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8. SEGMENT REPORTING
 9 Months Ended
Sep. 30, 2016
Segment Reporting [Abstract]  
NOTE 8. SEGMENT REPORTING

The Company has identified two operating segments, Direct Sales and Distributor Sales, based upon their different distribution channels, margins and selling strategies. Direct Sales includes retail sales in the tasting room and remote sites, Wine Club sales, on-site events, kitchen and catering sales and other sales made directly to the consumer without the use of an intermediary, including sales of bulk wine or grapes. Distributor Sales include all sales through a third party where prices are given at a wholesale rate.

 

The two segments reflect how the Company’s operations are evaluated by senior management and the structure of its internal financial reporting. The Company evaluates performance based on the gross profit of the respective business segments. Selling expenses that can be directly attributable to the segment, including depreciation of segment specific assets, are included, however, centralized selling expenses and general and administrative expenses are not allocated between operating segments. Therefore, net income information for the respective segments is not available. Discrete financial information related to segment assets, other than segment specific depreciation associated with selling, is not available and that information continues to be aggregated.

 

The following table outlines the sales, cost of sales, gross margin, directly attributable selling expenses, and contribution margin of the segments for the three and nine month periods ending September 30, 2016 and 2015. Sales figures are net of related excise taxes.

 

    Three Months Ended September 30,              
    Direct Sales         Distributor Sales       Total      
    2016     2015     2016     2015     2016     2015  
                                     
Sales, net   $ 2,052,390     $ 1,767,638     $ 2,689,321     $ 2,476,881     $ 4,741,711     $ 4,244,519  
Cost of Sales     633,116       541,918       1,067,344       1,066,650       1,700,460       1,608,568  
Gross Margin     1,419,274       1,225,720       1,621,977       1,410,231       3,041,251       2,635,951  
Selling Expenses     808,761       797,073       361,004       369,632       1,169,765       1,166,705  
Contribution Margin   $ 610,513     $ 428,647     $ 1,260,973     $ 1,040,599     $ 1,871,486     $ 1,469,246  
Percent of Sales     43.3 %     41.6 %     56.7 %     58.4 %     100.0 %     100.0 %

 

    Nine Months Ended September 30,              
    Direct Sales         Distributor Sales       Total      
    2016     2015     2016     2015     2016     2015  
                                     
Sales, net   $ 5,019,220     $ 5,150,223     $ 8,545,288     $ 7,727,951     $ 13,564,508     $ 12,878,174  
Cost of Sales     1,328,828       1,556,335       3,671,080       3,622,201       4,999,908       5,178,536  
Gross Margin     3,690,392       3,593,888       4,874,208       4,105,750       8,564,600       7,699,638  
Selling Expenses     2,332,103       2,225,678       1,189,349       1,170,875       3,521,452       3,396,553  
Contribution Margin   $ 1,358,289     $ 1,368,210     $ 3,684,859     $ 2,934,875     $ 5,043,148     $ 4,303,085  
Percent of Sales     37.0 %     40.0 %     63.0 %     60.0 %     100.0 %     100.0 %

 

Direct sales include $148,752 and $6,690 of bulk wine sales in the three months ended September 30, 2016 and 2015, respectively. Direct sales include $148,752 and $645,653 of bulk wine sales in the nine months ended September 30, 2016 and 2015, respectively.