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 our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section 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

For centuries, whiskey distillers believed that the flavor of the base beer didn't impact the finished whiskey so they'd use low-quality barley ingredients. Clint and I proved them wrong. In 2013, we started brewing high-quality craft beers to distill into whiskeys. The flavor profiles are drastically different between our products – and people love it.  Now you can find Seven Stills craft beer and whiskey at our three San Francisco taprooms and more than 2,500 retail stores. 

We've seen steady growth since launch and are on track to reach $3.5 million in sales this year, a 190% increase from last year. In five years, we aim to be the number one brewery and distillery in San Francisco with distribution throughout the United States.

Milestones

Seven Stills, Inc was incorporated in the State of Delaware in May 2018.

Seven Stills, LLC will merge into Seven Stills, Inc. upon issuance of all necessary licenses to do business.  Upon the merger, Seven Stills, Inc. will absorb the entity Seven Stills, LLC and all equity purchased in the LLC will be reflected in the new corporation.  

The objective of the merger is to act as a non-pass through entity, meaning investors will not receive an annual K-1 requiring them to pay taxes on any phantom income due to their ownership in the company.  All taxes will be paid upon the eventual dissolution of the investors' equity.

The company plans to authorize class E common stock prior to the closing of this offering.

The milestones, historical results of operations, and liquidity and capital resources listed below are those of Seven Stills LLC, not Seven Stills Inc.  Upon the completion of the merger, Seven Stills, Inc will gain these historical results of operation and resources.

The financial statements attached to this Form C are those of Seven Stills, LLC, not Seven Stills, Inc.  Upon the completion of the merger, Seven Stills, Inc will gain the financial conditions of Seven Stills, LLC.

Since organization, Seven Stills LLC has:

• 2,500+ retail locations 
• November 2016 - Opened first satellite taproom and restaurant in Outer Sunset of SF
• March 2018 - Completed expansion of brewing facilities to increase capacity 9x
• March 2018 - Opened second satellite taproom and restaurant in the Stanford Court in SF
• April 2018 - Signed lease for flagship brewery, distillery, restaurant, cocktail bar, taproom and retail shop in SoMa of SF.

Historical Results of Operations

• Revenues & Gross Margin. For the period ended December 31, 2017, the Company had revenues of $1,179,655 compared to the year ended December 31, 2016, when the Company had revenues of $621,833. Our gross margin was 81.61% in fiscal year 2017, compared to 80.25% in 2016.
• Assets. As of December 31, 2017, the Company had total assets of $867,468, including $102,106 in cash. As of December 31, 2016, the Company had $555,052 in total assets, including $37,876 in cash.
• Net Income. The Company has had net income of $103,864 and net income of $123,767 for the fiscal years ended December 31, 2017 and December 31, 2016, respectively.
• Liabilities. The Company's liabilities totaled $580,609 for the fiscal year ended December 31, 2017 and $315,936 for the fiscal year ended December 31, 2016.

Liquidity & Capital Resources

To-date, Seven Stills, Inc. has been financed for $790,500 in equity and Seven Stills LLC has been financed for $375,000 in equity. 

The Seven Still business has been financed with $3,461,006 in debt.

We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.

We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.

Runway & Short/Mid Term Expenses

Seven Stills, LLC cash in hand is $50,000, as of June 2018. Over the last three months, revenues have averaged $250,000/month, cost of goods sold has averaged $60,000/month, and operational expenses have averaged $130,000/month, for an average net margin of $60,000 per month.

The company has raised 2.5million in debt for this most recent project that will go towards the opening of the new facility.  Kilroy Realty Group, the developers, have also given us $1.2million to complete the project in exchange for being in their building.  We've also raised $600k from existing investors for this recent project. If we reach our maximum goal on Wefunder we will not seek further funding. If we only reach our minimum funding target we will seek investments from more traditional investors and VCs. The total cost of the project is $5.5mil.

If our Wefunder campaign is successful, we plan to open in November of 2018.  We generally do 53% of our total sales in Q4 of the year. Because our expenses for the first 18 months will be nominal, as our rest estate company is covering our rent, we expect the new location to become profitable within a month. When we opened our satellite facility in 2016 it was profitable within the first week.