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

BrewDog USA Inc. ("BrewDog" or the "Company" "Us" or "We") and its subsidiaries were formed for the general purpose of brewing and retailing craft beer in the United States. BrewDog has constructed a brewing facility in Columbus, Ohio that has been operational since April 2017. A taproom and a craft beer themed hotel were opened at the brewing facility in Columbus in February 2017 and August 2018, respectfully. BrewDog has also opened two bars in the Short North and Franklinton neighborhoods of Columbus, Ohio in 2018. BrewDog has 121 full time employees and 53 part-time employees as of December 31, 2018.

BrewDog’s mission is to make other people as passionate about great craft beer as we are.

BrewDog has three main prospective focuses:

To make the best beers we possibly can;

To be the best company to work for that we can be; and

To provide mind blowingly epic service to all our amazing customers.

Management’s discussion and analysis of financial condition and results of operations as of December 31, 2017 is available for review here and incorporated by reference.

https://www.sec.gov/Archives/edgar/data/1646269/000164626918000009/brewdogform1k.htm

A. Operating Results

Overview

BrewDog USA Inc. (“BrewDog” or the “Company” “Us” or “We”) was formed on April 22, 2015, as a Delaware Corporation, for the general purpose of brewing and distributing craft beer in the United States. BrewDog is majority owned by BrewDog Plc, a United Kingdom company. BrewDog has built a brewery in Columbus, Ohio to manufacture its craft beer for national distribution across the U.S., as well as wholesale and retail sales and also to operate local retail bar/restaurant establishments, which may have small brewing facilities on site that will operate under the name “BrewDog” and will sell BrewDog beer, along with food items.

Results of Operations

The year ended December 31, 2018

Revenue. Total revenue for the year ended December 31, 2018 was $17,198,075 primarily in wholesale craft beer sales and drink and food sales from our bars.

Cost of Sales. Cost of sales for the year ended December 31, 2018 were $11,000,842. Cost of sales for the period comprised of Brewery raw material costs, packaging costs, manufacturing labor and overhead as well as Bar drink and food purchases and labor for preparing and serving.

Administrative Expenses. Operating expenses for the year ended December 31, 2018 were

$6,507,705. Operating expenses for the period were comprised of organization costs as well as attorney fees, accounting fees, other administrative expenses associated with setting up our operations, payroll, web site development, real estate taxes and insurance.

Net Loss. Net loss for the year ended December 31, 2018 was $(2,499,727). This net loss was the result of operating expenses exceeding early stage operating revenues.

B.Liquidity and Capital Resources

We had net cash of $724,963 at December 31, 2018.

During the year ended December 31, 2018, operating activities used $(1,154,131) primarily due net losses sustained during the startup phase.

Cash used by investing activities relating to capital expenditures during the year ended December 31, 2018 was $(10,396,184). Cash provided by financing activities during the twelve months ending December 31, 2018 was $11,697,370 related to advances from BrewDog Plc and proceeds of the sale of stock. Since inception, our capital needs have primarily been met by BrewDog Plc.

C.Plan of Operations

Our plan of operation for the 12 months ended December 31, 2018 is as follows:

In 2018, we have expanded the distribution of our craft beer to 9 states. We plan to continue state expansion throughout 2019. Beginning in February 2018, the company entered into a contract brewing arrangement with a regional craft brewery whereby we produce and package their beer brands. We plan to continue to contract brew throughout 2019. We continue to operate the taproom at the Columbus brewery and have opened two BrewDog Bars in Columbus, Ohio. In addition, we also opened the BrewDog Hotel, the world’s first craft beer themed hotel, located at the Columbus brewery. We plan to continue to open new bars in 2019. We have hired and plan to hire staff to run our business and to help us follow through on our business plans.

D.Trend Information

Based on the results in 2017 and 2018, BrewDog believes there is a market for its products in North America. However, it is difficult to predict changing consumer preferences in craft beer. If we are unable to react to changing consumer preferences, our sales could decrease. Additionally, BrewDog sells its beer within a three-tier system consisting of manufacturers, distributors and retailers. BrewDog competes for a share of the distributor's attention, time and selling efforts. In retail establishments, BrewDog competes for shelf space and tap handle placement. Failure to maintain distributor's attention or retail space could cause sales to decrease. If the market price for hops, malt, barley or other brewing ingredients rises, BrewDog's product cost will rise and potentially threaten the Company's ability to meet profitability and/ or demand. It is important for Brewdog to continue to secure funding in order to grow the business and expand its offerings to meet consumer preferences.

