Document_and_Entity_Informatio
Document and Entity Information | 12 Months Ended |
Dec. 31, 2014 | |
Document And Entity Information | |
Entity Registrant Name | Eastside Distilling, Inc. |
Entity Central Index Key | 1534708 |
Document Type | S-1 |
Entity Trading Symbol | ESDI |
Document Period End Date | 31-Dec-14 |
Amendment Flag | TRUE |
Amendment Description | The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the securities act of 1933 or until the registration statement shall become effective on such date as the commission, acting pursuant to said section 8(a), may determine. |
Current Fiscal Year End Date | -19 |
Entity Filer Category | Smaller Reporting Company |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
ASSETS | ||
Cash | $1,082,290 | $29,784 |
Trade receivables | 138,041 | 63,177 |
Inventories | 377,020 | 59,051 |
Prepaid expenses | 174,147 | |
Total Current Assets | 1,771,498 | 152,012 |
Property and equipment - net | 81,206 | 22,395 |
Other long-term assets | 193,750 | |
Total Assets | 2,046,454 | 174,407 |
Liabilities and Stockholders' Equity | ||
Accounts payable | 206,630 | 13,506 |
Accrued liabilities | 72,610 | 10,086 |
Deferred revenue | 8,275 | 15,356 |
Current portion of notes payable | 3,560 | 2,301 |
Convertible note payable | 150,000 | |
Total current liabilities | 441,075 | 41,249 |
Notes payable - less current portion | 23,271 | 30,000 |
Total Liabilities | 464,346 | 71,249 |
Commitments and contingencies (note 9) | ||
Stockholders' equity: | ||
Preferred stock, $0.0001 par value; 100,000,000 shares authorized; no shares issued and outstanding at December 31, 2014 and 2013 | ||
Common stock, $0.0001 par value; 900,000,000 shares authorized; 45,512,500 and 32,000,000 shares issued and outstanding at December 31, 2014 and 2013, respectively | 4,551 | 3,200 |
Additional Paid-In Capital | 5,538,242 | 1,954 |
(Accumulated deficit) retained earnings | -3,960,685 | 98,004 |
Total stockholders' equity | 1,582,108 | 103,158 |
Total Liabilities and Stockholders' Equity | $2,046,454 | $174,407 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Stockholders' Deficit | ||
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, Authorized | 100,000,000 | 100,000,000 |
Preferred stock, Issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $0.00 | $0.00 |
Common stock, Authorized | 900,000,000 | 900,000,000 |
Common stock, Issued | 45,512,500 | 32,000,000 |
Common stock, outstanding | 45,512,500 | 32,000,000 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Statement [Abstract] | ||
Sales | $1,435,416 | $880,454 |
Less excise taxes | 379,972 | 138,897 |
Net sales | 1,055,444 | 741,557 |
Cost of sales | 494,889 | 303,220 |
Gross profit | 560,555 | 438,337 |
Selling, general, and administrative expenses | 1,366,341 | 347,582 |
Goodwill impairment | 3,246,149 | |
(Loss) income from operations | -4,051,935 | 90,755 |
Other expenses - net | 3,736 | 3,769 |
(Loss) income before income taxes | -4,055,671 | 86,986 |
Provision for income taxes | 1,500 | |
Net (loss) income | ($4,057,171) | $86,986 |
Basic and diluted net (loss) income per common share | ($0.12) | $0 |
Consolidated_Statement_of_Stoc
Consolidated Statement of Stockholders' Deficit (USD $) | Common Stock | Additional Paid-In Capital | Retained Earnings / Accumulated Deficit | Total |
Beginning balance, value at Dec. 31, 2012 | $3,200 | $15,315 | $18,515 | |
Beginning balance, shares at Dec. 31, 2012 | 32,000,000 | |||
Contributions | 1,954 | 1,954 | ||
Distributions | -4,297 | -4,297 | ||
Net loss | 86,986 | 86,986 | ||
Ending balance, amount at Dec. 31, 2013 | 3,200 | 1,954 | 98,004 | 103,158 |
Ending balance, Shares at Dec. 31, 2013 | 32,000,000 | |||
Contributions | 2,634 | 2,634 | ||
Distributions | -1,518 | -1,518 | ||
Conversion of notes payable to equity | 46,853 | 46,853 | ||
Shares issued to effect reverse acquisition | 8,000,000 | |||
Shares issued to effect reverse acquisition | 800 | 3,199,200 | 3,200,000 | |
Stock-based compensation | 120,000 | 120,000 | ||
Issuance of common stock - net of issuance costs | 5,512,500 | |||
Issuance of common stock - net of issuance costs | 551 | 2,167,601 | 2,168,152 | |
Net loss | -4,057,171 | -4,057,171 | ||
Ending balance, amount at Dec. 31, 2014 | $4,551 | $5,538,242 | ($3,960,685) | $1,582,108 |
Ending balance, Shares at Dec. 31, 2014 | 45,512,500 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash Flows From Operating Activities | ||
Net (loss) income | ($4,057,171) | $86,986 |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities | ||
Depreciation and amortization | 5,889 | 2,790 |
Loss on disposal of property and equipment | 2,217 | |
Goodwill impairment | 3,246,149 | |
Stock-based compensation | 10,000 | |
Changes in operating assets and liabilities | ||
Trade receivables | 80,196 | -28,202 |
Inventories | -317,969 | -16,321 |
Prepaid expenses | -114,147 | 2,567 |
Other long-term assets | -143,750 | |
Accounts payable | 165,713 | 10,976 |
Accrued liabilities | 51,222 | -23,685 |
Deferred revenue | -9,941 | -15,111 |
Net cash (used in) provided by operating activities | -1,083,809 | 22,217 |
Cash Flows From Investing Activities | ||
Purchases of property and equipment | -37,869 | -21,845 |
Cash received in reverse acquisition | 364 | |
Net cash used in investing activities | -37,505 | -21,845 |
Cash Flows From Financing Activities | ||
Proceeds from notes payable | 20,000 | 30,000 |
Payments of principal on notes payable | -5,448 | -21,290 |
Contributions | 2,634 | 1,954 |
Distributions | -1,518 | -4,297 |
Issuance of common stock - net of issuance costs of $36,848 | 2,158,152 | |
Net cash provided by financing activities | 2,173,820 | 6,367 |
Net increase in cash | 1,052,506 | 6,739 |
Cash - beginning of year | 29,784 | 23,045 |
Cash - end of year | 1,082,290 | 29,784 |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid during the year for Income taxes | ||
Cash paid during the year for Interest | 3,974 | 1,552 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||
Shares issued to effect reverse acquisition | 3,200,000 | |
Property and equipment acquired with note payable | 26,831 | |
Conversion of notes payable to equity | 46,853 | |
Stock-based compensation recorded as prepaid expenses and other long-term assets | 110,000 | |
Conversion of accounts payable to common stock | $10,000 |
Consolidated_Statements_of_Cas1
Consolidated Statements of Cash Flows (Parenthetical) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Statement of Cash Flows [Abstract] | ||
Net of issuance costs | $36,848 |
1_Description_of_Business_Orga
1. Description of Business, Organization, and Liquidity | 12 Months Ended | ||
Dec. 31, 2014 | |||
Accounting Policies [Abstract] | |||
