adversely affected by several factors.

The market price of our common stock could fluctuate significantly in response to various factors and events, including:

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

We have not, and may never pay dividends to shareholders.

We have not declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend. If we do not pay dividends, our common stock may be less valuable because a return on an investor’s investment will only occur if our stock price appreciates.

Our failure to meet the continued listing requirements of NASDAQ could result in a delisting of our common stock.

If we fail to satisfy the continued listing requirements of NASDAQ, such as the corporate governance requirements or the minimum closing bid price requirement, NASDAQ may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would take actions to restore our compliance with NASDAQ listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ listing requirements.

If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.

The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The price of our common stock could decline if one or more equity analyst downgrades our stock or if analysts downgrade our stock or issue other unfavorable commentary or cease publishing reports about us or our business.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our operations, packaging and distribution are currently being conducted out of the offices located at 1700 E. 68^th Avenue, Denver, CO 80229. We hold a mortgage on our Colorado property (expected until March 31, 2017), for which we pay $26,000 per month in principal and interest. We consider the current space to be adequate and will reassess our needs based upon future growth. Our manufacturing facilities are located in Alamosa, Colorado for our Aspen Pure product.

ITEM 3. LEGAL PROCEEDINGS

We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our company or has a material interest adverse to our company.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The following table sets forth the range of high and low bid prices of our common stock as reported and summarized on the NASDAQ market, as applicable, for the periods indicated. These prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.

Holders of Our Common Stock

As of the date of this filing we have 1,314 holders of common stock and there are 27,700,895 shares of our common stock outstanding.

Dividend Policy

We have never declared or paid any cash dividends on our common stock and we do not anticipate paying any cash dividends on our common stock for the foreseeable future. The payment of dividends on common stock, if any, in the future is within the discretion of our board of directors and will depend on our earnings, capital requirements and financial condition and other relevant facts. We currently intend to retain all future earnings, if any, to finance the development and growth of our business.

Securities Authorized for Issuance Under Equity Compensation Plans

The Company has a long-term incentive plan for employees and other associates adopted July 1, 2016 that allows for up to 1,600,000 shares of common stock, stock options, or stock appreciation rights annually. Although the Company does not expect to ever issue the full annual allotment, it may utilize portions of this amount to incent internal associates and other key business partners to facilitate alignment to and execution of its annual business plans.

Issuer Purchases of Equity Securities

We have not purchased any of our equity securities.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled “Selected Financial Data” and our financial statements and related notes included elsewhere in this Information Statement. Some of the information contained in this discussion and analysis or set forth elsewhere in this Information Statement, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those described below. You should read the “Risk Factors” section of this Information Statement for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a healthy functional beverage company engaged in the development, marketing, sales and distribution of a portfolio of RTD better-for-you beverages including competitive entrants currently in the kombucha, RTD tea, premium bottled water, and energy drinks segments. We differentiate our brands through functional characteristics and ingredients and offer all natural and certified organic products, with no HFCS, no GMOs, no preservatives, and only all natural flavors, fruits, and ingredients and extended shelf life’s or shelf stable technical advantages. We manufacture our products in our own fully-integrated manufacturing facilities and through a network of six additional manufacturers strategically located throughout the United States. Our products are currently distributed in 10 countries internationally, and in 46 states domestically through a hybrid of four routes to market including our own DSD system that reaches more than 6,000 outlets, and to more than 20,000 other outlets throughout the United States directly through customer’s warehouses, through our network of DSD partners, and through our network of brokers and natural product distributors. Our products are sold through multiple channels including major grocery retail, natural food retail, specialty outlets, hypermarkets, club stores, pharmacies, convenience stores and gas stations. We market our products using a range of marketing mediums including in-store merchandising and promotions, experiential marketing, events, and sponsorships, digital marketing and social media, direct marketing, and traditional media including print, radio, outdoor, and TV.