E.Off-Balance Sheet Arrangements

We do not have any 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 are material to investors.

F.Critical Accounting Policies

We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management's judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management's Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results. Note that our preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Income taxes are one such critical accounting policy. Income taxes are recorded on an accrual basis of accounting based on tax positions taken or expected to be taken in a tax return. A tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not (i.e., likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold are measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized. Should they occur, our policy is to classify interest and penalties related to tax positions as income tax expense. Since our inception, no such interest or penalties have been incurred.

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606), which replaces numerous requirements in U.S. GAAP, including industry-specific requirements, and provides companies with a single revenue recognition model for recognizing revenue from contracts with customers. On January 1, 2018, we adopted the requirements of ASC Topic 606 and all the related amendments to all of our contracts using the modified retrospective method. Upon completing our implementation assessment of Topic ASC 606, we concluded that no adjustment was required to the opening balance of retained earnings at the date of initial application. The comparative information has also not been restated and continues to be reported under the accounting standards in effect for those periods. Additional disclosures required by ASC Topic 606 are presented within the aforementioned Revenue Recognition policy disclosure. We recognize revenue on Brewery product sales to distributors or through self-distribution at the time when the

product is shipped and control of the product is transferred to the customer according to the shipping terms. Revenue from the Brewery Taproom and two bars are recognized as revenue at the point of the delivery of meals and services. Company sales are presented net of sales tax.

G.Additional Company Matters

The Company has not filed for bankruptcy protection nor has it ever been involved in receivership or similar proceedings. The Company is not presently involved in any legal proceedings material to the business or financial condition of the Company. The Company does not anticipate any material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business, in the next 12 months.

Item 2.Directors and Officers

As of December 31, 2017, BrewDog USA Inc.’s officers and directors information is available for review here. Please see pages 49-50.

https://www.sec.gov/Archives/edgar/data/1646269/000164626916000019/brewdogcpartiiandpartiii.htm

As of December 31, 2018, BrewDog USA Inc. had 121 full-time employees, one of which is an executive officer of the Company.

The directors, executive officers and significant employees of the Company as of December 31, 2018 are as follows:

Name	Position	Age	Term of Office	Approx. hours per week
Executive Officers:
James Watt	President	34	4-22-15 to present	10
Alan Martin Dickie	Vice President	34	4-22-15 to present	10
Neil Simpson	Chief Financial Officer	46	4-22-15 to present	10
Directors
James Watt	Chairman of Board of Directors	34	4-22-15 to present	N/A
Alan Martin Dickie	Director	34	4-22-15 to present	N/A
Neil Simpson	Director	46	4-22-15 to present	N/A

The directors of BrewDog USA Inc. are, at present, not compensated by the Company for their roles as directors. For the three present directors, only expenses are reimbursed for their participation on the board of directors. The Company may choose to compensate the present directors in the future, as well as compensate future directors, in the Company’s discretion.

Executive Compensation

From its inception in April 2015 to the end of the past fiscal year, BrewDog USA Inc. paid no salaries to its executive officers:

Name	Capacities in which compensation was received	Cash compensation ($)	Other compensation ($)	Total compensation ($)
James Watt	President	$ 0	$ 0	$ 0

Alan Martin Dickie	Vice President	$ 0	$ 0	$ 0

Neil Simpson	CFO	$ 0	$ 0	$ 0

Employment Agreements

We have not entered into any employment agreements with our executive officers or other employees to date. We may enter into employment agreements with them in the future. A stock incentive program for our directors, executive officers, employees and key consultants may be established in the future.

Board of Directors

Our board of directors currently consists of three directors. None of our directors are “independent” as defined in Rule 4200 of FINRA’s listing standards. We may appoint additional independent directors to our board of directors in the future, particularly to serve on committees should they be established.

Committees of the Board of Directors

We may establish an audit committee, compensation committee, a nominating and governance committee and other committees to our Board of Directors in the future, but have not done so to date. Until such committees are established, matters that would otherwise be addressed by such committees will be acted upon by the Board of Directors.

Director Compensation

We currently do not pay our directors any compensation for their services as board members, with the exception of reimbursing for board related expenses. In the future, we may compensate directors, particularly those who are not also employees and who act as independent board members, on either a per meeting or fixed compensation basis.