1. Description of Business, Organization, and Liquidity | 1 | Description of Business, Organization, and Liquidity | |
The Company began in 2008 and is a manufacturer, developer, producer, and marketer of hand-crafted spirits in the following beverage alcohol categories: bourbon, whiskey, rum, and vodka. The Company currently distributes its products in seven states (Oregon, Washington, Minnesota, Georgia, Pennsylvania, Idaho, and Maryland). The Company also generates revenue from tastings, tasting room tours, private parties, and merchandise sales from its facilities in Oregon. The Company is subject to the Oregon Liquor Control Commission (OLCC) and the Alcohol and Tobacco Tax and Trade Bureau (TTB). The Company is headquartered in Portland, Oregon. | |||
On October 31, 2014, Eurocan Holdings Ltd. (Eurocan) consummated the acquisition (the Acquisition) of Eastside Distilling, LLC (the LLC) pursuant to an Agreement and Plan of Merger (the Agreement) by and among Eurocan, the LLC, and Eastside Distilling, Inc., Eurocan's wholly-owned subsidiary. Pursuant to the Agreement, the LLC merged with and into Eastside Distilling, Inc. The merger consideration for the Acquisition consisted of 32,000,000 shares of Eurocan's common stock. In addition, certain of Eurocan's stockholders cancelled an aggregate of 24,910,000 shares of Eurocan's common stock held by them. As a result, on October 31, 2014, Eurocan had 40,000,000 shares of common stock issued and outstanding, of which 32,000,000 shares were held by the former members of the LLC. Consequently, for accounting purposes, the transaction was accounted for as a reverse acquisition, with the LLC as the acquirer of Eurocan. These financial statements are presented as a continuation of the operations of the LLC with one adjustment to retroactively adjust the legal common stock of Eastside Distilling, Inc. to reflect the legal capital of Eurocan prior to the Acquisition. See note 3 for additional discussion of the Acquisition. | |||
Subsequent to the Acquisition, Eastside Distilling, Inc. merged with and into Eurocan, and Eurocan's name was officially changed to Eastside Distilling, Inc. (Eastside). Prior to the Acquisition, Michael Williams Web Design, Inc. (MWWD) was a wholly-owned subsidiary of Eurocan and constituted the majority of Eurocan's operations. Pursuant to the Agreement and subsequent activity, MWWD became a wholly-owned subsidiary of Eastside on October 31, 2014. MWWD's operations were not significant during the two months ended December 31, 2014. Eastside and MWWD are collectively referred to herein as "the Company". | |||
The fiscal 2014 and 2013 results referred to in these consolidated financial statements represent results on a consolidated basis that include both the results of Eastside Distilling, Inc. and Subsidiary with those of the LLC and provide a full year presentation for comparability purposes. The LLC's period is from January 1, 2013 to October 31, 2014, and Eastside Distilling, Inc. and Subsidiary's period is from November 1, 2014 to December 31, 2014. | |||
Liquidity | |||
The Company incurred a loss of approximately $4.1 million in 2014, largely comprised of the impairment of goodwill of approximately $3.2 million, and used cash flow from operations of approximately $1.1 million. The Company raised net proceeds of approximately $2.2 million from the issuance of common stock in 2014 with approximately $1.1 million of cash on hand at December 31, 2014. Management believes that cash flow from operations and available capital are sufficient to sustain its current level of operations for the next twelve months. However, the Company may require additional capital to expand and market its business to become a nationwide distributor. The Company's ability to raise additional capital, as needed, on beneficial terms or at all could restrict its future growth and limit its current operations. |
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 12 Months Ended | ||
Dec. 31, 2014 | |||
Accounting Policies [Abstract] | |||
2. Summary of Significant Accounting Policies | 2 | Summary of Significant Accounting Policies | |
Basis of Presentation and Consolidation | |||
The accompanying consolidated financial statements have been 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. and its wholly-owned subsidiary MWWD. 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, marketing and distributing hand-crafted spirits, and operates as one segment. The Company's chief operating decision maker, its chief executive officer, reviews the Company's operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance. | |||
Use of Estimates | |||
The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||
Revenue Recognition | |||
The Company records revenue when all four of the following criteria are met: (i) there is persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. | |||
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, the Company recognizes sales upon the consignee’s (typically the OLCC) 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 location are recognized at the time of sale. | |||
Revenue received from online merchants who sell discounted gift certificates for the Company's merchandise and tastings is deferred until the customer has redeemed the discounted gift certificate or the gift certificate has expired, whichever occurs earlier. | |||
Cost of Sales | |||
Cost of sales consists of the costs of ingredients utilized in the production of spirits, contract production fees, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by contract production fees and packaging. | |||
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, 2014 and 2013. | |||
Concentrations | |||
The Company sells to third-party resellers and performs ongoing credit evaluations of trade receivables due from third-party resellers. Generally, the Company does not require collateral. An allowance for doubtful accounts is determined with respect to those amounts that the Company has determined to be doubtful of collection using specific identification of doubtful accounts and an aging of receivables analysis based on invoice due dates. Generally, trade receivables are past due after 30 days after an invoice date, unless special payment terms are provided. The Company did not record an allowance for doubtful accounts at December 31, 2014 and 2013. | |||
The Company relies on a limited number of suppliers for the ingredients used in producing its products. In order to mitigate any adverse impact from a disruption of supply, the Company attempts to maintain an adequate supply of ingredients and believes that other vendors would be able to provide similar ingredients if supplies were disrupted. | |||
