Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Mar. 30, 2020 | Jun. 28, 2019 | |
Document And Entity Information | |||
Entity Registrant Name | Eastside Distilling, Inc. | ||
Entity Central Index Key | 0001534708 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filer | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business Flag | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 37,101,492 | ||
Entity Common Stock, Shares Outstanding | 9,762,728 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 343,293 | $ 10,642,877 |
Trade receivables | 1,326,067 | 1,064,078 |
Inventories | 12,393,235 | 11,017,459 |
Prepaid expenses and current assets | 407,524 | 765,146 |
Total current assets | 14,470,119 | 23,489,560 |
Property and equipment, net | 4,773,528 | 1,758,130 |
Right-of-use assets | 742,808 | |
Intangible assets, net | 14,674,790 | 285,676 |
Goodwill | 28,182 | 28,182 |
Other assets, net | 1,176,436 | 796,260 |
Total Assets | 35,865,863 | 26,357,808 |
Current liabilities: | ||
Accounts payable | 2,937,426 | 1,984,690 |
Accrued liabilities | 896,059 | 386,166 |
Deferred revenue | 1,734 | 1,728 |
Current portion of notes payable | 1,819,172 | |
Current portion of lease liability | 483,211 | |
Total current liabilities | 6,137,602 | 2,372,584 |
Lease liability - less current portion | 387,623 | |
Secured trade credit facility, net of debt issuance costs | 2,961,566 | 2,934,106 |
Deferred consideration for Azuñia acquisition (Long Term) | 15,451,500 | |
Notes payable - less current portion and debt discount | 3,594,254 | 2,300,000 |
Total liabilities | 28,532,545 | 7,606,690 |
Commitments and contingencies (Note 13) | ||
Stockholders' equity: | ||
Series A convertible preferred stock, $0.0001 par value; 3,000 shares authorized; 0 and 0 shares issued and outstanding at December 31, 2019 and 2018 | ||
Common stock, $0.0001 par value; 15,000,000 shares authorized; 9,675,028 and 8,764,085 shares issued and outstanding at December 31, 2019 and 2018, respectively | 967 | 876 |
Additional paid-in capital | 51,566,438 | 45,888,872 |
Accumulated deficit | (44,234,087) | (27,138,630) |
Total Stockholders' Equity | 7,333,318 | 18,751,118 |
Total Liabilities and Stockholders' Equity | $ 35,865,863 | $ 26,357,808 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Series A convertible preferred stock, par value | $ 0.0001 | $ 0.0001 |
Series A convertible preferred stock, shares authorized | 3,000 | 3,000 |
Series A convertible preferred stock, shares issued | 0 | 0 |
Series A convertible preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 15,000,000 | 15,000,000 |
Common stock, shares issued | 9,675,028 | 8,764,085 |
Common stock, shares outstanding | 9,675,028 | 8,764,085 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Statement [Abstract] | ||
Sales | $ 17,021,484 | $ 7,204,302 |
Less excise taxes, customer programs and incentives | 1,424,860 | 1,080,792 |
Net sales | 15,596,624 | 6,123,510 |
Cost of sales | 10,139,663 | 3,813,309 |
Gross profit | 5,456,961 | 2,310,201 |
Operating expenses: | ||
Advertising, promotional and selling expenses | 7,452,877 | 4,345,210 |
General and administrative expenses | 11,538,438 | 6,225,998 |
Loss on disposal of property and equipment | 133,179 | |
Total operating expenses | 19,172,118 | 10,571,208 |
Loss from operations | (13,715,157) | (8,261,007) |
Other income (expense), net | ||
Interest expense | (523,391) | (789,362) |
Other income (expense) | (2,669,556) | 2,700 |
Total other expense, net | (3,192,947) | (786,662) |
Loss before income taxes | (16,908,104) | (9,047,669) |
Provision for income taxes | ||
Net loss | $ (16,908,104) | $ (9,047,669) |
Basic and diluted net loss per common share | $ (1.82) | $ (1.49) |
Basic and diluted weighted average common shares outstanding | 9,275,696 | 6,074,489 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholder's Equity - USD ($) | Convertible Series A Preferred Stock [Member] | Common Stock [Member] | Paid-In Capital [Member] | Accumulated Deficit [Member] | Total Stockholders' Equity [Member] | Non-controlling Interests [Member] | Total |
Balance at Dec. 31, 2017 | $ 489 | $ 23,223,435 | $ (18,090,961) | $ 5,132,963 | $ 15,585 | $ 5,148,548 | |
Balance, shares at Dec. 31, 2017 | 4,889,745 | ||||||
Issuance of common stock, net of expenses | $ 148 | 8,678,975 | 8,679,123 | 8,679,123 | |||
Issuance of common stock, net of expenses, shares | 1,480,250 | ||||||
Issuance of common stock from warrant exercise for cash, net of expenses | $ 152 | 8,004,029 | 8,004,181 | 8,004,181 | |||
Issuance of common stock from warrant exercise for cash, net of expenses, shares | 1,521,312 | ||||||
Issuance of common stock for services by third parties | $ 8 | 412,823 | 412,831 | 412,831 | |||
Issuance of common stock for services by third parties, shares | 81,708 | ||||||
Issuance of common stock for services by employees | $ 8 | 712,461 | 712,469 | 712,469 | |||
Issuance of common stock for services by employees, shares | 79,734 | ||||||
Issuance of common stock in exchange of debt | $ 67 | 3,722,821 | 3,722,888 | 3,722,888 | |||
Issuance of common stock in exchange of debt, shares | 672,273 | ||||||
Issuance of common stock for purchase of remaining 10% of Big Bottom LLC | 19,294 | 19,294 | 19,294 | ||||
Issuance of common stock for purchase of remaining 10% of Big Bottom LLC, shares | 3,122 | ||||||
Acquisition of remaining non-controlling interest in Big Bottom Distilling, Inc | (15,585) | (15,585) | |||||
Issuance of detachable warrants on notes payable | 351,548 | 351,548 | 351,548 | ||||
Issuance of detachable warrants on notes payable, shares | |||||||
Stock option exercises | $ 4 | 105,940 | 105,944 | $ 105,944 | |||
Stock option exercises, shares | 35,941 | 48,715 | |||||
Stock-based compensation | 863,262 | 863,262 | $ 863,262 | ||||
Net issuance to settle RSUs | (205,716) | (205,716) | (205,716) | ||||
Net issuance to settle RSUs, shares | |||||||
Net loss attributable to common shareholders | (9,047,669) | (9,047,669) | (9,047,669) | ||||
Balance at Dec. 31, 2018 | $ 876 | 45,888,872 | (27,138,630) | 18,751,118 | 18,751,118 | ||
Balance, shares at Dec. 31, 2018 | 8,764,085 | ||||||
Issuance of common stock, net of expenses | $ 28 | 1,262,469 | 1,262,497 | 1,262,497 | |||
Issuance of common stock, net of expenses, shares | 280,555 | ||||||
Issuance of common stock for services by third parties | $ 9 | 597,912 | 597,921 | 597,921 | |||
Issuance of common stock for services by third parties, shares | 87,150 | ||||||
Issuance of common stock for services by employees | $ 20 | 1,055,818 | 1,055,838 | 1,055,838 | |||
Issuance of common stock for services by employees, shares | 203,949 | ||||||
Stock option exercises | |||||||
Stock option exercises, shares | 1,077 | 3,167 | |||||
Stock-based compensation | 761,800 | 761,800 | $ 761,800 | ||||
Net issuance to settle RSUs | (94,403) | (94,403) | (94,403) | ||||
Net issuance to settle RSUs, shares | |||||||
Issuance of common stock for purchase of Craft Canning + Bottling, LLC | $ 34 | 2,079,970 | 2,080,004 | 2,080,004 | |||
Issuance of common stock for purchase of Craft Canning + Bottling, LLC, shares | 338,212 | ||||||
Adjustment to accumulated deficit for adoption of ASC 842 | (187,353) | (187,353) | (187,353) | ||||
Contributed capital | 14,000 | 14,000 | 14,000 | ||||
Net loss attributable to common shareholders | (16,908,104) | (16,908,104) | (16,908,104) | ||||
Balance at Dec. 31, 2019 | $ 967 | $ 51,566,438 | $ (44,234,087) | $ 7,333,318 | $ 7,333,318 | ||
Balance, shares at Dec. 31, 2019 | 9,675,028 |
Consolidated Statements of St_2
Consolidated Statements of Stockholder's Equity (Parenthetical) | 12 Months Ended |
Dec. 31, 2018 | |
Big Bottom Distilling, LLC [Member] | |
Percentage of common stock unit | 10.00% |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (16,908,104) | $ (9,047,669) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 1,696,755 | 364,813 |
Loss on disposal of fixed assets | 133,179 | |
Loss on remeasurement of deferred consideration | 2,670,408 | |
Lease expense | 562,095 | |
Amortization of debt issuance costs | 27,460 | 392,230 |
Bad debt expense | 71,032 | |
Issuance of common stock in exchange for services for related parties | 1,055,839 | 712,469 |
Issuance of common stock in exchange for services for 3rd parties | 597,921 | 412,831 |
Stock-based compensation | 667,397 | 657,546 |
Changes in operating assets and liabilities: | ||
Trade receivables | 292,695 | (748,757) |
Inventories | (384,926) | (6,966,177) |
Prepaid expenses and other assets | (73,774) | (625,750) |
Accounts payable | 721,123 | 721,209 |
Accrued liabilities | 435,504 | 208,677 |
Deferred revenue | (51,994) | 149 |
Net lease liabilities | (644,912) | |
Net cash used in operating activities | (9,132,302) | (13,918,429) |
Cash Flows From Investing Activities: | ||
Acquisition of business, net of cash acquired | (1,449,917) | |
Purchases of property and equipment | (2,176,506) | (1,296,410) |
Net cash used in investing activities | (3,626,423) | (1,296,410) |
Cash Flows From Financing Activities: | ||
Proceeds from common stock, net of issuance costs | 1,262,497 | 8,679,123 |
Proceeds from option exercise | 105,944 | |
Proceeds from warrant exercise | 8,004,181 | |
Contributed capital | 14,000 | |
Payments of principal on notes payable | (607,056) | (514,867) |
Proceeds from notes payable | 1,789,700 | |
Proceeds from convertible notes payable, net of issuance costs | 3,630,000 | |
Proceeds from notes payable, warrants issued | 447,020 | |
Proceeds from secured credit facility, net of issuance costs of $80,000 | 2,920,000 | |
Net cash provided by financing activities | 2,459,141 | 23,271,401 |
Net increase (decrease) in cash | (10,299,584) | 8,056,562 |
Cash - beginning of year | 10,642,877 | 2,586,315 |
Cash - end of year | 343,293 | 10,642,877 |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid during the year for interest | 371,189 | 293,342 |
Cash paid for amounts included in measurement of lease liabilities | 754,643 | |
Supplemental Disclosure of Non-Cash Financing Activity | ||
Acquisition of remaining non-controlling interest in Big Bottom Distilling, LLC | 15,585 | |
Deferred consideration for the acquisition of Azuñia | 12,781,092 | |
Common stock issued in exchange of notes payable | 3,722,888 | |
Fixed assets acquired through financing | 300,000 | |
Issuance of debt discount | 351,548 | |
Right-of-use assets obtained in exchange for lease obligations | $ 1,257,371 |
Consolidated Statements of Ca_2
Consolidated Statements of Cash Flows (Parenthetical) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Statement of Cash Flows [Abstract] | |
Stock of issuance costs | $ 80,000 |
Description of Business
Description of Business | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Description of Business | 1. Description of Business Eastside Distilling was incorporated under the laws of Nevada in 2004 under the name of Eurocan Holdings, Ltd. In December 2014, we changed our corporate name to Eastside Distilling, Inc. to reflect our acquisition of Eastside Distilling, LLC. We manufacture, acquire, blend, bottle, import, export, market and sell a wide variety of alcoholic beverages under recognized brands. We employ 89 people in the United States. Our brands span several alcoholic beverage categories, including bourbon, American whiskey, vodka, gin, rum, tequila and Ready-to-Drink (RTD). We sell our products on a wholesale basis to distributors, and until March 2020, we operated four retail tasting rooms in Portland, Oregon to market our brands directly to consumers. Principal Brands Gin Big Bottom The Ninety One Gin Big Bottom Navy Strength Big Bottom Barrel Finished Gin Big Bottom London Dry Gin Rum Hue-Hue Coffee Rum Tequila Azuñia Blanco Organic Tequila Azuñia Reposado Organic Tequila Azuñia Añejo Tequila Azuñia Black, 2-Year, Extra-Aged, Private Reserve Añejo Tequila Vodka Portland Potato Vodka Portland Potato Vodka - Marionberry Portland Potato Vodka - Habanero Whiskey Redneck Riviera Whiskey Redneck Riviera Whiskey - Granny Rich Reserve Burnside Oregon Oaked Rye Whiskey Burnside West End Blend Whiskey Burnside Goose Hollow Bourbon Burnside Oregon Oaked Bourbon Burnside Buckman RSV 10 Year Bourbon Marionberry Whiskey Big Bottom Barlow Whiskey Big Bottom Barlow Port Whiskey Big Bottom Delta Rye Big Bottom American Single Malt Big Bottom Zin Cask Bourbon Barrel Hitch American Whiskey Special Advocaat Holiday Egg Nog Ready-to-Drink Redneck Riviera Howdy Dew! Portland Mule - Original Portland Mule - Marionberry Operating as a small business in a large, international spirits marketplace occupied by large multi-national conglomerates, we seek to utilize our size and our public company stature to our advantage and position Eastside Distilling as a leading tier 2 spirits provider by acquiring and developing brands, growing them to a national presence and positioning them for sale to the tier 1 suppliers to the market. This strategy was demonstrated by the launch of our Redneck Riviera Brand (RRW) in conjunction with our branding partners, Sandstrom Partners in 2018. This demonstrated how our team can leverage its position to launch nascent or new brands and grow them more quickly than the tier 1 larger conglomerates because we are able to focus and dedicate more of our attention to developing innovative products. Our RRW brand went from idea, to market roll-out in less than nine months and achieved national distribution in 49 states in 18 months. In September 2019, we acquired the Azuñia tequila brand and have begun to distribute this brand through our national platform. In May 2017, we used our shares to acquire 90% of Big Bottom Distilling, LLC (“BBD”), known for its award-winning, super-premium gins and whiskeys, and American Single Malt Whiskey. BBD’s super-premium spirits give us a presence at the “ultra-premium segment” of the market. In December 2018, we acquired the remaining 10% of BBD. In September 2019, we also acquired the high-end, luxury tequila brand, Azuñia, to complement our portfolio and provide us with a larger established brand in the high-growth tequila category. In addition, through MotherLode Craft Distillery (“MotherLode”), our wholly-owned subsidiary acquired in March 2017 and Craft Canning + Bottling, LLC (formerly known as Craft Canning, LLC) (“Craft Canning”), which we acquired in January 2019, we provide contract bottling, canning, and packaging services for existing and emerging beer, wine and spirits producers. We have used our mobile canning operations to profit from the rapid growth in the canned beverages industry (beer, wine, spirit-based RTD’s). |
Liquidity