Highlights

We generate revenue through the commercialization of our portfolio of brands to consumers via our retailer partners. The following are highlights of our operating results for the year ended December 31, 2016 (Successor), as well as for the nine months ended December 31, 2015 (Successor) and three months ended March 31, 2015 (Predecessor) on a standalone, pre-acquisition basis:

The following are highlights of our operating results for the year ended December 31, 2016:

We believe that as a result of the Xing acquisition, our revenue and gross profit will continue to be higher than reported in prior periods. Historically, prior to the acquisition, our cash generated from operations has not been sufficient to meet our expenses. The newly acquired Xing brands, however, generated $222,680 of net income for the year ended December 31, 2014, and $772,308 in net income for the year ended December 31, 2015. We believe that on a consolidated basis, and with the reductions in operating expenses for the Búcha division, the integrated company will generate sufficient cash flow internally to meet its needs. In addition, as part of the financing of the acquisition, we entered into two Credit Agreements on June 30, 2016, whereby we are able to borrow up to $5,900,000 (the “Revolving Commitment Amount”) under a revolving credit line, and whereby we borrowed an additional $4,800,000 under a loan. Each loan amount under the revolving credit line shall accrue interest at an annual rate equal to the Applicable Margin, which ranges from 2.25% to 3.00%, plus the Daily Reset LIBOR Rate. For the revolving credit line, upon an event of default related to a bankruptcy event, the obligations of the lender shall immediately terminate and all loan amounts shall become due and payable. Upon any other event of default under the revolving credit line, the lender may terminate or suspend the obligations of the lender to make loans under the agreement, or declare the loan to be due and payable, or both. During the continuance of an event of default, the loan(s) shall accrue interest at a rate of 5% per annum. As of December 31, 2016, there was $5,650,000 outstanding. With respect to the $4,800,000 loan, of which $4,754,636 is outstanding, all amounts owed shall accrue interest at 4.04% per annum, and the entire loan shall become due and payable on June 30, 2021. Upon an event of default under the loan, the lender may require that the entire loan become due and payable.

The following are highlights of our operating results for the year ended December 31, 2016 (Successor) and the nine months ended December 31, 2015 (Successor) and the three months ended March 31, 2015 (Predecessor):

Recent Developments

On January 10, 2017, our wholly owned subsidiary, NABC Properties, LLC, entered into a Purchase and Sale Agreement with an unaffiliated third party. Pursuant to the agreement, NABC Properties, LLC entered into a commitment to sell the property located at 1700 E 68^th Avenue, Denver, CO 80229 for a purchase price of $8,900,000. $100,000 of the purchase price was paid upon execution of the agreement, with the balance of $8,800,000 to be paid on or before March 31, 2017. The agreement contains a lease back provision, whereby NABC Properties, LLC shall lease the property for an initial term of ten years, with an option to extend for two successive five year periods. The lease cost is $52,000 per month for the initial year, with two percent annual increases.

Uncertainties in our Business

We believe that the key uncertainties in our business are as follows:

Successor and Predecessor Financial Presentation

Throughout the consolidated financial statements and in this Management’s Discussion and Analysis of Financial Condition and Results of Operation section, we refer to “Successor” and “Predecessor”. For periods after the acquisition of the Búcha^® Live Kombucha brand (since April 1, 2015), our operating results and cash flows are referred to as Successor. For periods prior to the acquisition of the Búcha® Live Kombucha brand, our operating results and cash flows are referred to as Predecessor. Where tables are presented in this MD&A, a black line separates the Successor and Predecessor financial information to highlight the lack of comparability between the periods.

Results of Operations

The remainder of this MD&A discusses our continuing operations of the newly combined entity including all of the Company’s brands. The comparisons on a twelve months basis for 2016 are of the newly combined entity versus the Bucha, Inc. standalone company in 2015. The year ended comparisons include the breakout of twelve months of the combined new entity and of the Búcha standalone for 2016, compared to Búcha standalone for year ended of 2015, including three months (the first three months of the year) of the predecessor company, B&R Liquid Adventure. Where tables are presented, a black line separates the Successor and Predecessor financial information to highlight the lack of comparability between the periods. See further discussion under “Successor and Predecessor Financial Presentation” above.

