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8. SEGMENT REPORTING

6 Months Ended

Jun. 30, 2018

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 six month periods ending June 30, 2018 and 2017. Sales figures are net of related excise taxes.

		Three Months Ended June 30,
		Direct Sales								Distributor Sales								Total
		2018				2017				2018				2017				2018				2017

Sales, net		$	2,353,487			$	1,995,008			$	3,467,805			$	3,318,776			$	5,821,292			$	5,313,784
Cost of Sales			650,359				589,575				1,448,827				1,535,275				2,099,186				2,124,850
Gross Margin			1,703,128				1,405,433				2,018,978				1,783,501				3,722,106				3,188,934
Selling Expenses			1,030,106				862,458				545,403				452,301				1,575,509				1,314,759
Contribution Margin		$	673,022			$	542,975			$	1,473,575			$	1,331,200			$	2,146,597			$	1,874,175
Percent of Sales			40.4	%			37.5	%			59.6	%			62.5	%			100.0	%			100.0	%

		Six Months Ended June 30,
		Direct Sales								Distributor Sales								Total
		2018				2017				2018				2017				2018				2017

Sales, net		$	3,903,643			$	3,484,127			$	6,450,268			$	6,280,202			$	10,353,911			$	9,764,329
Cost of Sales			1,038,543				954,186				2,703,018				2,878,344				3,741,561				3,832,530
Gross Margin			2,865,100				2,529,941				3,747,250				3,401,858				6,612,350				5,931,799
Selling Expenses			2,016,858				1,719,463				995,706				927,783				3,012,564				2,647,246
Contribution Margin		$	848,242			$	810,478			$	2,751,544			$	2,474,075			$	3,599,786			$	3,284,553
Percent of Sales			37.7	%			35.7	%			62.3	%			64.3	%			100.0	%			100.0	%

Direct sales include $134,970 and $155,538 of bulk wine sales in the three months ended June 30, 2018 and 2017, respectively. Direct sales include $134,970 and $163,788 of bulk wine sales in the six months ended June 30, 2018 and 2017, respectively.