Form 1-SA California Tequila, inc. For: Jun 30

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 1-SA

 

SEMIANNUAL REPORT PURSUANT TO REGULATION A

 

For the fiscal semiannual period ended: June 30, 2022

 

CALIFORNIA TEQUILA, Inc.

(Exact name of issuer as specified in its charter)

 

California		851049284
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

 

California Tequila, Inc.

30012 Aventura, Suite A

Rancho Santa Margarita, California 92688

 

 (Full mailing address of principal executive offices)

 

310-427-9779

(Issuer’s telephone number, including area code)

 

Class B Non-Voting Common Stock

(Title of each class of securities issued pursuant to Regulation A)

 

 

 

In this semi-annual report, the term “California Tequila,” “we,” “us, “our” or “the Company” refers to California Tequila, Inc., a California corporation.

 

The following information contains certain forward-looking statements. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as “may,” “could,” “expect,” “estimate,” “anticipate,” “plan,” “predict,” “probable,” “possible,” “should,” “continue,” or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

 

Item 1. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

SUMMARY

 

Overview

 

California Tequila, Inc. (the “Company”) was incorporated under the laws of California on April 27, 2020. The Company is principally engaged in the business of importing, marketing, and selling ultra-premium tequila products under its “AsomBroso” brand. AsomBroso is the cognate of the Spanish word for “amazing.” The Company offers AsomBroso Tequila products across the entire price point spectrum of the ultra-premium tequila category from its AsomBroso Silver (USA MSRP $40.00/bottle) to its state of the art 12-year-aged Collaboration Extra Anejo (USA MSRP $1,800.00/bottle). The Company has also begun to market other spirits, specifically flavored whiskeys under its “Knucklenoggin” brand.

 

The Company’s tequila products are manufactured at Tequila Selecto Distillery, situated within Jalisco, Mexico – a province renowned for the production of a Mexican national resource, agave tequila. AsomBroso has been certified by the province of Jalisco to use the geographic distinctions of “Tequila” and/or “Tequila 100% De Agave” and continues to maintain such standards.

  

The Company currently has distribution of AsomBroso tequilas in thirty- five states and three foreign countries, with the intention to expand into new territories.

 

Results of Operations

 

Revenue

 

Revenue for the six-month period ended June 30, 2022 (“Interim 2022”) was $1,449,930, as compared to $1,284,736 for the six-month period ended June 30, 2021 (“Interim 2021”). The increase in revenues was primarily due to the increase in global tequila consumption.

 

Cost of goods sold are the cost of our Tequila and Whiskey goods, supplies and materials, shipping and materials related to our revenues. Cost of goods sold for Interim 2022 was $934,637 compared to $738,192 for Interim 2021 an increase of $196,445 or 27%. The increase resulted from the increase in production to prepare for Q4 demand that is the highest of the year due to the holidays. The COVID-19 pandemic restrictions also affected manufacturing and transportation time related to cost of goods sold, causing it to increase. Additionally, the increased global demand of agave resulted in increased agave costs effecting cost of goods sold to increase. The Company’s wholesale distributor product price increase did not become effective until 2022. As a percentage of total revenues for Interim 2022, costs of goods sold was 64% compared to 57% for Interim 2021.

 

SG&A expenses consist primarily of wages and salaries, payroll expenses, insurance, legal and professional services, including consulting, legal, and accounting fees, rent, utilities, office supplies plus travel expense and other general corporate expenses. Sales and Marketing expenses for Interim 2022, were $152,770 compared to $142,390 for Interim 2021, a 7.3%. The Company determined that it was necessary to increase its spending on sales and marketing so that it would further increase its online presence.

 

 

General and administrative (G&A) expenses for Interim 2022 were $1,065,080 compared to $579,919 for Interim 2021, an increase of $485,161 or 84%. The increase was due primarily to hiring five additional sales and marketing personal.

 

Our net loss for Interim 2022 was $(702,557) compared to $(175,763) for Interim 2021. The increase in net loss was due to: (i) delays in launching our products in new states and (ii) increased labor costs.

 

Liquidity and Capital Resources

 

Our total current assets at June 30, 2022 were $2,318,953, which included accounts receivable in the amount of $783,791. The Company also receives loans from its founder from time to time to meet operational needs.

 

As of June 30, 2022, we had cash on hand of $115,238, inventory of $1,419,924, and accounts receivable (net) of $783,791 and total liabilities of $544,253.