Liquidity | 12 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Liquidity | 2. Liquidity Historically, the Company has funded its cash and liquidity needs through operating cash flow convertible notes, extended credit terms, and equity financings. For the years ended December 31, 2019 and 2018, the Company incurred a net loss of approximately $16.9 million and $9.0 million, respectively, and has an accumulated deficit of approximately $44.2 million as of December 31, 2019. The Company has been dependent on raising capital from debt and equity financings to meet its needs for cash flow used in operating activities. For the year ended December 31, 2019, we raised approximately $2.5 million in additional capital through equity and debt financing (net of repayments). At December 31, 2019, we had $0.3 million of cash on hand with a positive working capital of $8.3 million. Our ability to meet our ongoing operating cash needs over the next 12 months depends on reducing our operating costs, raising additional debt or equity capital and generating positive operating cash flow, primarily through increased sales, improved profit growth and controlling expenses. We intend to implement actions to improve profitability, by managing expenses while continuing to increase sales. Additionally, we are seeking to leverage our large inventory balances and our accounts receivable balance to help satisfy its working capital needs over the next 12 months. See Notes 10, 11 and 18 to our financial statements for a description of our debt and the debt refinancing initiatives completed in the first quarter of 2020. If we are unable to obtain additional financing, or additional financing is not available on acceptable terms, we may seek to sell assets, reduce operating expenses or reduce or eliminate marketing initiatives, and take other measures that could impair our ability to be successful. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying consolidated financial statements for Eastside Distilling, Inc. and subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements include the accounts of Eastside Distilling, Inc.’s wholly-owned subsidiaries, including, MotherLode, BBD, Outlandish, LLC, Redneck Riviera Whiskey Co., LLC, Craft Canning (beginning as of January 11, 2019) and the Azuñia tequila assets (beginning September 12, 2019). All intercompany balances and transactions have been eliminated in consolidation. Segment Reporting The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity, packaging, producing, marketing and distributing alcoholic beverages and operates as one segment. The Company’s chief operating decision makers, its chief executive officer, president and chief financial officer, review the Company’s operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition Net sales includes product sales, less excise taxes and customer programs and incentives. The Company recognizes revenue by applying the following steps in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, which include sales to the Oregon Liquor Control Commission (OLCC), the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. The Company excludes sales tax collected and remitted to various states from sales and cost of sales. Sales from items sold through the Company’s retail locations are recognized at the time of sale. Revenue received from online merchants who sell discounted gift certificates for the Company’s merchandise and tastings at its tasting rooms, is deferred until the customer has redeemed the discounted gift certificate or the gift certificate has expired, whichever occurs earlier. Customer Programs and Incentives Customer programs and incentives, which include customer promotional discount programs, customer incentives and other payments, are a common practice in the alcoholic beverage industry. The Company makes these payments to customers and incurs these costs to promote sales of products and to maintain competitive pricing. Amounts paid in connection with customer programs and incentives are recorded as reductions to net sales or as advertising, promotional and selling expenses in accordance with ASC 606 - Revenue from Contracts with Customers, Advertising, Promotional and Selling Expenses The following expenses are included in advertising, promotional and selling expenses in the accompanying consolidated statements of operations: media advertising costs, special event costs, tasting room costs, sales and marketing expenses, promotional costs of value added packaging, salary and benefit expenses, travel and entertainment expenses for the sales, brand and sales support workforce and promotional activity expenses. Advertising, promotional and selling costs are expensed as incurred. Advertising, promotional and selling expense totaled $7.5 million and $4.3 million in years 2019 and 2018, respectively, of which 2019 was $4.0 million compared to $2.3 in 2018 are included in the 50% Redneck Riviera Whiskey Marketing reimbursement and are expected to be collected upon the sale of the Redneck Riviera Brand by the licensor if sold while the licensing agreement is in effect. The reimbursement is payable upon the sale of the brand within the term of the agreement, which is 10 years, with a renewable option for any additional 10 years, by the licensor. Cost of Sales Cost of sales consists of the costs of ingredients utilized in the production of spirits, manufacturing labor and overhead, warehousing rent, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by packaging and production costs. Shipping and Fulfillment Costs Freight costs incurred related to shipment of merchandise from the Company’s distribution facilities to customers are recorded in cost of sales. Cash and Cash Equivalents Cash equivalents are considered to be highly liquid investments with maturities of three months or less at the time of the purchase. The Company had no cash equivalents at December 31, 2019 and 2018. Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. At December 31, 2019, two distributors represented 40% of trade receivables. At December 31, 2018, two distributors represented 37% of trade receivables. Sales to one distributor accounted for 16% of consolidated sales for the year ended December 31, 2019. Sales to two distributors accounted for 42% of consolidated sales for the year ended December 31, 2018. Fair Value Measurements GAAP defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAAP permits an entity to choose to measure many financial instruments and certain other items at fair value and contains financial statement presentation and disclosure requirements for assets and liabilities for which the fair value option is elected. At December 31, 2019 and December 31, 2018, management has not elected to report any of the Company’s assets or liabilities at fair value under the “fair value option” provided by GAAP. The hierarchy of fair value valuation techniques under GAAP provides for three levels: Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, generally would require significant management judgment. The three levels for categorizing assets and liabilities under GAAP’s fair value measurement requirements are as follows: Level 1: Fair value of the asset or liability is determined using cash or unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Fair value of the asset or liability is determined using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Fair value of the asset or liability is determined using unobservable inputs that are significant to the fair value measurement and reflect management’s own assumptions regarding the applicable asset or liability. None of the Company’s assets or liabilities were measured at fair value at December 31, 2019 or 2018. However, GAAP requires the disclosure of fair value information about financial instruments that are not measured at fair value. Financial instruments consist principally of trade receivables, accounts payable, accrued liabilities, note payable, and convertible note payable. The estimated fair value of trade receivables, accounts payable, and accrued liabilities approximates their carrying value due to the short period of time to their maturities. At December 31, 2019 and December 31, 2018, the Company’s notes are payable at fixed rates and their carrying value approximates fair value. Items Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities acquired in a business acquisition are valued at fair value at the date of acquisition. Inventories Inventories primarily consist of bulk and bottled liquor and merchandise and are stated at the lower of cost or market. Cost is determined using an average costing methodology, which approximates cost under the first-in, first-out (FIFO) method. A portion of inventory is held by certain independent distributors on consignment until it is sold to a third party. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost basis of accounting for the related inventory. The Company recorded write-downs of inventory of $0.3 million and $Nil for the years ended December 31, 2019 and 2018, respectively. Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Amortization of leasehold improvements is computed using the straight-line method over the life of the lease or the useful lives of the assets, whichever is shorter. The cost and related accumulated depreciation and amortization of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current period income or expense. The costs of repairs and maintenance are expensed as incurred. Intangible Assets / Goodwill The Company accounts for long-lived assets, including property and equipment and intangible assets, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount, an impairment loss would be recognized to write down the asset to its estimated fair value. The Company performed a qualitative assessment of goodwill at December 31, 2019 and determined that goodwill was not impaired. Long-lived Assets The Company accounts for long-lived assets, including property and equipment, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount of the asset, an impairment loss would be recognized to write down the asset to its estimated fair value. Income Taxes The provision for income taxes is based on income and expenses as reported for financial statement purposes using the “asset and liability method” for accounting for deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. At December 31, 2019 and 2018, the Company established valuation allowances against its net deferred tax assets. Income tax positions that meet the “more-likely-than-not” recognition threshold are measured at the largest amount of income tax benefit that is more than 50 % likely to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with income tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized income tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized income tax benefits would be classified as additional income taxes in the accompanying consolidated statements of operations. There were no unrecognized income tax benefits, nor any interest and penalties associated with unrecognized income tax benefits, accrued or expensed at and for the years ended December 31, 2019 and 2018. The Company files federal income tax returns in the United States. and various state income tax returns. The Company is no longer subject to examinations by the related tax authorities for the Company’s U.S. federal and state income tax returns for years prior to 2012. Comprehensive Income The Company does not have any reconciling other comprehensive income items for the for the years ended December 31, 2019 and 2018, respectively. Excise Taxes The Company is responsible for compliance with the TTB regulations, which includes making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual states also impose excise taxes on alcoholic beverages in varying amounts. The Company calculates its excise tax expense based upon units produced and on its understanding of the applicable excise tax laws. Excise taxes totaled $0.8 million and $0.7 million in years 2019 and 2018, respectively. Stock-Based Compensation The Company recognizes as compensation expense all stock-based awards issued to employees. The compensation cost is measured based on the grant-date fair value of the related stock-based awards and is recognized over the service period of stock-based awards, which is generally the same as the vesting period. The fair value of stock options is determined using the Black-Scholes valuation model, which estimates the fair value of each award on the date of grant based on a variety of assumptions including expected stock price volatility, expected terms of the awards, risk-free interest rate, and dividend rates, if applicable. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments at the end of each reporting period and as the underlying stock-based awards vest. Stock-based compensation was $0.7 million and $0.7 million in fiscal years 2019 and 2018, respectively. Accounts Receivable Factoring Program The Company has entered into two accounts receivable factoring programs. One for its spirits customers (the “spirits program”) and another for its co-packing customers (the “co-packing program”). Under the programs, the Company has the option to sell certain customer account receivables in advance of payment for 75% (spirits program) or 85% (co-packing program) of the amount due. When the customer remits payment, the Company receives the remaining balance. For the spirits program, interest is charged on the advanced 75% payment at a rate of 2.4% for the first 30 days plus 1.44% for each additional ten-day period. For the co-packing program, interest is charged against the greater of $500,000 or the total funds advanced at a rate of 5% plus the prime rate published in the Wall Street Journal. Under the terms of both agreements, the factoring provider has full recourse against the Company should the customer fail to pay the invoice. In accordance with ASC 860, we have concluded that these agreements have met all three conditions identified in ASC 860-10-40-5 (a) – (c) and have accounted for this activity as a sale. Given the quality of the factored accounts, the Company has not recognized a recourse obligation. In certain limited instances, the Company may provide collection services on the factored accounts but does not receive any fees for acting as the collection agent, and as such, the Company has not recognized a service obligation asset or liability. The Company factored $2.2 million of invoices and incurred $0.1 million in fees associated with the factoring programs during the year ended December 31, 2019. At December 31, 2019, the Company had $0.6 million factored invoices outstanding. Discontinued Operations The Company reports discontinued operations by applying the following criteria in accordance with Accounting Standards Codification (“ASC”) Topic 205-20 – Presentation of Financial Statements – Discontinued Operations Recently Adopted Accounting Pronouncements In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash In May 2014, the FASB issued ASU 2014-09, which superseded virtually all existing revenue guidance. Under this update, an entity is required to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. As such, an entity will need to use more judgment and make more estimates than under the current guidance. ASU 2014-09 is to be applied retrospectively either to each prior reporting period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. The Company elected to apply ASU 2014-09 with a cumulative effect adjustment to retained earnings. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . - A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and - A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting will be largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and ASU No. 2014-09, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842). In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based Payment Accounting Recent Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment |
Business Acquisitions
Business Acquisitions | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