For the year ended December 31, 2016 (newly Combined Entity) compared to the nine months ended December 31, 2015 (Successor) and the three months ended March 31, 2015 (Predecessor)

Revenues

Net revenues for the year ended December 31, 2016 were $25,301,806 as compared to $1,844,889 for the nine months ended December 31, 2015 (Successor) and $576,863 for the three months ended March 31, 2015 (Predecessor). The primary reason for the significant increase was the acquisition of Xing on June 30, 2016.

Sales during the three months ended December 31, 2016 for the portfolio on a proforma basis increased 10.1%, with all brands and divisions growing vs. the three month period in the prior year. The primary reason for the significant increase was the penetration of Búcha^® Live Kombucha into the New Age Distribution system, national distribution expansion of the entire portfolio, and continued expansion of the New Age DSD division in Colorado.

In the planning of the acquisition and combination between Búcha, Inc. and Xing, numerous revenue synergies were identified that included sales of the Búcha brand in Xing national/regional accounts, sale of the Búcha^® brand through New Age DSD system, and sale of the XingTea^® Brand in Búcha, Inc. national/regional accounts. Capturing of these synergies have manifested in immediate value reflected in the net sales growth for the quarter, and are expected to continue with the impact of increased distribution to more than 2,000 new accounts that have been added across the portfolio during the third quarter.

Cost of Goods Sold

Total cost of goods sold for the twelve months ended December 31, 2016 was $19,505,580 as compared to $1,606,141 for the nine months ended December 31, 2015 (Successor) and $402,235 for the three months ended March 31, 2015 (Predecessor). The primary reason for the significant increase was the acquisition of Xing on June 30, 2016.

As a percentage of sales, total cost of goods sold was 77.1% for the twelve months ended December 31, 2016 (gross margin of 22.9%). Production costs were $18,932,510 for the twelve months ended December 31, 2016, as compared to $1,504,471 for the nine months ended December 31, 2015 (Successor) and $397,135 for the three months ended March 31, 2015 (Predecessor). The change was directly attributable to our Xing acquisition.

The increase in the gross margin was due to several factors, including (1) a significant increase in gross and net sales, (2) significantly increased scale and efficiencies that led to lower freight costs and transportation costs, and (3) an improvement in the production processes of some of our key products that led to lower overall manufacturing costs.

Improvement in costs of goods sold is one of the Company’s major priorities, and numerous improvement opportunities across each brand have been identified and action plans emplaced to improve gross margins, have already begun to positively impact gross margin, and are expected to significantly impact gross margin in 2017.

Operating Expenses

Total operating expenses for the twelve months ended December 31, 2016 was $9,422,983, as compared to $1,000,453 for the nine months ended December 31, 2015 (Successor) and $244,356 for the three months ended March 31, 2015 (Predecessor). The primary reason for the significant increase was the acquisition of Xing on June 30, 2016. In addition to the impact of the operating costs of a substantially larger scale enterprise, a significant amount of the increase was also attributable to the transactional costs recognized when acquiring Xing, and numerous other one-time, non-recurring legal and other expenses associated with the integration.

In the planning of .the acquisition and combination between Búcha, Inc and Xing, numerous cost synergies were identified that included reduction of freight expenses, improvement in cost of goods sold in both packaging and raw material sourcing, and numerous improvements in operating expenses including elimination of overlapping headcount and other duplicative expenses. Capturing of these synergies have manifested in immediate value reflected in the cost of goods sold improvement for the quarter, and are expected to continue with the impact of elimination of headcount from Búcha, Inc, further COGS savings that take time to materialize, and further operating expense improvements resulting from new processes emplaced during the quarter.

 Liquidity and Capital Resources

As of December 31, 2016, we had cash of $529,088.