  

We expect that our liquidity needs for the next twelve months will be met by continued use of operating cash flows. We believe that we will be able to continue to operate our business for the foreseeable future.

 

Operating Activities

 

For Interim 2022, cash used in operating activities was in the amount of $(852,385) compared to $187,586 for Interim 2021. The increase in cash used in operating activities was mainly due to an increase in labor costs and cost of goods.

 

Investing Activities

 

For Interim 2022, cash used in investing activities decreased to $0 from $3,577 for Interim 2021. The decrease in cash used in investing activities was due to the Company determining that it did not need to purchase property and equipment during Interim 2022.

 

Financing Activities

 

For Interim 2022, cash provided by financing activities increased to $1,066,233 from $40,945 for Interim 2021. The increase in cash provided by financing activities was a result of the Regulation A Offering.

 

On April 19, 2020, the Company received an SBA Loan in the amount of $416,500 with an interest rate 3.75%. The monthly payment is $2,030, including principal and interest. The balance of principal and interest will be payable 30 years from the date of the promissory note.  As of Interim 2022, the amount outstanding is $329,470 in principal and $29,000 in interest payable. The Company notes that this loan is not eligible for forgiveness.

  

On August 9, 2021, the Company commenced a Regulation A offering. On February 24, 2022, the Company closed the Regulation A offering and issued 302,788 shares of Class B non-voting common stock for gross proceeds of $2,501,452. As of June 30, 2022, the Company had a subscription receivable balance of $96,600 pertaining to this offering.

 

Subsequent Events

 

On July 8, 2022, the Company commenced an offering pursuant to Regulation Crowdfunding. The Company is seeking to sell up to 528,541 shares of Class B non-voting common stock at $9.46 per share for total proceeds of $5,000,000.

 

 

On July 11, 2022, Richard Gamarra sold 2,042,990 of his 9,020,988 shares of Class A-Voting common stock of the Company.

 

The following table displays, as of July 15, 2022, the voting securities beneficially owned by (1) any individual director or officer who beneficially owns more than 10% of any class of the Company’s capital stock, (2) all executive officers and directors as a group and (3) any other holder who beneficially owns more than 10% of any class of the Company’s capital stock:

 

Title of Class	Name of beneficial owner	Address	Amount and nature of beneficial ownership (Shares)	Amount and nature of beneficial ownership acquirable	Percent of Class	Percent of All Classes of Shares
Class A Voting Common Stock	Richard D Gamarra Living Trust	30012 Aventura Rancho  Santa Marg7arita, CA 92688	6,977,998	6,977,988	70.5%	66.6%
Class A Voting Common Stock	Rajan Bhadresh Patel	106 Hudson Bridge Ct, Stockbridge, GA 30281	2,042,990	2,042,990	22%	21%

 

Trends

 

Tequila consumption continues to surge to new heights. Specifically:

 

	•	For the year ended December 31, 2021, tequila sales volume increased to 26.7 million (9 liter) cases up from 22.7 million cases.
	•	Tequila’s largest-selling premium labels have seen an influx of 100% blue agave extensions, which have carved out a significant share in a space once reserved for mixtos, the less expensive (not 100% agave) tequilas.
	•	Tequila shipments from Mexico to the U.S. increased 13.4% in the year-to-date through November 2021, with 100% blue agave offerings comprising over two-thirds of that volume—up from less than 60% in 2020—according to the Consejo Regulador del Tequila. Year-to-date Tequila volumes in control states rose 22.7% through October 2021, according to NABCA.
	•	Tequila and mezcal was the second-fastest growing spirits category in 2021, trailing only premixed cocktails. Agave-based spirits saw sales climb 30.1% compared with the prior year to $5.2 billion, according to the Distilled Spirits Council of the U.S.
	•	Tequila could soon overtake vodka as America’s favorite liquor, fueled by consumers’ desire for pricey bottles of agave-based spirits.
	•	Tequila is the second-largest category by revenue behind No. 1 vodka, which has been the top-selling spirit in the U.S. since the 1970s. At $7.3 billion in revenue, vodka is still selling roughly $2 billion more annually than tequila and mezcal, but agave-based spirits could be on track to outstrip it in just a few years.

 

Due to the aforementioned factors, the Company believes that increased consumption of tequila will continue to grow and shape the tequila market domestically and globally.