Business Acquisitions | 4. Business Acquisitions During the fiscal year 2019, the Company completed the following acquisitions: Craft Canning + Bottling On January 11, 2019, the Company completed the acquisition of Craft Canning + Bottling, LLC (“Craft Canning”), a Portland, Oregon-based provider of bottling and canning services. The Company’s consolidated financial statements for the year ended December 31, 2019 include Craft Canning’s results of operations from the acquisition date of January 11, 2019 through December 31, 2019. The Company’s consolidated financial statements reflect the final purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. The following allocation of the purchase price is as follows: Consideration given: 338,212 shares of common stock valued at $6.10 per share $ 2,080,004 Cash 2,003,200 Notes payable 761,678 Total value of acquisition $ 4,844,882 Assets and liabilities acquired: Cash $ 553,283 Trade receivables, net 625,717 Inventories, net 154,824 Prepaid expenses and current assets 250 Property and equipment, net 1,839,486 Right-of-use assets 232,884 Intangible assets - customer list 2,895,318 Other assets 26,600 Accounts payable (231,613 ) Accrued liabilities (74,389 ) Deferred revenue (52,000 ) Lease liabilities (256,375 ) Notes payable (869,103 ) Total $ 4,844,882 Intangible assets are recorded at estimated fair value, as determined by management based on available information. The fair value assigned to the customer list intangible asset was determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earning methods. The major assumptions used in arriving at the estimated identifiable intangible asset value included management’s estimates of future cash flows, discounted at an appropriate rate of return which is based on the weighted average cost of capital for both the Company and other market participants, projected customer attrition rates, as well as applicable royalty rates for comparable assets. The useful lives for intangible assets were determined based upon the remaining useful economic lives of the tangible assets that are expected to contribute directly or indirectly to future cash flows. The customer relationships estimated useful life is seven years. The Company incurred Craft Canning-related acquisition costs of $0.1 million during the year ended December 31, 2019 that have been recorded in general and administrative expenses on the consolidated statements of operations. The results of the Craft Canning acquisition are included in our consolidated financial statements from the date of acquisition through December 31, 2019. The sales and net income (including transaction costs) of Craft Canning operations included in our consolidated statements of operations were $7.1 million and $0.4 million, for the period from January 11, 2019 through December 31, 2019. Azuñia Tequila On September 12, 2019, the Company completed the acquisition of the Azuñia Tequila brand, the direct sales team, existing product inventory, supply chain relationships and contractual agreements from Intersect Beverage, LLC, an importer and distributor of tequila and related products. The Company’s consolidated financial statements as of and for the year ended December 31, 2019 include the Azuñia Tequila assets and results of operations. For the year ended December 31, 2019, the Azuñia Tequila results of operations are included from the acquisition date of September 12, 2019 through December 31, 2019. The acquisition was structured as an all-stock transaction, provided that the Company may, at its election, pay a portion of the consideration in cash or by executing a three-year promissory note if the issuance of stock would require the Company to hold a vote of its stockholders under the applicable Nasdaq rules. Subject to compliance with applicable Nasdaq rules, the initial consideration, will be payable approximately 18 months following the closing and will consist of 850,000 shares of the Company’s common stock at a stipulated value of $6.00 per share, 350,000 shares of the Company’s common stock based on the Company’s stock price twelve months after the close of the transaction, and additional shares based on the Azuñia business achieving certain revenue targets and the Company’s stock price 18 months after the close of the transaction. The Company has also agreed to issue additional stock consideration (subject to compliance with applicable Nasdaq rules) of up to $1.5 million upon the Azuñia business achieving revenue of at least $9.45 million in the period commencing on the 13th month following the closing and ending on the 24th month following the closing. The Company’s consolidated financial statements reflect the final purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was allocated to the assets acquired based upon their estimated fair values on the acquisition date. The Company estimated the purchase price based on weighted probabilities of future results and recorded deferred consideration payable of $12.8 million on the acquisition date that will be remeasured to fair value at each reporting date until the contingencies are resolved, with the changes in fair value recognized in earnings. The Company remeasured the deferred consideration payable for the period ended December 31, 2019 and increased the liability by $2.7 million to a balance of $15.5 million. The following allocation of the purchase price is as follows: Consideration given: Deferred consideration payable $ 12,781,092 Total value of acquisition $ 12,781,092 Assets acquired: Inventories, net $ 836,026 Intangible assets - brand 11,945,066 Total $ 12,781,092 Intangible assets are recorded at estimated fair value, as determined by management based on available information. The fair value assigned to the brand intangible asset was determined through the use of the market approach. The major assumptions used in arriving at the estimated identifiable intangible asset value included category averages for comparable acquisitions, including multiples of annual sales and dollars per case sold. The Company used an estimated brand useful life of seven years for these accounting purposes. The Company incurred Azuñia Tequila-related acquisition costs of $0.2 million during the year ended December 31, 2019 that have been recorded in general and administrative expenses on the consolidated statements of operations. The results of the Azuñia Tequila asset acquisition are included in our consolidated financial statements from the date of acquisition through December 31, 2019. The sales of Azuñia Tequila products included in our consolidated statements of operations were $1.1 million for the period from September 12, 2019 through December 31, 2019. Pro Forma Financial Information The following unaudited pro forma consolidated results of operations for the years ended December 31, 2019 and 2018 assume that both acquisitions of Craft Canning + Bottling and Azuñia Tequila were completed on January 1, 2018: 2019 2018 Pro forma sales $ 19,868,484 $ 16,088,104 Pro forma net loss (20,350,193 ) (10,868,474 ) Pro forma basic and diluted net loss per share $ (2.19 ) $ (1.69 ) Pro forma data does not purport to be indicative of the results that would have been obtained had these events actually occurred at the beginning of the periods presented and is not intended to be a projection of future results. The share and per share data have been retroactively reflected for the acquisitions. |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Inventories | 5. Inventories Inventories consist of the following at December 31: 2019 2018 Raw materials $ 9,336,304 $ 10,347,616 Finished goods 3,056,931 669,843 Total inventories $ 12,393,235 $ 11,017,459 The $2.3 million increase of finished goods inventory includes $1.0 million of inventory acquired from the Azuñia brand acquisition and $1.1 million inventory build to support Redneck Riviera. Raw materials inventories decreased by $1.0 million notwithstanding the fact that it includes an additional $0.5 million increase related to the Craft acquisition and $0.2 million related to the Azuñia brand acquisition. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 6. Property and Equipment Property and equipment consists of the following at December 31: 2019 2018 Furniture and fixtures $ 4,558,362 $ 1,148,540 Leasehold improvements 1,750,833 477,184 Vehicles 689,930 49,483 Construction in progress 98,252 425,851 Total cost 7,097,377 2,101,058 Less accumulated depreciation (2,323,849 ) (342,928 ) Total property and equipment, net $ 4,773,528 $ 1,758,130 Purchases of property and equipment totaled $2.2 million and $1.3 million for the years ended December 31, 2019 and 2018, respectively. Depreciation expense totaled $1.2 million and $0.3 million for the years ended December 31, 2019 and 2018, respectively. Losses totaled $0.1 million on vehicles that were disposed of in 2019. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | 7. Intangible Assets and Goodwill Intangible assets and goodwill at December 31, 2019 and December 31, 2018 consisted of the following: December 31, 2019 December 31, 2018 Permits and licenses $ 25,000 $ 25,000 Azuñia brand 11,945,066 - Customer lists 3,246,748 351,430 Goodwill 28,182 28,182 Total intangible assets and goodwill 15,244,996 404,612 Less accumulated amortization (542,024 ) (90,754 ) Intangible assets and goodwill - net $ 14,702,972 313,858 Amortization expense totaled $0.4 million and $0.1 million for the years ended December 31, 2019 and 2018, respectively. The permits and license, Azuñia brand and goodwill have all been determined to have indefinite life and will not be amortized. The customer list is being amortized over a seven-year life. |
Other Assets
Other Assets | 12 Months Ended |
Dec. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets | 8. Other Assets Other assets consist of the following at December 31: 2019 2018 Product branding $ 809,000 $ 525,000 Investment in online company - 300,000 Notes Receivable 450,000 - Deposits 53,542 29,297 Total other assets 1,312,542 854,297 Less accumulated amortization (136,106 ) (58,037 ) Other assets - net $ 1,176,436 $ 796,260 As of December 31, 2019, the Company had $0.8 million of capitalized costs related to services provided for the rebranding of its existing product line and branding of new product lines. This amount is being amortized over a seven-year life. The Company has notes receivable totaling $450,000. These notes bear interest at 5.00% and mature on August 25, 2020. The remaining deposits of $0.1 million represent office and retail space lease deposits. Amortization expense totaled $0.1 million and $0.1 million for the years ended December 31, 2019 and 2018, respectively. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Leases | 9. Leases The Company has various lease agreements in place for facilities and equipment. Terms of these leases include, in some instances, scheduled rent increases, renewals, purchase options and maintenance costs, and vary by lease. These lease obligations expire at various dates through 2023. As the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate based on information available at commencement to determine the present value of the lease payments. Based on the present value of the lease payments for the remaining lease term of the Company’s existing leases, the Company recognized right-of-use assets of $0.9 million, lease liabilities of $1.1 million, and a net adjustment to retained earnings of $0.2 million upon adoption on January 1, 2019. Right-of-use assets and lease liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. As of December 31, 2019, the right-of-use assets and lease liabilities were $0.7 million and $0.9 million, respectively. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term. Aggregate lease expense for the year ended December 31, 2019 was $0.9 million, consisting of $0.6 million in lease expense for lease liabilities recorded on the Company’s balance sheet and $0.3 million in short-term lease expense. Maturities of lease liabilities as of December 31, 2019 are as follows: Operating Leases Weighted-Average 2020 $ 549,116 2021 299,352 2022 37,477 Thereafter 38,564 Total lease payments 924,509 Less imputed interest (based on 6.3% weighted- average discount rate (53,675 ) Present value of lease liability $ 870,834 1.9 |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Notes Payable | 10. Notes Payable Notes payable as of December 31, 2019 and December 31, 2018 consists of the following: December 31, 2019 December 31, 2018 Notes payable bearing interest at 5.00%. The notes’ principal, plus any accrued and unpaid interest is due May 1, 2021. Interest is paid monthly. 2,300,000 2,300,000 Notes payable bearing interest at 5.00%. The notes’ principal, plus any accrued and unpaid interest is due December 31, 2019. 254,075 - Notes payable bearing interest at 5.00%. Principal and accrued interest is payable in six equal installments on each six-month anniversary of the issuance date of January 11, 2019. The notes are secured by the security interests and subordinated to the Company’s senior indebtedness. 649,774 - Promissory note payable bearing interest of 5.2%. The note has a 46-month term with maturity in May 2023. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 176,571 - Promissory note payable bearing interest of 4.45%. The note has a 34-month term with maturity in May 2022. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning and includes debt covenants requiring a Current Ratio of 1.75 to 1.00 and a Debt Service Coverage Ratio of 1.25 to 1.00. Craft Canning must also provide annual financial statements and tax returns. Craft Canning was in compliance with all debt covenants as of December 31, 2019. 265,509 - Promissory note payable under a revolving line of credit bearing variable interest starting at 5.5%. The note has a 12-month term with principal and accrued interest due in lump sum in July 2020. The borrowing limit is $250,000. The note is secured by the assets of Craft Canning. 50,000 - Promissory note payable bearing interest of 4.14%. The note has a 60-month term with maturity in July 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 183,202 - Promissory note payable bearing interest of 3.91%. The note has a 60-month term with maturity in August 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 281,802 - Promissory note payable bearing interest of 3.96%. The note has a 60-month term with maturity in November 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 295,463 - Secured line of credit promissory note for a revolving line of credit in the aggregate principal amount of $2,000,000. The Note matures on April 15, 2020 and may be prepaid in whole or in part at any time without penalty or premium. Repayment of the Note is subject to acceleration in the event of an event of default. The Company may use the proceeds to purchase tequila for its Azuñia product line and for general corporate purposes, as approved by the Holder. The obligations of the Company under the Note are secured by certain inventory of the Company and its subsidiaries and the Company’s membership interests in Craft Canning. In addition, the Note is guaranteed by the Company’s subsidiaries Craft Canning and Big Bottom Distilling. The Note and the accompanying guaranty restrict Craft Canning from incurring any new indebtedness, other than trade debt incurred in the ordinary course of business, until the Note is repaid in full. The obligations under the Note are subordinate and junior in right and priority of payment to the Company’s obligations under the Company’s Credit and Security Agreement with the KFK Children’s Trust dated May 10, 2018. 946,640 - Promissory notes payable bearing interest between 2.99% - 3.14%. The notes have 60-month terms with maturity dates between February 2019 – June 2020. Principal and accrued interest are paid monthly. The notes are secured by the specific vehicle underlying the loan. 10,390 - Total notes payable 5,413,426 2,300,000 Less current portion (1,819,172 ) - Long-term portion of notes payable $ 3,594,254 $ 2,300,000 The company paid $0.2 million and $0.2 million in interest on notes during 2019 and 2018 respectively. Maturities on notes payable as of December 31, 2019, are as follows: Year ending December 31: 2020 $ 1,819,172 2021 2,871,525 2022 399,138 Thereafter 323,591 $ 5,413,426 |
Secured Credit Facility
Secured Credit Facility | 12 Months Ended |
Dec. 31, 2019 | |
Line of Credit Facility [Abstract] | |
