UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 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 number: 000-55511

EPIC STORES CORP.
(Exact name of registrant as specified in its charter)
Nevada	45-5355653
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
20805 North 19th Avenue, #2, Phoenix, AZ  85027
(Address of principal executive offices)(Zip Code)
(855) 636-3742
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

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 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 (Check one).

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date

As of May 20, 2016, there were 38,680,263 shares of the issuer’s common stock, par value $0.0001, outstanding.

EPIC STORES CORP.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2016

TABLE OF CONTENTS

		PAGE
	PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	29
Item 4.	Controls and Procedures.	30
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	31
Item 1A.	Risk Factors.	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	37
Item 3.	Defaults Upon Senior Securities.	37
Item 4.	Mine Safety Disclosures.	37
Item 5.	Other Information.	37
Item 6.	Exhibits.	38

2

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements.

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2015, which were filed on our annual report on Form 10-K with the SEC March 30, 2016. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.

Financial Statements of our company for the quarter ended March 31, 2016

3

EPIC STORES CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

ASSETS	March 31, 2016			December 31, 2015
Current assets
Cash	$	—		$	—
Accounts receivable		—			—
Inventory		49,952			76,433
Deferred rents		—			—
Prepaid expense		153,626			33,809
Total current assets		203,578			110,242
Deposits		55,025			55,025
Fixed assets, net		558,904			617,267
Tenant improvements, net		861,048			872,060
Total assets	$	1,678,555		$	1,654,594
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liabilities	$	1,913,970		$	1,539,524
Accounts payable to related parties		436,384			413,507
Bank overdraw		39,219			4,449
Deferred rents - current portion		37,719			33,127
Equipment loan - current portion		48,042			39,601
Notes payable - current portion		664,235			703,914
Convertible notes		611,428
Loans from related parties		590,413			231,938
Total current liabilities		4,341,410			2,966,060
Deferred rents		1,371,122			1,456,409
Equipment loan		95,516			115,396
Notes payable		250,000			250,000
Declared dividends		85,399			85,399
Total liabilities		6,143,447			4,873,264
Stockholders' deficit
Preferred stock, $0.001 par value; 10,000,000 shares authorized;
0 and 0 shares issued and outstanding as of March 31, 2016
and  December 31, 2015, respectively		—			—
Common stock; $0.0001 par value; 687,500,000 shares authorized;
38,680,263 and 38,123,120 shares issued and outstanding
as of March 31, 2016 and  December 31, 2015, respectively		3,868			3,812
Additional paid-in capital		11,581,666			10,875,648
Accumulated deficit		(16,050,426	)		(14,098,130	)
Total stockholders' deficit of the Company		(4,464,892	)		(3,218,670	)
Total liabilities and stockholders' deficit	$	1,678,555		$	1,654,594

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

EPIC STORES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended
		March 31, 2016			March 31, 2015
Retail revenues	$	1,188,504		$	1,841,296
Wholesale revenues		1,245			138,993
Total revenues		1,189,749			1,980,289
Cost of revenues		(127,058	)		(517,930	)
Gross profit		1,062,691			1,462,359
Operating expenses
Payroll and related expenses		883,907			1,208,009
Rent expense		628,902			652,100
General and administrative expenses		327,746			626,847
Professional fees		332,375			137,610
Depreciation and amortization expense		69,375			57,291
Total operating expenses		2,242,305			2,681,857
Loss from operations		(1,179,614	)		(1,219,498	)
Other income (expense)
Interest expense		(275,453	)		(30,802	)
Commitment fees		(500,000	)		—
Other income		2,771			1,400
Total other expense		(772,682	)		(29,402	)
Net loss	$	(1,952,296	)	$	(1,248,900	)
Basic loss per common share	$	(0.05	)	$	(0.08	)
Basic weighted average common shares outstanding		38,390,153			15,969,510

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

EPIC STORES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three months Ending
	March 31, 2016			March 31, 2015
Cash Flows from Operating Activities
Net loss	$	(1,952,296	)	$	(1,248,900	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		212,000			—
Warrants issued for interest		81,528			—
Penalty increase to note payable		25,000			—
Bank overdraw		34,770			—
Amortization of original issue discount		99,152			—
Amortization of Benefitial conversion feature		28,423			—
Depreciation and amortization		69,375			57,291
Changes in assets and liabilities
Increase (Decrease) in deferred rents		(80,695	)		223,582
Decrease in prepaid expense		(119,817	)		2,421
Increase in deposits		—			(12,473	)
Decrease in inventory		26,481			39,793
Increase (decrease) in accounts payable to related parties		22,877			58,981
Increase (decrease) in accounts payable and accrued liabilities		374,446			160,022
(Increase) decrease in accounts receivable		—			(50,287	)
Net cash used in operating activities		(1,178,756	)		(769,570	)
Cash Flows from investing
Purchase of fixed assets		—			(94,563	)
Investment in tenant improvements		—			(179,817	)
Net cash used in investing activities		—			(274,380	)
Cash Flows from Financing Activities
Proceeds from issuance of common stock		250,000			400,000
Dividends paid to shareholders		—			(232,472	)
Principal payments on note payable		(363,280	)		—
Proceeds from convertible notes payable		740,000			—
Proceeds from notes payable		205,000			850,000
Proceeds from related party debts		358,475			—
Principal payments on capital leases		(11,439	)		(5,407	)
Net cash from financing activities		1,178,756			1,012,121
Net increase (decrease) in cash		—			(31,829	)
Beginning cash balance		—			142,034
Ending cash balance	$	—		$	110,205
Supplemental disclosure of cash flow information
Cash paid for interest	$	101,712		$	67,022
Cash paid for tax	$	—		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

EPIC STORES CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

History and Organization

Epic Stores Corp. (the “Company”) was incorporated under the name “SBOR, Inc.” in the State of Nevada on April 30, 2012. Effective December 20, 2013, the Company completed a merger with its wholly-owned subsidiary, Be At TV, Inc., a Nevada corporation, which was incorporated solely to effect a change in its name. As a result, the Company changed its name from “SBOR, Inc.” to “Be At TV, Inc.”.

On June 24, 2015, the Company entered into, and closed, a share exchange agreement dated June 24, 2015 (the “Exchange Agreement”) among the Company, Epic Stores Corp., a private Nevada company (“Epic Corp.”), and the stockholders of Epic Corp., pursuant to which the Company acquired all of Epic Corp.’s 27,083,493 issued and outstanding shares of common stock from its stockholders in consideration for the issuance of an aggregate of: (i) 19,959,970 shares of the Company’s common stock (on a post-reverse split basis), and (ii) 1,133,813 warrants (on a post-reverse split basis), each of which is exercisable into one share of the Company’s common stock at a price of $1.02 per share until June 24, 2018. As a result of the closing of the Exchange Agreement, Epic Corp. became a wholly-owned subsidiary of the Company.

In connection with the closing of the Exchange Agreement, the Company experienced a change of control as four new directors, all of whom were directors of Epic Corp., were appointed to the Company’s board, all of the Company’s prior management resigned and were replaced by management nominated by Epic Corp., and former stockholders of Epic Corp. were issued shares of the Company’s common stock that constituted approximately 58.1% of the Company’s issued and outstanding shares, on an undiluted basis, at the time of closing of the Exchange Agreement. As a result, the Company determined to treat the acquisition of Epic Corp. as a reverse merger and recapitalization for accounting purposes, with Epic Corp. as the acquirer for accounting purposes. 

Effective August 18, 2015, the Company completed a merger with its wholly-owned subsidiary, Epic Stores Corp., a Nevada corporation, which was incorporated solely to effect a change in its name. As a result, the Company changed its name from “Be At TV, Inc.” to “Epic Stores Corp.”. This name change was effected to reflect the change in the Company’s business resulting from the closing of the Exchange Agreement.

Also effective August 18, 2015, the Company completed a reverse split of its authorized and issued and outstanding shares of common stock, on the basis of one new share of common stock for each 2.4 shares of authorized, issued and outstanding shares of common stock prior to completion of the reverse split. In accordance with Staff Accounting Bulletin (“SAB”) Topic 4.C of the Securities and Exchange Commission, the equity presentation has been retroactively applied to the presentation of these financial statements. 

The Company currently has four wholly-owned subsidiaries, being Epic Stores, LLC, a Nevada limited liability company, Epic Stores 2 LLC, a Nevada limited liability company, Epic Stores III LLC, a Nevada limited company, and Epic Corp, a Nevada corporation. The Company operates its retail stores through its wholly-owned subsidiaries.

The Company, and each of its subsidiaries are collectively referred to herein as the “Company”, unless the context otherwise requires.

Description of Business

The Company is a second hand goods retailer that operates second hand retail stores in the United States. The Company focuses on offering high quality, on-trend second hand clothing, accessories and household products at affordable prices. Additionally, the Company sells used goods that do not meet or exceed its strict quality standards through the wholesale market. The Company maintains executive offices in Phoenix, Arizona.

As of March 31, 2016, the Company had 10 operating stores in four states, being Arizona, Nevada, Colorado and Texas. The Company has two additional locations under construction in Texas.

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2. BASIS OF PRESENTATION AND GOING CONCERN

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated.

Going Concern – The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of $16,050,426 since its inception and requires additional capital for its contemplated operational and marketing activities to take place. The Company’s ability to raise additional capital through the future issuance of common stock is unknown. Additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations, are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.

Use of Estimates – The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

Cash and Cash Equivalents – For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. There was $nil and $nil in cash and cash equivalents as of March 31, 2016 and December 31, 2015, respectively.

Fair Value of Financial Instruments – The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

As required by the Fair Value Measurements and Disclosures topic of the Financial Accounting Standards Board ("FASB") ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 – observable inputs such as quoted prices in active markets; Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3 – unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1: Cash and unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

8

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Property and Equipment – Property and equipment are recorded at historical cost.  Minor additions and renewals are expensed in the year incurred.  Major additions and renewals are capitalized and depreciated over their estimated useful lives.  When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.  Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes.  The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate.  The estimated useful lives for significant property and equipment categories are as follows:

Furniture and Fixtures	5 - 7 Years
Leasehold Improvements	Shorter of lease term or useful life.

Impairment of Long-Lived Assets – The Company assesses long-lived assets or asset groups for recoverability on a quarterly basis and when events or changes in circumstances indicate that their carrying amount may not be recoverable. The Company considers the following indicators, among others, that may trigger an impairment: (i) loss from operations or income from operations significantly below historical or projected future operating results; (ii) significant changes in the manner or use of the assets or in the Company's overall strategy with respect to the manner or use of the acquired assets or changes in its overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company's stock price for a sustained period of time; and (vi) regulatory changes.

The Company evaluates the performance of its stores to determine impairment of its long-lived assets at retail stores. Stores that have been operating for less than 12 months are excluded from the analysis because of lack of historical financial results or trends. Each new store needs between 12 months and 24 months to mature and begin generating positive cash flows. For purposes of this evaluation, long-lived assets subject to store impairments include leasehold improvements as well as certain intangible assets such as broker and finder fees, lease rights, key money on store leases, and any other non-transferable assets. All intangible assets are subject to impairment analysis if they are non-refundable in nature.

If the Company identifies an indicator of impairment, it assesses recoverability by comparing, per store, the carrying amount of the store assets to the estimated future undiscounted cash flows associated with the store. An impairment loss is recognized when the carrying amount is not recoverable and is measured as the excess of carrying value over fair value. Such estimated fair values are generally determined by using the discounted future cash flows using a rate that approximates the Company's weighted average cost of capital.

