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8. SEGMENT REPORTING

9 Months Ended

Sep. 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 nine month periods ending September 30, 2018 and 2017. Sales figures are net of related excise taxes.

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

Sales, net		$	2,333,721			$	2,263,453			$	3,127,318			$	2,880,135			$	5,461,039			$	5,143,588
Cost of Sales			542,154				555,817				1,376,714				1,206,397				1,918,868				1,762,214
Gross Margin			1,791,567				1,707,636				1,750,604				1,783,501				3,542,171				3,381,374
Selling Expenses			1,073,089				1,022,807				554,408				423,433				1,627,497				1,446,240
Contribution Margin		$	718,478			$	684,829			$	1,196,196			$	1,331,200			$	1,914,674			$	1,935,134
Percent of Sales			42.7	%			44.0	%			57.3	%			56.0	%			100.0	%			100.0	%

		Nine Months Ended September 30,
		Direct Sales								Distributor Sales								Total
		2018				2017				2018				2017				2018				2017

Sales, net		$	6,237,364			$	5,747,579			$	9,577,586			$	9,160,338			$	15,814,950			$	14,907,917
Cost of Sales			1,580,697				1,510,003				4,079,732				4,084,741				5,660,429				5,594,744
Gross Margin			4,656,667				4,237,576				5,497,854				5,075,597				10,154,521				9,313,173
Selling Expenses			3,089,948				2,742,294				1,550,114				1,351,216				4,640,062				4,093,510
Contribution Margin		$	1,566,719			$	1,495,282			$	3,947,740			$	3,724,381			$	5,514,459			$	5,219,663
Percent of Sales			39.4	%			38.6	%			60.6	%			61.4	%			100.0	%			100.0	%

Direct sales include $66,420 and $30,624 of bulk wine sales in the three months ended September 30, 2018 and 2017, respectively. Direct sales include $201,390 and $194,412 of bulk wine sales in the nine months ended September 30, 2018 and 2017, respectively.