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. At December 31, 2014 and 2013, one distributor, the OLCC, represented 70% and 63% of trade receivables, respectively. Sales to one distributor, the OLCC, accounted for approximately 40% of our consolidated revenues for each of the years ended December 31, 2014 and 2013. | |||
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, 2014 and 2013, management has elected to not 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 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, 2014 and 2013. 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, notes 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, 2014 and 2013, the Company’s notes payable and convertible note payable are at fixed rates and their carrying value approximates fair value. | |||
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 the OLCC 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 has recorded no write-downs of inventory for the years ended December 31, 2014 and 2013. | |||
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 two 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. | |||
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. | |||
Goodwill | |||
Goodwill is initially recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identifiable tangible and intangible assets acquired. Goodwill is presumed to have an indefinite useful life and is analyzed annually for impairment. An annual review is performed during the fourth quarter of each fiscal year, or more frequently if indicators of potential impairment exist, to determine if the recorded goodwill is impaired. At December 31, 2014, the Company determined that its goodwill recorded as a result of the Acquisition was fully impaired (see note 3). | |||
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, 2014, the Company established a valuation allowance 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 percent 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, 2014 and 2013. | |||
The Company files federal income tax returns in the U.S. 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 2011. | |||
Advertising | |||
Advertising costs are expensed as incurred. Advertising expense was approximately $303,000 and $56,000 for the years ended December 31, 2014 and 2013, respectively, and is included in selling, general, and administrative expenses in the accompanying consolidated statements of operations. | |||
Comprehensive Income | |||
Comprehensive (loss) income consists of net (loss) income and other comprehensive income. The Company does not have any reconciling other comprehensive income items for the years ended December 31, 2014 and 2013. | |||
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 alcohol 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. | |||
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 as the underlying stock-based awards vest. | |||
Recent Accounting Pronouncements | |||
The Financial Accounting Standards Board has recently issued various Accounting Standards Updates, most of which represent technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations, or cash flows. |
3_Acquisition
3. Acquisition | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
3. Acquisition | 3 | Acquisition | |||
As discussed in note 1, through a reverse acquisition transaction, the LLC obtained a controlling financial interest in Eurocan on October 31, 2014. The following tables summarize the consideration paid for Eurocan and the recognized amounts of identifiable assets acquired and liabilities assumed on the date of the Acquisition: | |||||
Consideration | |||||
Shares issued (8,000,000) to effect reverse acquisition | $ | 3,200,000 | |||
Fair value of total consideration transferred | $ | 3,200,000 | |||
Recognized amounts of identifiable assets acquired and liabilities assumed | |||||
Cash | $ | 364 | |||
Receivables | 155,060 | ||||
Accounts payable | (37,411 | ) | |||
Accrued liabilities | (11,302 | ) | |||
Deferred revenue | (2,860 | ) | |||
Convertible note payable | (150,000 | ) | |||
Total identifiable net liabilities | (46,149 | ) | |||
Goodwill | 3,246,149 | ||||
Total recognized amounts of identifiable assets acquired and liabilities assumed | $ | 3,200,000 | |||
The reverse acquisition was accounted for under the purchase method; accordingly, the purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair values as determined by Company management. As part of the assessment of the fair value of assets acquired, no intangible assets were recognized. Fair values were estimated by the Company's management based on information currently available and on current assumptions as to future operations. The primary reason for the reverse acquisition was to allow the Company to gain access to public markets. | |||||
Eurocan's revenues and net loss were not significant for the ten months ended October 31, 2014 and for the year ended December 31, 2013. | |||||
On February 3, 2015, the Company entered into a Separation and Share Transfer Agreement (Share Transfer) with MWWD under which substantially all assets and liabilities of MWWD were transferred to Michael Williams in consideration of MWWD's and Mr. Williams' full release of all claims and liabilities related to MWWD and the MWWD business. Following the Share Transfer, MWWD ceased to be a subsidiary of the Company. As a result of the terms of the Share Transfer, the Company determined that the goodwill recorded in connection with the Acquisition was impaired; accordingly, the Company recorded $3,246,149 of goodwill impairment in the accompanying consolidated statement of operations for the year ended December 31, 2014. | |||||
MWWD is an online marketing and media solutions firm specializing in digital interactive media. MWWD uses digital interactive media to efficiently carry out highly targeted advertising and marketing campaigns. | |||||
4_Inventories
4. Inventories | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Debt Disclosure [Abstract] | |||||||||
4. Inventories | 4 | Inventories | |||||||
Inventories consist of the following at December 31: | |||||||||
2014 | 2013 | ||||||||
Raw materials | $ | 116,318 | $ | 17,129 | |||||
Finished goods | 260,702 | 41,922 | |||||||
Total | $ | 377,020 | $ | 59,051 |
5_Property_and_Equipment
5. Property and Equipment | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Related Party Transactions [Abstract] | |||||||||
5. Property and Equipment | 5 | Property and Equipment | |||||||
Property and equipment consists of the following at December 31: | |||||||||
2014 | 2013 | ||||||||
Furniture and fixtures | $ | 48,585 | $ | 22,716 | |||||
Leasehold improvements | 5,487 | 5,487 | |||||||
Vehicles | 38,831 | - | |||||||
Total cost | 92,903 | 28,203 | |||||||