The key assumptions used in management's estimates of projected cash flow at its retail stores deal largely with forecasts of sales levels, gross margins and payroll costs. These forecasts are typically based on historical trends and take into account recent developments as well as management's plans and intentions. Any material change in manufacturing costs or raw material costs could significantly impact projected future cash flows of retail stores, and these factors are considered in evaluating impairment. Other factors, such as increased competition or a decrease in the desirability of the Company's products, could lead to lower projected sales levels which would adversely impact cash flows. A significant change in cash flows in the future could result in an impairment of long lived assets.

The Company performed a recoverability test on its stores and did not identify any indicators of impairment at its retail stores, and determined that no impairment charges were required, for the periods ended March 31, 2016 and December 31, 2015, respectively.

9

 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition –  The Company recognizes revenue on arrangements in accordance with ASC Section 605, "Revenue Recognition" and the Securities and Exchange Commission Staff Accounting Bulletins No. 101, "Revenue Recognition in Financial Statements" and No. 104, "Revenue Recognition". In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. For the periods ended March 31, 2016 and 2015, the Company reported revenues of $1,188,504 and $1,841,296, respectively.

ASC 605-45-50-3 and ASC 605-45-50-4, "Taxes Collected from Customers and Remitted to Governmental Authorities" provide that the presentation of taxes on either a gross or net basis is an accounting policy decision. The Company collects various taxes assessed by governmental authorities and records these amounts on a net basis.

The Company’s products are acquired on a bulk basis with the same price per pound being paid to suppliers regardless of the specific product types. To date, the Company has not internally tracked different categories of products as between, for example, clothing and household goods, as it has not had the system capability to support such categorizations. As such, it is impracticable to provide information on a per product basis. The Company does, however, differentiate between revenues received from retail sales versus revenue received from wholesale sales, which are amounts that are easily determinable.

Sales Returns and Allowances–The Company analyzes its historical sales return experience and records an allowance for its wholesale and retail store sales. Estimating sales returns is based on many factors including expected return data communicated by customers. The Company regularly reviews those factors and makes adjustments when it believes that actual product returns and claims may differ from established reserves. If actual or expected future returns and claims are significantly greater or lower than reserves established, the Company would decrease or increase net revenues in the period in which it made such determination.

Inventories –Merchandise inventory is valued at the lower of average cost or market, utilizing the weighted average method.  Average cost includes the direct cost of merchandise and related expenses. The Company records merchandise receipts at the time that both title and risk of loss for the merchandise transfers to the Company.

The Company identifies potentially excess and slow-moving inventories by evaluating turn rates, inventory levels and other factors, and records lower of cost or market reserves for such identified excess and slow-moving inventories. As of March 31, 2016 and December 31, 2015, no such reserve had been recorded.

Stock-Based Compensation – The Company follows the guidelines in FASB Codification Topic ASC 718-10 "Compensation - Stock Compensation", which provides investors and other users of financial statements with more complete and neutral financial information, by requiring that the compensation cost relating to share-based payment transactions be recognized in the financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. ASC 718-10 covers a wide range of share-based compensation arrangements, including share options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As of March 31, 2016, the Company has not implemented an employee stock based compensation plan.

Non-Employee Stock Based Compensation –  The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50. The Company may issue compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.

10

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Earnings (Loss) per Share – The Company reports earnings (loss) per share in accordance with FASB Standards ASC 260-10 "Earnings Per Share", which provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.

Advertising – The Company does not defer advertising expenses but expenses them as incurred. Advertising expenses were $3,408, and $79,074 for the three months ended March 31, 2016 and 2015, respectively, and were included in general and administrative expenses in the consolidated statements of operations.

Concentration of Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash (the amounts of which may, at times, exceed Federal Deposit Insurance Corporation limits on insurable amounts) and trade accounts receivable relating substantially to the Company's U.S. Wholesale segment.  Cash is managed within established guidelines, and the Company mitigates its risk by investing through major financial institutions.

Concentration of credit risk with respect to trade accounts receivable is limited by performing on-going credit evaluations of the Company's customers and adjusting credit limits based upon payment history and the customer's current credit worthiness. Collections and payments from customers are continuously monitored. 

The Company maintains an allowance for doubtful accounts which is based upon historical experience and specific customer collection issues that have been identified. While bad debt expenses have historically been within expectations and allowances established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past.

Income Taxes – The Company was a limited liability company from inception until May 20, 2015 and treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the members. As such, no recognition of federal or state income taxes for the Company or its subsidiaries that are organized as limited liability companies have been provided for in the accompanying consolidated financial statements. Any uncertain tax position taken by the member is not an uncertain position of the Company.

Subsequent to May 20, 2015 the Company merged with a corporation and, as a result, income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. Because the Company has no net income, the tax benefit of the accumulated net loss has been fully offset by an equal valuation allowance.

Deferred Rent, Rent Expense and Tenant Allowances – The Company occupies its retail stores, corporate office, manufacturing facilities, and distribution center under operating leases with terms of one to eleven years. Some leases contain renewal options for periods ranging from five to seven years under substantially the same terms and conditions as the original leases but with rent adjustments based on various factors specific to each agreement. Many of the store leases require payment of a specified minimum rent, a contingent rent based on a percentage of the store's net sales in excess of a specified threshold, plus defined escalating rent provisions. The Company recognizes its minimum rent expense on a straight-line basis over the term of the lease (including probable lease renewals) plus the construction period prior to occupancy of the retail location using a mid-month convention. Further, rent expenses include payments of real estate taxes, insurance and certain common area and maintenance costs in addition to the future minimum operating lease payments. Certain lease agreements provide for the Company to receive lease inducements or tenant allowances from landlords to assist in the financing of certain property. These inducements are recorded as a component of deferred rent and amortized as a reduction of rent expense over the term of the related lease.

Capital Lease Obligations – The Company leases certain equipment and vehicles that are classified as capital leases. The cost of equipment and vehicles under capital lease is included in the consolidated balance sheets as property and equipment and was recorded, net of accumulated depreciation, at $141,071 and $154,409 at March 31, 2016 and December 31, 2015, respectively. Accumulated depreciation of the leased equipment was recorded at $100,865 and $87,527 at March 31, 2016 and December 31, 2015, respectively.

Recently Issued Accounting Pronouncements – The Company has evaluated all recent accounting pronouncements through May 15, 2016, and believes that none of them will have a material effect on the Company's financial position, results of operations or cash flows.

11

4. INVENTORY

The components of inventories are as follows: 

	March 31, 2016		December 31, 2015
Merchandise goods	$	49,952	$	76,433
Less reserve for inventory shrinkage and obsolescence		—		—
Total, net of reserves	$	49,952	$	76,433

The Company evaluated the need to increase its market reserves for excess and slow-moving inventories and determined that no reserve was needed for the periods ended March 31, 2016 and December 31, 2015. As part of the Company’s valuation analysis of inventory, the Company also analyzed its inventory to determine if reserves were needed for inventory shrinkage. At March 31, 2016 and March 31, 2015, respectively, the Company determined no such reserves were needed.

5. FIXED ASSETS

Fixed assets consist of the following:

	March 31, 2016			December 31, 2015
Furniture and fixtures	$	873,196		$	873,196
Capitalized equipment leases		241,936			241,936
		1,115,132			1,115,132
Less accumulated depreciation and amortization		(556,228	)		(497,865	)
Property and equipment, net	$	558,904		$	617,267

Fixed assets are recorded on the basis of cost and depreciated using a straight-line method over the estimated useful lives of fixed assets. Expenditures which significantly improve or extend the life of an asset are capitalized and depreciated over the asset’s remaining useful life. The Company expenses maintenance and repair costs as incurred.

Depreciation expense for the three months ended March 31, 2016 and 2015 was $58,363 and $52,558, respectively.

6. TENANT IMPROVEMENTS

Tenant improvements consist of the following:

	March 31, 2016			December 31, 2015
Tenant Improvements	$	923,820		$	923,820
Less accumulated depreciation and amortization		(62,772	)		(51,760	)
Tenant improvements, net	$	861,048		$	872,060

Leasehold improvements are amortized over the shorter of the useful life of the assets or the estimated lease term (including probable lease renewals). Expenditures which significantly improve or extend the life of an asset are capitalized and depreciated over the asset’s remaining useful life. The Company expenses maintenance and repair costs as incurred.

Depreciation expense for the three months ended March 31, 2016 and 2015 was $11,012 and $4,733, respectively.

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7. RELATED PARTY TRANSACTIONS

From time to time, members of the Company have advanced funds to support its operations through Titan Investments L.L.C. As of March 31, 2016 and December 31, 2015, the outstanding balance of advanced funds was $590,413 and $231,938, respectively. The advances are due on demand and do not bear interest. Subsequent to the quarter ending March 31, 2016 Titan advanced an additional $71,600 and was repaid $88,025 to support our operations. ZSL Trust subsequent to the end of the quarter purchased $450,000 of this debt through the issuance of a convertible note. As of the date of this filing $123,988 remains payable to Titan Investments. All advances are due on demand and do not bear interest.

On January 1, 2015, the Company renegotiated existing consulting agreements with Brian Davidson and Bobby Riggs, both of whom are officers and directors of the Company. Under these agreements, each officer is to receive compensation of $160,000 annually, a reimbursement for health insurance costs, and is entitled to participate in the Company’s stock option plan, when and if established.

During the quarter ended March 31, 2016, management consulting fees were paid to the officers in accordance with the terms of the management agreements.

During the quarter ended March 31, 2016, the Company’s Chief Executive Officer, Brian Davidson, received $40,000, for the provision of management and business development services to the Company. $20,000 in unpaid management consulting fees accrued in prior years remained due to Brian Davidson as of March 31, 2016.

During the quarter ended March 31, 2016, the Company’s Chief Operating Officer, Bobby J. Riggs, received $40,000 for the provision of management and business development services to the Company. $13,333 in unpaid management consulting fees accrued in prior years remained due to Bobby J. Riggs as of March 31, 2016.

On March 3, 2015, Epic Corp. appointed Zachary Bradford to serve as the Chief Financial Officer (“CFO”) of Epic Corp., and Mr. Bradford subsequently became the Chief Financial Officer of the Company upon closing of the Exchange Agreement on June 24, 2015. In connection with this appointment, The Company also entered into certain agreements with Bluechip Advisors LLC (“Bluechip”), a company in which Mr. Bradford holds a 50 percent interest pursuant to which the Company agreed to pay Bluechip a consulting fee of $5,500 per month, plus expenses incurred, in exchange for Mr. Bradford’s CFO services. The Company also entered into certain agreements with Bluechip, having a term from March 1, 2015 through February 28, 2016, pursuant to which Bluechip agreed to provide controller and accounting services for base fee compensation of $8,000 per month, plus expenses, plus an additional fee of $200 per month for each operating store over five open during the month of service. The Company also entered into a further agreement with Bluechip pursuant to which Bluechip agreed to provide services to the Company in connection with the preparation of financial statements and other public filings subsequent to the Exchange agreement for $2,000 a month. $50,033 in unpaid fees related to the above engagements were due as of March 31, 2016.

Atlas Global, LLC is a company controlled by Brian Davidson and Wayne Riggs who also serve as officers of the Company. The Company has first right of refusal to purchase all inventory collected by Atlas Global that meets the Company’s quality standards. The Company purchases this inventory at a fixed rate of $0.36 per pound. 