Secured Credit Facility | 11. Secured Credit Facility On May 10, 2018, the Company entered into a credit and security agreement (the “Credit and Security Agreement”), by and between the Company and The KFK Children’s Trust, Jeffrey Anderson – Trustee (the “Lender”). Pursuant to the Credit and Security Agreement, the Lender will make loans to the Company in an aggregate principal amount not to exceed $3,000,000 (the “Loans”). The Loans are secured by all of the Company’s bulk whiskey, bourbon and rye inventory held in third-party storage facilities (“Specified Inventory”). The Company may borrow 80% of the value of the Specified Inventory it is able to purchase under the Credit and Security Agreement. The proceeds of the Loans are to be used by the Company to purchase the Specified Inventory for use in distilling and producing its spirits products, and for no other purpose. The Loans have an annual interest rate of 7.00%. The Company will pay accrued and unpaid interest on the Loans, for the period commencing on the date each such Loan is made and continuing until each such Loan is paid in full. During 2019, The Company paid $0.2 million in interest on the Loans. The Company must pay the outstanding principal amount of the Loans in a one-time payment on the termination date of the Credit and Security Agreement (June 10, 2021), or earlier pursuant to other provisions thereof. The Company may prepay the Loans or any portion thereof at any time, and from time to time, without premium or penalty. As of December 31, 2019, the Company has borrowed the full $3 million available under the agreement. The Loans were paid in full on January 30, 2020. The current market value of the Company’s bulk whiskey, bourbon and rye inventories must be at least 120% of the outstanding Loan balance. In addition, the Credit and Security Agreement contains other customary covenants including, among other things, certain restrictions on incurring indebtedness. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 12. Income Taxes The provision for income taxes results in effective tax rates which are different than the federal income tax statutory rate. The provision (benefit) for income taxes for the years ended December 31, 2019 and 2018 were as follows, assuming a 21% federal effective tax rate. The Company also has a state tax rate for Oregon, of 6.6% for both December 31, 2019 and 2018. 2019 2018 Expected federal income tax benefit $ (3,389,519 ) $ (1,774,610 ) State income taxes after credits (1,140,554 ) (597,146 ) Change in valuation allowance 4,530,073 2,371,756 Total provision for income taxes $ - $ - The components of the net deferred tax assets and liabilities at December 31 consisted of the following: 2019 2018 Deferred tax assets: Net operating loss carryforwards $ 12,751,273 $ 7,780,105 Stock-based compensation 807,587 623,386 Total deferred tax assets 12,558,860 8,403,491 Deferred tax liabilities: Depreciation and amortization (834,160 ) (208,864 ) Total deferred tax liabilities (834,160 ) (208,864 ) Valuation allowance (12,724,700 ) (8,194,627 ) Net deferred tax assets $ - - At December 31, 2019, the Company has a cumulative net operating loss carryforward (NOL) of approximately $37.8 million, to offset against future income for federal and state tax purposes. These federal and state NOLs can be carried forward for 20 and 15 years, respectively. The federal NOLs begin to expire in 2034, and the state NOLs begin to expire in 2029. The utilization of the net operating loss carryforwards may be subject to substantial annual limitation due to ownership change provisions of the Internal Revenue Code of 1986 (as amended, the Internal Revenue Code) and similar state provisions. In general, if the Company experiences a greater than 50 percentage aggregate change in ownership of certain significant stockholders over a three-year period (a “Section 382 ownership change”), utilization of its pre-change NOL carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code (and similar state laws). The annual limitation generally is determined by multiplying the value of the Company’s stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization and may be substantial. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. Due to the uncertainty of the realizability of the deferred tax assets, management has determined a full valuation allowance is appropriate. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 13. Commitments and Contingencies Legal Matters We are party to the material legal proceeding described below. In addition, we could be subject to legal proceedings and claims from time to time in the ordinary course of our business, or legal proceedings we considered immaterial may in the future become material. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and divert management resources. On October 22, 2019, a complaint was filed against the Company in the Circuit Court of Oregon, County of Multnomah by two former employees, Laurie Branch and Justina Thoreson. The complaint also named as defendants certain current and former officers and employees of the Company. The complaint is captioned Branch et al. v. Eastside Distilling, Inc. et al., case number 19-CV-45716 |
Net Loss Per Common Share
Net Loss Per Common Share | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Net Loss Per Common Share | 14. Net Loss per Common Share Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, without considering any dilutive items. Diluted net loss per common share is computed by dividing net loss by the sum of the weighted average number of common shares outstanding and the potential number of any dilutive common shares outstanding during the period. Potentially dilutive securities consist of the incremental common stock issuable upon exercise of stock options and convertible notes. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. There were no dilutive common shares at December 31, 2019 and 2018. The numerators and denominators used in computing basic and diluted net loss per common share in 2019 and 2018 are as follows: December 31, 2019 2018 Net loss available to common shareholders (numerator) $ (16,908,104 ) $ (9,047,669 ) Weighted average shares (denominator) 9,275,696 6,074,489 Basic and diluted net loss per common share $ (1.82 ) $ (1.49 ) |
Stockholder's Equity
Stockholder's Equity | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Stockholder's Equity | 15. Stockholder’s Equity Issuance of Common Stock During 2019, the Company issued 291,099 shares of common stock to directors, employees and consultants for stock-based compensation of $1,653,759. The shares were valued using the closing share price of the Company’s common stock on the date of grant, within the range of $3.68 to $6.13 per share. In September 2019, the Company issued 280,555 units (the “Units”) in connection with a private offering at a per Unit price of $4.50 per share, resulting in net proceeds of $1,262,497. Each Unit consists of one share of Eastside’s common stock and a three-year warrant to acquire 0.5 shares of common stock at an exercise price of $5.50 per share. In April 2019, the Company issued 1,077 shares of common stock in connection with existing option exercises at an exercise price of $3.99. On January 11, 2019, the Company issued 338,212 shares of common stock in connection with the acquisition of Craft Canning for a total consideration of $2,080,004. On December 31, 2018, the Company issued 3,122 shares in connection with the purchase of the remaining 10% interest in BBD. On November 20, 2018, the Company issued 1,235,000 shares of common stock at $6.50 per share in connection with an underwritten public offering for net proceeds of approximately $7.2 million. On December 19, 2018 an additional 185,250 shares were issued as part of the overallotment for additional proceeds of approximately $1.1 million. During 2018, the Company issued 1,345,978 shares of common stock at $5.40 per share in connection with the exercise of warrants for cash proceeds of $7,268,281, and 500,000 shares of common stock at $5.40 per share in connection with the exercise of warrants in exchange for a reduction in outstanding note principal of $2,700,000. On September 25, 2018, the Company issued 120,000 shares of common stock at $5.40 per share in connection with the exercise of underwriter warrants. The warrants were part of units, and each unit consisted of one share of common stock and one common stock warrant exercisable at $5.40 per share. In July 2018, the Company issued 167,273 shares of common stock at $6.00 per share in exchange for outstanding note principal and interest. The conversion was within the terms of the original note agreement and no gain or loss was recorded. During 2018, the Company issued 115,334 shares of common stock at an average of $5.35 per share in connection with the exercise of warrants for proceeds of $617,004. In addition, the Company issued 59,308 shares of common stock at an average of approximately $4.05 per share in exchange for services rendered. During 2018, the Company issued 79,734 shares of common stock to directors and employees for stock-based compensation of $712,469. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.99 - $8.50 per share. During 2018, the Company issued 35,941 shares of common stock in connection with existing option exercises, at an average exercise price of $4.56. During 2018, the Company issued 27,400 shares of common stock to consultants in exchange for services. The shares were valued using the closing share price of our common stock on the date of grant, with a range of $3.99 - $7.72 per share, for a total value of $162,378. Stock-Based Compensation On September 8, 2016, the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”). Pursuant to the terms of the plan, on January 1, 2019, the number of shares available for grant under the 2016 Plan reset to 1,991,350 shares, equal to 8% of the number of outstanding shares of the Company’s capital stock, calculated on an as-converted basis, on December 31 of the preceding calendar year, and then added to the prior year plan amount. As of December 31, 2019, there were 825,659 options and 527,337 restricted stock units (“RSUs”) issued under the 2016 Plan, with vesting schedules varying between immediate and five (5) years from the grant date. On January 29, 2015, our Board of Directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”). The total number of shares available for the grant of either stock options or compensation stock under the plan is 50,000 shares, subject to adjustment. At December 31, 2019, there were 19,584 options issued under the Plan outstanding, with vesting schedules varying between immediate and one (1) year from the grant date, which options vest at the rate of at least 25% in the first year, starting 6-months after the grant date, and 75% in year two. A summary of all stock option activity at and for the years ended December 31, 2019 and 2018 is presented below: # of Options Weighted- Outstanding at December 31, 2017 369,006 $ 6.47 Options granted 654,000 5.47 Options exercised (48,715 ) 4.56 Options canceled (78,433 ) 4.86 Outstanding at December 31, 2018 895,858 $ 5.62 Options granted 79,000 5.01 Options exercised (3,167 ) 4.04 Options canceled (187,590 ) 4.61 Outstanding at December 31, 2019 784,101 $ 5.65 Exercisable at December 31, 2019 556,420 $ 5.59 The aggregate intrinsic value of options outstanding at December 31, 2019 was $Nil, compared to $558,278 at December 31, 2018. At December 31, 2019, there were 227,681 unvested options with an aggregate grant date fair value of $582,209. The unvested options will vest in accordance with the vesting schedule in each respective option agreement, which varies between immediate and five (5) years from the grant date. The aggregate intrinsic value of unvested options at December 31, 2019 was $Nil. During the year ended December 31, 2019, 193,072 options vested. The Company uses the Black-Scholes valuation model to measure the grant-date fair value of stock options. The grant-date fair value of stock options issued to employees is recognized on a straight-line basis over the requisite service period. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments as the underlying stock-based awards vest. To determine the fair value of stock options using the Black-Scholes valuation model, the calculation takes into consideration the effect of the following: ● Exercise price of the option ● Fair value of the Company’s common stock on the date of grant ● Expected term of the option ● Expected volatility over the expected term of the option ● Risk-free interest rate for the expected term of the option The calculation includes several assumptions that require management’s judgment. The expected term of the options is calculated using the simplified method described in GAAP. The simplified method defines the expected term as the average of the contractual term and the vesting period. Estimated volatility is derived from volatility calculated using historical closing prices of common shares of similar entities whose share prices are publicly available for the expected term of the options. The risk-free interest rate is based on the U.S. Treasury constant maturities in effect at the time of grant for the expected term of the options. The following weighted-average assumptions were used in the Black-Scholes valuation model for options granted during the year ended December 31, 2019: Risk-free interest rate 2.22 % Expected term (in years) 6.50 Dividend yield - Expected volatility 31 % The weighted-average grant-date fair value per share of stock options granted during the year ended December 31, 2019 was $1.83. The aggregate grant date fair value of the 79,000 options granted during the year ended December 31, 2019 was $142,189. For the twelve months ended December 31, 2019, net compensation expense related to stock options was $759,385. At December 31, 2019, the total compensation expense related to stock options not yet recognized is approximately $582,209, which is expected to be recognized over a weighted-average period of approximately 1.80 years. Warrants During the twelve months ended December 31, 2019, the Company issued an aggregate of 316,540 common stock warrants, consisting of 146,262 in connection with the acquisition of Craft Canning on January 11, 2019, 140,278 in connection with the private equity offering in September 2019, and 30,000 to a related party consultant. The Company has determined the warrants should be classified as equity on the consolidated balance sheet as of December 31, 2019. The estimated fair value of the warrants at issuance was $297,417, based on a combination of closing market trading price on the date of issuance for the public offering warrants, and the Black-Scholes option-pricing model using the weighted-average assumptions below: Volatility 31 % Risk-free interest rate 2.16 % Expected term (in years) 2.78 Expected dividend yield - Fair value of common stock $ 5.61 No warrants were exercised during the twelve months ended December 31, 2019. A summary of activity in warrants is as follows: Warrants Weighted Weighted Aggregate Outstanding at December 31, 2018 1,083,435 1.04 years $ 6.83 $ - Twelve months ended December 31, 2019: Granted 316,540 2.14 years $ 6.78 $ - Exercised - - $ - - Forfeited and cancelled (663,416 ) - $ 6.61 - Outstanding at December 31, 2019 736,559 1.18 years $ 6.95 $ - |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 16. Related Party Transactions The following is a description of transactions since January 1, 2018 as to which the amount involved exceeds the lesser of $120,000 or one percent (1%) of the average of our total assets at year-end for the last two completed fiscal years which was $176,934 and in which any related person has or will have a direct or indirect material interest, other than equity, compensation, termination and other arrangements. On August 9, 2018, Grover Wickersham, the former Executive Chairperson of our Board through August 9, 2019 and his affiliates exercised 55,555 warrants acquired in connection with the Company’s 2017 unit offering at an exercise price of $5.40 per share, for total proceeds of approximately $300,000. On June 11, 2019, our Board appointed Owen Lingley to the Board to fill an existing vacancy on the Board effective immediately. Owen Lingley is the founder of Craft Canning, LLC, which was acquired by the Company on January 11, 2019 and subsequently changed its name to Craft Canning + Bottling LLC. In connection with the acquisition of Craft Canning, Mr. Lingley received $1,843,200 in cash, 338,212 shares of common stock of the Company and a promissory note in the aggregate principal amount of $731,211, which bears interest at a rate of 5% per annum and matures on January 11, 2022. The shares acquired by Mr. Lingley in connection with the acquisition of Craft Canning are subject to a one-year lock-up restriction and have “piggyback” registration rights effective after the one-year lock-up. In addition, the Company also issued to Mr. Lingley a warrant to purchase 146,262 shares of common stock of the Company at $7.80 per share and an exercise period of three years. The shares of common stock issuable upon exercise of the warrant will be subject to the same “piggyback” registration rights as the shares received in connection with the acquisition of Craft Canning, described above. Following the acquisition of Craft Canning, Mr. Lingley became non-executive Chairman of Craft Canning and is party to a consulting agreement with the Company. Under his consulting agreement with the Company, Mr. Lingley receives annual cash compensation of $75,000 per year. On March 29, 2018, June 22, 2018 and July 10, 2018, Paul F. Shoen, who was elected to the Board in August 2019, purchased from us promissory notes having an aggregate principal amount of $363,930, $500,000 and $197,020, respectively. The promissory notes bear interest at a rate of 5% per annum, payable monthly on the last day of the month. In August 2018, we repaid a total of $572,912 of the principal balance outstanding under the notes. In September 2018, Mr. Shoen sold an additional $300,000 of the outstanding principal amount. The entire amount of the remaining principal and any accrued and unpaid interest is due and payable on May 1, 2021. $188,037 currently remains outstanding on the notes. On October 24, 2019, our Board