Less accumulated depreciation and amortization | (11,697 | ) | (5,808 | ) | |||||
Property and equipment - net | $ | 81,206 | $ | 22,395 | |||||
Depreciation and amortization expense totaled $5,889 and $2,790 for the years ended December 31, 2014 and 2013, respectively |
6_Notes_Payable
6. Notes Payable | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Equity [Abstract] | |||||||||
6. Notes Payable | 6 | Notes Payable | |||||||
Notes payable consists of the following at December 31: | |||||||||
2014 | 2013 | ||||||||
Unsecured note payable bearing interest at 7.00%. The note is payable in monthly interest only payments from May 1, 2012 through May 1, 2013, followed by principal and interest payments through May 1, 2015. Paid in full during 2014. | $ | - | $ | 2,301 | |||||
Unsecured note payable bearing interest at 6.00%. The note is payable in monthly principal plus interest payments of $1,079 beginning March 1, 2014. During 2014, this note payable was increased to $50,000 and the unpaid principal balance of $46,853 was converted to equity. | - | 30,000 | |||||||
Note payable bearing interest at 7.99%. The note is payable in monthly principal plus interest payments of $472 through December, 2020. The note is secured by a vehicle. | 26,831 | - | |||||||
Total notes payable | 26,831 | 32,301 | |||||||
Less current portion | (3,560 | ) | (2,301 | ) | |||||
Long-term portion of notes payable | $ | 23,271 | $ | 30,000 | |||||
Future annual principal repayments on notes payable are as follows for the years ended December 31: | |||||||||
2015 | $ | 3,560 | |||||||
2016 | 3,944 | ||||||||
2017 | 4,271 | ||||||||
2018 | 4,625 | ||||||||
2019 | 5,008 | ||||||||
Thereafter | 5,423 | ||||||||
Total | $ | 26,831 |
7_Convertible_Note_Payable
7. Convertible Note Payable | 12 Months Ended | ||
Dec. 31, 2014 | |||
Commitments and Contingencies Disclosure [Abstract] | |||
7. Convertible Note Payable | 7 | Convertible Note Payable | |
At December 31, 2014, convertible note payable consists of a $150,000 convertible note bearing interest at 5% per annum with a maturity date of June 13, 2015. The note may be converted into shares of the Company's common stock at a fixed conversion price of $0.40 per share. The note may be prepaid upon payment of 150% of the outstanding principal balance to the holder. |
8_Income_Taxes
8. Income Taxes | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Income Tax Disclosure [Abstract] | |||||
8. Income Taxes | 8 | Income Taxes | |||
At December 31, 2013, the Company was a limited liability company. As a limited liability company, all income tax effects of the Company's operations were passed through to its members individually, accordingly, the accompanying financial statements do not include any income tax effects for the Company at or for the year ended December 31, 2013. | |||||
The provision for income taxes for the year ended December 31, 2014 consists of current state minimum income taxes. | |||||
The provision for income taxes results in effective tax rates which are different than the federal income tax statutory rate. The nature of the differences for the year ended December 31, 2014 were as follows: | |||||
Expected federal income tax benefit | $ | (1,378,928 | ) | ||
State income taxes after credits | (266,684 | ) | |||
Change in valuation allowance | 138,579 | ||||
Permanent tax differences | 1,497,622 | ||||
Other | 10,911 | ||||
Total provision for income taxes | $ | 1,500 | |||
The components of the net deferred tax assets and liabilities at December 31, 2014 consisted of the following: | |||||
Deferred tax assets | |||||
Net operating loss carryforwards | $ | 148,927 | |||
Stock-based compensation | 4,060 | ||||
Total deferred tax assets | 152,987 | ||||
Deferred tax liabilities | |||||
Depreciation and amortization | (14,408 | ) | |||
Total deferred tax liabilities | (14,408 | ) | |||
Valuation allowance | (138,579 | ) | |||
Net deferred tax assets | $ | - | |||
At December 31, 2014, the Company has federal and state net operating loss carryforwards (NOLs) of approximately $367,000 and $366,000, respectively, 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 begins to expire in 2034, and the state NOLs begins to expire in 2029. | |||||
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. |
9_Commitments_and_Contingencie
9. Commitments and Contingencies | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Major Customers | |||||
9. Commitments and Contingencies | 9 | Commitments and Contingencies | |||
Operating Leases | |||||
The Company leases its warehouse, kiosks, and tasting room space under operating lease agreements which expire through October 2020. Monthly lease payments range from $1,300 to $24,000 over the terms of the leases. For operating leases which contain fixed escalations in rental payments, the Company records the total rent expense on a straight-line basis over the lease term. The difference between the expense computed on a straight-line basis and actual payments for rent represents deferred rent which is included within accrued liabilities on the accompanying consolidated balance sheets. Retail spaces under lease are subject to monthly percentage rent adjustments when gross sales exceed certain minimums. | |||||
At December 31, 2014, future minimum lease payments required under the operating leases are approximately as follows: | |||||
2015 | $ | 185,000 | |||
2016 | 294,000 | ||||
2017 | 254,000 | ||||
2018 | 266,000 | ||||
2019 | 278,000 | ||||
Thereafter | 240,000 | ||||
Total | $ | 1,517,000 | |||
Total rent expense was approximately $144,000 and $16,000 for the years ended December 31, 2014 and 2013, respectively. | |||||
Legal Matters | |||||
The Company is involved in certain legal matters arising from the ordinary course of business. Management does not believe that the outcome of these matters will have a significant effect on the Company's consolidated financial position or results of operations. |
10_Net_Loss_Income_per_Common_
10. Net (Loss) Income per Common Share | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Subsequent Events [Abstract] | |||||||||||||
10. Net (Loss) Income per Common Share | 10 | Net (Loss) Income per Common Share | |||||||||||
Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period, without considering any dilutive items. Diluted net (loss) income per common share is computed by dividing net (loss) income 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. There were no dilutive common shares at December 31, 2014 and 2013. The numerators and denominators used in computing basic and diluted net (loss) income per common share in 2014 and 2013 are as follows: | |||||||||||||
Net (Loss) | Weighted | Net (Loss) | |||||||||||