Limitation of Liability and Indemnification of Officers and Directors

Our Bylaws limit the liability of directors and officers of the Company to the maximum extent permitted by Delaware law. The Bylaws state that the Company shall indemnify and hold harmless each person who was or is a party or is threatened to be made a party to, or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or an officer of the Company or such director or officer is or was serving at the request of the Company as a director, officer, partner, member, manager, trustee, employee or agent of another company or of a partnership, limited liability company, joint venture, trust or other enterprise.

The Company believes that indemnification under our Bylaws covers at least negligence and gross negligence on the part of indemnified parties. The Company also may secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our Bylaws permit such indemnification.

The Company may also enter into separate indemnification agreements with its directors and officers, in addition to the indemnification provided for in our Bylaws. These agreements, among other things, may provide that we will indemnify our directors and officers for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of such person’s services as one of our directors or officers, or rendering services at our request, to any of its subsidiaries or any other company or enterprise. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers.

There is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

For additional information on indemnification and limitations on liability of our directors and officers, please review the Company’s Bylaws, which are attached to the Offering Circular and available for review here and incorporated by reference:

https://www.sec.gov/Archives/edgar/data/1646269/000164626916000019/brewdogbylaws.htm

Item 3.Security Ownership of Management and Certain Securityholders

Information regarding security ownership of management and certain shareholders as of December 31, 2017 is available for review here and incorporated by reference.

https://www.sec.gov/Archives/edgar/data/1646269/000164626918000009/brewdogform1k.htm

The following table sets forth information regarding beneficial ownership of our Common Stock as of December 31, 2018. There is no beneficial ownership of our Common Stock by any of our directors or executive officers or by all of our directors and executive officers as a group.

Beneficial ownership and percentage ownership are determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to Shares of stock. This information does not necessarily indicate beneficial ownership for any other purpose.

Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each Shareholder named in the following table possesses sole voting and investment power over their Shares of Common Stock.

¹James Watt and Martin Dickie will exercise voting control over the shares of BrewDog Plc. Watt and Dickie own voting stock of BrewDog Plc and are authorized by BrewDog Plc to vote on behalf of its shares of BrewDog USA, Inc.

Item 4.Interest of Management and Others in Certain Transactions

Information regarding interest of management and others in certain transactions as of December 31, 2017 is available for review here and incorporated by reference.

https://www.sec.gov/Archives/edgar/data/1646269/000164626917000004/brewdogformonek.htm

BrewDog Plc, the Company’s parent, has built a highly successful operation in the United Kingdom, with the same lines of business as BrewDog USA wishes to establish in the United States. As part of BrewDog Plc’s business, it previously established relationships with local beer and spirits distributors of BrewDog craft beers in the United States. BrewDog USA will therefore be able to draw upon such distribution relationships and BrewDog Plc’s expertise in launching the U.S. business.

In addition, BrewDog Plc plans to enter into a license with BrewDog USA permitting the Company to use the intellectual property of BrewDog Plc (including any trademarks) and any new marks created by BrewDog Plc. It is anticipated that any new intellectual property will be owned by BrewDog Plc, who will pay for the cost of clearing, registering and protecting any new intellectual property and will be licensed to BrewDog USA.

During the last fiscal year, the Company was a participant in transactions with BrewDog Plc, its parent company, in which the amounts involved exceed the lesser of $120,000 and one percent of the average of the Company’s total assets at year end for the last completed fiscal year. In these transactions, BrewDog Plc charged management fees of $270,005, charged interest of $790,026 and made advances of $10,368,512 to the Company.

James Watt and Martin Dickie own stock of, and are executive officers and directors of BrewDog Plc. As a result, they both have an indirect interest in the above-referenced transactions, as well as any other transactions involving the Company and BrewDog. James Watt and Martin Dickie will also have an indirect interest in any future transactions between BrewDog Plc and the Company due to their status as majority shareholders, executive officers and directors. There have been no transactions between BrewDog Plc and the Company in which either James Watt

or Martin Dickie received any extra or special benefit not shared on a pro-rata basis by all of the holders of securities of the class of stock owned by them as shareholders of BrewDog Plc.

Item 5.Other Information

None.

INDEX TO FINANCIAL STATEMENTS OF BREWDOG USA INC.
Consolidated Balance Sheets as of December 31, 2018 and 2017	15
Consolidated Statements of Comprehensive Loss - December 31, 2018 and 2017	16
Consolidated Statements of Cash Flows - December 31, 2018 and 2017	18
Notes to Consolidated Financial Statements	19