appointed Stephanie Kilkenny to the Board to fill an existing vacancy on the Board effective immediately. Stephanie Kilkenny was the former managing director of Azuñia Tequila, and together with her spouse, owns and controls TQLA, LLC (“TQLA”), the majority owner of Intersect Beverage, LLC. In connection with the acquisition of Azuñia Tequila from Intersect Beverage, LLC, TQLA is entitled to receive up to 93.88% of the aggregate consideration payable under the asset purchase agreement. Subject to compliance with applicable Nasdaq rules, aggregate the initial consideration will be payable approximately 18 months following the closing and will consist of 850,000 shares of Company common stock at a stipulated value of $6.00 per share, 350,000 shares of Company common stock based on the Company’s stock price twelve months after the close of the transaction, and additional shares based on the Azuñia business achieving certain revenue targets and the Company’s stock price 18 months after the close of the transaction. The Company has also agreed to issue additional stock consideration (subject to compliance with applicable Nasdaq rules) of up to $1.5 million upon the Azuñia business achieving revenue of at least $9.45 million in the period commencing on the 13th month following the closing and ending on the 24th month following the closing. In addition, on September 16, 2019, the Company entered into a Subscription Agreement with Stephanie Kilkenny’s spouse, Patrick J. Kilkenny as Trustee For Patrick J. Kilkenny Revocable Trust (the “Kilkenny Trust”), in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder, pursuant to which the Company agreed to issue and sell to the Kilkenny Trust an aggregate of 55,555 units at a per unit price of $4.50. Each unit consists of one share of the Company’s common stock and a three-year warrant to acquire 0.5 shares of common stock at an exercise price of $5.50 per share. Effective November 29, 2019, the Company issued to TQLA, LLC, a California limited liability company (“Holder”), a Secured Line of Credit Promissory Note (the “Note”) for a revolving line of credit in the aggregate principal amount of $2,000,000. The Note matures on April 15, 2020 and may be prepaid in whole or in part at any time without penalty or premium. Repayment of the Note is subject to acceleration in the event of an event of default. The Company may use the proceeds to purchase tequila for its Azuñia product line and for general corporate purposes, as approved by the Holder. As of December 31, 2019, the Company has borrowed $946,640 on the Note. Stephanie Kilkenny, a director of the Company, owns and controls TQLA, LLC with her spouse. The Company’s Audit Committee approved the transaction. The Note was paid in full in early 2020. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | 17. Subsequent Events On January 15, 2020, the Company entered into a loan agreement (the “ Loan Agreement Borrowers Borrower Lender Loan The Loan matures on January 14, 2021 (the “ Maturity Date The Loan bears interest at a rate equal to the prime rate plus a spread of 2.49%, adjusted quarterly. Accrued interest is payable monthly, with the final installment of interest being due and payable on the Maturity Date. The Borrowers are also obligated to pay a servicing fee, unused commitment fee and origination fee in connection with the Loan. The Loan Agreement contains affirmative and negative covenants that include covenants restricting each Borrower’s ability to, among other things, incur indebtedness, grant liens, dispose of assets, merge or consolidate, make investments, or enter into restrictive agreements, subject to certain exceptions. The obligations of the Borrowers under the Loan Agreement are secured by substantially all of their respective assets, except for accounts receivable and certain other specified excluded property. The Loan Agreement includes customary events of default that include among other things, non-payment defaults, covenant defaults, inaccuracy of representations and warranties, cross default to material indebtedness, bankruptcy and insolvency defaults and change in control defaults. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default under the Loan Agreement at a per annum rate equal to 2.00% above the applicable interest rate. In connection with the Loan Agreement, Company issued to Lender a warrant to purchase up to 100,000 shares of the Company’s common stock at an initial exercise price of $3.9425 per share (the “ Warrant On January 16, 2020, in connection with the Company’s consummation of the Loan Agreement, Eastside repaid in full and terminated the Secured Line of Credit Promissory Note that Eastside had issued to TQLA, LLC (“ Holder TQLA Note On January 12, 2020, the Company issued 87,700 shares of common stock under the 2016 Plan to directors, employees and consultants for stock-based compensation of $280,640. The shares were valued used the closing share price of the Company’s common stock on the date of the grant, $3.20 per share |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation The accompanying consolidated financial statements for Eastside Distilling, Inc. and subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements include the accounts of Eastside Distilling, Inc.’s wholly-owned subsidiaries, including, MotherLode, BBD, Outlandish, LLC, Redneck Riviera Whiskey Co., LLC, Craft Canning (beginning as of January 11, 2019) and the Azuñia tequila assets (beginning September 12, 2019). All intercompany balances and transactions have been eliminated in consolidation. |
Segment Reporting | Segment Reporting The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity, packaging, producing, marketing and distributing alcoholic beverages and operates as one segment. The Company’s chief operating decision makers, its chief executive officer, president and chief financial officer, review the Company’s operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance. |
Use of Estimates | Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Revenue Recognition | Revenue Recognition Net sales includes product sales, less excise taxes and customer programs and incentives. The Company recognizes revenue by applying the following steps in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, which include sales to the Oregon Liquor Control Commission (OLCC), the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. The Company excludes sales tax collected and remitted to various states from sales and cost of sales. Sales from items sold through the Company’s retail locations are recognized at the time of sale. Revenue received from online merchants who sell discounted gift certificates for the Company’s merchandise and tastings at its tasting rooms, is deferred until the customer has redeemed the discounted gift certificate or the gift certificate has expired, whichever occurs earlier. |
Customer Programs and Incentives | Customer Programs and Incentives Customer programs and incentives, which include customer promotional discount programs, customer incentives and other payments, are a common practice in the alcoholic beverage industry. The Company makes these payments to customers and incurs these costs to promote sales of products and to maintain competitive pricing. Amounts paid in connection with customer programs and incentives are recorded as reductions to net sales or as advertising, promotional and selling expenses in accordance with ASC 606 - Revenue from Contracts with Customers, |
Advertising, Promotional and Selling Expenses | Advertising, Promotional and Selling Expenses The following expenses are included in advertising, promotional and selling expenses in the accompanying consolidated statements of operations: media advertising costs, special event costs, tasting room costs, sales and marketing expenses, promotional costs of value added packaging, salary and benefit expenses, travel and entertainment expenses for the sales, brand and sales support workforce and promotional activity expenses. Advertising, promotional and selling costs are expensed as incurred. Advertising, promotional and selling expense totaled $7.5 million and $4.3 million in years 2019 and 2018, respectively, of which 2019 was $4.0 million compared to $2.3 in 2018 are included in the 50% Redneck Riviera Whiskey Marketing reimbursement and are expected to be collected upon the sale of the Redneck Riviera Brand by the licensor if sold while the licensing agreement is in effect. The reimbursement is payable upon the sale of the brand within the term of the agreement, which is 10 years, with a renewable option for any additional 10 years, by the licensor. |
Cost of Sales | Cost of Sales Cost of sales consists of the costs of ingredients utilized in the production of spirits, manufacturing labor and overhead, warehousing rent, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by packaging and production costs. |
Shipping and Fulfillment Costs | Shipping and Fulfillment Costs Freight costs incurred related to shipment of merchandise from the Company’s distribution facilities to customers are recorded in cost of sales. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash equivalents are considered to be highly liquid investments with maturities of three months or less at the time of the purchase. The Company had no cash equivalents at December 31, 2019 and 2018. |
Concentrations | Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. At December 31, 2019, two distributors represented 40% of trade receivables. At December 31, 2018, two distributors represented 37% of trade receivables. Sales to one distributor accounted for 16% of consolidated sales for the year ended December 31, 2019. Sales to two distributors accounted for 42% of consolidated sales for the year ended December 31, 2018. |
Fair Value Measurements | Fair Value Measurements GAAP defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAAP permits an entity to choose to measure many financial instruments and certain other items at fair value and contains financial statement presentation and disclosure requirements for assets and liabilities for which the fair value option is elected. At December 31, 2019 and December 31, 2018, management has not elected to report any of the Company’s assets or liabilities at fair value under the “fair value option” provided by GAAP. The hierarchy of fair value valuation techniques under GAAP provides for three levels: Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, generally would require significant management judgment. The three levels for categorizing assets and liabilities under GAAP’s fair value measurement requirements are as follows: Level 1: Fair value of the asset or liability is determined using cash or unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Fair value of the asset or liability is determined using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Fair value of the asset or liability is determined using unobservable inputs that are significant to the fair value measurement and reflect management’s own assumptions regarding the applicable asset or liability. None of the Company’s assets or liabilities were measured at fair value at December 31, 2019 or 2018. However, GAAP requires the disclosure of fair value information about financial instruments that are not measured at fair value. Financial instruments consist principally of trade receivables, accounts payable, accrued liabilities, note payable, and convertible note payable. The estimated fair value of trade receivables, accounts payable, and accrued liabilities approximates their carrying value due to the short period of time to their maturities. At December 31, 2019 and December 31, 2018, the Company’s notes are payable at fixed rates and their carrying value approximates fair value. Items Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities acquired in a business acquisition are valued at fair value at the date of acquisition. |
Inventories | Inventories Inventories primarily consist of bulk and bottled liquor and merchandise and are stated at the lower of cost or market. Cost is determined using an average costing methodology, which approximates cost under the first-in, first-out (FIFO) method. A portion of inventory is held by certain independent distributors on consignment until it is sold to a third party. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost basis of accounting for the related inventory. The Company recorded write-downs of inventory of $0.3 million and $Nil for the years ended December 31, 2019 and 2018, respectively. |
Property and Equipment | Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Amortization of leasehold improvements is computed using the straight-line method over the life of the lease or the useful lives of the assets, whichever is shorter. The cost and related accumulated depreciation and amortization of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current period income or expense. The costs of repairs and maintenance are expensed as incurred. |
Intangible Assets / Goodwill | Intangible Assets / Goodwill The Company accounts for long-lived assets, including property and equipment and intangible assets, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount, an impairment loss would be recognized to write down the asset to its estimated fair value. The Company performed a qualitative assessment of goodwill at December 31, 2019 and determined that goodwill was not impaired. |
Long-lived Assets | Long-lived Assets The Company accounts for long-lived assets, including property and equipment, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount of the asset, an impairment loss would be recognized to write down the asset to its estimated fair value. |
Income Taxes | Income Taxes The provision for income taxes is based on income and expenses as reported for financial statement purposes using the “asset and liability method” for accounting for deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. At December 31, 2019 and 2018, the Company established valuation allowances against its net deferred tax assets. Income tax positions that meet the “more-likely-than-not” recognition threshold are measured at the largest amount of income tax benefit that is more than 50 % likely to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with income tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized income tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized income tax benefits would be classified as additional income taxes in the accompanying consolidated statements of operations. There were no unrecognized income tax benefits, nor any interest and penalties associated with unrecognized income tax benefits, accrued or expensed at and for the years ended December 31, 2019 and 2018. The Company files federal income tax returns in the United States. and various state income tax returns. The Company is no longer subject to examinations by the related tax authorities for the Company’s U.S. federal and state income tax returns for years prior to 2012. |
Comprehensive Income | Comprehensive Income The Company does not have any reconciling other comprehensive income items for the for the years ended December 31, 2019 and 2018, respectively. |
Excise Taxes | Excise Taxes The Company is responsible for compliance with the TTB regulations, which includes making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual states also impose excise taxes on alcoholic beverages in varying amounts. The Company calculates its excise tax expense based upon units produced and on its understanding of the applicable excise tax laws. Excise taxes totaled $0.8 million and $0.7 million in years 2019 and 2018, respectively. |
Stock-based Compensation | Stock-Based Compensation The Company recognizes as compensation expense all stock-based awards issued to employees. The compensation cost is measured based on the grant-date fair value of the related stock-based awards and is recognized over the service period of stock-based awards, which is generally the same as the vesting period. The fair value of stock options is determined using the Black-Scholes valuation model, which estimates the fair value of each award on the date of grant based on a variety of assumptions including expected stock price volatility, expected terms of the awards, risk-free interest rate, and dividend rates, if applicable. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments at the end of each reporting period and as the underlying stock-based awards vest. Stock-based compensation was $0.7 million and $0.7 million in fiscal years 2019 and 2018, respectively. |