Income | Average | Income Per | |||||||||||
(Numerator) | Shares | Common | |||||||||||
(Denominator) | Share | ||||||||||||
2014 | |||||||||||||
Basic and diluted net loss per common share | $ | (4,057,171 | ) | 33,374,007 | $ | (0.12 | ) | ||||||
2013 | |||||||||||||
Basic and diluted net income per common share | $ | 86,986 | 32,000,000 | $ | 0 |
11_Related_Party_Transactions
11. Related Party Transactions | 12 Months Ended | ||
Dec. 31, 2014 | |||
Related Party Transactions [Abstract] | |||
11. Related Party Transactions | 11 | Related Party Transactions | |
During the year ended December 31, 2014, the Company's chief executive officer paid expenses on behalf of the Company on his personal credit card totaling approximately $345,000. These related party advances do not bear interest and are payable on demand. At December 31, 2014, the remaining balance due to the chief executive officer was approximately $3,000 and is included in accounts payable on the accompanying consolidated balance sheet. | |||
In December 2014, the Company's chief executive officer purchased 37,500 shares of common stock for $15,000. |
12_StockBased_Compensation
12. Stock-Based Compensation | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Compensation and Retirement Disclosure [Abstract] | |||||||||
12. Stock-Based Compensation | 12 | Stock-Based Compensation | |||||||
On October 21, 2014, per the terms of a consulting agreement, the Company agreed to issue options to purchase 1,000,000 shares of common stock to a third-party consultant at an exercise price of $0.40 per share in consideration of services to be rendered through October 2016. The options have not been registered under a formal option plan as of December 31, 2014. The options were formally issued on February 10, 2015. However, the Company has considered October 21, 2014 the grant date for accounting purposes because all of the requirements for establishing a grant date under GAAP were met at October 21, 2014 (a mutual understanding of the options' key terms and conditions was agreed to, the third-party consultant began providing the related services, and the options were approved by the Company's management which also comprise the Company's board of directors). The options became immediately vested on October 21, 2014 and are exercisable from February 10, 2015 until February 10, 2017. | |||||||||
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 is recognized on a straight-line basis over the requisite service period. 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 fair value of the Company's common stock on the date of grant was determined by management to be $0.40 per share based on the proximity of the grant date to the date of the Acquisition and the value used to determine the fair value of total consideration transferred for the Acquisition, as well as the price used in the Company's common stock offering which closed in December 2014. The expected term of the options was 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 was 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 the year ended December 31, 2014: | |||||||||
Risk-free interest rate | 0.1 | % | |||||||
Expected term (in years) | 1.29 | ||||||||
Dividend yield | - | ||||||||
Expected volatility | 70 | % | |||||||
The weighted-average grant-date fair value of stock options granted during the year ended December 31, 2014 was $0.12. For the year ended December 31, 2014, total stock-based compensation expense was $10,000. At December 31, 2014, the total compensation cost related to stock options not yet recognized was $110,000, which is expected to be recognized over a weighted-average period of approximately 1.83 years. This unrecognized compensation cost is included in prepaid expenses and other long-term assets in the accompanying consolidated balance sheet at December 31, 2014. | |||||||||
A summary of stock option activity at and for the year ended December 31, 2014 is presented below: | |||||||||
# of Options | Weighted- | ||||||||
Average | |||||||||
Exercise Price | |||||||||
Outstanding at December 31, 2013 | - | $ | - | ||||||
Options granted | 1,000,000 | 0.4 | |||||||
Options exercised | - | - | |||||||
Options canceled | - | - | |||||||
Outstanding at December 31, 2014 | 1,000,000 | 0.4 |
13_Subsequent_Events
13. Subsequent Events | 12 Months Ended | ||
Dec. 31, 2014 | |||
Subsequent Events [Abstract] | |||
13. Subsequent Events | 13 | Subsequent Events | |
On January 29, 2015, the Company adopted the 2015 Stock Incentive Plan. The total number of shares available for the grant of either stock options or compensation stock under the plan is 3,000,000 shares, subject to adjustment. | |||
At March 31, 2015, there are options to purchase 350,000 shares of common stock under this plan. |
2_Summary_of_Significant_Accou1
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended | ||
Dec. 31, 2014 | |||
Accounting Policies [Abstract] | |||
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation | ||
The accompanying consolidated financial statements have been 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. and its wholly-owned subsidiary MWWD. 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, marketing and distributing hand-crafted spirits, and operates as one segment. The Company's chief operating decision maker, its chief executive officer, reviews 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 consolidated 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 consolidated 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 | ||
The Company records revenue when all four of the following criteria are met: (i) there is persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. | |||
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, the Company recognizes sales upon the consignee’s (typically the OLCC) 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 location are recognized at the time of sale. | |||
Revenue received from online merchants who sell discounted gift certificates for the Company's merchandise and tastings is deferred until the customer has redeemed the discounted gift certificate or the gift certificate has expired, whichever occurs earlier. | |||
Cost of Sales | Cost of Sales | ||
Cost of sales consists of the costs of ingredients utilized in the production of spirits, contract production fees, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by contract production fees and packaging. | |||
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, 2014 and 2013. | |||
Concentrations | Concentrations | ||
