Stockholder's Equity

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Stockholder's Equity

14. Stockholder’s Equity

	Common Stock				Paid-in			Accumulated			Total Stockholders’
	Shares		Amount		Capital			Deficit			Equity
Balance, December 31, 2018		8,764,085	$	876	$	45,888,872		$	(27,138,630	)	$	18,751,118
Issuance of common stock in exchange for services by third parties		-		-		26,862			-			26,862
Issuance of common stock for services by employees		63,978		7		376,975			-			376,985
Issuance of common stock for purchase Craft Canning + Bottling, LLC		338,212		34		2,079,970			-			2,080,004
Stock option exercises		1,077		-		-			-			-
Stock-based compensation		-		-		395,561			-			395,561
Net issuance to settle RSUs		-		-		(32,290	)		-			(32,290	)
Adjustment to accumulated deficit for adoption of ASC 842		-		-		-			(187,353	)		(187,353	)
Contributed capital		-		-		14,000			-			14,000
Net loss attributable to common shareholders		-		-		-			(5,891,926	)		(5,891,926	)
Balance, June 30, 2019		9,167,352		917		48,794,950		$	(33,217,909	)	$	15,532,958

Issuance of Common Stock

On January 11, 2019, the Company issued 338,212 shares of common stock in connection with the acquisition of Craft Canning for a total consideration of $2,080,004.

During the first half of 2019, the Company issued 63,978 shares of common stock to directors, employees and consultants for stock-based compensation of $376,982. The shares were valued using the closing share price of our common stock on the date of grant, within the range of $4.47 - $6.13 per share.

In April 2019, the Company issued 1,077 shares of common stock in connection with existing option exercises at an exercise price of $3.99.

Issuance of Convertible Preferred Stock

Each share of Series A Preferred has a stated value of $1,000, which is convertible into shares of the Company’s common stock at a fixed conversion price equal to $4.50 per share. The Series A Preferred accrue dividends at a rate of 8% per annum, cumulative. Dividends are payable quarterly in arrears at the Company’s option either in cash or “in kind” in shares of common stock; provided, however that dividends may only be paid in cash following the fiscal year in which the Company has net income (as shown in its audited financial statements contained in its Annual Report on Form 10-K for such year) of at least $500,000, to the extent permitted under applicable law out of funds legally available therefore. For “in-kind” dividends, holders will receive that number of shares of common stock equal to (i) the amount of the dividend payment due such shareholder divided by (ii) 90% of the average of the per share market values during the twenty (20) trading days immediately preceding the dividend date.

In the event of any voluntary or involuntary liquidation, dissolution or winding up, or sale of the Company, each holder of Series A Preferred is entitled to receive its pro rata portion of an aggregate payment equal to: (i) $1,000 multiplied by (ii) the total number of shares of Series A Preferred issued under the Series A Certificate of Designation multiplied by (iii) 2.5.

For all matters submitted to a vote of the Company’s shareholders, the holders of the Series A Preferred as a class have an aggregate number of votes equal to the product of (x) the number of shares of Common Stock (rounded to the nearest whole number) into which the total shares of Series A Preferred Stock issued under the Series A Certificate of Designation on such date of determination are convertible multiplied by (y) 2.5 (the “Total Series A Votes”), with each holder of Series A Preferred entitled to vote its pro rata portion of the Total Series A Votes. Holders of Common Stock do not have cumulative voting rights. In addition, the holders of Series A Preferred vote separately a class to change any of the rights, preferences and privileges of the Series A Preferred.

As of June 30, 2019, the Company has zero shares of preferred stock outstanding.

Stock-Based Compensation

On September 8, 2016, the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”). Pursuant to the terms of the plan, on January 1, 2019, the number of shares available for grant under the 2016 Plan reset to 2,030,775 shares, equal to 8% of the number of outstanding shares of the Company’s capital stock, calculated on an as-converted basis, on December 31 of the preceding calendar year, and then added to the prior year plan amount. As of June 30, 2019, there have been 983,249 options and 289,758 restricted stock units (“RSUs”) issued under the 2016 Plan, with vesting schedules varying between immediate and five (5) years from the grant date.