Atlas is responsible for payment of its own obligations and the Company has no responsibility in this regard. If the Company does not pay Atlas for the products the Company acquires from it, Atlas may have no way to cover its costs as it does not have any other significant customers, but the Company has no obligation to purchase from Atlas and no obligation to provide it with financial support in the event it is required.

As of March 31, 2016 and December 31, 2015, $219,018 and $213,721 were payables due to Atlas for inventory received.

During the three months ended March 31, 2016 and 2015, the Company purchased inventory from Atlas of $32,172 and $166,656, respectively.

Planet Green, LLC is a company controlled by a family member of Wayne Riggs, a director of the Company. The Company purchases inventory collected by Planet Green, LLC that meets the Company’s quality standards. The Company purchases this inventory at a fixed rate of $0.36 per pound. The Company has no obligation to purchase from Planet Green, LLC. Planet Green, LLC is also solely responsible for payment of its own obligations and the Company has no responsibility and no obligation to provide it with financial support in the event it is required.

As of March 31, 2016 and December 31, 2015, $167,344 and $152,826 were payables due to Planet Green, LLC for inventory received.

During the three months ended March 31, 2016 and 2015, the Company purchased inventory from Planet Green, LLC of $14,508 and $72,897, respectively.

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8. NOTES PAYABLE

On August 15, 2014, Epic Corp. issued two unsecured promissory notes to two investors, each in the principal amount of $250,000. The notes bear a 16% annual interest rate, maturing at the earlier of the sale of Epic Corp. or December 31, 2018. The notes also carry provisions that allow the holder to call the balance prior to maturity subject to early withdrawal penalties as follows: 12% if called in 2015, 8% if called in 2016 and 4% if called in 2017. On May 20, 2015, the Company and the noteholders agreed to settle 50% of the noteholders’ respective balances outstanding under the notes in consideration for the issuance of an aggregate of 233,791 shares of the common stock of Epic Corp. to each of the note holders.

On January 15, 2015, Epic Corp. issued an unsecured promissory note to an investor in the principal amount of $100,000. The note bears no interest and is due upon demand.

On March 2, 2015, the Company entered into a letter of intent with Epic Corp. pursuant to which the Company agreed to acquire all of the outstanding securities of Epic Corp. In connection with the entry into the letter of intent, on March 18, 2015, Epic Corp. entered into a loan agreement with a third party lender, pursuant to which the lender agreed to make a loan in the principal amount of $750,000 to Epic Corp. The loan bore interest at the rate of 12% per annum, and had a maturity date of September 18, 2015. As security for the secured note, Epic Corp. provided the lender with security over all of its assets pursuant to the terms of a general security agreement made by Epic Corp. in favor of the lender. In connection with the closing of the Exchange Agreement on June 24, 2015, the principal amount outstanding under the March 18, 2015 note, and accrued interest thereon, totaling $770,959, was settled by the issuance of units of the Company at a deemed price of $0.882 per unit. Each unit consisted of one share of common stock in the capital of the Company and one warrant, each of which is exercisable into one share of common stock of the Company at a price of $1.02 until June 24, 2018.

On April 16, 2015, Epic Corp., an entity that is not related to the Company, issued a secured convertible promissory note to an investor in the principal amount of $200,000. The note bears a 23% annual interest rate and matured on June 30, 2015. The note was convertible into one Class B Unit of Epic LLC. The note is secured by all assets of Epic Corp. At the time of issuance, the Company evaluated the conversion feature and determined that the value associated with the conversion feature was $0.

On January 25, 2016, the Company entered into an amending agreement with the Company’s wholly-owned subsidiary, Epic Stores, LLC, and Epic Store Funding Corp. amending the note purchase agreement dated April 16, 2015. Under the terms of the original note purchase agreement, the subsidiary and Funding Corp. agreed that they would use their commercially reasonable efforts to agree upon the price and other terms of securities of the subsidiary into which Funding Corp. could, at its option, convert the principal and interest of the note and, in the event that they were unable to so agree on or prior to the June 30, 2015, the subsidiary would pay Funding Corp., in addition to any other amounts due and owing under the note, a break-up fee of $50,000. The Company completed the acquisition of the subsidiary on June 24, 2015. Notwithstanding that the subsidiary and Funding Corp. had not agreed to conversion terms by June 30, 2015, and the fee was not paid. Pursuant to the terms of the amending agreement entered into on January 25, 2016:

(a)	the maturity date for repayment of the note was changed from June 30, 2015 to December 31, 2015;
(b)	the Company agreed to the pay Funding Corp. the fee of $50,000 on or prior to January 8, 2016, plus accrued interest at a rate of 23% per annum beginning on July 1, 2015, until the date of payment in full of the fee and any accrued but unpaid interest thereon, which accrued interest will be payable on the last day of each calendar month with the first such payment made on December 31, 2015; and
(c)	if all amounts owing under the note and the fee, including all accrued but unpaid interest thereon, had not been wired to Funding Corp. on or prior to February 2, 2016, the Company would be required to pay Funding Corp. an additional $25,000 on February 2, 2016, with interest at the rate of 23% per annum to accrue with respect to such $25,000 effective as of February 2, 2016 in the event such payment is not made on February 2, 2016.

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In consideration of the foregoing amendments, the Company agreed to issue Funding Corp., at the time of full repayment of all amounts owing in connection with the note:

(a)	145,000 stock purchase warrants, plus
(b)	commencing on January 8, 2016, 1,000 warrants per day until the date of repayment of all amounts owing under the note.

Each warrant will be exercisable into one share of the Company’s common stock at a price of $1.02 per share until the date that is two years from the date of issuance.

As of the March 31, 2016, neither the original principal balance or the penalties had been paid. The penalties have been added to the principal balance of the note and $275,000 in principal remained outstanding as of March 31, 2016.

On August 13, 2015, Epic Corp. issued a secured promissory note to an investor in the principal amount of $195,000. The note carried an original issue discount of $45,000, therefore $150,000 was received by the Company, net of the discount. The loan was be repaid over 126 equal payments of $1,547 over the six-month term and was secured by all assets of the Company. The original issue discount was recorded as a reduction of the principal balance and is being amortized over the life of term of the note. The note had been paid in full as of March 31, 2016

During the quarter ended March 31, 2016, the Company paid $47,976 in principal and interest. The aggregate original issue discount feature has been accreted and charged to interest expense in the amount of $11,489 during the quarter ended March 31, 2016.

On November 3, 2015, the Company issued a secured promissory note to an investor in the principal amount of $217,500. The note carried an original issue discount of $117,000, therefore $150,000 was received by the Company, net of the discount. The loan will be repaid over 126 equal daily payments of $1,726 and is secured by all assets of the Company. The original issue discount was recorded as a reduction of the principal balance and will be amortized over the life of term of the agreement.

The balance of the note and unamortized debt discount are as follows:

	March 31, 2016
Note payable	$	32,818
Less unamortized debt discount		(8,821	)
Note payable, net	$	23,997

During the quarter ended March 31, 2015, the Company paid $112,190 in principal and interest. The aggregate original issue discount feature has been accreted and charged to interest expense in the amount of $34,901 during the quarter ended March 31, 2016.

On November 4, 2015, the Company issued a secured promissory note to an investor in the principal amount of $180,461. The note carried an original issue discount of $30,461, therefore $150,000 was received by the Company, net of the discount. The loan will be repaid over 187 equal daily payments of $968 and is secured by all assets of the Company. The original issue discount was recorded as a reduction of the principal balance and will be amortized over the life of term of the agreement.

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The balance of the note and unamortized debt discount are as follows:

	March 31, 2016
Note payable	$	83,636
Less unamortized debt discount		(13,651	)
Note payable, net	$	69,985

During the quarter ended March 31, 2016, the Company paid $60,032 in principal and interest. The aggregate original issue discount feature has been accreted and charged to interest expense in the amount of $10,267 during the quarter ended March 31, 2016

On November 27, 2015, the Company issued a secured promissory note to an investor in the principal amount of $146,000. The note carried an original issue discount of $46,000, therefore $100,000 was received by the Company, net of the discount. The loan will be repaid over 80 equal daily payments of $1,825 and is secured by all assets of the Company. The original issue discount was recorded as a reduction of the principal balance and will be amortized over the life of term of the agreement. As of March 31, 2016 the note has been paid in full.

During the the quarter ended March 31, 2016, the Company paid $113,150 in principal and interest. The aggregate original issue discount feature has been accreted and charged to interest expense in the amount of $29,795 during the quarter ended March 31, 2016.

On July 15, 2015, the Company issued a secured promissory note to an investor in the principal amount of $16,000. The note bears interest at a rate of 12% annually and matures on January 28, 2016. Amortized payments of interest and principal are due monthly. The Company made all required payments under the note. As of March 31, 2016 the note has been paid in full.

On November 17, 2015, the Company issued a secured promissory note to an investor in the principal amount of $10,900. The note bears interest at a rate of 12% annually and matures on November 27, 2016. Amortized payments of interest and principal are due monthly. The Company has made all required payments under the note and $7,485 remained due as of March 31, 2016.

On January 28, 2016, the Company issued a secured promissory note to an investor in the principal amount of $6,000. The note bears interest at a rate of 12% annually and matures on January 27, 2017. Amortized payments of interest and principal are due monthly. The Company has made all required payments under the note and $5,000 remained due as of March 31, 2016.

On February 26, 2016, the Company issued a secured promissory note to an investor in the principal amount of $256,000. The note carried an original issue discount of $56,000, therefore $200,000 was received by the Company, net of the discount. The loan will be repaid in 147 equal payments of $1,742 and is secured by all assets of the Company. The original issue discount was recorded as a reduction of the principal balance and will be amortized over the life of term of the agreement.

The balance of the note and unamortized debt discount are as follows:

	March 31, 2016
Note payable	$	231,619
Less unamortized debt discount		(48,851	)
Note payable, net	$	182,768

During the quarter ended March 31, 2016, the Company paid $24,381 in principal and interest. The aggregate original issue discount feature has been accreted and charged to interest expense in the amount of $7,149 during the quarter ended March 31, 2016.

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9. CONVERTIBLE NOTES PAYABLE

Pursuant to a securities purchase agreement dated January 27, 2016, as amended April 1, 2016 (the “Purchase Agreement”), with Old Main Capital, LLC (“Old Main”), Old Main agreed to purchase an aggregate of up to $750,000 in subscription amount corresponding to an aggregate of up to $815,217 in principal amount of 10% senior secured convertible promissory notes (the “10% Notes”) due, subject to the terms therein, 12 months from the date of issuance. The purchase is to occur in up to four tranches, of which the first tranche of $250,000 closed upon the execution of the Purchase Agreement, the second tranche of $250,000 closed on April 1, 2016 (being within three trading days after filing of our annual report on Form 10-K for the year ended December 31, 2015), the third tranche of $125,000 to occur on the Friday after three trading days after the date that a registration statement (the “Registration Statement”) registering shares of our common stock issuable upon conversion or redemption of the 10% Notes and issuable in lieu of the cash payment of interest on the 10% Notes is filed with the Securities and Exchange Commission (the “SEC”), and the fourth tranche of $125,000 to occur on the Friday after three trading days of the date that the Registration Statement is declared effective by the SEC. Old Main is not required to fund any of the second through fourth tranches if: (a) an event of default occurs, (b) we have not timely filed (or obtained extensions and filed within the applicable grace period) all reports other than Form 8-K reports required to be filed pursuant to the Securities Exchange Act of 1934 and (c) our common stock is not DWAC eligible or is subject to a “DTC” chill.