The Company sells to third-party resellers and performs ongoing credit evaluations of trade receivables due from third-party resellers. Generally, the Company does not require collateral. An allowance for doubtful accounts is determined with respect to those amounts that the Company has determined to be doubtful of collection using specific identification of doubtful accounts and an aging of receivables analysis based on invoice due dates. Generally, trade receivables are past due after 30 days after an invoice date, unless special payment terms are provided. The Company did not record an allowance for doubtful accounts at December 31, 2014 and 2013. | |||
The Company relies on a limited number of suppliers for the ingredients used in producing its products. In order to mitigate any adverse impact from a disruption of supply, the Company attempts to maintain an adequate supply of ingredients and believes that other vendors would be able to provide similar ingredients if supplies were disrupted. | |||
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. At December 31, 2014 and 2013, one distributor, the OLCC, represented 70% and 63% of trade receivables, respectively. Sales to one distributor, the OLCC, accounted for approximately 40% of our consolidated revenues for each of the years ended December 31, 2014 and 2013. | |||
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, 2014 and 2013, management has elected to not 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 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, 2014 and 2013. 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, notes 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, 2014 and 2013, the Company’s notes payable and convertible note payable are at fixed rates and their carrying value approximates fair value. | |||
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 the OLCC 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 has recorded no write-downs of inventory for the years ended December 31, 2014 and 2013. | |||
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 two 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. | |||
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. | |||
Goodwill | Goodwill | ||
Goodwill is initially recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identifiable tangible and intangible assets acquired. Goodwill is presumed to have an indefinite useful life and is analyzed annually for impairment. An annual review is performed during the fourth quarter of each fiscal year, or more frequently if indicators of potential impairment exist, to determine if the recorded goodwill is impaired. At December 31, 2014, the Company determined that its goodwill recorded as a result of the Acquisition was fully impaired (see note 3). | |||
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, 2014, the Company established a valuation allowance 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 percent 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, 2014 and 2013. | |||
The Company files federal income tax returns in the U.S. 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 2011. | |||
Advertising | Advertising | ||
Advertising costs are expensed as incurred. Advertising expense was approximately $303,000 and $56,000 for the years ended December 31, 2014 and 2013, respectively, and is included in selling, general, and administrative expenses in the accompanying consolidated statements of operations. | |||
Comprehensive Income | Comprehensive Income | ||
Comprehensive (loss) income consists of net (loss) income and other comprehensive income. The Company does not have any reconciling other comprehensive income items for the years ended December 31, 2014 and 2013. | |||
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 alcohol 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. | |||
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 as the underlying stock-based awards vest. | |||
Recent Accounting Pronouncements | Recent Accounting Pronouncements | ||
The Financial Accounting Standards Board has recently issued various Accounting Standards Updates, most of which represent technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations, or cash flows. |
3_Acquisition_Table
3. Acquisition (Table) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Assets acquired and liabilities assumed | The following tables summarize the consideration paid for Eurocan and the recognized amounts of identifiable assets acquired and liabilities assumed on the date of the Acquisition: | ||||
Consideration | |||||
Shares issued (8,000,000) to effect reverse acquisition | $ | 3,200,000 | |||
Fair value of total consideration transferred | $ | 3,200,000 | |||
Recognized amounts of identifiable assets acquired and liabilities assumed | |||||
Cash | $ | 364 | |||
Receivables | 155,060 | ||||
Accounts payable | (37,411 | ) | |||
Accrued liabilities | (11,302 | ) | |||
Deferred revenue | (2,860 | ) | |||
Convertible note payable | (150,000 | ) | |||
Total identifiable net liabilities | (46,149 | ) | |||
Goodwill | 3,246,149 | ||||
Total recognized amounts of identifiable assets acquired and liabilities assumed | $ | 3,200,000 |
4_Inventories_Table
4. Inventories (Table) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Inventories | Inventories consist of the following at December 31: | ||||||||
2014 | 2013 | ||||||||
Raw materials | $ | 116,318 | $ | 17,129 | |||||
Finished goods | 260,702 | 41,922 | |||||||
Total | $ | 377,020 | $ | 59,051 |
5_Property_and_Equipment_Table
5. Property and Equipment (Table) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Related Party Transactions [Abstract] | |||||||||
Property and equipment net | Property and equipment consists of the following at December 31: | ||||||||
2014 | 2013 | ||||||||
Furniture and fixtures | $ | 48,585 | $ | 22,716 | |||||
Leasehold improvements | 5,487 | 5,487 | |||||||
Vehicles | 38,831 | - | |||||||
Total cost | 92,903 | 28,203 | |||||||
Less accumulated depreciation and amortization | (11,697 | ) | (5,808 | ) | |||||
Property and equipment - net | $ | 81,206 | $ | 22,395 |
6_Notes_Payable_Table
6. Notes Payable (Table) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Equity [Abstract] | |||||||||
Notes payable | Notes payable consists of the following at December 31: | ||||||||
2014 | 2013 | ||||||||
Unsecured note payable bearing interest at 7.00%. The note is payable in monthly interest only payments from May 1, 2012 through May 1, 2013, followed by principal and interest payments through May 1, 2015. Paid in full during 2014. | $ | - | $ | 2,301 | |||||
Unsecured note payable bearing interest at 6.00%. The note is payable in monthly principal plus interest payments of $1,079 beginning March 1, 2014. During 2014, this note payable was increased to $50,000 and the unpaid principal balance of $46,853 was converted to equity. | - | 30,000 | |||||||