 

Item 2.

Other Information

 

None.

 

Item 3.

Financial Statements

 

The accompanying semiannual consolidated financial statements are unaudited and have been prepared in accordance with the instructions to Form 1-SA. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with accounting principles generally accepted in the United States of America. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Company’s Annual Report on Form 1-K for the year ended December 31, 2021. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included, and all such adjustments are of a normal recurring nature. Operating results for the six months ended June 30, 2022, are not necessarily indicative of the results that can be expected for the year ending December 31, 2022.

 

 

 

 

 

CALIFORNIA TEQUILA, INC.

 

 

Financial Statements

As of June 30, 20222 (unaudited) and December 31, 20211 (audited) and for the six-month periods ended June 30, 2022 and 2021 (unaudited)

 

 

(Expressed in United States Dollars)

 

 

CALIFORNIA TEQUILA, INC.

BALANCE SHEETS 

 

As of June 30, 2022 (unaudited) and December 31, 2021 (audited)		2021				2022
(USD $ in Dollars)
ASSETS
Current Assets:
Cash & cash equivalents			12,136				115,238
Accounts receivable—net			916,881				783,791
Inventories			1,061,875				1,419,924
Total current assets			1,990,892				2,318,953
Property and equipment, net			31,230				38,830
Other assets			8,472				872
Total assets			2,030,594				2,358,655
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable			162,770				158,721
Accrued expenses			35,565				3,999
Loan payable, current portion			24,360				24,360
Interest payable			56,063				56,063
Due to related party			0				0
Total current liabilities			278,758				243,143
Loan payable			390,110				301,110
Total liabilities			668,868				544,253
STOCKHOLDERS' EQUITY
Common stock			8,747				888,980
Additional paid-in capital			5,673,553				5,673,553
Subscription receivable			(90,973	)			(90,973	)
Members equity			-
Retained earnings/(accumulated deficit)			(4,229,602	)			(4,657,158	)
Total stockholders' equity			1,361,726				1,814,402
Total liabilities and stockholders' equity			2,030,595				2,358,655

 

See accompanying notes to financial statements.

 

 

CALIFORNIA TEQUILA, INC.

STATEMENTS OF OPERATIONS (UNAUDITED)

 

For the six-month periods ended June 30, 2022 and 2021		2022				2021
(USD $ in Dollars)
Net revenue			1,449,930				1,284,736
Cost of goods sold			934,637				738,192
Gross profit			515,293				546,544
Operating expenses
General and administrative			1,065,080				579,919
Sales and marketing			152,770				142,390
Total operating expenses			1,217,850				722,309
Operating income/(loss)			(702,557	)			(175,764	)
Interest expense							(2	)
Other income							-
Income/(Loss) before provision for income taxes			(702,557	)			(175,763	)
Provision/(Benefit) for income taxes			-				-
Net income/(Net Loss)			(702,557	)			(175,763	)

 

In the opinion of management, all adjustments necessary in order to make the interim financial statements not misleading have been included.

 

See accompanying notes to financial statements.

 

 

 

CALIFORNIA TEQUILA, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

 

For the six-month periods Ended June 30, 2022 and 2021

 

		Common Stock								Additional				Subscription				Members'				Accumulated				Total Stockholders'
(in $US)		Shares				Amount				Paid-In Capital				Receivable				Equity				Deficit				Equity
Balance—December 31, 2020			8,456,603			$	8,457			$	936,003			$	(92,989	)		$	-			$	93,628			$	945,098
Issuance of common stock, net
of issuance costs			290,546				291				1,560,028				2,017				-				-				1,562,336
Stock-based compensation			-				-				3,177,522				-				-				-				3,177,522
Net loss			-				-				-				-				-				(4,323,230	)			(4,323,230	)
Balance—December 31, 2021			8,747,149			$	8,747			$	5,673,553			$	(90,973	)		$	-			$	(4,229,602	)		$	1,361,726
Net loss			-			$	-			$	-			$	-			$	-			$	(702,557	)		$	(702,557	)
Balance—June 30, 2022			8,747,149			$	8,747			$	5,673,553			$	-			$	-			$	(4,932,159	)		$	659,169

 

See accompanying notes to financial statements.

 

 

CALIFORNIA TEQUILA, INC.