Accounts Receivable Factoring Program | Accounts Receivable Factoring Program The Company has entered into two accounts receivable factoring programs. One for its spirits customers (the “spirits program”) and another for its co-packing customers (the “co-packing program”). Under the programs, the Company has the option to sell certain customer account receivables in advance of payment for 75% (spirits program) or 85% (co-packing program) of the amount due. When the customer remits payment, the Company receives the remaining balance. For the spirits program, interest is charged on the advanced 75% payment at a rate of 2.4% for the first 30 days plus 1.44% for each additional ten-day period. For the co-packing program, interest is charged against the greater of $500,000 or the total funds advanced at a rate of 5% plus the prime rate published in the Wall Street Journal. Under the terms of both agreements, the factoring provider has full recourse against the Company should the customer fail to pay the invoice. In accordance with ASC 860, we have concluded that these agreements have met all three conditions identified in ASC 860-10-40-5 (a) – (c) and have accounted for this activity as a sale. Given the quality of the factored accounts, the Company has not recognized a recourse obligation. In certain limited instances, the Company may provide collection services on the factored accounts but does not receive any fees for acting as the collection agent, and as such, the Company has not recognized a service obligation asset or liability. The Company factored $2.2 million of invoices and incurred $0.1 million in fees associated with the factoring programs during the year ended December 31, 2019. At December 31, 2019, the Company had $0.6 million factored invoices outstanding. |
Discontinued Operations | Discontinued Operations The Company reports discontinued operations by applying the following criteria in accordance with Accounting Standards Codification (“ASC”) Topic 205-20 – Presentation of Financial Statements – Discontinued Operations |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash In May 2014, the FASB issued ASU 2014-09, which superseded virtually all existing revenue guidance. Under this update, an entity is required to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. As such, an entity will need to use more judgment and make more estimates than under the current guidance. ASU 2014-09 is to be applied retrospectively either to each prior reporting period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. The Company elected to apply ASU 2014-09 with a cumulative effect adjustment to retained earnings. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . - A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and - A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting will be largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and ASU No. 2014-09, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842). In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based Payment Accounting |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisition Assets and Liabilities | The following allocation of the purchase price is as follows: Consideration given: 338,212 shares of common stock valued at $6.10 per share $ 2,080,004 Cash 2,003,200 Notes payable 761,678 Total value of acquisition $ 4,844,882 Assets and liabilities acquired: Cash $ 553,283 Trade receivables, net 625,717 Inventories, net 154,824 Prepaid expenses and current assets 250 Property and equipment, net 1,839,486 Right-of-use assets 232,884 Intangible assets - customer list 2,895,318 Other assets 26,600 Accounts payable (231,613 ) Accrued liabilities (74,389 ) Deferred revenue (52,000 ) Lease liabilities (256,375 ) Notes payable (869,103 ) Total $ 4,844,882 |
Schedule of Allocation of Purchase Price | The following allocation of the purchase price is as follows: Consideration given: Deferred consideration payable $ 12,781,092 Total value of acquisition $ 12,781,092 Assets acquired: Inventories, net $ 836,026 Intangible assets - brand 11,945,066 Total $ 12,781,092 |
Schedule of Pro Forma Financial Information | The following unaudited pro forma consolidated results of operations for the years ended December 31, 2019 and 2018 assume that both acquisitions of Craft Canning + Bottling and Azuñia Tequila were completed on January 1, 2018: 2019 2018 Pro forma sales $ 19,868,484 $ 16,088,104 Pro forma net loss (20,350,193 ) (10,868,474 ) Pro forma basic and diluted net loss per share $ (2.19 ) $ (1.69 ) |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consist of the following at December 31: 2019 2018 Raw materials $ 9,336,304 $ 10,347,616 Finished goods 3,056,931 669,843 Total inventories $ 12,393,235 $ 11,017,459 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment Net | Property and equipment consists of the following at December 31: 2019 2018 Furniture and fixtures $ 4,558,362 $ 1,148,540 Leasehold improvements 1,750,833 477,184 Vehicles 689,930 49,483 Construction in progress 98,252 425,851 Total cost 7,097,377 2,101,058 Less accumulated depreciation (2,323,849 ) (342,928 ) Total property and equipment, net $ 4,773,528 $ 1,758,130 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets and Goodwill | Intangible assets and goodwill at December 31, 2019 and December 31, 2018 consisted of the following: December 31, 2019 December 31, 2018 Permits and licenses $ 25,000 $ 25,000 Azuñia brand 11,945,066 - Customer lists 3,246,748 351,430 Goodwill 28,182 28,182 Total intangible assets and goodwill 15,244,996 404,612 Less accumulated amortization (542,024 ) (90,754 ) Intangible assets and goodwill - net $ 14,702,972 313,858 |
Other Assets (Tables)
Other Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Other Assets | Other assets consist of the following at December 31: 2019 2018 Product branding $ 809,000 $ 525,000 Investment in online company - 300,000 Notes Receivable 450,000 - Deposits 53,542 29,297 Total other assets 1,312,542 854,297 Less accumulated amortization (136,106 ) (58,037 ) Other assets - net $ 1,176,436 $ 796,260 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Schedule of Maturities of Operating Lease Liabilities | Maturities of lease liabilities as of December 31, 2019 are as follows: Operating Leases Weighted-Average 2020 $ 549,116 2021 299,352 2022 37,477 Thereafter 38,564 Total lease payments 924,509 Less imputed interest (based on 6.3% weighted- average discount rate (53,675 ) Present value of lease liability $ 870,834 1.9 |
Notes Payable (Tables)
Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable | Notes payable as of December 31, 2019 and December 31, 2018 consists of the following: December 31, 2019 December 31, 2018 Notes payable bearing interest at 5.00%. The notes’ principal, plus any accrued and unpaid interest is due May 1, 2021. Interest is paid monthly. 2,300,000 2,300,000 Notes payable bearing interest at 5.00%. The notes’ principal, plus any accrued and unpaid interest is due December 31, 2019. 254,075 - Notes payable bearing interest at 5.00%. Principal and accrued interest is payable in six equal installments on each six-month anniversary of the issuance date of January 11, 2019. The notes are secured by the security interests and subordinated to the Company’s senior indebtedness. 649,774 - Promissory note payable bearing interest of 5.2%. The note has a 46-month term with maturity in May 2023. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 176,571 - Promissory note payable bearing interest of 4.45%. The note has a 34-month term with maturity in May 2022. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning and includes debt covenants requiring a Current Ratio of 1.75 to 1.00 and a Debt Service Coverage Ratio of 1.25 to 1.00. Craft Canning must also provide annual financial statements and tax returns. Craft Canning was in compliance with all debt covenants as of December 31, 2019. 265,509 - Promissory note payable under a revolving line of credit bearing variable interest starting at 5.5%. The note has a 12-month term with principal and accrued interest due in lump sum in July 2020. The borrowing limit is $250,000. The note is secured by the assets of Craft Canning. 50,000 - Promissory note payable bearing interest of 4.14%. The note has a 60-month term with maturity in July 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 183,202 - Promissory note payable bearing interest of 3.91%. The note has a 60-month term with maturity in August 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 281,802 - Promissory note payable bearing interest of 3.96%. The note has a 60-month term with maturity in November 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 295,463 - Secured line of credit promissory note for a revolving line of credit in the aggregate principal amount of $2,000,000. The Note matures on April 15, 2020 and may be prepaid in whole or in part at any time without penalty or premium. Repayment of the Note is subject to acceleration in the event of an event of default. The Company may use the proceeds to purchase tequila for its Azuñia product line and for general corporate purposes, as approved by the Holder. The obligations of the Company under the Note are secured by certain inventory of the Company and its subsidiaries and the Company’s membership interests in Craft Canning. In addition, the Note is guaranteed by the Company’s subsidiaries Craft Canning and Big Bottom Distilling. The Note and the accompanying guaranty restrict Craft Canning from incurring any new indebtedness, other than trade debt incurred in the ordinary course of business, until the Note is repaid in full. The obligations under the Note are subordinate and junior in right and priority of payment to the Company’s obligations under the Company’s Credit and Security Agreement with the KFK Children’s Trust dated May 10, 2018. 946,640 - Promissory notes payable bearing interest between 2.99% - 3.14%. The notes have 60-month terms with maturity dates between February 2019 – June 2020. Principal and accrued interest are paid monthly. The notes are secured by the specific vehicle underlying the loan. 10,390 - Total notes payable 5,413,426 2,300,000 Less current portion (1,819,172 ) - Long-term portion of notes payable $ 3,594,254 $ 2,300,000 |
Schedule of Maturities on Notes Payable | Maturities on notes payable as of December 31, 2019, are as follows: Year ending December 31: 2020 $ 1,819,172 2021 2,871,525 2022 399,138 Thereafter 323,591 $ 5,413,426 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Tax Rates Reconciliation | The Company also has a state tax rate for Oregon, of 6.6% for both December 31, 2019 and 2018. 2019 2018 Expected federal income tax benefit $ (3,389,519 ) $ (1,774,610 ) State income taxes after credits (1,140,554 ) (597,146 ) Change in valuation allowance 4,530,073 2,371,756 Total provision for income taxes $ - $ - |
Schedule of Deferred Tax Assets and Liabilities | The components of the net deferred tax assets and liabilities at December 31 consisted of the following: 2019 2018 Deferred tax assets: Net operating loss carryforwards $ 12,751,273 $ 7,780,105 Stock-based compensation 807,587 623,386 Total deferred tax assets 12,558,860 8,403,491 Deferred tax liabilities: Depreciation and amortization (834,160 ) (208,864 ) Total deferred tax liabilities (834,160 ) (208,864 ) Valuation allowance (12,724,700 ) (8,194,627 ) Net deferred tax assets $ - - |
Net Loss Per Common Share (Tabl
Net Loss Per Common Share (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Net Loss Per Common Share | The numerators and denominators used in computing basic and diluted net loss per common share in 2019 and 2018 are as follows: December 31, 2019 2018 Net loss available to common shareholders (numerator) $ (16,908,104 ) $ (9,047,669 ) Weighted average shares (denominator) 9,275,696 6,074,489 Basic and diluted net loss per common share $ (1.82 ) $ (1.49 ) |
Stockholder's Equity (Tables)
Stockholder's Equity (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Summary of Stock Option Activity | A summary of all stock option activity at and for the years ended December 31, 2019 and 2018 is presented below: # of Options Weighted- Outstanding at December 31, 2017 369,006 $ 6.47 Options granted 654,000 5.47 Options exercised (48,715 ) 4.56 Options canceled (78,433 ) 4.86 Outstanding at December 31, 2018 895,858 $ 5.62 Options granted 79,000 5.01 Options exercised (3,167 ) 4.04 Options canceled (187,590 ) 4.61 Outstanding at December 31, 2019 784,101 $ 5.65 Exercisable at December 31, 2019 556,420 $ 5.59 |
Schedule of Weighted-average Assumptions Used in Black-scholes Valuation Method | The following weighted-average assumptions were used in the Black-Scholes valuation model for options granted during the year ended December 31, 2019: Risk-free interest rate 2.22 % Expected term (in years) 6.50 Dividend yield - Expected volatility 31 % |
Schedule of Weighted-average Assumptions for Warrants | The estimated fair value of the warrants at issuance was $297,417, based on a combination of closing market trading price on the date of issuance for the public offering warrants, and the Black-Scholes option-pricing model using the weighted-average assumptions below: Volatility 31 % Risk-free interest rate 2.16 % Expected term (in years) 2.78 Expected dividend yield - Fair value of common stock $ 5.61 |
Summary of Warrant Activity | A summary of activity in warrants is as follows: Warrants Weighted Weighted Aggregate Outstanding at December 31, 2018 1,083,435 1.04 years $ 6.83 $ - Twelve months ended December 31, 2019: Granted 316,540 2.14 years $ 6.78 $ - Exercised - - $ - - Forfeited and cancelled (663,416 ) - $ 6.61 - Outstanding at December 31, 2019 736,559 1.18 years $ 6.95 $ - |
Description of Business (Detail
Description of Business (Details Narrative) | Dec. 31, 2018 | May 31, 2017 |
Big Bottom Distillery, LLC [Member] | ||
Acquire ownership percentage | 10.00% | 90.00% |
Liquidity (Details Narrative)
Liquidity (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net loss | $ (16,908,104) | $ (9,047,669) |
Accumulated deficit | (44,234,087) | (27,138,630) |
Cash from combination of equity and debt | 2,459,141 | 23,271,401 |
Cash on hand | 343,293 | $ 10,642,877 |
Working capital | $ 8,300,000 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details Narrative) | Jan. 02, 2019USD ($) | Dec. 31, 2019USD ($)Number | Dec. 31, 2018USD ($) |
Number of operating segments | Number | 1 | ||
Customer programs and incentives paid | $ 600,000 | $ 400,000 | |
Customer programs and incentives, agrement term description | The reimbursement is payable upon the sale of the brand within the term of the agreement, which is 10 years, with a renewable option for any additional 10 years, by the licensor. | ||
Advertising, promotional and selling expenses | $ 7,500,000 | 4,300,000 | |
Advertising, promotional and selling expenses, agrement term description | The reimbursement is payable upon the sale of the brand within the term of the agreement, which is 10 years, with a renewable option for any additional 10 years, by the licensor. | ||
Cash equivalents | |||
Inventory write-downs | 300,000 | ||
Goodwill impairment loss | |||
Income tax likelihood, description | More than 50% | ||
Unrecognized income tax benefit, interest and penalties | |||
Excise taxes | 800,000 | 700,000 | |
Stock-based compensation | $ 667,397 | 657,546 | |
Payment of account receivables in advance percentage | 75.00% | ||
Concentration risk percentage description | Under the programs, the Company has the option to sell certain customer account receivables in advance of payment for 75% (spirits program) or 85% (co-packing program) of the amount due. When the customer remits payment, the Company receives the remaining balance. For the spirits program, interest is charged on the advanced 75% payment at a rate of 2.4% for the first 30 days plus 1.44% for each additional ten-day period. | ||
Interest charged on advance payment, rate | 2.40% | ||
Interest charged on advance payment amount | $ 500,000 | ||
Factored invoices | 2,200,000 | ||
Factoring fee amount | 100,000 | ||
Outstanding factored invoices | 600,000 | ||
