Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

Operating Leases

The Company leases its warehouse, kiosks and tasting room space under operating lease agreements, which expire through October 2021. Monthly lease payments range from $1,802 to $6,400 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 September 30, 2017, future minimum lease payments required under the operating leases are approximately as follows:

2017	$	82,000
2018		133,000
2019		114,000
2020		96,000
2021		64,000
Thereafter		-
Total	$	489,000

Total rent expense was $248,535 and $304,000 for the nine months ended September 30, 2017 and 2016, respectively.

On February 7, 2017, we entered into a Lease Termination Agreement with PJM BLDG. II LLC (the “Termination Agreement”), the landlord of our current headquarters and production facilities located at 1805 SE Martin Luther King Jr. Blvd., Portland, Oregon. The Termination Agreement provides that the original lease agreement dated July 17, 2014 terminated on June 30, 2017 rather than October 30, 2020.

Legal Matters

Except as described below, we are not currently subject to any material legal proceedings, however we could be subject to legal proceedings and claims from time to time in the ordinary course of our business. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and divert management resources.

On October 10, 2017, we received a letter from a law firm purporting to represent a Company stockholder named Jason Price. The letter stated that such representative was launching an “investigation” into certain grants of stock options and restricted stock units that exceeded applicable limits under the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) (collectively, the “Additional Grants”). The representative stated the belief that the Board had violated the terms of the 2016 Plan by approving the Additional Grants, and such approval constituted a breach of fiduciary duty and possible evidence of material weaknesses in internal controls. The Board rejects any such contentions. Although we acknowledge that the Additional Grants were made despite the stated limits in the 2016 Plan, we believe that the Additional Grants were in the best interests of our stockholders. We believe that our existing corporate governance mechanisms are sufficiently robust as to be able to review and take a proper response to Mr. Price’s letter. We are seeking stockholder approval of the Additional Grants and of certain amendments to the 2016 Plan to increase such limits at the upcoming annual stockholder meeting on December 8, 2017.