STATEMENTS OF CASH FLOWS (UNAUDITED)

 

For the six-month periods ended June 30, 2022 and 2021		2022				2021
(USD $ in Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)			(702,557	)			(175,763	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Bad debt expense							-
Depreciation							-
Changes in operating assets and liabilities:
Accounts receivable			69,119				(37,071	)
Inventory			(183,332	)			185,355
Accounts payable			69,630				80,079
Interest payable			7,811				7,811
Other current liabilities			(113,056	)-			127,174
Net cash used in operating activities			(852,385	)			187,586
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment							(3,577	)
Net cash used in investing activities							(3,577	)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from loan payable			(89,000	)			(2,030	)
Line of credit repayment							-
Issuance of common stock			1,165,174				55,632
Dividends / distributions			(9,941	)			(12,657	)
Net cash provided/(used) by financing activities			1,066,233				40,945
Change in cash			213,848				49,192
Cash—beginning of period			12,136				26,419
Cash—end of period			225,984				75,610
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest		$	-			$	-
Cash paid during the year for income taxes		$	-			$	-

 

See accompanying notes to financial statements.

 

 

CALIFORNIA TEQUILA, INC.

NOTES TO FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 and 2021 (unaudited) 

 

1.

NATURE OF OPERATIONS

 

California Tequila, Inc. (the “Company”), is a corporation organized April 19, 2019, under the laws of California. The Company was created to import and distribute AsomBroso brand tequila, a high-end ultra-premium tequila made in the Jalisco region of Mexico and Knucklenoggin Whiskey, and assortment of flavored whiskey brands. Products are distributed worldwide.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America ("US GAAP"). The accompanying unaudited financial statements do not include all the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for the fair presentation of the unaudited financial statements for the years presented have been included.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.

 

Significant estimates inherent in the preparation of the accompanying financial statements include inventory and cost of goods sold, equity transactions and contingencies.

 

Risks and Uncertainties

 

The Company has a limited operating history. The Company's business and operations are sensitive to general business and economic conditions in the United States. A host of factors beyond the Company's control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn or otherwise, local competition or changes in consumer taste. These adverse conditions could affect the Company's financial condition and the results of its operations.

 

 

CALIFORNIA TEQUILA, INC.

NOTES TO FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 and 2021 (unaudited) 

 

Concentration of Credit Risk

 

The Company maintains its cash with a major financial institution located in the United States of America, which it believes to be credit worthy. The Federal Deposit Insurance Corporation insures balances up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits.

 

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue. As of June 30, 2022, and June 30, 2021, one customer account for 42% and 62% of revenue, respectively. As of June 30, 2022, and December 31, 2021, one customer accounted for 74% and 88% of accounts receivable, respectively.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include all cash in banks. The Company’s cash are deposited in demand accounts at financial institutions that management believes are creditworthy. As of June 30, 2022, and December 31, 2021, the Company’s cash balances were $115,238 and $12,136, respectively.

 

Accounts Receivable

 

Accounts receivable due from customers are uncollateralized customer obligations due under normal trade terms requiring payment on receipt of invoice or within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Payments of accounts receivable are allocated to the specific invoices identified on the customer's remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

 

The Company estimates an allowance for doubtful accounts based upon an evaluation of the current status of receivables, historical experience, and other factors as necessary. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change.

 

Inventories

 

Inventories are valued at the lower of cost and net realizable value. Cost is determined on an average cost basis. Inventory includes finished goods and work in progress. The inventory balances of $1,409,330 and $1,061,875 as of June 30, 2022 and June 30, 2021, respectively, consisted of raw goods and finished products. The Company records impairment and obsolescence reserves against its inventory balances as deemed necessary.

 

Property and Equipment

 

Property and equipment are stated at cost. Normal repairs and maintenance costs are charged to earnings as incurred and additions and major improvements are capitalized. The cost of assets retired or otherwise disposed of and the related depreciation are eliminated from the accounts in the period of disposal and the resulting gain or loss is credited or charged to earnings.

 

Depreciation is computed over the estimated useful lives of the related asset type using the straight-line method for financial statement purposes. The estimated service lives for property and equipment ranges from five to seven years. Leasehold improvements are amortized over the lesser of the useful life of the asset or the lease term.

 

 

CALIFORNIA TEQUILA, INC.