The 10% Notes will bear interest at the rate of 10% per annum, which interest amount will be guaranteed for six months and such interest due on the 10% Notes for a period of six months will be deemed earned as of the original issue date of the 10% Notes. All overdue accrued and unpaid interest to be paid under the 10% Notes will entail a late fee at an interest rate equal to the lesser of 24% per annum or the maximum rate permitted by applicable law. At any time upon 10 days written notice to the holder of the 10% Notes, we may prepay any portion of the principal amount of the 10% Notes and any accrued and unpaid interest by paying the principal amount of the 10% Notes and interest multiplied by 130%. At any time after the issue date of the 10% Notes, the holder may convert the 10% Notes into shares of our common stock at the holder’s option. The conversion price will be equal to the lower of (i) $0.63 (the “10% Fixed Conversion Price”), (ii) 50% of the lowest daily volume weighted average price of our common stock (the “VWAP”) in the 30 trading days prior to the conversion date, or (iii) the conversion price of any other 10% Note. If we sell or issue any common stock or certain common stock equivalents at an effective price per share that is lower than the 10% Fixed Conversion Price, the conversion price will be reduced to equal to such lower price.

On January 29, 2016, we issued Old Main a 10% Note in the principal amount of $271,739 with the original issue date of January 27, 2016, as amended on April 1, 2016, in exchange for $250,000 pursuant to the Purchase Agreement. On April 1, 2016, we issued Old Main a 10% Note in the principal amount of $271,739 with the original issue date of April 1, 2016 in exchange for $250,000 pursuant to the Purchase Agreement.

Pursuant to a registration rights agreement dated January 27, 2016, as amended April 1, 2016, with Old Main, we are obligated to file a Registration Statement to register the resale of the shares of our common stock issuable upon conversion of: (i) the 10% Notes issued or to be issued pursuant to the Purchase Agreement, (ii) the 8% Note (as defined below), and (iii) a 10% Note (the “Exchange Note”) in the principal amount of $266,000 with the original issue date of April 1, 2016 issued pursuant to an assignment and exchange agreement dated April 1, 2016 among Epic Stores Corp., Epic Stores LLC and Old Main.

On January 29, 2016, our subsidiaries jointly and severally agreed to guarantee and act as surety for the payment of the 10% Notes issued or to be issued pursuant to the Purchase Agreement pursuant to a subsidiary guarantee dated January 27, 2016. In addition, on January 29, 2016, Epic Stores Corp. and its subsidiaries entered into a security agreement dated January 27, 2016 with Old Main, pursuant to which Epic Stores Corp. and its subsidiaries agreed to pledge, grant and hypothecate to Old Main a perfected, first priority security interest in and to, a lien upon, and a right of set-off against, all of their respective right, title and interest of whatsoever kind and nature in and to, the collaterals, including all goods, all contract rights and other general intangibles, all accounts, and all investment property and general intangibles respecting ownership and/or other equity interests in each subsidiary of Epic Stores Corp.

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On January 29, 2016, we issued Old Main an 8% senior convertible promissory note (the “8% Note”) in the principal amount of $500,000 with the original issue date of January 27, 2016, as amended April 1, 2016, for Old Main’s commitment to the equity line transaction and preparation of the related transaction documents. The 8% Note bears interest at the rate of 8% per annum. All overdue accrued and unpaid interest to be paid under the 8% Note will entail a late fee at an interest rate equal to the lesser of 24% per annum or the maximum rate permitted by applicable law. At any time upon 10 days written notice to the holder of the 8% Note, we may prepay any portion of the principal amount of the 8% Note and any accrued and unpaid interest by paying the principal amount of the 8% Note and interest multiplied by 130%. At any time after the issue date of the 8% Note, the holder may convert the 8% Note into shares of our common stock at the holder’s option. The conversion price will be equal to the lower of (i) $0.98 (the “8% Fixed Conversion Price”), (ii) 50% of the lowest VWAP in the 30 trading days prior to the conversion date, or (iii) the conversion price of any other 8% Note. If we sell or issue any common stock or certain common stock equivalents at an effective price per share that is lower than the 8% Fixed Conversion Price, the conversion price will be reduced to equal to such lower price.

Old Main is an accredited investor (as that term is defined in Regulation D of the Securities Act), and in issuing the above securities to Old Main, we relied on and intend to rely on the exemption from the registration requirements of the Securities Act provided by Rule 506 of Regulation D promulgated thereunder and/or Section 4(a)(2) of the Securities Act.

Under these agreements, Old Main currently has the ability to cause our company to issue up to 6,197,552 shares of our common stock, subject to a beneficial ownership limitation which limits the total holdings of Old Main at any one time to 4.99% (subject to the adjustments in accordance with the terms of the convertible notes) of our issued and outstanding common stock.

The following table sets forth the terms of the outstanding convertible notes issued or to be issued to Old Main.

Summary of Old Main Convertible Note Financing
							Number of shares issuable upon conversion
Issuance date	Note holder	Interest rate	Current Conversion price	Principal	Interest	Maturity date
January 27, 2016	Old Main	8%	0.25	500,000	11,555	January 27, 2017	2,046,220
January 27, 2016	Old Main	10%	0.25	271,739	13,587	January 27, 2017	1,141,304
February 26, 2016	Old Main	10%	0.25	181,857	-	September 26, 2016	727,428
April 1, 2016	Old Main	10%	0.25	271,739	13,587	April 1, 2017	1,141,304
April 15, 2016	Old Main	10%	0.25	135,869	6,793	April 15, 2017	570,648
Upon S-1 effectiveness	Old Main	10%	0.25	135,869	6,793	1 year from issuance	570,648
Total				1,497,073	52,315		6,197,552

The conversion price of the convertible notes issued or to be issued to Old Main is based upon the trading prices of our common stock at the time of such conversion. If the trading prices of the common stock are low when the conversion price of the convertible notes is determined, we would be required to issue a higher number of shares of our common stock, which could cause substantial dilution to our stockholders. In addition, if Old Main converts its notes and sell our common stock, this could result in an imbalance of supply and demand for our common stock and reduce our stock price. The further our stock price declines, the further the adjustment of the conversion price will fall and the greater the number of shares we will have to issue upon conversion.

In addition, the number of shares issuable upon conversion of the convertible notes is potentially limitless. While the overall ownership by Old Main of the convertible notes at any one moment is limited to 4.99% (subject to the adjustments in accordance with the terms of the convertible notes) of the outstanding shares of our common stock, Old Main is free to sell any shares it owns into the market, which have been issued to it, thereby enabling it to convert the remaining convertible notes.

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10. STOCKHOLDERS’ DEFICIT

Description of Share Capital

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock having a par value of $0.001 per share. The Company had no issued and outstanding shares of preferred stock as of December 31, 2015 and 2014, respectively. The Company’s board of directors has the ability to designate rights to its preferred stock. As of the date of these financial statements, the board has made no such designation.

Common Stock

The Company is authorized to issue 687,500,000 shares of common stock having a par value of $0.0001 per share. The Company had 38,680,263 and 38,123,120 issued and outstanding shares of common stock as of March 31, 2016 and December 31, 2015, respectively.

On January 24, 2016, we issued 200,000 shares of common stock to Vista Partners LLC (“Vista”) pursuant to the terms of a letter agreement dated July 24, 2015 between our company and Vista pursuant to which Vista agreed to provide investor relations services to our company in consideration of the payment of a monthly fee of $15,000 per month and the issuance of 200,000 shares of our common stock for each six-month term of the agreement. The shares were valued at $1.06 per share or $212,000. The securities were issued to one accredited investor (as that term is defined in Regulation D of the Securities Act of 1933, as amended) relying on Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act of 1933, as amended.

On February 25, 2016, the Company sold an aggregate of 357,143 shares of common stock at a price of $0.70 per share for gross proceeds of US $250,000. The Company issued the shares to one non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction in which the Company relied on the exemptions from the registration requirements provided for in Regulation S and/or Section 4(a)(2) of the Securities Act of 1933.

11. STOCK OPTIONS AND WARRANTS

The following is a summary of warrant activity during the quarter ended March 31, 2016:

	Number of Warrant Shares		Weighted Average Exercise Price
Balance, December 31, 2015		6,265,286	$	0.73
Warrants granted and assumed		228,000		1.02
Warrants expired		—		—
Warrants cancelled		—		—
Warrants exercised		—		—
Balance, March 31, 2016		6,493,286	$	0.74

 
All warrants outstanding as of March 31, 2016 are exercisable.

On January 25, 2016, the Company entered into an amending agreement with the Company’s wholly-owned subsidiary, Epic Stores, LLC, and Epic Store Funding Corp. amending the note purchase agreement dated April 16, 2015. In consideration of the amendments, the Company agreed to issue Funding Corp, 145,000 stock purchase warrants, plus commencing on January 8, 2016, 1,000 warrants per day until the date of repayment of all amounts owing under the note.

Under this agreement the Company has issued 228,000 stock warrants as of March 31, 2016. Each warrant will be exercisable into one share of the Company’s common stock at a price of $1.02 per share until the date that is two years from the date of issuance. These warrants were valued using the black-scholes method and an expense of 81,528 was recorded to interest expense.

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12. COMMITMENTS AND CONTINGENCIES

The Company does not have any off-balance sheet transactions. 

Contractual Obligations

The following illustrates the Company’s contractual obligations as of March 31, 2016 and the respective future commitments related to same:

			Year 1			Year 2		Year 3		Year 4		Year 5
	Total		December 2016			December 2017		December 2018		December 2019		December 2020		Thereafter
Long-Term Debt   Obligations	$	250,000		$	—	$	—		250,000	$	—	$	—	$	—
Current Convertible Debt   Obligations	$	611,428		$	611,428	$	—		—	$	—	$	—	$	—
Current Debt   Obligations	$	1,254,648		$	1,254,648	$	—		—	$	—	$	—	$	—
Capital  Leases	$	143,558		$	35,607	$	47,996		34,886	$	17,287	$	7,782	$	—
Operating Lease   Obligations	$	14,845,173		$	1,506,638	$	2,061,836		2,036,119	$	1,725,979	$	1,644,042	$	5,870,559
Total	$	17,104,807		$	3,408,321	$	2,109,832		2,321,005	$	1,743,266	$	1,651,824	$	5,870,559

Property Lease Obligations. The Company has entered into various operating lease agreements with terms ranging from 5 to 10 years that expire between May 2016 and June 2025. In almost all cases the rent agreements provide for annual rent escalations and abatements. In accordance with ASC 840, the Company has recorded all of the leases on a straight-line basis over the respective lease term. The difference between the rent recorded under ASC 840 and actual lease payments is reflected as deferred rent in the accompanying financial statements. The Company has recorded deferred rent of $1,408,841 as of March 31, 2016 and rent expense of $628,902 and $652,100 for the three months ended March 31, 2016 and 2015, respectively.

The remaining aggregate lease payments under the operating leases for the Company’s facilities as of March 31, 2016 are as follows:

2016	$	1,506,638
2017		2,061,836
2018		2,036,119
2019		1,725,979
2020		1,644,042
Thereafter		5,870,559
	$	14,845,173

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13. INCENTIVES FROM LESSORS

The Company received $333,500 from landlords as construction contributions pursuant to agreed-upon terms of certain lease agreements during the year ended December 31, 2015.