Right-of-use assets | 742,808 | ||
Lease liabilities | 870,834 | ||
ASU 2016-02 [Member] | |||
Right-of-use assets | $ 900,000 | ||
Lease liabilities | 1,100,000 | ||
Net adjustment to retained earnings | $ 200,000 | ||
Employees [Member] | |||
Stock-based compensation | $ 700,000 | $ 700,000 | |
Prime Rate [Member] | |||
Interest charged on advance payment, rate | 5.00% | ||
Minimum [Member] | |||
Property and equipment estimated useful lives | 3 years | ||
Maximum [Member] | |||
Property and equipment estimated useful lives | 7 years | ||
Trade Receivables [Member] | two distributors Member] | |||
Concentration of credit risk percentage | 40.00% | 37.00% | |
Sales Revenue, Net [Member] | two distributors Member] | |||
Concentration of credit risk percentage | 42.00% | ||
Sales Revenue, Net [Member] | One Distributor [Member] | |||
Concentration of credit risk percentage | 16.00% | ||
Redneck Riviera Whiskey Co., LLC [Member] | |||
Customer programs and incentives paid | $ 100,000 | ||
Percentage for customer programs and incentives paid | 50.00% | ||
Advertising, promotional and selling expenses | $ 2,300,000 | ||
Percentage for advertising, promotional and selling expenses | 50.00% |
Business Acquisitions (Details
Business Acquisitions (Details Narrative) - USD ($) | Jan. 11, 2019 | Dec. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Sep. 12, 2019 |
Sales | $ 15,596,624 | $ 6,123,510 | |||||
Net income | (16,908,104) | (9,047,669) | |||||
Deferred Consideration for Azuñia acquisition (Long Term) | $ 15,451,500 | $ 15,451,500 | 15,451,500 | $ 15,451,500 | |||
Craft Canning and Big Bottom Distillery, LLC [Member] | |||||||
Acquisitions costs | $ 100,000 | ||||||
Stock issued during period, shares, acquisitions | 338,212 | ||||||
Acquisition price per share | $ 6.10 | ||||||
Intangible asset estimated useful life | 7 years | ||||||
Azunia Tequila [Member] | |||||||
Acquisitions costs | 200,000 | ||||||
Sales | 7,100,000 | $ 1,100,000 | |||||
Net income | $ 400,000 | ||||||
Debt instrument term | 3 years | ||||||
Stock issued during period, shares, acquisitions | 850,000 | ||||||
Acquisition price per share | $ 6 | $ 6 | $ 6 | $ 6 | |||
Additional common stock of shares acquired during acquisition | 350,000 | ||||||
Deferred Consideration for Azuñia acquisition (Long Term) | $ 12,800,000 | $ 12,800,000 | $ 12,800,000 | $ 12,800,000 | $ 12,781,092 | ||
Azunia Tequila [Member] | Maximum [Member] | |||||||
Aggregate future revenue performance on acquisition | 1,500,000 | 15,500,000 | |||||
Azunia Tequila [Member] | Minimum [Member] | |||||||
Aggregate future revenue performance on acquisition | $ 9,450,000 | $ 2,700,000 |
Business Acquisitions - Schedul
Business Acquisitions - Schedule of Business Acquisition Assets and Liabilities (Details) - Craft Canning and Big Bottom Distillery, LLC [Member] | Jan. 11, 2019USD ($) |
338,212 shares of common stock valued at $6.10 per share | $ 2,080,004 |
Cash | 2,003,200 |
Notes payable | 761,678 |
Total value of acquisition | 4,844,882 |
Cash | 553,283 |
Trade receivables, net | 625,717 |
Inventories, net | 154,824 |
Prepaid expenses and current assets | 250 |
Property and equipment, net | 1,839,486 |
Right-of-use assets | 232,884 |
Intangible assets - customer list | 2,895,318 |
Other assets | 26,600 |
Accounts payable | (231,613) |
Accrued liabilities | (74,389) |
Deferred revenue | (52,000) |
Lease liabilities | (256,375) |
Notes payable | (869,103) |
Total | $ 4,844,882 |
Business Acquisitions - Sched_2
Business Acquisitions - Schedule of Business Acquisition Assets and Liabilities (Details) (Parenthetical) - Craft Canning and Big Bottom Distillery, LLC [Member] | Jan. 11, 2019$ / sharesshares |
Stock issued during period, shares, acquisitions | shares | 338,212 |
Common stock valued per share | $ / shares | $ 6.10 |
Business Acquisitions - Sched_3
Business Acquisitions - Schedule of Allocation of Purchase Price (Details) - USD ($) | Dec. 31, 2019 | Sep. 12, 2019 | Dec. 31, 2018 |
Deferred consideration payable | $ 15,451,500 | ||
Azunia Tequila [Member] | |||
Deferred consideration payable | $ 12,800,000 | $ 12,781,092 | |
Total value of acquisition | 12,781,092 | ||
Inventories, net | 836,026 | ||
Intangible assets - brand | 11,945,066 | ||
Total assets acquired | $ 12,781,092 |
Business Acquisitions - Sched_4
Business Acquisitions - Schedule of Pro Forma Financial Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Business Combinations [Abstract] | ||
Pro forma sales | $ 19,868,484 | $ 16,088,104 |
Pro forma net loss | $ (20,350,193) | $ (10,868,474) |
Pro forma basic and diluted net loss per share | $ (2.19) | $ (1.69) |
Inventories (Details Narrative)
Inventories (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Finished goods | $ 3,056,931 | $ 669,843 |
Raw materials | 9,336,304 | $ 10,347,616 |
Azunia Tequila [Member] | ||
Finished goods | 1,000,000 | |
Raw materials | 200,000 | |
Redneck Riviera Whiskey Co., LLC [Member] | ||
Finished goods | 1,100,000 | |
Craft Canning and Big Bottom Distillery, LLC [Member] | ||
Raw materials | 500,000 | |
Maximum [Member] | ||
Finished goods | 2,300,000 | |
Minimum [Member] | ||
Raw materials | $ 1,000,000 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 9,336,304 | $ 10,347,616 |
Finished goods | 3,056,931 | 669,843 |
Total inventories | $ 12,393,235 | $ 11,017,459 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Purchases of property and equipment | $ 2,176,506 | $ 1,296,410 |
Depreciation expense | 1,200,000 | 300,000 |
Loss on disposal of assets | (133,179) | |
Vehicles [Member] | ||
Loss on disposal of assets | $ 100,000 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment Net (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Total cost | $ 7,097,377 | $ 2,101,058 |
Less accumulated depreciation | (2,323,849) | (342,928) |
Total property and equipment, net | 4,773,528 | 1,758,130 |
Furniture and Fixtures [Member] | ||
Total cost | 4,558,362 | 1,148,540 |
Leasehold Improvements [Member] | ||
Total cost | 1,750,833 | 477,184 |
Vehicles [Member] | ||
Total cost | 689,930 | 49,483 |
Construction in progress [Member] | ||
Total cost | $ 98,252 | $ 425,851 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of intangible assets | $ 400,000 | $ 100,000 |
Amotization period | 7 years |
Intangible Assets and Goodwil_3
Intangible Assets and Goodwill - Schedule of Intangible Assets and Goodwill (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Total intangible assets and goodwill | $ 15,244,996 | $ 404,612 |
Less accumulated amortization | (542,024) | (90,754) |
Intangible assets and goodwill - net | 14,702,972 | 313,858 |
Permits and Licenses [Member] | ||
Total intangible assets and goodwill | 25,000 | 25,000 |
Azunia Brand [Member] | ||
Total intangible assets and goodwill | 11,945,066 | |
Customer Lists [Member] | ||
Total intangible assets and goodwill | 3,246,748 | 351,430 |
Goodwill [Member] | ||
Total intangible assets and goodwill | $ 28,182 | $ 28,182 |
Other Assets (Details Narrative
Other Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Capitalized costs of rebranding product line | $ 800,000 | |
Capitalized costs amortization period | 7 years | |
Amortization expense | $ 100,000 | $ 100,000 |
Office and Retail Space Lease [Member] | ||
Deposits | 100,000 | |
Notes Receivable [Member] | ||
Notes receivable | $ 450,000 | |
Notes bear interest | 5.00% | |
Notes maturity date | Aug. 25, 2020 |
Other Assets - Schedule of Othe
Other Assets - Schedule of Other Assets (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Total other assets | $ 1,312,542 | $ 854,297 |
Less accumulated amortization | (136,106) | (58,037) |
Other assets - net | 1,176,436 | 796,260 |
Product Branding [Member] | ||
Total other assets | 809,000 | 525,000 |
Investment in Online Company [Member] | ||
Total other assets | 300,000 | |
Notes Receivable [Member] | ||
Total other assets | 450,000 | |
Deposits [Member] | ||
Total other assets | $ 53,542 | $ 29,297 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | Jan. 02, 2019 | Dec. 31, 2019 | Dec. 31, 2018 |
Lease obligations expire, description | These lease obligations expire at various dates through 2023 | ||
Right-of-use assets | $ 742,808 | ||
Lease liabilities | 870,834 | ||
Aggregate lease expense | 900,000 | ||
Lease expense | 600,000 | ||
Short-term lease expense | $ 300,000 | ||
ASU 2016-02 [Member] | |||
Right-of-use assets | $ 900,000 | ||
Lease liabilities | 1,100,000 | ||
Net adjustment to retained earnings | $ 200,000 |
Leases - Schedule of Maturities
Leases - Schedule of Maturities of Operating Lease Liabilities (Details) | Dec. 31, 2019USD ($) |
Leases [Abstract] | |
2020 | $ 549,116 |
2021 | 299,352 |
2022 | 37,477 |
Thereafter | 38,564 |
Total lease payments | 924,509 |
Less imputed interest (based on 6.3% weighted- average discount rate | (53,675) |
Present value of lease liability | $ 870,834 |
Weighted-Average Remaining Term in Years | 1 year 10 months 25 days |
Leases - Schedule of Maturiti_2
Leases - Schedule of Maturities of Operating Lease Liabilities (Details) (Parenthetical) | Dec. 31, 2019 |
Leases [Abstract] | |
Weighted average discount rate | 6.30% |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Debt Disclosure [Abstract] | ||
Interest on notes | $ 200,000 | $ 200,000 |
Notes Payable - Schedule of Not
Notes Payable - Schedule of Notes Payable (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Total notes payable | $ 5,413,426 | $ 2,300,000 |
Less current portion | (1,819,172) | |
Long-term portion of notes payable | 3,594,254 | 2,300,000 |
Note Payable 1 [Member] | ||
Total notes payable | 2,300,000 | 2,300,000 |
Note Payable 2 [Member] | ||
Total notes payable | 254,075 | |
Note Payable 3 [Member] | ||
Total notes payable | 649,774 | |
Note Payable 4 [Member] | ||
Total notes payable | 176,571 | |
Note Payable 5 [Member] | ||
Total notes payable | 265,509 | |
Note Payable 6 [Member] | ||
Total notes payable | 50,000 | |
Note Payable 7 [Member] | ||
Total notes payable | 183,202 | |
Note Payable 8 [Member] | ||
Total notes payable | 281,802 | |
Note Payable 9 [Member] | ||
Total notes payable | 295,463 | |
Note Payable 10 [Member] | ||
Total notes payable | 946,640 | |
Note Payable 11 [Member] | ||
Total notes payable | $ 10,390 |
Notes Payable - Schedule of N_2
Notes Payable - Schedule of Notes Payable (Details) (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Note Payable 1 [Member] | ||
Debt instrument interest rate | 5.00% | 5.00% |
Debt instrument maturity date description | Due May 1, 2021 | Due May 1, 2021 |
Note Payable 2 [Member] | ||
Debt instrument interest rate | 5.00% | 5.00% |
Debt instrument maturity date description | Due December 31, 2019 | Due December 31, 2019 |
Note Payable 3 [Member] | ||
Debt instrument interest rate | 5.00% | 5.00% |
Note Payable 4 [Member] | ||
Debt instrument interest rate | 5.20% | 5.20% |
Debt instrument maturity date description | The note has a 46-month term with maturity in May 2023 | The note has a 46-month term with maturity in May 2023 |
Debt maturity term | 46 months | 46 months |
Note Payable 5 [Member] | ||
Debt instrument interest rate | 4.45% | 4.45% |
Debt instrument maturity date description | The note has a 34-month term with maturity in May 2022 | The note has a 34-month term with maturity in May 2022 |
Debt instrument, covenants | The note is secured by the assets of Craft Canning and includes debt covenants requiring a Current Ratio of 1.75 to 1.00 and a Debt Service Coverage Ratio of 1.25 to 1.00. | The note is secured by the assets of Craft Canning and includes debt covenants requiring a Current Ratio of 1.75 to 1.00 and a Debt Service Coverage Ratio of 1.25 to 1.00. |
Debt service coverage | Debt Service Coverage Ratio of 1.25 to 1.00 | Debt Service Coverage Ratio of 1.25 to 1.00 |
Note Payable 6 [Member] | ||
Debt instrument interest rate | 5.50% | 5.50% |
Debt instrument maturity date description | The note has a 12-month term with principal and accrued interest due in lump sum in July 2020. | The note has a 12-month term with principal and accrued interest due in lump sum in July 2020. |
Debt maturity term | 12 months | 12 months |
Revolving line of credit borrowing limit | $ 250,000 | $ 250,000 |
Note Payable 7 [Member] | ||
Debt instrument interest rate | 4.14% | 4.14% |
Debt instrument maturity date description | The note has a 60-month term with maturity in July 2024. | The note has a 60-month term with maturity in July 2024. |
Note Payable 8 [Member] | ||
Debt instrument interest rate | 3.91% | 3.91% |
Debt instrument maturity date description | The note has a 60-month term with maturity in August 2024 | The note has a 60-month term with maturity in August 2024 |
Debt maturity term | 60 months | 60 months |
Note Payable 9 [Member] | ||
Debt instrument interest rate | 3.96% | 3.96% |
Debt instrument maturity date description | The note has a 60-month term with maturity in November 2024. | The note has a 60-month term with maturity in November 2024. |
Debt maturity term | 60 months | 60 months |
Note Payable 10 [Member] | ||
Debt instrument maturity date description | The Note matures on April 15, 2020 | The Note matures on April 15, 2020 |
Revolving line of credit borrowing limit | $ 2,000,000 | $ 2,000,000 |
Note Payable 11 [Member] | ||
Debt instrument maturity date description | The notes have 60-month terms with maturity dates between February 2019 | The notes have 60-month terms with maturity dates between February 2019 |
Note Payable 11 [Member] | Minimum [Member] | ||
Debt instrument interest rate | 2.99% | 2.99% |
Note Payable 11 [Member] | Maximum [Member] | ||
Debt instrument interest rate | 3.14% | 3.14% |
Notes Payable - Schedule of Mat
Notes Payable - Schedule of Maturities on Notes Payable (Details) | Dec. 31, 2019USD ($) |
Debt Disclosure [Abstract] | |
2020 | $ 1,819,172 |
2021 | 2,871,525 |
2022 | 399,138 |
Thereafter | 323,591 |
Total | $ 5,413,426 |
Secured Credit Facility (Detail
Secured Credit Facility (Details Narrative) - Credit and Security Agreement [Member] - USD ($) | May 10, 2018 | Dec. 31, 2019 |
Line of credit maximum borrowing | $ 3,000,000 | |
Line of credit facility, borrowing capacity, description | The Company may borrow 80% of the value of the Specified Inventory it is able to purchase under the Credit and Security Agreement. | |
Line of credit annual interest | 7.00% | |
Line of credit, interest on loans | $ 200,000 | |
Percentage of outstanding loan balance | 120.00% | |
Loan [Member] | ||
Line of credit maximum borrowing | $ 3,000,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Loss Contingencies [Line Items] | ||
Federal effective tax rate | 21.00% | 21.00% |
Net operating loss carryforward | $ 37,800,000 | |
Stockholder [Member] | ||
Loss Contingencies [Line Items] | ||
Ownership percentage | 50.00% | |
Federal [Member] | ||
Loss Contingencies [Line Items] | ||
Net operating loss carryforward year | 20 years | |
Net operating loss expiration year | 2034 | |
State [Member] | ||
Loss Contingencies [Line Items] | ||
Net operating loss carryforward year | 15 years | |
Net operating loss expiration year | 2029 | |
OREGON | ||
Loss Contingencies [Line Items] | ||
State tax rate | 6.60% | 6.60% |
Income Taxes - Schedule of Effe
Income Taxes - Schedule of Effective Tax Rates Reconciliation (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Expected federal income tax benefit | $ (3,389,519) | $ (1,774,610) |
State income taxes after credits | (1,140,554) | (597,146) |
Change in valuation allowance | 4,530,073 | 2,371,756 |
Total provision for income taxes |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 12,751,273 | $ 7,780,105 |
Stock-based compensation | 807,587 | 623,386 |
Total deferred tax assets | 12,558,860 | 8,403,491 |
Depreciation and amortization | (834,160) | (208,864) |
Total deferred tax liabilities | (834,160) | (208,864) |
Valuation allowance | (12,724,700) | (8,194,627) |
Net deferred tax assets |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - Laurie Branch and Justina Thoreson [Member] | Oct. 22, 2019USD ($) |
Estimate of retention per claim | $ 100,000 |
Maximum [Member] | |
Litigation damages | $ 560,000 |
Net Loss Per Common Share - Sch
Net Loss Per Common Share - Schedule of Basic and Diluted Net Loss Per Common Share (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Earnings Per Share [Abstract] | ||
Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator) | $ (16,908,104) | $ (9,047,669) |