NOTES TO FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 and 2021 (unaudited) 

 

Impairment of Long-lived Assets

 

Long-lived assets such as property and equipment are periodically evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We look for indicators of a trigger event for asset impairment and pay special attention to any adverse change in the extent or manner in which the asset is being used or in its physical condition. Assets are grouped and evaluated for impairment at the lowest level of which there are identifiable cash flows, which is generally at a location level. Assets are reviewed using factors including, but not limited to, our future operating plans and projected cash flows. The determination of whether impairment has occurred is based on an estimate of undiscounted future cash flows directly related to the assets, compared to the carrying value of the assets. If the sum of the undiscounted future cash flows of the assets does not exceed the carrying value of the assets, full or partial impairment may exist. If the asset carrying amount exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined using an income approach, which requires discounting the estimated future cash flows associated with the asset.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation.  Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the option vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options.

 

Income Taxes

 

Income taxes are provided for the tax effects of transactions reporting in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of receivables, property and equipment, intangible assets, and accrued expenses for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

There is a 100% valuation allowance against the net operating losses generated by the Company at December 31, 2021.

 

The Company evaluates its tax positions that have been taken or are expected to be taken on income tax returns to determine if an accrual is necessary for uncertain tax positions. As of December 31, 2021, the unrecognized tax benefits accrual was zero. The Company will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred.

 

Revenue Recognition

 

ASC Topic 606, “Revenue from Contracts with Customers” establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.

 

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to performance obligations in the contract; and 5) recognize revenue as the performance obligation is satisfied.

 

 

CALIFORNIA TEQUILA, INC.

NOTES TO FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 and 2021 (unaudited) 

 

The Company generates revenues by selling liquor products. The Company recognizes revenue from product sales when the goods have been delivered to the customer and the Company has satisfied its performance obligation.

 

Advertising

 

The Company expenses advertising costs as they are incurred and include advertising costs related to the Class B Non-Voting Stocks offerings. Total expense related to the offerings was $0 and $0 for the periods ended June 30, 2022, and 2021, respectively.

 

Fair Value of Financial Instruments

 

The carrying value of the Company’s financial instruments included in current assets and current liabilities (such as cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term nature of such instruments.

 

The inputs used to measure fair value are based on a hierarchy that prioritizes observable and unobservable inputs used in valuation techniques. These levels, in order of highest to lowest priority, are described below:

 

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

 

Level 2—Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

 

Level 3—Unobservable inputs reflecting the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

 

INVENTORY

 

Inventory was comprised of the following items:

 

		December 31, 2022				June 30, 2021
Finished goods			734,737				472,979
Work in progress			674,593				704,548
Inventories, net			1,409,330				1,177,527

 

As of June 30, 2022, and December 31, 2021, the Company had $35,000 and zero $0.00 in tequila barrel inventory, respectively, which consists of tequila product held in barrels for several years before being sold. As such, the amounts are included in non-current assets on the balance sheets.

 

 

CALIFORNIA TEQUILA, INC.

NOTES TO FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 and 2021 (unaudited) 

 

3.

PROPERTY AND EQUIPMENT

 

As of June 30, 2022, and December 31, 2021, property and equipment, net consist of:

 

		December 31, 2022				June 30, 2021
Barrels			35,000				0
Office and warehouse equipment			34,094				44,503
Less: Accumulated depreciation			(30,264	)			(13,273	)
Property and Equipment, Net			38,830				31,230

 

Depreciation expense for property and equipment for the year ended June 30, 2022, and the six months ended June 30, 2021, was $30,264 and $13,273 respectively.

 

4.

LOAN PAYABLE

 

SBA Loan

 

On April 19, 2020, California Tequila, Inc., received an SBA Loan in the amount of $416,500 with an interest rate 3.75%. The monthly payment is $2,030, including principal and interest. The balance of principal and interest will be payable 30 years from the date of the promissory note.

 

As of December 31, 2021, and June 30, 2022, the Company had $390,110 and $301,110 in principal outstanding, and $29,000 and $29,000 in interest payable, respectively.

 

5.

CAPITALIZATION and equity transactions

 

On April 19, 2021, the articles of incorporation were amended and California Tequila, Inc. is authorized to issue a total of 20,000,000 shares of Class A voting common stock and 1,500,000 shares of Class B non-voting common stock, both at par value $0.01.

 

As of June 30, 2022, the Company had 9,886,281 shares and 589,999 shares of Class A and Class B common stock issued and outstanding.