Landlord construction contributions usually take the form of up-front cash reimbursements for tenant improvements. Depending on the specifics of the leased space and the lease agreement, amounts paid for structural components are recorded during the construction period as leasehold improvements and the landlord construction contributions are recorded as an incentive from lessor. The incentive from lessor is amortized over the life of the lease and netted against rent expense.

Amortization of the incentives from lessors was $13,206 for the three months ended March 31, 2016. 

14.    SUBSEQUENT EVENTS

Amendment to Securities Purchase Agreement

On April 1, 2016, Epic Stores Corp. (“Epic”) entered into an Amendment to Securities Purchase Agreement (the “Amendment to Purchase Agreement”) with Old Main Capital, LLC (“Old Main”), whereby the parties agreed to amend the Securities Purchase Agreement dated as of January 27, 2016 (the “Purchase Agreement”).

Pursuant to the terms of the Amendment to Purchase Agreement, the parties agreed to:

(a) increase the subscription from up to $500,000 to up to $750,000 corresponding to an aggregate amount of $815,217 in principal amount of Notes. The purchase will occur in up to four tranches, with the first tranche of $250,000 being closed upon the execution of the Purchase Agreement, the second tranche of $250,000 occurring within three trading days after filing of Epic’s Annual Report on Form 10-K, the third tranche of $125,000 occurring the Friday after three (3) trading days after the filing date and the fourth tranche of $125,000 occurring the Friday after three (3) trading days after the date that the Registration Statement is declared effective by the SEC; and

(b) remove the right of first refusal clause of the Purchase Agreement and add a “Variable Rate Transactions” clause whereby until such time as no Purchaser holds any Notes or Underlying Shares, Epic shall be prohibited from effecting or entering into an agreement to effect any issuance by Epic or any of its subsidiaries of common stock or common stock equivalents (or a combination of units thereof) involving a Variable Rate Transaction.

Amendment to Convertible Promissory Notes

On April 1, 2016, Epic entered into an Amendment to Convertible Promissory Notes dated April 1, 2016 (the “Amendment”) with Old Main, amending each of the 8% Senior Convertible Promissory Notes, dated as of January 27, 2016, issued by Epic to Old Main (the “8% Note”) and each of the 10% Senior Secured Convertible Promissory Notes (each, a “10% Note” and together with the 8% Note, a “Note”) issued by Epic to Old Main pursuant to the Purchase Agreement.

There is currently an existing event of default (the “Default”) based on the failure of Epic to file a registration statement by no later than the 45^th calendar day after the initial closing date of January 29, 2016.

Pursuant to the Amendment, the parties agreed:

(a) to amend the conversion price of each of the 10% Notes to be equal to the lower of (i) 64% of the lowest VWAP in the five (5) trading days prior to the closing date, (ii) 50% of the lowest VWAP of the common stock in the thirty (30) trading days prior to the conversion date, or (iii) the conversion price of any other Note;

(b) to amend the conversion price of each of the 8% Notes to be equal to the lower of (i) 94% of the lowest VWAP during the ten (10) trading days prior to the original issue date, (ii) 50% of the lowest VWAP of the common stock in the thirty (30) trading days prior to the conversion date, or (iii) the conversion price of any other Note; and

(c) waive the Default.

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Amendment to Registration Rights Agreement

On April 1, 2016, Epic entered into an Amendment to Registration Rights Agreement (the “Amendment to Registration Rights Agreement”) with Old Main, whereby the parties agreed to amend the Registration Rights Agreement dated as of January 27, 2016 (the “Registration Rights Agreement”).

Pursuant to the terms of the Amendment to Registration Rights Agreement, the parties agreed to:

(a) add a new definition for “Notes”, which includes the addition of (i) that certain 8% Senior Convertible Promissory Note in the principal amount of $500,000 issued by Epic to Old Main on January 27, 2016 and (ii) that certain 10% Senior Secured Convertible Promissory Note in the principal amount of $266,000 issued by Epic to Old Mail on April 1, 2016;

(b) add a requirement that if the Initial Registration Statement is not filed within fifteen (15) calendar days after Epic filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2015, then (i) the outstanding principal amount of each Note shall be automatically increased by 10%, and (ii) the definition of “Alternate Conversion Price” in each of the Notes shall be automatically amended to read as follows: “’Alternate Conversion Price’ means 40% of the lowest VWAP in the thirty (30) days prior to the Conversion Date”.

Issuance of New Convertible Notes

On April 1, 2016, Epic issued Old Main a new 10% Note in the principal amount of $271,739 with the original issue date of April 1, 2016 in exchange for $250,000 pursuant to the Amended Purchase Agreement. The 10% Notes will bear interest at the rate of 10% per annum, which interest amount will be guaranteed for six months and such interest due on the 10% Notes for a period of six months will be deemed earned as of the original issue date of the 10% Notes. All overdue accrued and unpaid interest to be paid under the Notes will entail a late fee at an interest rate equal to the lesser of 24% per annum or the maximum rate permitted by applicable law. At any time upon 10 days written notice to the holder of the 10% Notes, Epic may prepay any portion of the principal amount of the 10% Note and any accrued and unpaid interest by paying the principal amount of the 10% Notes and interest multiplied by 130%. At the earlier of the six months anniversary of the closing date or the SEC Effective Date, Epic must redeem 1/12^th of the face amount of the 10% Notes and any accrued but unpaid interest on a bi-weekly basis. Such amortization payment may be made, at the option of Epic, in cash or, subject to certain conditions, in common stock of Epic pursuant to the conversion rate equal to the lower of (i) 64% of the lowest daily volume weighted average price of common stock of Epic (the “VWAP”) in the 5 trading prior to the closing date (the “Fixed Conversion Price”), (ii) 50% of the lowest VWAP of the common stock in the thirty (30) trading days prior to the conversion date, or (iii) the conversion price of any other Note. At any time after the issue date of the Notes, the holder may convert the Notes into shares of common stock of Epic at the holder’s option. The conversion price will be the Fixed Conversion Price. If Epic sells or issues its common stock or certain common stock equivalents at an effective price per share that is lower than the Fixed Conversion Price, the conversion price will be reduced to equal to such lower price.

On April 15, 2016, Epic issued Old Main a new 10% Note in the principal amount of $135,870 with the original issue date of April 15, 2016 in exchange for $125,000 pursuant to the Amended Purchase Agreement. The 10% Notes will bear interest at the rate of 10% per annum, which interest amount will be guaranteed for six months and such interest due on the 10% Notes for a period of six months will be deemed earned as of the original issue date of the 10% Notes. All overdue accrued and unpaid interest to be paid under the Notes will entail a late fee at an interest rate equal to the lesser of 24% per annum or the maximum rate permitted by applicable law. At any time upon 10 days written notice to the holder of the 10% Notes, Epic may prepay any portion of the principal amount of the 10% Note and any accrued and unpaid interest by paying the principal amount of the 10% Notes and interest multiplied by 130%. At the earlier of the six months anniversary of the closing date or the SEC Effective Date, Epic must redeem 1/12^th of the face amount of the 10% Notes and any accrued but unpaid interest on a bi-weekly basis. Such amortization payment may be made, at the option of Epic, in cash or, subject to certain conditions, in common stock of Epic pursuant to the conversion rate equal to the lower of (i) 64% of the lowest daily volume weighted average price of common stock of Epic (the “VWAP”) in the 5 trading prior to the closing date (the “Fixed Conversion Price”), (ii) 50% of the lowest VWAP of the common stock in the thirty (30) trading days prior to the conversion date, or (iii) the conversion price of any other Note. At any time after the issue date of the Notes, the holder may convert the Notes into shares of common stock of Epic at the holder’s option. The conversion price will be the Fixed Conversion Price. If Epic sells or issues its common stock or certain common stock equivalents at an effective price per share that is lower than the Fixed Conversion Price, the conversion price will be reduced to equal to such lower price.

Old Main is an accredited investor (as that term is defined in Regulation D of the Securities Act of 1933, as amended (the “Securities Act”)), and in issuing the above securities to Old Main, we relied on and intend to rely on the exemption from the registration requirements of the Securities Act provided by Rule 506 of Regulation D promulgated thereunder and/or Section 4(a)(2) of the Securities Act.

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Assignment and Exchange Note

On April 1, 2016, Epic and Epic Stores LLC, a wholly-owned subsidiary of Epic, entered into an Assignment and Exchange Agreement with Old Main, pursuant to which Epic Stores LLC agreed to assign certain Loan Agreement dated as of February 26, 2016 (the “Old Main Loan”) between Epic Stores LLC and Old Main to Epic, Old Main agreed to surrender the Old Main Loan to Epic Stores Corp. and, in exchange, we agreed to issue Old Main a 10% Note (the “Exchange Note”) in the principal amount of $266,000 with the original issue date of April 1, 2016. On April 1, 2016, we issued the Exchange Note to Old Main. We issued the Exchange Note, relying on the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) of the Securities Act.

ZSL Assignment agreement

Effective April 5, 2016, we entered into an Assignment Agreement (the “Assignment Agreement”) with Titan Investments, LLC (“Titan”) and ZSL Trust Dated March 12, 2010 (“ZSL”), whereby ZSL agreed to assume our debt to Titan in the amount of $450,000 (the “Loan”). Titan is an entity jointly controlled by Brian Davidson.

As consideration for the assumption of the Loan by ZSL, we agreed to issue a convertible note (the “Note”) to ZSL in the principal amount of $450,000. The Note will have a maturity date of September 30, 2016 and bear interest at the rate of 4% per annum. The principal amount of the Note and accrued interest thereon will be convertible, at the option of ZSL, into shares of our common stock at a conversion price of $0.90 per share.

Issuance of Convertible Notes

On April 19, 2016, the Company issued a secured promissory note to an investor in the principal amount of $290,000. The note carried an original issue discount of $90,000, therefore $200,000 was received by the Company, net of the discount. The loan will be repaid in 126 equal payments of $2,300 and is secured by all assets of the Company. The original issue discount was recorded as a reduction of the principal balance and will be amortized over the life of term of the agreement.

On April 21, 2016, the Company issued a secured promissory note to an investor in the principal amount of $260,000. The note carried an original issue discount of $60,000, therefore $200,000 was received by the Company, net of the discount. The loan will be repaid in 147 equal payments of $1,769 and is secured by all assets of the Company. The original issue discount was recorded as a reduction of the principal balance and will be amortized over the life of term of the agreement.

On May 12, 2016, the Company issued a secured promissory note to an investor in the principal amount of $167,400. The note carried an original issue discount of $43,400, therefore $124,000 was received by the Company, net of the discount. The loan will be repaid in 110 equal payments of $1,522 and is secured by all assets of the Company. The original issue discount was recorded as a reduction of the principal balance and will be amortized over the life of term of the agreement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the “Description of Business – Risk Factors” section in our current report on Form 8-K as filed with the SEC on June 30, 2015. You should carefully review the risks described in such current report and in other documents we file from time to time with the SEC. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

All references in this Form 10-Q to “Epic,” “we,” “us,” or “our” are to Epic Stores Corp. and our subsidiaries.

Our unaudited financial statements are stated in United States Dollars and are prepared in accordance with United States generally accepted accounting principles.

Current Business

As further, described below, we are a second hand goods retailer that operates retail stores in the United States.