Note payable bearing interest at 7.99%. The note is payable in monthly principal plus interest payments of $472 through December, 2020. The note is secured by a vehicle. | 26,831 | - | |||||||
Total notes payable | 26,831 | 32,301 | |||||||
Less current portion | (3,560 | ) | (2,301 | ) | |||||
Long-term portion of notes payable | $ | 23,271 | $ | 30,000 | |||||
Annual principal repayments on notes payable | Future annual principal repayments on notes payable are as follows for the years ended December 31: | ||||||||
2015 | $ | 3,560 | |||||||
2016 | 3,944 | ||||||||
2017 | 4,271 | ||||||||
2018 | 4,625 | ||||||||
2019 | 5,008 | ||||||||
Thereafter | 5,423 | ||||||||
Total | $ | 26,831 |
8_Income_Taxes_Table
8. Income Taxes (Table) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Income Tax Disclosure [Abstract] | |||||
Provision for income taxes | The provision for income taxes results in effective tax rates which are different than the federal income tax statutory rate. The nature of the differences for the year ended December 31, 2014 were as follows: | ||||
Expected federal income tax benefit | $ | (1,378,928 | ) | ||
State income taxes after credits | (266,684 | ) | |||
Change in valuation allowance | 138,579 | ||||
Permanent tax differences | 1,497,622 | ||||
Other | 10,911 | ||||
Total provision for income taxes | $ | 1,500 | |||
Net deferred tax assets and liabilities | The components of the net deferred tax assets and liabilities at December 31, 2014 consisted of the following: | ||||
Deferred tax assets | |||||
Net operating loss carryforwards | $ | 148,927 | |||
Stock-based compensation | 4,060 | ||||
Total deferred tax assets | 152,987 | ||||
Deferred tax liabilities | |||||
Depreciation and amortization | (14,408 | ) | |||
Total deferred tax liabilities | (14,408 | ) | |||
Valuation allowance | (138,579 | ) | |||
Net deferred tax assets | $ | - |
9_Commitments_and_Contingencie1
9. Commitments and Contingencies (Table) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Major Customers | |||||
Operating leases | At December 31, 2014, future minimum lease payments required under the operating leases are approximately as follows: | ||||
2015 | $ | 185,000 | |||
2016 | 294,000 | ||||
2017 | 254,000 | ||||
2018 | 266,000 | ||||
2019 | 278,000 | ||||
Thereafter | 240,000 | ||||
Total | $ | 1,517,000 |
10_Net_Loss_Income_per_Common_1
10. Net (Loss) Income per Common Share (Table) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Subsequent Events [Abstract] | |||||||||||||
Basic and diluted net (loss) income per common share | The numerators and denominators used in computing basic and diluted net (loss) income per common share in 2014 and 2013 are as follows: | ||||||||||||
Net (Loss) | Weighted | Net (Loss) | |||||||||||
Income | Average | Income Per | |||||||||||
(Numerator) | Shares | Common | |||||||||||
(Denominator) | Share | ||||||||||||
2014 | |||||||||||||
Basic and diluted net loss per common share | $ | (4,057,171 | ) | 33,374,007 | $ | (0.12 | ) | ||||||
2013 | |||||||||||||
Basic and diluted net income per common share | $ | 86,986 | 32,000,000 | $ | 0 |
12_StockBased_Compensation_Tab
12. Stock-Based Compensation (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Compensation and Retirement Disclosure [Abstract] | |||||||||
Black-Scholes assumptions in arriving at the fair value | The following weighted-average assumptions were used in the Black-Scholes valuation model for the year ended December 31, 2014: | ||||||||
Risk-free interest rate | 0.1 | % | |||||||
Expected term (in years) | 1.29 | ||||||||
Dividend yield | - | ||||||||
Expected volatility | 70 | % | |||||||
Schedule of Stock Option activity | A summary of stock option activity at and for the year ended December 31, 2014 is presented below: | ||||||||
# of Options | Weighted- | ||||||||
Average | |||||||||
Exercise Price | |||||||||
Outstanding at December 31, 2013 | - | $ | - | ||||||
Options granted | 1,000,000 | 0.4 | |||||||
Options exercised | - | - | |||||||
Options canceled | - | - | |||||||
Outstanding at December 31, 2014 | 1,000,000 | 0.4 |
1_Description_of_Business_Orga1
1. Description of Business, Organization, and Liquidity (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Impairment of goodwill | $3,246,149 | ||
Cash flow from operations | -1,083,809 | 22,217 | |
Net proceeds from the issuance of common stock | 2,158,152 | ||
Cash on hand | 1,082,290 | 29,784 | 23,045 |
Acquisition description | The merger consideration for the Acquisition consisted of 32,000,000 shares of Eurocan's common stock. In addition, certain of Eurocan's stockholders cancelled an aggregate of 24,910,000 shares of Eurocan's common stock held by them. As a result, on October 31, 2014, Eurocan had 40,000,000 shares of common stock issued and outstanding, of which 32,000,000 shares were held by the former members of the LLC. | ||
Net Loss | ($4,057,171) | $86,986 |
2_Summary_of_Significant_Accou2
2. Summary of Significant Accounting Policies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Accounting Policies [Abstract] | ||
Allowance for doubtful accounts | $0 | $0 |
Advertising expense | 303,000 | 56,000 |
Percentage of trade receivables | 70.00% | 63.00% |
Percentage of sales | 40.00% | 40.00% |
Unrecognized income tax benefits | $0 | $0 |
3_Acquisition_Details
3. Acquisition (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Consideration | |
Shares issued (8,000,000) to effect reverse acquisition | $3,200,000 |
Fair value of total consideration transferred | 3,200,000 |
Recognized amounts of identifiable assets acquired and liabilities assumed | |
Cash | 364 |
Receivables | 155,060 |
Accounts payable | -37,411 |
Accrued liabilities | -11,302 |
Deferred revenue | -2,860 |
Convertible note payable | -150,000 |
Total identifiable net liabilities | -46,149 |
Goodwill | 3,246,149 |
Total recognized amounts of identifiable assets acquired and liabilities assumed | $3,200,000 |
3_Acquisition_Details_Narrativ
3. Acquisition (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Goodwill impairment | $3,246,149 |
Shares Issued | 8,000,000 |
4_Inventories_Details
4. Inventories (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Debt Disclosure [Abstract] | ||
Raw materials | $116,318 | $17,129 |
Finished goods | 260,702 | 41,922 |
Total | $377,020 | $59,051 |
5_Property_and_Equipment_Detai
5. Property and Equipment (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Related Party Transactions [Abstract] | ||
Furniture and fixtures | $48,585 | $22,716 |
Leasehold improvements | 5,487 | 5,487 |
Vehicles | 38,831 | |
Total cost | 92,903 | 28,203 |
Less accumulated depreciation and amortization | -11,697 | -5,808 |
Property and equipment net | $81,206 | $22,395 |