 

As of June 30, 2022, and December 31, 2021, the Company issued dividend payments of $0.00 and $12,657, respectively.

 

In March 2021, the Company filed an offering statement on Form 1-A under Regulation A of the Securities Act pursuant to which it intends to offer up to 1,500,000 shares of Class B common stock at a price of $8.00 per share. The offering commenced on August 9, 2021.

 

 

CALIFORNIA TEQUILA, INC.

NOTES TO FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 and 2021 (unaudited) 

 

On February 24, 2022, the Company closed its Reg A+ offering and issued 302,788 shares of Class B non-voting common stock for gross proceeds of $2,501,452. As of June 30, 2022, the Company has a subscription receivable balance of $96,600 pertaining to this offering.

 

6.

Income Taxes

 

The Company intends to file its income tax return for the period ended December 31, 2022, by the due date set by the Internal Revenue Service. The tax return will remain subject to examination by the Internal Revenue Service under the statute of limitations for a period of three years from the date it is filed.

 

Since the passage of the Tax Cuts and Jobs Act of 2017 (“TJCA”), net operating losses can be carried forward indefinitely. The Federal net operating loss carryforward (since incorporation in April 2019) as of December 31, 2021, totaled 161,754. Net operating loss carryforwards for state income tax purposes approximate those available for Federal income tax purposes. The Company has a book to tax difference due to revenue recognition of contract revenue. It is likely that the net operating loss carryforwards will be exhausted in the tax return for the period ended December 31, 2022.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, the Company has determined that it is more likely than not that the Company will not recognize the benefits of the federal and state net deferred tax assets, and, as a result, full valuation allowance has been set against its net deferred tax assets as of December 31, 2021. The amount of the deferred tax asset to be realized could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased.

 

The Company recognizes the impact of a tax position in the financial statements if that position is more likely than not of being sustained on a tax return upon examination by the relevant taxing authority, based on the technical merits of the position. As of December 31, 2021, the Company had no unrecognized tax benefits.

 

The Company recognizes interest and penalties related to income tax matters in income tax expense. As of December 31, 2021, the Company had no accrued interest and penalties related to uncertain tax positions.

 

The Company is subject to examination for its US federal and California jurisdictions for each year in which a tax return was filed.

 

7.

Commitments and Contingencies

 

Operating Leases

 

During 2022 and 2021, the company paid month to month rent for an office space to Tangar 1, LLC.

 

Rent expense as of June 30, 2022, and December 31, 2021, was $27,816 and $13,044, respectively.

 

 

CALIFORNIA TEQUILA, INC.

NOTES TO FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 and 2021 (unaudited) 

 

Contingencies

 

The Company’s operations are subject to a variety of local and state regulations. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations.

 

Litigation and Claims

 

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of September 22, 2022, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations.

 

8.

SUBSEQUENT EVENTS

 

The Company considers events or transactions that occur after the balance sheets date, but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through September 26, 2022, which is the date the financial statements were issued.

 

On July 8, 2022, the Company commenced an offering pursuant to Regulation Crowdfunding. The Company is seeking to sell up to 528,541 shares of Class B non-voting common stock at $9.46 per share for total proceeds of $5,000,000.

 

 

Item 4. Exhibits

 

The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each case as indicated below.

 

2.1	Certificate of Incorporation*
2.2	Certificate of Amendment to the Articles of Incorporation*
2.3	Bylaws*
6.1	Entailment and Joint Responsibility Agreement*
6.2	Retroactive Addendum*
6.3	Certificate of Good Standing*

 

* Filed as an exhibit to the Company’s Offering Statement on Form 1-A (File No. 024-11474) and incorporated by reference.

 

 

SIGNATURE

 

Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

California Tequila, Inc.

 

By:

/s/ Richard Gamarra
Richard Gamarra, Chief Executive Officer
Date: September 28, 2022

 

This Offering Statement has been signed by the following persons in the capacities and on the dates indicated.

 

/s/ Richard Gamarra
Richard Gamarra, Chief Executive Officer, Secretary and Director
Date: September 28, 2022
Location Signed: City of Rancho Santa Margarita, California
/s/ Andrew Ulmer
Andrew Ulmer, President, Chief Financial Officer, Chief Accounting Officer and Director
Date: September 28, 2022
Location Signed: City of Rancho Santa Margarita, California

 

 

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