The acquisition of Xing substantially improved the Company’s resources. With the profitability of the new acquisition, we believe we have sufficient cash and generate sufficient profitability to meet the needs of the combined operation. We estimate our capital needs over the next twelve-month period to be $500,000, which can be funded from the profits of the combined Xing, Búcha operations. If our own combined financial resources and current cash-flows from operations are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. Any sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects.

During the year ended December 31, 2016, the Company borrowed $200,000 in the form of a convertible promissory note, which included warrants, from an unaffiliated third party. During the year, the convertible promissory note, and warrants were converted into shares of Series B preferred stock. During the year ended December 31, 2016, we entered into a $4,500,000 promissory note issued in connection with our Xing acquisition. The promissory note related to our Xing acquisition accrues interest at a rate of 1.00% per annum, which shall begin to accrue on January 1, 2017. Interest shall be due and payable in arrears on the first day of each month beginning on February 1, 2017 through the maturity date. The maturity date of the promissory note is June 30, 2017.

Working Capital

Current assets are primarily comprised of accounts receivable and inventories, which accounts for 47.3% and 44.2% of our current assets as of December 31, 2016 and which accounts for 49.4% and 37.3% of our current assets as of December 31, 2015, respectively.

Current liabilities are comprised of accounts payable and accrued expenses and, as of December 31, 2016, a current portion ($4,562,179) of a note payable, which is due on June 30, 2017.

Increases in our reported assets and liabilities are attributable to our June 30, 2016 acquisition of Xing’s net assets for $19,995,000. The purchase price was allocated to the net assets acquired as follows:

The acquisition was consummated on June 30, 2016, and as such, the Company assessed the fair value of the various net assets acquired. The Company identified other intangible assets, such as customer lists that were recognized apart from goodwill, and recorded at fair value.

The $4,506,227 of goodwill currently recognized is deductible for income tax purposes over the next fifteen years.

Cash Flows

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2016 (Successor) was $975,176. Our Net cash used in operating activities for the nine months ended December 31, 2015 (Successor) was ($633,982). Net cash provided by operating activities for the three months ended March 31, 2015 (Predecessor) was $24,330.

Investing Activities

Net cash used in investing activities is primarily driven by our acquisition of Xing on December 31, 2016 (Successor), whereby we paid $8,500,000, and the acquisition of B&R Liquid Adventure on April 1, 2015 (Successor), whereby we paid $400,000. Net cash used in investing activities for the year ended December 31, 2016 was $(8,547,198). Net cash used in investing activities during the nine months ended December 31, 2015 (Successor) and three months ended March 31, 2015 (Predecessor) were ($28,351) and ($11,688). The primary cause for the change from period to period was cash proceeds and cash payments on discontinued operations and the acquisition of B&R Liquid Adventure during the year ended December 31, 2015 (Successor).

Financing Activities

For the year ended December 31, 2016 (Successor), net cash provided by financing activities of $8,057,254 was due to us borrowing (i) $10,700,000 from US Bank to finance the Xing acquisition. The $10.7 million in debt was secured in two separate notes with U.S. Bank; one note for $4.8 million, which is secured by our Denver, Colorado property; and another revolving note of $5.9 million, which is secured by the company’s inventories and receivables. $2,200,000 of the $10,700,000 was used to pay off the balance from the previous mortgagor and the remaining $8.5 million was used to fund the Xing acquisition. There was additional debt of (ii) $200,000 from an unrelated party pursuant to a convertible note payable (that has since been converted). Net cash provided by financing activities during the nine months ended December 31, 2015 (Successor) was $248,054. Net cash used in financing activities during the three months ended March 31, 2015 (Predecessor) was ($70,874). The primary cause for the change from period to period was cash proceeds and cash payments on notes payables and net factoring advances during the year ended December 31, 2015 (Successor).

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Effects of Inflation

We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.

Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in the notes to our consolidated financial statements included herein for the year ended December 31, 2016.

Newly Issued Accounting Pronouncements

We do not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on our consolidated financial statements.