5_Property_and_Equipment_Detai1
5. Property and Equipment (Details Narrative) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Related Party Transactions [Abstract] | ||
Depreciation and amortization expense | $5,889 | $2,790 |
6_Notes_Payable_Details
6. Notes Payable (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Equity [Abstract] | ||
Unsecured note payable bearing interest at 7.00%. The note is payable in monthly interest only payments from May 1, 2012 through May 1, 2013, followed by principal and interest payments through May 1, 2015. Paid in full during 2014. | $2,301 | |
Unsecured note payable bearing interest at 6.00%. The note is payable in monthly principal plus interest payments of $1,079 beginning March 1, 2014. During 2014, this note payable was increased to $50,000 and the unpaid principal balance of $46,853 was converted to equity. | 30,000 | |
Note payable bearing interest at 7.99%. The note is payable in monthly principal plus interest payments of $472 through December, 2020. The note is secured by a vehicle. | 26,831 | |
Total notes payable | 26,831 | 32,301 |
Less current portion | -3,560 | -2,301 |
Long-term portion of notes payable | $23,271 | $30,000 |
6_Notes_Payable_Details_1
6. Notes Payable (Details 1) (USD $) | Dec. 31, 2014 |
Equity [Abstract] | |
2015 | $3,560 |
2016 | 3,944 |
2017 | 4,271 |
2018 | 4,625 |
2019 | 5,008 |
Thereafter | 5,423 |
Total | $26,831 |
6_Notes_Payable_Details_Narrat
6. Notes Payable (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Note payable bearing interest | 7.99% | |
Proceeds from Note payable | $472 | |
Increased Note payable | 165,713 | 10,976 |
Convertible Notes Payabl | 150,000 | |
Unsecured Note Payable 1 [Member ] | ||
Note payable bearing interest | 7.00% | |
Unsecured Note Payable Two [Member] | ||
Note payable bearing interest | 6.00% | |
Proceeds from Unsecured Note payable | 1,079 | |
Increased Note payable | 50,000 | |
Convertible Notes Payabl | $46,853 |
7_Convertible_Note_Payable_Dea
7. Convertible Note Payable (Deatils Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Convertible note payable | $150,000 |
Convertible note payable interest rate | 7.99% |
Notes payable conversion price per share | $0.40 |
Percentage of outstanding principal of notes payable amount | 150.00% |
Convertible Notes Payable [Member] | |
Convertible note payable interest rate | 5.00% |
8_Income_Taxes_Details
8. Income Taxes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ||
Expected federal income tax benefit | ($1,378,928) | |
State income taxes after credits | -266,684 | |
Change in valuation allowance | 138,579 | |
Permanent tax differences | 1,497,622 | |
Other | 10,911 | |
Total provision for income taxes | $1,500 |
8_Income_Taxes_Details_1
8. Income Taxes (Details 1) (USD $) | Dec. 31, 2014 |
Income Tax Disclosure [Abstract] | |
Net operating loss carryforwards | $148,927 |
Stock-based compensation | 4,060 |
Total deferred tax assets | 152,987 |
Deferred tax liabilities | |
Depreciation and amortization | -14,408 |
Total deferred tax liabilities | -14,408 |
Valuation allowance | -138,579 |
Net Deferred Tax Asset | $0 |
8_Income_Taxes_Details_Narrati
8. Income Taxes (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Net operating loss carryforward | $367,000 | $366,000 |
Net operating loss begins and expire year (federal) | 2034 | |
Net operating loss begins and expire year (State) | 2029 | |
Minimum [Member] | ||
Federal and state net operating loss period | 15 years | |
Maximum [Member] | ||
Federal and state net operating loss period | 20 years |
9_Commitments_and_Contingencie2
9. Commitments and Contingencies (Details) (USD $) | Dec. 31, 2014 |
Major Customers | |
2015 | $185,000 |
2016 | 294,000 |
2017 | 254,000 |
2018 | 266,000 |
2019 | 278,000 |
Thereafter | 240,000 |
Total | $1,517,000 |
9_Commitments_and_Contingencie3
9. Commitments and Contingencies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Rent expense | $144,000 | $16,000 |
Operating lease agreements Expire | Oct-20 | |
Minimum [Member] | ||
Monthly lease payments | 1,300 | |
Maximum [Member] | ||
Monthly lease payments | $24,000 |
10_Net_Loss_Income_per_Common_2
10. Net (Loss) Income per Common Share (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net (Loss) Income | ($4,057,171) | $86,986 |
Weighted Average Shares | 33,374,007 | 32,000,000 |
Basic and diluted net loss per common share | ($0.12) | $0 |
10_Net_Loss_Income_per_Common_3
10. Net (Loss) Income per Common Share (Details Narrative) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Dilutive common shares | 0 | 0 |
11_Related_Party_Transactions_
11. Related Party Transactions (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Amount due to related party | $3,000 |
Credit card expenses paid | 345,000 |
Chief Financial Officer [Member] | |
Common Stock Purchased | 37,500 |
Common Stock, Share Value | $15,000 |
12_StockBased_Compensation_Det
12. Stock-Based Compensation (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Compensation and Retirement Disclosure [Abstract] | |
Risk-free interest rate | 0.10% |
Expected term (in years) | 1 year 3 months 15 days |
Dividend yield | 0.00% |
Expected volatility | 70.00% |
12_StockBased_Compensation_Det1
12. Stock-Based Compensation (Details 1) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Compensation and Retirement Disclosure [Abstract] | |
Beginning, balance Number of Options | |
Number of Options Granted | 1,000,000 |
Number of Options Exercised | |
Number of Options cancelled | |
Ending Balance Number of Options | 1,000,000 |
Beginning, balance Weighted Average Exercise Price | |
Weighted Average Exercise Price Granted | $0.40 |
Weighted Average Exercise Price Exercised | |
Weighted Average Exercise Price cancelled | |
Ending balance Weighted Average Exercise Price | $0.40 |
12_StockBased_Compensation_Det2
12. Stock-Based Compensation (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Compensation and Retirement Disclosure [Abstract] | |
Weighted-average grant-date fair value of stock options granted | $0.12 |
Stock-based compensation expense | $10,000 |
Compensation cost related to stock options not yet recognized | $110,000 |
Period of compensation cost related to stock options not yet recognized | 1 year 9 months 29 days |
Number of common stock purchase under plan | 1,000,000 |
Excercise price of common stock per share | $0.40 |
13_Subsequent_Events_Details_N
13. Subsequent Events (Details Narrative) | 12 Months Ended |
Dec. 31, 2014 | |
Number of common stock purchase under plan | 1,000,000 |
Subsequent Event [Member] | |
Shares available for the grant ofstock options or compensation stock under the plan | 3,000,000 |
Number of common stock purchase under plan | 350,000 |