We were incorporated in the State of Nevada on April 30, 2012 under the name “SBOR, Inc”. Effective December 20, 2013, we completed a merger with our wholly-owned subsidiary, Be At TV, Inc., a Nevada corporation, which was incorporated solely to effect a change in our name.  As a result, we changed our name from “SBOR, Inc.” to “Be At TV, Inc.”. Also effective December 20, 2013, we effected a 16.5 to 1 forward stock split of our authorized and issued and outstanding common stock. As a result, our authorized capital of common stock increased from 100,000,000 shares of common stock with a par value of $0.0001 per share to 1,650,000,000 shares of common stock with a par value of $0.0001 per share, and our previously outstanding 3,700,000 shares of common stock increased to 61,050,000 shares of common stock outstanding. Our authorized preferred stock was not affected by the forward split of common stock and continues to be comprised of 10,000,000 shares of preferred stock having a par value of $0.0001 per share, of which no shares of preferred stock are currently outstanding.

On June 24, 2015, we completed the acquisition of Epic Stores Corp., a private Nevada corporation (“Epic Corp.”), pursuant to the terms of a share exchange agreement dated June 24, 2015 (the “Exchange Agreement”) among our company, Epic Corp., and the shareholders of Epic Corp. As a result of our acquisition of Epic Corp., we ceased to be a “shell company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. For additional information with respect to our acquisition of Epic Corp, see our current report on Form 8-K, as filed with the SEC on June 30, 2015.

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Effective August 18, 2015, we completed a merger with our wholly-owned subsidiary, Epic Stores Corp., a Nevada corporation, which was incorporated solely to effect a change in our name.  As a result, we changed our name from “Be At TV, Inc.” to “Epic Stores Corp.”.  Also effective August 18, 2015, we effected a reverse stock split of our authorized and issued and outstanding common stock, on the basis of one new share of common stock for each 2.4 old shares of common stock. As a result, our authorized capital of common stock decreased from 1,650,000,000 shares of common stock with a par value of $0.0001 per share to 687,500,000 shares of common stock with a par value of $0.0001 per share, and our previously outstanding 82,519,461 shares of common stock decreased to 34,383,109 shares of common stock outstanding. Our authorized preferred stock was not affected by the reverse split of common stock and continues to be comprised of 10,000,000 shares of preferred stock having a par value of $0.0001 per share, of which no shares of preferred stock are currently outstanding.

As a result of the closing of the Exchange Agreement, the business of Epic Corp., being that of a second hand goods retailer that operates second hand retail stores in the United States, became our business. We offer high quality, on-trend second hand clothing, accessories and household products at affordable prices. We are based in Phoenix, Arizona. We commenced operations in 2010. In 2011, we opened our first retail store in Phoenix, Arizona. Since 2011, we have opened stores in Arizona, Nevada, Colorado, and Texas. All of our retail stores sell our products directly to consumers. We also operate a leading wholesale business that supplies used shoes, books and clothing to distributors.

Incorporation of Subsidiaries

Epic Stores, L.L.C. (“Epic 1”) was incorporated on December 2, 2010 as an Arizona limited liability company.  Epic 1 opened its first store in Phoenix, Arizona in 2011. It then formed a company, Epic Stores 2 LLC (“Epic 2”), a Nevada limited liability company, on September 20, 2011 to open its second retail location in Las Vegas, Nevada. On February 16, 2012, a second company, Epic Stores III LLC (“Epic 3”), a Nevada limited liability company, was formed to open the third retail location in Las Vegas, Nevada. After opening the third store, Epic 1 determined that its growth plans would be more efficiently reached if all the stores were operated under the same limited liability company. As a result, Epic 1 opened three locations in 2013 and five additional locations in 2014. Effective January 1, 2015, the sole member of each of Epic 2 and Epic 3 assigned all of its membership interest in Epic 2 and Epic to Epic 1 pursuant to the terms of an assignment and assumption of membership interests agreement.

On February 11, 2015, Epic Stores LLC (“Epic LLC”), a Nevada limited liability company, was formed. On February 11, 2015, Epic 1 merged with and into Epic LLC, with Epic LLC as the surviving corporation, for the purposes of changing its jurisdiction of formation from Arizona to Nevada. On May 4, 2015, Epic Corp. was incorporated under the laws of the State of Nevada. Pursuant to a contribution agreement dated May 12, 2015, Epic LLC contributed all of its assets, including all of the membership interests in Epic 2 and Epic 3, to Epic Corp. On May 21, 2015, Epic LLC and its members executed a conversion and liquidation agreement converting all units of Epic LLC into Class A Units of Epic LLC, which in turn were converted into an aggregate of 10,034,789 shares of common stock of Epic Corp., which were all exchanged for shares of our common stock in connection with the closing of the Exchange Agreement. Upon execution of the conversion and liquidation agreement, the members of Epic LLC authorized its manager to take action as needed to dissolve Epic LLC. As at the date hereof, Epic LLC has not yet been dissolved and continues to be a wholly-owned subsidiary of Epic.

Results of Operations

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue operating. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

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Results of Operations for the Three Months Ended March 31, 2016 and 2015

The following table provides our results of operations for the three months ended March 31, 2016 and 2015:

	Three Months Ended March 31
	2016			2015
Retail revenue	$	1,188,504		$	1,841,296
Wholesale revenue	$	1,245		$	138,993
Cost of revenue	$	(127,058	)	$	(517,930	)
Gross profit	$	1,062,691		$	1,462,359
Operating expenses	$	2,242,305		$	2,681,857
Loss from operations	$	(1,179,614	)	$	(1,219,498	)
Interest expenses	$	(275,453	)	$	(30,802	)
Commitment fees	$	(500,000	)	$	—
Other income	$	2,771		$	1,400
Net loss	$	(1,952,296	)	$	(1,248,900	)

Revenues

Our retail revenue decreased by $652,792 in the three months ended March 31, 2016, as compared to the three months ended March 31, 2015, from $1,841,296 to $1,188,504. The decrease was primarily due to decreased inventory due to budgetary restrictions.

Our wholesale revenue decreased by $137,748 in the three months ended March 31, 2016, as compared to the three months ended March 31, 2015, from $138,993 in 2015 to $1,245 in 2016. The decrease was primarily due to a decrease in market price for wholesale goods, which is attributed to decreased demand in export markets and the current strength of the U.S. dollar. The wholesale market is driven by export to foreign markets. Buyers pay by the pound for wholesale product, typically on the expectation that they will be able to sell overseas for a profit. If such markets are experiencing a slowdown, it has a negative impact on our wholesale business.

Gross Profit

Gross profit as a percentage of total revenues for the three months ended March 31, 2016 was 89% as compared to 73.8% for the three months ended March 31, 2015. The increase in gross profit was due to the Company obtaining inventories from lower cost providers.

Cost of Goods Sold

Cost of revenue decreased by $390,872 in the three months ended March 31, 2016, as compared to the three months ended March 31, 2015, from $517,930 in 2015 to $127,058 in 2016. The decrease in cost of revenue was primarily due to the Company obtaining inventories from lower cost providers.

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Operating Expenses

During the three months ended March 31, 2016, we incurred general and administrative expenses of approximately $327,746, payroll and related expenses of $883,907, rent expense of $628,902, professional fees of $332,375 and depreciation and amortization expenses of $69,375, compared to general and administrative expenses of $626,847, payroll and related expenses of $1,208,009, rent expense of $652,100, professional fees of $137,610 and depreciation and amortization expense of $57,291 during the three months ended March 31, 2015. The decrease of $439,552 in operating expenses incurred during the three month period ended March 31, 2016, as compared to the three month period ended March 31, 2015, was mainly related to a decrease in general and administrative expenses of $299,101, payroll and related expenses of $324,102 and rent expense of $23,198, offset by an increase in professional fees of $194,765 and depreciation and amortization expense of $12,084. The decreases were mainly the result of reduced spending due to budgetary constraints, while the increases were primarily related to the professional fees incurred to prepare our public filings.

Interest

Interest expense increased from ($30,802) in the three months ended March 31, 2015 to ($275,453) in the three months ended March 31, 2016. The increase of $244,651 was due to increased debt financing and related interest.

Commitment Fees

Commitment fees increased from $nil in the three months ended March 31, 2015 to ($500,000) in the three months ended March 31, 2016. The increase of $500,000 was due to commitment fees charged by Old Main, LLC on the January 27, 2016 financing agreement.

Other Income

Other income increased from $1,400 in the three months ended March 31, 2015 to $2,771 in the three months ended March 31, 2016. The increase of $1,371 was due to an increase in consulting income.

Liquidity and Financial Condition

Working Capital

The following table provides selected financial data about our company as of March 31, 2016 and December 31, 2015:

Balance Sheet Date	March 31, 2016 (unaudited)			December 31, 2015 (audited)			(Decrease) / Increase
Cash	$	—		$	—		$	—
Total current assets	$	203,578		$	110,242		$	93,336
Total current liabilities	$	4,341,410		$	2,966,060		$	1,375,350
Working capital (deficiency)	$	(4,137,832	)	$	(2,855,818	)	$	(1,282,014	)

Our working capital decreased as of March 31, 2016 as compared to December 31, 2015 due to an increase in accounts payable of $374,446, an increase in accounts payable to related parties of $22,877, an increase in bank overdraw of $34,770, an increase in deferred rents – current portion of $4,592, an increase in equipment loan – current portion of $8,441, an increase in convertible notes of $611,423 and an increase in loans from related parties of $358,475, offset by a decrease in notes payable – current portion of $39,679.

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Cash Flows

	For the Three Months Ended March 31,
	2016			2015
Cash flows used in operating activities	$	(1,178,756	)	$	(769,570	)
Cash flows used in investing activities	$	—		$	(274,380	)
Cash flows provided by financing activities	$	1,178,756		$	1,012,121
Net increase (decrease) in cash during period	$	—		$	(31,829	)

Cash Flows from Operating Activities

For the three months ended March 31, 2016, our cash flows used in operating activities amounted to $1,178,756, compared to cash used in the three months ended March 31, 2015 of $769,570. The primary reason for the change relates to increase in net loss offset mainly by depreciation and amortization, stock based compensation, a decrease in deferred rents and an increase in accounts payable.

Cash Flows from Investing Activities

Our cash used in investing activities amounted to $nil for the three months ended March 31, 2016, as compared to $274,380 for the three months ended March 31, 2015. The primary reason for the change relates to a decrease in investments in tenant improvements and fixtures for stores.

Cash Flows from Financing Activities

Our cash provided by financing activities for the three months ended March 31, 2016 amounted to $1,178,756, consisting primarily of $250,000 from proceeds received from the issuance of common stock, $740,000 from proceeds received from convertible notes payable borrowing, $205,000 from proceeds received from notes payable borrowing and $358,475 received from proceeds from related party debts. Cash provided by financing activities in the three months ended March 31, 2015 amounted to $1,012,121, consisting primarily of $400,000 from proceeds received from the issuance of common stock and $850,000 from notes payable borrowing.

Cash Requirements

We believe that cash flow from operations will not meet our present and near-term cash needs and thus we will require additional cash resources, to be derived through the sale of equity or debt securities, or otherwise, to meet our planned capital expenditures and working capital requirements for the next 12 months.

We estimate that our capital needs over the next 12 months will be $3,000,000 to $4,500,000. We will require additional cash resources to invest in fixtures, equipment and leasehold improvements for our planned expansion, and to provide working capital to newly opened stores for personnel and marketing costs until the stores reach market saturation and cashflow positively. Our current cash is being used to fund day to day expenses at our retail stores.

We currently require additional capital to fund our ongoing operations and planned expansion. If our own financial resources and then 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.

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The 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.

Going Concern

Our auditors issued a going concern opinion on our financial statements for the year ended December 31, 2015. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay for our expenses.  There is no assurance we will ever reach this point. Our financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.