Inventories and Provision for Excess or Expired Inventory

Inventories consist of tea ingredients, packaging and finished goods and are stated at the lower of cost (first-in, first-out basis) or market value. Provisions for excess inventory are included in cost of goods sold and have historically been immaterial but adequate to provide for losses on its raw materials.

Long-lived Assets

Our long-lived assets consisted of property and equipment and customer relationships and are reviewed for impairment in accordance with the guidance of the FASB Topic ASC 360, Property, Plant, and Equipment. We test for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Through December 31, 2016, we had not experienced impairment losses on our long-lived assets as management determined that there were no indicators that a carrying amount of the asset may not be recoverable.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivables. We place our cash with high credit quality financial institutions. At times such amounts may exceed federally insured limits. Receivables arising from sales of our products are not collateralized. For the year ended December 31, 2016 (Successor), three customers represented approximately 27.5% (14.5%, 7.5% and 5.5%) of revenue. As of December 31, 2016, three customers represented approximately 29.4% (12.3%,8.9% and 8.2%) of accounts receivable. As of December 31, 2015 (Predecessor), three customers represented approximately 92.8% (59.0%, 22.9% and 10.9%) of accounts receivable. For the nine months ended December 31, 2015 (Successor), three customers represented approximately 75.5% (32.7%, 24.2% and 18.6%) of revenue. For the three months ended March 31, 2015 (Predecessor), three customers represented approximately 84.5% (28.1%, 18.9% and 18.6%) of revenue.

Accounts Receivable Factoring Arrangement with Recourse

In April 2015, we entered into a factoring agreement to sell, with recourse, certain receivables to an unrelated third-party financial institution. Under the terms of the factoring agreement, we receive an advance of 80% of qualified receivables and maximum amount of outstanding advances at any one time will not exceed $500,000. On July 1, 2016, the Company cancelled its factoring contract. There were no advances received during the year ended December 31, 2016. For the year ended December 31, 2015 (Successor), we received net advances from the factoring of accounts receivable of $110,663 and recognized factoring interest and fees of $34,069. We pay factoring fees associated with the sale of receivables at the rate of 0.67% of the gross face value of the receivable for every ten-day period or fraction thereof from the date of the advance until the receivable is paid in full.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired. The goodwill impairment test is applied by performing a qualitative assessment before calculating the fair value of the reporting unit. If, on the basis of qualitative factors, it is considered not more likely than not that the fair value of the reporting unit is less than the carrying amount, further testing of goodwill for impairment would not be required. Otherwise, goodwill impairment is tested using a two-step approach.

Intangible assets are recorded at acquisition cost less accumulated amortization and impairment. Definite lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated.

Share-Based Compensation

We account for stock-based compensation to employees in accordance with FASB ASC 718, Compensation—Stock Compensation. Stock-based compensation to employees is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite employee service period. We account for stock-based compensation to other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. We estimate the fair value of stock-based payments using the Black-Scholes option-pricing model for common stock options and warrants and the latest fair market price of the Company’s common stock for common share issuances.

Acquisitions

We entered into an Asset Purchase Agreement on May 20, 2016, which closed on June 30, 2016, whereby we acquired substantially all of the operating assets of New Age Beverages, LLC, New Age Properties, LLC, Aspen Pure, LLC and Xing Beverage, LLC (collectively, “Xing”), which are companies engaged in the manufacture and sale of various teas and beverages. The transaction was disclosed in a Form 8-K filed on May 23, 2016, and an amended Form 8-K filed on June 30, 2016. Upon the closing of the acquisition, we received substantially all of the operating assets of Xing, consisting of inventory, fixed assets and intellectual property in exchange for an aggregate purchase price of $19,995,000, consisting of $6,995,000 worth of our common stock, consisting of 4,353,915 shares of common stock, $8,500,000 in cash, and a secured promissory note in an amount of $4,500,000. The promissory note shall accrue interest of 1% per annum, beginning after six months from the Closing Date, and shall be secured by a second lien on our assets. The shares of common stock issued pursuant to the acquisition are subject to an additional leak out provision, which states that upon the date that is six months after Closing Date, the holders of the shares may only sell up to fifteen percent of the shares held by such shareholder each calendar quarter for an additional twelve month period, meaning that the leak out provision will expire 18 months from the Closing of the acquisition.