Weighted average shares (denominator) | 9,275,696 | 6,074,489 |
Basic and diluted net loss per common share | $ (1.82) | $ (1.49) |
Stockholder's Equity (Details N
Stockholder's Equity (Details Narrative) - USD ($) | Dec. 31, 2019 | Jan. 11, 2019 | Jan. 11, 2019 | Jan. 02, 2019 | Dec. 19, 2018 | Nov. 20, 2018 | Sep. 25, 2018 | Sep. 30, 2019 | Apr. 30, 2019 | Dec. 31, 2018 | Jul. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Jan. 29, 2015 |
Stock issued during period, value, issued for services | $ 597,921 | $ 412,831 | ||||||||||||
Stock issued during period for services, price per share | $ 4.05 | $ 4.05 | ||||||||||||
Option exercise price | $ 5.01 | $ 5.47 | ||||||||||||
Stock issued in connection with exercise of warrants | 167,273 | |||||||||||||
Stock issued in connection with exercise of warrants, exercise price | $ 6 | |||||||||||||
Proceeds from warrant exercise | $ 8,004,181 | |||||||||||||
Stock issued during period in connection with exercise of underwriter units | 120,000 | |||||||||||||
Stock issued during period in connection with exercise of underwriter units, exercise price | $ 5.40 | |||||||||||||
Warrant exercisable price per share | $ 5.40 | |||||||||||||
Number of warrant shares of common stock | 59,308 | 59,308 | ||||||||||||
Value of shares issued to directors and employees | $ 761,800 | $ 863,262 | ||||||||||||
Stock option exercises, shares | 3,167 | 48,715 | ||||||||||||
Average exercise price per share | $ 4.04 | $ 4.56 | ||||||||||||
Option granted | 79,000 | 654,000 | ||||||||||||
Vesting period of option | 5 years | |||||||||||||
Aggregate intrinsic value of options outstanding | $ 558,278 | $ 558,278 | ||||||||||||
Number of unvested options | 227,681 | 227,681 | ||||||||||||
Aggregate grant date fair value unvested options | $ 582,209 | |||||||||||||
Aggregate intrinsic value of unvested options | ||||||||||||||
Number of options vested | 193,072 | 193,072 | ||||||||||||
Stock compensation expenses | $ 759,385 | |||||||||||||
Compensation cost related to stock options not yet recognized | $ 582,209 | $ 582,209 | ||||||||||||
Period of compensation cost related to stock options not yet recognized | 1 year 9 months 18 days | |||||||||||||
Warrants issued | 316,540 | |||||||||||||
Due to related parties | $ 176,934 | $ 176,934 | ||||||||||||
Fair value of warrants | $ 297,417 | |||||||||||||
2016 Equity Incentive Plan [Member] | ||||||||||||||
Number of shares available for grant | 1,991,350 | |||||||||||||
Outstanding capital stock shares percentage | 8.00% | |||||||||||||
Option granted | 825,659 | |||||||||||||
Vesting period of option | 5 years | |||||||||||||
Number of RSU's issued | 527,337 | |||||||||||||
2015 Equity Incentive Plan [Member] | ||||||||||||||
Number of shares available for grant | 50,000 | |||||||||||||
Number of options issued | 19,584 | |||||||||||||
Description of vesting percentage | Options vest at the rate of at least 25% in the first year, starting 6-months after the grant date, and 75% in year two. | |||||||||||||
Stock Option [Member] | ||||||||||||||
Option exercise price | $ 1.83 | |||||||||||||
Option granted | 79,000 | |||||||||||||
Aggregate intrinsic value of options outstanding | $ 140,278 | |||||||||||||
Fair value of aggregate options granted | $ 142,189 | |||||||||||||
Due to related parties | $ 30,000 | |||||||||||||
Big Bottom Distilling, LLC [Member] | ||||||||||||||
Stock issued during period, shares, acquisitions | 3,122 | |||||||||||||
Business combination acquisition equity interest percentage | 10.00% | 10.00% | ||||||||||||
Craft Canning [Member] | ||||||||||||||
Acquisition costs | $ 146,262 | |||||||||||||
Craft Canning [Member] | ||||||||||||||
Stock issued during period, shares, acquisitions | 338,212 | |||||||||||||
Business combination, consideration transferred | $ 2,080,004 | |||||||||||||
Common Stock [Member] | ||||||||||||||
Issuance of common stock for services by employees, shares | 87,150 | 81,708 | ||||||||||||
Stock issued during period, value, issued for services | $ 9 | $ 8 | ||||||||||||
Issuance of common stock, shares | 280,555 | 1,480,250 | ||||||||||||
Number of shares issued existing option | 1,077 | |||||||||||||
Option exercise price | $ 3.99 | |||||||||||||
Value of shares issued to directors and employees | ||||||||||||||
Stock option exercises, shares | 1,077 | 35,941 | ||||||||||||
Number of RSU's issued | ||||||||||||||
Warrant [Member] | ||||||||||||||
Issuance of common stock, shares | 1,345,978 | |||||||||||||
Unit price | $ 5.40 | $ 5.40 | ||||||||||||
Proceeds from warrant exercise | $ 7,268,281 | |||||||||||||
Warrant One [Member] | ||||||||||||||
Issuance of common stock, shares | 500,000 | |||||||||||||
Proceeds from warrant exercise | $ 2,700,000 | |||||||||||||
Warrant One [Member] | ||||||||||||||
Unit price | 5.40 | $ 5.40 | ||||||||||||
Warrant Two [Member] | ||||||||||||||
Stock issued in connection with exercise of warrants | 115,334 | |||||||||||||
Stock issued in connection with exercise of warrants, exercise price | $ 5.35 | |||||||||||||
Proceeds from warrant exercise | $ 617,004 | |||||||||||||
Common Stock Option [Member] | ||||||||||||||
Stock option exercises, shares | 35,941 | |||||||||||||
Average exercise price per share | $ 4.56 | |||||||||||||
Private Offeirng [Member] | ||||||||||||||
Issuance of common stock, shares | 280,555 | |||||||||||||
Net proceeds from private offering | $ 1,262,497 | |||||||||||||
Units, description | Each Unit consists of one share of Eastside's common stock and a three-year warrant to acquire 0.5 shares of common stock at an exercise price of $5.50 per share. | |||||||||||||
Acquisition costs | $ 140,278 | |||||||||||||
Private Unit Offeirng [Member] | ||||||||||||||
Unit price | $ 4.50 | |||||||||||||
Public Offering [Member] | ||||||||||||||
Issuance of common stock, shares | 1,235,000 | |||||||||||||
Unit price | $ 6.50 | |||||||||||||
Proceeds from issuance of public offering | $ 7,200,000 | |||||||||||||
Over-Allotment [Member] | ||||||||||||||
Issuance of common stock, shares | 185,250 | |||||||||||||
Proceeds from issuance of public offering | $ 1,100,000 | |||||||||||||
Directors, Employees and Consultants [Member] | ||||||||||||||
Issuance of common stock for services by employees, shares | 291,099 | |||||||||||||
Stock issued during period, value, issued for services | $ 1,653,759 | |||||||||||||
Directors and Employees [Member] | ||||||||||||||
Number of shares issued to directors and employees | 79,734 | |||||||||||||
Value of shares issued to directors and employees | $ 712,469 | |||||||||||||
Directors and Employees [Member] | Minimum [Member] | ||||||||||||||
Stock issued during period for services, price per share | $ 3.68 | $ 3.68 | ||||||||||||
Unit price | 3.99 | $ 3.99 | ||||||||||||
Directors and Employees [Member] | Maximum [Member] | ||||||||||||||
Stock issued during period for services, price per share | $ 6.13 | $ 6.13 | ||||||||||||
Unit price | 8.50 | $ 8.50 | ||||||||||||
Consultant [Member] | ||||||||||||||
Issuance of common stock for services by employees, shares | 27,400 | |||||||||||||
Stock issued during period, value, issued for services | $ 162,378 | |||||||||||||
Consultant [Member] | Minimum [Member] | ||||||||||||||
Unit price | 3.99 | $ 3.99 | ||||||||||||
Consultant [Member] | Maximum [Member] | ||||||||||||||
Unit price | $ 7.72 | $ 7.72 |
Stockholder's Equity - Summary
Stockholder's Equity - Summary of Stock Option Activity (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Equity [Abstract] | ||
Number of Options Outstanding, Beginning Balance | 895,858 | 369,006 |
Number of Options Outstanding, Granted | 79,000 | 654,000 |
Number of Options Outstanding, Exercised | (3,167) | (48,715) |
Number of Options Outstanding, Canceled | (187,590) | (78,433) |
Number of Options Outstanding, Ending Balance | 784,101 | 895,858 |
Number of Options Exercisable, Ending Balance | 556,420 | |
Weighted- Average Exercise Price Options Outstanding, Beginning Balance | $ 5.62 | $ 6.47 |
Weighted- Average Exercise Price Options Outstanding, Granted | 5.01 | 5.47 |
Weighted- Average Exercise Price Options Outstanding, Exercised | 4.04 | 4.56 |
Weighted- Average Exercise Price Options Outstanding, Canceled | 4.61 | 4.86 |
Weighted- Average Exercise Price Options Outstanding, Ending Balance | 5.65 | $ 5.62 |
Weighted- Average Exercise Price Options Exercisable, Ending Balance | $ 5.59 |
Stockholder's Equity - Schedule
Stockholder's Equity - Schedule of Weighted-average Assumptions Used in Black-scholes Valuation Method (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Risk-free interest rate | 2.22% |
Expected term (in years) | 6 years 6 months |
Expected dividend yield | 0.00% |
Expected volatility | 31.00% |
Stockholder's Equity - Schedu_2
Stockholder's Equity - Schedule of Weighted-average Assumptions for Warrants (Details) | Dec. 31, 2019$ / shares |
Warrants and rights outstanding, measurement input, Fair value of common stock, price per share | $ 5.61 |
Volatility [Member] | |
Warrants and rights outstanding, measurement input, percentage | 31 |
Risk-free Interest Rate [Member] | |
Warrants and rights outstanding, measurement input, percentage | 2.16 |
Expected Term (in Years) [Member] | |
Warrants and rights outstanding, measurement input, term | 2 years 9 months 11 days |
Expected Dividend Yield [Member] | |
Warrants and rights outstanding, measurement input, percentage | 0 |
Stockholder's Equity - Summar_2
Stockholder's Equity - Summary of Warrant Activity (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Equity [Abstract] | ||
Warrants Outstanding, Beginning Balance | 1,083,435 | |
Warrants Outstanding, Granted | 316,540 | |
Warrants Outstanding, Exercised | ||
Warrants Outstanding, Forfeited and Cancelled | (663,416) | |
Warrants Outstanding, Ending Balance | 736,559 | 1,083,435 |
Warrants Outstanding Weighted Average Remaining Life, Beginning Balance | 1 year 15 days | |
Warrants Outstanding Weighted Average Remaining Life, Granted | 2 years 1 month 20 days | |
Warrants Outstanding Weighted Average Remaining Life, Ending Balance | 1 year 2 months 5 days | 1 year 15 days |
Warrants Outstanding Weighted Average Exercise Price, Beginning Balance | $ 6.83 | |
Warrants Outstanding Weighted Average Exercise Price, Granted | 6.78 | |
Warrants Outstanding Weighted Average Exercise Price, Exercised | ||
Warrants Outstanding Weighted Average Exercise Price, Forfeited and Cancelled | 6.61 | |
Warrants Outstanding Weighted Average Exercise Price, Ending Balance | $ 6.95 | $ 6.83 |
Warrants Outstanding Aggregate Intrinsic Value, Beginning Balance | ||
Warrants Outstanding Aggregate Intrinsic Value, Granted | ||
Warrants Outstanding Aggregate Intrinsic Value, Ending Balance |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Nov. 29, 2019 | Oct. 24, 2019 | Sep. 16, 2019 | Jun. 11, 2019 | Aug. 09, 2018 | Aug. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jul. 10, 2018 | Jun. 22, 2018 | Mar. 29, 2018 |
Related Party Transaction [Line Items] | ||||||||||||
Assets from related party transaction | $ 120,000 | |||||||||||
Percentage of average of assets net | 1.00% | |||||||||||
Due to related party | $ 176,934 | |||||||||||
Loan borrowed | 5,413,426 | $ 2,300,000 | ||||||||||
Proceeds from warrant exercise | $ 8,004,181 | |||||||||||
Mr. Lingley [Member] | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Due to related party | $ 1,843,200 | |||||||||||
Number of warrants exercised | 146,262 | |||||||||||
Warrant exercise price | $ 7.80 | |||||||||||
Shares issued to related party | 338,212 | |||||||||||
Employee benefits and share-based compensation | $ 75,000 | |||||||||||
Mr. Lingley [Member] | Promissory Notes [Member] | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Principal amount | $ 731,211 | |||||||||||
Debt instrument maturity date | Jan. 11, 2022 | |||||||||||
Debt interest rate, percentage | 5.00% | |||||||||||
Paul F. Shoen [Member] | Promissory Notes [Member] | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Principal amount | 188,037 | $ 300,000 | $ 197,020 | $ 500,000 | $ 363,930 | |||||||
Debt instrument maturity date | May 1, 2021 | |||||||||||
Debt interest rate, percentage | 5.00% | 5.00% | 5.00% | |||||||||
Repayments of debt | $ 572,912 | |||||||||||
Stephanie Kilkenny [Member] | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Shares issued to related party | 850,000 | |||||||||||
Related party transaction, description | On October 24, 2019, our Board appointed Stephanie Kilkenny to the Board to fill an existing vacancy on the Board effective immediately. Stephanie Kilkenny was the former managing director of Azuñia Tequila, and together with her spouse, owns and controls TQLA, LLC ("TQLA"), the majority owner of Intersect Beverage, LLC. In connection with the acquisition of Azuñia Tequila from Intersect Beverage, LLC, TQLA is entitled to receive up to 93.88% of the aggregate consideration payable under the asset purchase agreement. Subject to compliance with applicable Nasdaq rules, aggregate the initial consideration will be payable approximately 18 months following the closing and will consist of 850,000 shares of Company common stock at a stipulated value of $6.00 per share, 350,000 shares of Company common stock based on the Company's stock price twelve months after the close of the transaction, and additional shares based on the Azuñia business achieving certain revenue targets and the Company's stock price 18 months after the close of the transaction. The Company has also agreed to issue additional stock consideration (subject to compliance with applicable Nasdaq rules) of up to $1.5 million upon the Azuñia business achieving revenue of at least $9.45 million in the period commencing on the 13th month following the closing and ending on the 24th month following the closing. | |||||||||||
Shares issued price, per share | $ 6 | |||||||||||
Stephanie Kilkenny's Spouse [Member] | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Number of warrants exercised | 0.5 | |||||||||||
Warrant exercise price | $ 5.50 | |||||||||||
Shares issued to related party | 55,555 | |||||||||||
Shares issued price, per share | $ 4.50 | |||||||||||
Grover Wickersham and Affiliates [Member] | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Number of warrants exercised | 55,555 | |||||||||||
Warrant exercise price | $ 5.40 | |||||||||||
Proceeds from warrant exercise | $ 300,000 | |||||||||||
TQLA, LLC [Member] | Secured Line of Credit Promissory Note [Member] | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Loan borrowed | $ 946,640 | |||||||||||
TQLA, LLC [Member] | Secured Line of Credit Promissory Note [Member] | Revolving Credit Facility [Member] | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Principal amount | $ 2,000,000 | |||||||||||
Debt instrument maturity date | Apr. 15, 2020 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Jan. 15, 2020 | Jan. 12, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Issuance of common stock for stock based compensation, value | $ 597,921 | $ 412,831 | ||
Directors, Employees and Consultants [Member] | ||||
Issuance of common stock for stock based compensation, shares | 291,099 | |||
Issuance of common stock for stock based compensation, value | $ 1,653,759 | |||
Subsequent Event [Member] | Loan Agreement [Member] | ||||
Loan advance to borrowers | $ 8,000,000 | |||
Borrowing base percentage, description | Under the Loan Agreement, Lender has committed to make up to two loan advances to the Borrowers in an aggregate principal amount not to exceed the lesser of (i) $8,000,000 and (ii) a borrowing base equal to 85% of the appraised value of the Borrowers' eligible inventory of whisky in barrels or totes less an amount equal to all service fees or rental payments owed by Borrowers during the 90 day period immediately succeeding the date of determination to any warehouses or bailees holding eligible inventory (the "Loan"). | |||
Maturity date | Jan. 14, 2021 | |||
Interest rate | 2.49% | |||
Increase in interest rate | 2.00% | |||
Warrants to purchase common stock | 100,000 | |||
Warrant exercise price | $ 3.9425 | |||
Warrant expiration, description | Jan. 15, 2025 | |||
Subsequent Event [Member] | 2016 Plan [Member] | Directors, Employees and Consultants [Member] | ||||
Issuance of common stock for stock based compensation, shares | 87,700 | |||
Issuance of common stock for stock based compensation, value | $ 280,640 | |||
Shares issued price per share | $ 3.20 |