The continuation of our business is dependent upon obtaining further financing and achieving more profitable operations. If we issue additional equity securities, the equity interests of our current or future stockholders could be significantly diluted. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain additional financing through private placements, and/or bank financing or other loans necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us.

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.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company”, we are not required to provide the information required by this Item.

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Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal accounting officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our principal executive officer and principal accounting officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2016, our disclosure controls and procedures were not effective: (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines; and (ii) matters related to the transition of management in connection with the closing of the Exchange Agreement on June 24, 2015.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2016: (i) adopt sufficient written policies and procedures for accounting and financial reporting, and (ii) provide our new management with additional guidance regarding the financial monitoring and reporting responsibilities associated with being a reporting company. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2016, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II – OTHER INFORMATION

Item 1.  Legal Proceedings.

Other than as set out below, and other than ordinary routine litigation incidental to our business or proceedings that involve primarily a claim for damages in an amount that does not exceed 10% of our current assets, we know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

On October 2, 2015, HH-Poca Fiesta, LLC (“HH”) commenced an action against our company in the Maricopa County Superior Court, Arizona, related to a lease dated October 7, 2013 with respect to one of our former retail premises, located at 1110 West Southern Avenue, Suite 20, in Mesa, Arizona. On January 5, 2016, we entered into a settlement agreement dated January 5, 2016 with HH with respect to the settlement of such claim.

Pursuant to the terms of the settlement agreement, HH has agreed to settle its claims against our company in exchange for payment of $200,000, which is to be paid according to the following schedule: (i) $17,000 on or before January 5, 2016 (which has been paid); (ii) $2,000 on or before January 11, 2016 (which has been paid); (iii) $2,000 each week thereafter until March 7, 2016(which has been paid); and (iv) $5,000 on March 15, 2016(which has been paid); and (v) $5,000 on March 25, 2016(which has been paid); and (vi) $10,000 on April 1, 2016(which has been paid); and (vii) $5,000 on April 18, 2016(which has been paid); and (viii) $15,000 on May 1, 2016(which has been paid); and (ix) the remaining $165,000 on or before May 31, 2016 (each, a “Settlement Installment”).

In connection with the foregoing, we agreed to deliver an executed stipulation to judgment to HH, which provides for the entry of a judgment in the lawsuit in favor of HH in the amount of $335,000. In the event that any of the Settlement Installments are not made in the time provided in the settlement agreement (after giving effect to any applicable grace periods), HH will be entitled to immediately file the stipulation with the court, and lodge the judgment for immediate entry by the court, provided that the amounts of any Settlement Installments we have previously paid will be deemed payments against the judgment. Assuming we pay all Settlement Installments as provided in the settlement agreement, HH agreed to destroy the executed stipulation and dismiss the lawsuit, and HH agreed to release our company from any claims related to the lawsuit, the lease and the leased premises.

Item 1A.  Risk Factors.

In addition to the other information set forth in this quarterly report, you should carefully consider the following factors, which could materially affect our business, financial condition or results of operations in future periods. The risks described below are not the only risks facing our company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.

Risks Related to Our Business

Our future success depends, in part, upon our ability to anticipate and respond to changing consumer preferences, trends and competitive environment in a timely manner.

Our future success depends, in part, upon our ability to identify and respond to shopping trends in a timely manner. The second hand retail apparel business fluctuates according to changes in the economy and customer preferences, dictated by economic factors and seasons. These fluctuations especially affect the inventory possessed by secondary retailers because merchandise typically is collected in advance of the selling season and is provided based on consumers percentage of discarded merchandise. While we endeavor to test many merchandise items from our suppliers before ordering large quantities, we are still susceptible to poor or low quality merchandise and fluctuations in customer demands.

In addition, the cyclical nature of the retail business requires that we carry a significant amount of inventory, especially during our peak selling seasons. As a result, we are vulnerable to changes in consumer demand, pricing shifts and the timing and selection of merchandise purchases. The failure to enter into agreements for the purchase of merchandise in a timely manner could, among other things, lead to a shortage of inventory and lower sales.

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Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

Our financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have not yet established an ongoing source of revenues sufficient to cover our operating costs and to allow us to continue as a going concern. Our ability to continue as a going concern is dependent on our company obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to significantly curtail or cease operations. In its report on our financial statements for the year ended December 31, 2015, our independent registered public accounting firm included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The success of our operations depends upon the effect of economic pressures and other business factors.

The success of our operations depends to a significant extent upon a number of factors relating to discretionary consumer spending, including economic conditions affecting disposable consumer income, such as payroll taxes, employment, consumer debt, interest rates, increases in energy costs and consumer confidence. There can be no assurance that consumer spending will not be further negatively be affected by general, local or international economic conditions, thereby adversely impacting our business and results of operations.

Our business is subject to seasonality.

Historically, our operations have been seasonal, with a large portion of total net revenue and operating income occurring in the first and fourth fiscal quarters, reflecting increased demand during tax rebates and year-end holiday selling seasons, respectively. As a result of this seasonality, any factors negatively affecting us during the first and fourth fiscal quarters of any year, including adverse weather or unfavorable economic conditions, could have a material adverse effect on our financial condition and results of operations for the entire year. Our quarterly results of operations also may fluctuate based upon such factors as the timing of certain holiday seasons, the number and timing of new store openings, the acceptability of seasonal merchandise offerings, competitive factors, weather and general economic conditions.

Our overall profitability depends on our ability to react to raw material cost, labor and energy cost increases.

Increases in our costs, such as raw materials, labor and energy, may reduce our overall profitability. Specifically, fluctuations in the cost associated with the collection of merchandise we purchase from our suppliers impacts our cost of sales. Additionally, increases in other costs, including labor and energy, could further reduce our profitability if not mitigated.

Our ability to drive improved performance will depend in part on our ability to rebalance our store fleet and drive improved performance through new store openings, selective closings and existing store remodels and expansions.

Our ability to drive improved performance will depend in part on our ability to expand stores on a timely and profitable basis. Accomplishing our expansion goals will depend upon a number of factors, including the ability to obtain suitable sites for new and expanded stores at acceptable costs, the hiring and training of qualified personnel, particularly at the store management level, the integration of new stores into existing operations, and the expansion of our buying and inventory capabilities. There can be no assurance that we will be able to achieve our store expansion and rebalancing goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new stores profitably.

The results achieved by our stores may not be indicative of long-term performance or the potential performance of stores in other locations. The failure of stores to achieve acceptable results could result in additional store asset impairment charges, which could adversely affect our results of operations and financial condition.

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The financial failure of a key supplier could disrupt our operations.

Our merchandise is collected by suppliers nationwide. Although we purchase approximately one third of our merchandise through a single agent, we do not maintain any exclusive commitments to purchase from any one supplier. Because we have a nationwide supply chain, any event causing the disruption of product, including the insolvency of a significant supplier or a major labor slow-down, strike or dispute, including any actions involving trucking, transloaders, consolidators or shippers, could have an adverse effect on our operations. Given the volatility and risk in the current markets, our reliance on external suppliers leaves us subject to certain risks should one or more of these external suppliers become insolvent. Although we monitor the financial stability of our key suppliers and plan for contingencies, the financial failure of a key supplier could disrupt our operations and have an adverse effect on our cash flows, results of operations and financial condition.

Information technology system disruptions and inaccurate system information could have a material adverse effect on our results of operations.

We regularly evaluate our information technology systems and are currently implementing modifications and/or upgrades to the information technology systems that support our business. Modifications include replacing legacy systems with successor systems, making changes to legacy systems or acquiring new systems with new functionality. We are aware of inherent risks associated with operating, replacing and modifying these systems, including inaccurate system information and system disruptions. There is a risk that information technology system disruptions and inaccurate system information, if not anticipated and/or promptly and appropriately mitigated, could have a material adverse effect on our results of operations.

If we fail to safeguard against security breaches with respect to our information technology systems, we could be exposed to a risk of loss or misuse of this information and potential liability.

Our business employs systems and websites that allow for the storage and transmission of proprietary or confidential information regarding our business, customers and employees, including credit card information. Security breaches could expose us to a risk of loss or misuse of this information and potential liability. We may not be able to anticipate or prevent rapidly evolving types of cyber-attacks. Actual or anticipated attacks may cause us to incur increased costs, including costs to deploy additional personnel and protection technologies, train employees and engage third party experts and consultants. Advances in computer capabilities, new technological discoveries or other developments may result in the technology used by us to protect transaction or other data being breached or compromised. Data and security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breach by employees or persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information. Any compromise or breach could result in a violation of applicable privacy and other laws, significant financial exposure and a loss of confidence in our security measures, which could have an adverse effect on our results of operations and our reputation.

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We rely on key personnel.

Our success depends to a significant extent upon our ability to attract and retain qualified key personnel, including senior management. Collective or individual changes in our senior management and other key personnel could have an adverse effect on our ability to determine and execute our strategies, which could adversely affect our business and results of operations. There is a high level of competition for senior management and other key personnel, and we cannot be assured we will be able to attract, retain and develop a sufficient number of qualified senior managers and other key personnel.

Risks Related to Ownership of Our Common Stock

Because we became public by means of a reverse takeover transaction, we may not be able to attract the attention of major brokerage firms.

Additional risks may exist since we became public through a “reverse takeover” with a shell company. Security analysts of major brokerage firms and securities institutions may not cover us since there are no broker-dealers who sold our stock in a public offering who would have an incentive to follow or recommend the purchase of our common stock. No assurance can be given that established brokerage firms will want to conduct any financings for us in the future.

Penny stock rules will limit the ability of our stockholders to sell their stock.

The Securities and Exchange Commission has adopted regulations which generally define a “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements that may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

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Our board of directors is authorized to issue additional shares of our common stock that would dilute existing stockholders.

We are currently authorized to issue up to 687,500,000 shares of common stock and 10,000,000 shares of preferred stock, of which 38,680,263 shares of common stock and no shares of preferred stock are currently issued and outstanding. We expect to seek additional financing in order to provide working capital to our business. Our board of directors has the power to issue any or all of such authorized but unissued shares at any price they consider sufficient, without stockholder approval. The issuance of additional shares of common stock in the future will reduce the proportionate ownership and voting power of current stockholders.

There is not now, and there may never be, an active, liquid and orderly trading market for our common stock, which may make it difficult for you to sell your shares of our common stock.

There is not now, nor has there been since our inception, any trading activity in our common stock or a market for shares of our common stock, and an active trading market for our shares may never develop or be sustained. As a result, investors in our common stock must bear the economic risk of holding those shares for an indefinite period of time. Although our common stock is quoted on the OTCQB marketplace operated by OTC Markets Inc., an over-the-counter quotation system, trading of our common stock is extremely limited and sporadic and at very low volumes. We do not now, and may not in the future, meet the initial listing standards of any national securities exchange, and we presently anticipate that our common stock will continue to be quoted on the OTCQB marketplace or another over-the-counter quotation system for the foreseeable future. As a result, our stockholders may find it difficult to obtain accurate quotations as to the market value of their shares of our common stock, and may find few buyers to purchase their stock and few market makers to support its price. As a result of these and other factors, you may be unable to resell your shares of our common stock at or above the price for which you purchased them, or at all. Further, an inactive market may also impair our ability to raise capital by selling additional equity in the future, and may impair our ability to enter into strategic partnerships or acquire companies or products by using shares of our common stock as consideration.

A decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our ability to continue operations and we may go out of business.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors not to choose to invest in our stock lf we are unable to raise the funds we require for all our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business.

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The market price of our common stock may be volatile.

The market price of our common stock may be highly volatile. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate, or sales of our common stock. These factors may materially adversely affect the market price of our common stock, regardless of our performance. In addition, public stock markets have experienced extreme price and trading volume volatility.  This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies.  These broad market fluctuations may adversely affect the market price of our common stock.

Because we do not intend to pay any cash dividends on our shares of common stock in the near future, our stockholders will not be able to receive a return on their shares unless they sell them.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the near 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 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. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.

Because our directors and executive officers are among our largest stockholders, they can exert significant control over our business and affairs and have actual or potential interests that may depart from those of investors.

Certain of our executive officers and directors own a significant percentage of our outstanding capital stock. As of the date hereof, our executive officers and directors beneficially own approximately 26.7% of our outstanding voting stock, on an undiluted basis. The holdings of our directors and executive officers may increase further in the future upon vesting or other maturation of exercise rights under any of the options or warrants they may hold or in the future be granted, or if they otherwise acquire additional shares of our common stock. The interests of such persons may differ from the interests of our other stockholders. As a result, in addition to their board seats and offices, such persons will have significant influence and control over all corporate actions requiring stockholder approval, irrespective of how our company’s other stockholders may vote, including the following actions:

• to elect or defeat the election of our directors;

• to amend or prevent amendment of our articles of incorporation or by-laws;

• to effect or prevent a merger, sale of assets or other corporate transaction; and

• to control the outcome of any other matter submitted to our stockholders for a vote.

This concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for our common stock, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.  Defaults Upon Senior Securities.

On April 16, 2015, Epic Corp., an entity that is not related to the Company, issued a secured convertible promissory note to an investor in the principal amount of $200,000. The note bears a 23% annual interest rate and matured on June 30, 2015. The note was convertible into one Class B Unit of Epic LLC. The note is secured by all assets of Epic Corp. At the time of issuance, the Company evaluated the conversion feature and determined that the value associated with the conversion feature was $0.

On January 25, 2016, the Company entered into an amending agreement with the Company’s wholly-owned subsidiary, Epic Stores, LLC, and Epic Store Funding Corp. amending the note purchase agreement dated April 16, 2015. Under the terms of the original note purchase agreement, the subsidiary and Funding Corp. agreed that they would use their commercially reasonable efforts to agree upon the price and other terms of securities of the subsidiary into which Funding Corp. could, at its option, convert the principal and interest of the note and, in the event that they were unable to so agree on or prior to the June 30, 2015, the subsidiary would pay Funding Corp., in addition to any other amounts due and owing under the note, a break-up fee of $50,000. The Company completed the acquisition of the subsidiary on June 24, 2015. Notwithstanding that the subsidiary and Funding Corp. had not agreed to conversion terms by June 30, 2015, and the fee was not paid. Pursuant to the terms of the amending agreement entered into on January 25, 2016: 

(a)	the maturity date for repayment of the note was changed from June 30, 2015 to December 31, 2015;
(b)	the Company agreed to the pay Funding Corp. the fee of $50,000 on or prior to January 8, 2016, plus accrued interest at a rate of 23% per annum beginning on July 1, 2015, until the date of payment in full of the fee and any accrued but unpaid interest thereon, which accrued interest will be payable on the last day of each calendar month with the first such payment made on December 31, 2015; and
(c)	if all amounts owing under the note and the fee, including all accrued but unpaid interest thereon, had not been wired to Funding Corp. on or prior to February 2, 2016, the Company would be required to pay Funding Corp. an additional $25,000 on February 2, 2016, with interest at the rate of 23% per annum to accrue with respect to such $25,000 effective as of February 2, 2016 in the event such payment is not made on February 2, 2016.

 In consideration of the foregoing amendments, the Company agreed to issue Funding Corp., at the time of full repayment of all amounts owing in connection with the note:

(a)	145,000 stock purchase warrants, plus
(b)	commencing on January 8, 2016, 1,000 warrants per day until the date of repayment of all amounts owing under the note.

 Each warrant will be exercisable into one share of the Company’s common stock at a price of $1.02 per share until the date that is two years from the date of issuance.

As of the March 31, 2016, neither the original principal balance or the penalties had been paid. The penalties have been added to the principal balance of the note and $275,000 in principal remained outstanding as of March 31, 2016.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

None.

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Item 6.  Exhibits.

The following exhibits are included as part of this report:

Exhibit No.	Description
2.1	Articles of Incorporation (incorporated by reference from our registration statement on Form S-1, as filed on February 26, 2013)
3.1	Bylaws (incorporated by reference from our registration statement on Form S-1, as filed on February 26, 2013)
3.2	Articles of Merger dated effective December 20, 2013 (incorporated by reference from our current report on Form 8-K, as filed on December 21, 2013)
3.3	Certificate of Change dated effective December 20, 2013 (incorporated by reference from our current report on Form 8-K, as filed on December 21, 2013)
3.4	Certificate of Change dated effective December 30, 2013 (incorporated by reference from our current report on Form 8-K, as filed on December 21, 2013)
3.5	Articles of Merger dated effective August 18, 2015 (incorporated by reference from our current report on Form 8-K, as filed on August 19, 2015)
3.6	Certificate of Change dated effective August 18, 2015 (incorporated by reference from our current report on Form 8-K, as filed on August 18, 2015)
3.7	Articles of Incorporation (incorporated by reference from our registration statement on Form S-1, as filed on February 26, 2013)
10.1	Share cancellation agreement dated June 24, 2015 between our company and John Kitchen (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.2	Share cancellation agreement dated June 24, 2015 between our company and Linda Miller (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.3	Warrant cancellation agreement dated June 24, 2015 between our company and Paul Medley (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.4	Form of subscription agreement for units dated June 24, 2015 (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.5	Investor rights agreement among our company, Belloc Pty Ltd and the subscribers to the concurrent financing (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.6	Voting agreement dated June 24, 2015 among our company and each of the former stockholders of Epic (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.7	Escrow agreement dated June 24, 2015 among our company, Doney Ventures, Inc. and certain former stockholders of Epic (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.8	Management agreement dated January 1, 2015 between Epic and Brian Davidson (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.9	Management agreement dated January 1, 2015 between Epic and Bob Riggs (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.10	Management agreement dated January 1, 2015 between Epic and Wayne Riggs (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.11	Consulting agreement dated March 3, 2015 between Epic and Bluechip Advisors LLC with respect to the provision of services as Chief Financial Officer by Zach Bradford (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.12	Consulting agreement dated March 3, 2015 between Epic and Bluechip Advisors LLC with respect to the provision of controller and accounting services (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.13	Consulting agreement dated March 3, 2015 between Epic and Bluechip Advisors LLC with respect to the provision of SEC financial reporting services (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
10.14	Form of subscription agreement for units dated effective October 7, 2015 (incorporated by reference from our registration statement on Form S-1/A, as filed on December 10, 2015)
10.15	Form of subscription agreement for units dated effective November 20, 2015 (incorporated by reference from our registration statement on Form S-1/A, as filed on December 10, 2015)
10.16	Form of subscription agreement for units dated effective December 10, 2015 (incorporated by reference from our registration statement on Form S-1/A, as filed on January 21, 2016)
10.17	Form of subscription agreement for units dated effective December 31, 2015 (incorporated by reference from our registration statement on Form S-1/A, as filed on January 21, 2016)
10.18	Settlement agreement dated January 5, 2016 among HH-Poca Fiesta, LLC, Epic, Epic Stores, L.L.C. and Epic Stores, LLC. (incorporated by reference from our current report on Form 8-K, as filed on January 13, 2016)
10.19	Amending Agreement dated January 25, 2016 (incorporated by reference from our current report on Form 8-K, as filed on February 2, 2016)

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10.20	Securities Purchase Agreement dated January 27, 2016 (incorporated by reference from our current report on Form 8-K, as filed on February 4, 2016)
10.21	10% Senior Secured Convertible Promissory Note Due January 27, 2017 (incorporated by reference from our current report on Form 8-K, as filed on February 4, 2016)
10.22	Registration Rights Agreement dated January 27, 2016 (incorporated by reference from our current report on Form 8-K, as filed on February 4, 2016)
10.23	Security Agreement dated January 27, 2016 (incorporated by reference from our current report on Form 8-K, as filed on February 4, 2016)
10.24	Subsidiary Guarantee dated January 27, 2016 (incorporated by reference from our current report on Form 8-K, as filed on February 4, 2016)
10.25	8% Senior Convertible Promissory Note Due January 27, 2017 (incorporated by reference from our current report on Form 8-K, as filed on February 4, 2016)
10.26	Leak-Out Agreement dated January 27, 2016 (incorporated by reference from our current report on Form 8-K, as filed on February 4, 2016)
10.27	Secured Promissory Note dated February 26, 2016 (incorporated by reference from our current report on Form 8-K, as filed on March 2, 2016)
10.28	Amendment to Securities Purchase Agreement dated April 1, 2016 (incorporated by reference from our current report on Form 8-K, as filed on April 6, 2016)
10.29	Amendment to Registration Rights Agreement dated April 1, 2016 (incorporated by reference from our current report on Form 8-K, as filed on April 6, 2016)
10.30	Amendment to Convertible Promissory Notes dated April 1, 2016 (incorporated by reference from our current report on Form 8-K, as filed on April 6, 2016)
10.31	10% Senior Secured Convertible Promissory Note Due April 1, 2017 (incorporated by reference from our current report on Form 8-K, as filed on April 6, 2016)
10.32	Assignment and Exchange Note dated April 1, 2016 (incorporated by reference from our current report on Form 8-K, as filed on April 6, 2016)
10.33	10% Senior Convertible Promissory Note in the principal amount of $266,000 due April 1, 2017 (incorporated by reference from our current report on Form 8-K, as filed on April 6, 2016)
10.34	Assignment Agreement dated April 5, 2016 (incorporated by reference from our current report on Form 8-K, as filed on April 11, 2016)
10.35	Convertible Promissory Note dated April 5, 2016 issued to ZSL Trust Dated March 12, 2010 (incorporated by reference from our registration statement on Form S-1, as filed on April 12, 2016)
16.1	Letter from Sadler, Gibb & Associates, LLC (incorporated by reference from our current report on Form 8-K, as filed on June 30, 2015)
16.2	Letter from De Joya Griffith, LLC (incorporated by reference from our current report on Form 8-K, as filed on August 10, 2015)
21.1	Wholly-owned subsidiaries of Epic Stores Corp.: Epic Stores Corp., a Nevada corporation Epic Stores, LLC, a Nevada limited liability company Epic Stores 2 LLC, a Nevada limited liability company Epic Stores III LLC, a Nevada limited liability company Variable interest entity of Epic Stores Corp.: Atlas Global LLC, an Arizona limited liability company
31.1*	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculations
101.DEF*	XBRL Taxonomy Extension Definitions
101.LAB*	XBRL Taxonomy Extension Labels
101.PRE*	XBRL Taxonomy Extension Presentation

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EPIC STORES CORP.
	(Registrant)
Dated: May 23, 2016	/s/ Brian Davidson
	Brian Davidson
	President, Chief Executive Officer, Secretary, Treasurer and Director
	(Principal Executive Officer)
Dated:  May 23, 2016	/s/ Zach Bradford
	Zach Bradford
	Chief Financial Officer and Director
	(Principal Financial Officer, and Principal Accounting Officer)

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