On April 1, 2015 we entered into an Asset Purchase Agreement whereby we acquired substantially all of the operating assets of B&R Liquid Adventure, LLC a California Limited Liability Company. Upon the closing of the acquisition, we received substantially all of the operating assets of B&R, consisting of inventory, fixed assets and intellectual property in exchange for 1,479,290 shares of common stock valued at $500,000, a cash payment of $260,000, and a secured promissory note in an amount of $140,000. In addition, the Company assumed $121,416 of scheduled liabilities. The shares of common stock issued pursuant to the acquisition are restricted under Rule 144, and are also subject to an additional leak out provision, which states that upon the date that is six months after Closing, the holders of the shares may only sell up to fifteen percent of the shares held by such shareholder each calendar quarter for an additional twelve month period, meaning that the leak out provision will expire 18 months from the Closing of the acquisition.

Capital Expenditures

Other Capital Expenditures

We expect to incur research and development costs, as well as marketing expenses in connection with the expansion of our business and the development of our products.

Going Concern

The Report of our Independent Registered Public Accounting Firm with respect to our December 31, 2015 consolidated financial statements as provided in our Form 10-K filed on April 7, 2016 includes an explanatory paragraph stating that the recurring losses, an accumulated deficit and a working capital deficit at December 31, 2015 raise substantial doubt about our ability to continue as a going concern.

We believe that the actions presently being taken to further implement our business plan and generate revenues provide the opportunity for us to continue as a going concern. While we believe in the viability of our strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to further implement our business plan and generate revenues.

The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Future Contractual Obligations and Commitment

We incur contractual obligations and financial commitments in the normal course of our operations and financing activities. Contractual obligations include future cash payments required under existing contracts, such as debt and lease agreements. These obligations may result from both general financing activities and from commercial arrangements that are directly supported by related operating activities.

As of December 31, 2016, we have no future contractual obligations or commitments, other than our distribution agreements, lease agreements and the promissory note related to the Xing acquisition.

Off-Balance Sheet Arrangements

As of December 31, 2016, we have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated under which it has:

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of New Age Beverages Corporation

We have audited the accompanying consolidated balance sheets of New Age Beverages Corporation and its subsidiaries as of December 31, 2016, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of New Age Beverages Corporation and its subsidiaries as of December 31, 2016, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Accell Audit & Compliance, P.A.

Tampa, Florida

March 31, 2017

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

New Age Beverages Corporation

(formerly American Brewing Company, Inc. and Búcha, Inc.)

We have audited the accompanying balance sheet of New Age Beverages Corporation (formerly American Brewing Company, Inc. and Búcha, Inc.) (the “Company”) as of December 31, 2015, and the related statements of operations, members’ capital and stockholders’ equity (deficit), and cash flows for the nine months ended December 31, 2015 (Successor) and for the three months ended March 31, 2015 (Predecessor). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New Age Beverages Corporation (formerly American Brewing Company, Inc. and Búcha, Inc.) as of December 31, 2015, and the results of its operations and its cash flows for the nine months ended December 31, 2015 (Successor) and for the three months ended March 31, 2015 (Predecessor) in conformity with accounting principles generally accepted in the United States of America.

NEW AGE BEVERAGES CORPORATION  

CONSOLIDATED BALANCE SHEETS

See accompanying notes, which are an integral part of these consolidated financial statements.

NEW AGE BEVERAGES CORPORATION  

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes, which are an integral part of these consolidated financial statements.

NEW AGE BEVERAGES CORPORATION

STATEMENT OF MEMBERS’ CAPITAL AND STOCKHOLDERS’ EQUITY (DEFICIT)

For the years ended December 31, 2016 and 2015