On January 29, 2015, the Company adopted the 2015 Stock Incentive Plan (the “2015 Plan” and, together with the 2016 Plan, the “Plans”). The total number of shares available for the grant of either stock options or compensation stock under the 2015 Plan is 50,000 shares, subject to adjustment. The exercise price per share of each stock option will not be less than 20 percent of the fair market value of the Company’s common stock on the date of grant. At June 30, 2019, there were 49,584 options issued under the Plan outstanding, which options vest at the rate of at least 25 percent in the first year, starting six months after the grant date, and 75% in year two.

The Company also issues, from time to time, options that are not registered under a formal option plan. At June 30, 2019, there were no options outstanding that were not issued under the Plans.

A summary of all stock option activity at and for the six months ended June 30, 2019 is presented below:

	# of Options			Weighted- Average Exercise Price
Outstanding at December 31, 2018		895,858		$	5.62
Options granted		79,000		$	5.03
Options exercised		(3,167	)	$	4.04
Options canceled		(32,334	)	$	4.73
Outstanding at June 30, 2019		939,357		$	5.61
Exercisable at June 30, 2019		545,521		$	5.69

The aggregate intrinsic value of options outstanding at June 30, 2019 was $232,310.

At June 30, 2019, there were 415,085 unvested options with an aggregate grant date fair value of $1,054,563. The unvested options will vest in accordance with the vesting schedule in each respective option agreement, which varies between immediate and five (5) years from the grant date. The aggregate intrinsic value of unvested options at June 30, 2019 was $86,599. During the six months ended June 30, 2019, 117,808 options vested and became exercisable.

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 issued to employees is recognized on a straight-line basis over the requisite service period. 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. 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 expected term of the options is 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 is 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 options granted during the six months ended June 30, 2019:

Risk-free interest rate	2.22	%
Expected term (in years)	6.5
Dividend yield	-
Expected volatility	31	%

The weighted-average grant-date fair value per share of stock options granted during the six months ended June 30, 2019 was $1.80. The aggregate grant date fair value of the 79,000 options granted during the six months ended June 30, 2019 was $142,189.

For the six months ended June 30, 2019 and 2018, total stock compensation expense related to stock options was $395,561 and $398,615 respectively. At June 30, 2019, the total compensation cost related to stock options not yet recognized is approximately $935,755, which is expected to be recognized over a weighted-average period of approximately 2.01 years.

Warrants

During the six months ended June 30, 2019, the Company issued an aggregate of 146,262 common stock warrants in connection with the acquisition of Craft Canning on January 11, 2019. These warrants are subject to the continuation of a consulting agreement and are not part of the purchase price of the acquisition. The Company has determined the warrants should be classified as equity on the condensed consolidated balance sheet as of June 30, 2019. The estimated fair value of the warrants at issuance was $133,537, based on a combination of closing market trading price on the date of issuance for the public offering warrants, and the Black-Scholes option-pricing model using the weighted-average assumptions below:

Volatility		31	%
Risk-free interest rate		2.51	%
Expected term (in years)		3.0
Expected dividend yield		-
Fair value of common stock	$	6.10

No warrants were exercised during the six months ended June 30, 2019.

A summary of activity in warrants is as follows:

	Warrants		Weighted Average Remaining Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at December 31, 2018		1,083,435		1.04 years	$	6.83	$	-
Six months ended June 30, 2019:
Granted		146,262		2.50 years	$	7.80	$	-
Exercised		-		-	$	-	$	-
Forfeited and cancelled		-		-	$	-	$	-
Outstanding at June 30, 2019		1,229,697		1.02 years	$	6.95	$	-