Details
1 | In our first competition, we won "Best In Show" for Gin, "Gin of the Year" and "Vodka of the Year." We've since won a dozen more awards. |
2 | Skeptic Gin was rated one of the Top 100 Spirits in the World by Wine Enthusiast in December 2019 |
3 | Skeptic spirits capture and retain the freshness of our base ingredients by distilling at colder, more natural temperatures. |
4 | We are expanding rapidly, including 4 new markets in Q1 2020, which will expand our customer base and revenues. |
5 | We will achieve break even later this year at approx. 200 cases sold per month, or about $180,000 annual sales, just from vodka and gin. |
6 | Our craft beer whiskey will catapult us to profitability rapidly. Demand is high and our whiskey creates a new niche in the space. |
7 | Our founder has a history of success. He turned a company on the edge of bankruptcy into the industry leader with over 80% market share. |
8 | We are self-funded, with zero bank/investor debt. In the past 12 months, we've had revenues of $53K despite no distribution until May. |
I always thought that most liquor tasted too harsh. As an avid home brewer, I knew that fresh beer tasted better than mass produced, pasteurized beer. I wondered if there was a way to make liquor taste fresher and smoother, like cold brewed coffee or cold pressed juice.
Vacuum distillation is a process often used in industrial plants to better separate chemicals, remove impurities and distill at lower temperatures. I began distilling some of my craft beers in the laboratory at work and they smelled and tasted super fresh and just like the beer! At that moment, I decided to change my startup brewery concept into a distillery, focused on using this process to make award-winning, cold distilled, fresh spirits.
Vacuum distillation had been done before with gin, and was not an entirely new idea. But it had never been done in a way that was scale-able, or for other types of spirits. So we built a distillery and the still ourselves, because nobody had ever made one quite like ours before.
In November 2017 we received our Federal Permit for distilling. A few months later we got the Illinois Craft Distiller's Permit and we were ready to go! However, there was still a little roadblock known as the three tier system, and due to timing we wouldn't be able to launch with a distributor in Illinois until May 2019.
While biding our time until our launch with Heritage Wine Cellars, we focused on building our brand and developing alternate sales avenues, including online. We also entered as many competitions as we could afford and wound up with some serious hardware!
"The bright spearmint scent gives a hint of what's to come: a refreshing, tingly sip with plenty of lemon peel, juniper and minty zing, with just a tinge of sweetness on the exhale. Distilled from corn, with botanicals that include hibiscus, gooseberry, mango and cardamom, although the soft palate doesn't read as particularly floral or fruity. It's pleasing just the same."
Wine Enthusiast - Kara Newman, Spirits Editor
On May 1st, 2019 we officially launched with our Illinois distributor. Skeptic Vodka and Gin are currently being sold in over 30 retail stores in the Chicago area, including 12 Binny's Beverage Depots and over 40 bars and restaurants. Just recently, we sold our 500th case overall and 150th in Illinois, and sales are doubling month over month as we continue to grow sales.
Gin and vodka sales are projected to continue to expand in Illinois at a steady rate of approx. 20-30% per month on average. While it cannot be guaranteed, we hope to sell a target of at least 2,400 cases (of ONLY gin and vodka) by the end of 2020, while also branching into the neighboring states of Wisconsin, Minnesota and Indiana as well as California and possibly Florida. Based on our margins now, we expect profitability will occur at approx. 250 cases per month in sales, which we hope to achieve by the middle of 2020.
By adding our cold distilled craft beer whiskeys to the mix, we'll begin opening up new revenue channels in both on and off premise locations, not only because the demand for whiskey is so high, but because it will indirectly amplify our other product sales as part of a complete portfolio offering. Our whiskeys will be uniquely "Skeptic" and scale-able, so that we'll be able to meet what we expect will be a very strong demand based on conversations with our customers.
We have plans for new products and line extensions, beginning with a limited release gin (GinQuila) based on the paloma cocktail and Mexican-inspired flavors, aged in Cazadores tequila barrels. Other revenue streams include working with other distillers and brand companies to contract distill and collaborating with craft breweries to distill and market whiskeys cold distilled from some of their more popular beers.
Skeptic Distillery has financial statements ending December 31 2018. Our cash in hand is $15,285.62, as of October 2019. Over the three months prior, revenues averaged $3,307/month, cost of goods sold has averaged $1,281/month, and operational expenses have averaged $18,175/month.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We use a unique distilling process to preserve the freshness and flavor of our ingredients. We make award-winning spirits, distilled at natural temperatures, with no sugar or additives for the consumer who cares about how his/her spirits are made. Our two main products are currently gin and vodka. We'll have at least three when the whiskey is ready (which we hope will be in about 6 months of a successful raise). Our spirits are available to buy at the distillery, online and in various bars, restaurants and stores in Illinois, Alaska and Oklahoma.
We hope to become a global brand, sold in all 50 states through distribution (e.g. Southern Glazer, RNDC, etc.) and online, as well as many countries around the world. Always experimenting, we'll push the boundaries of what spirits can taste like. We plan to launch (and sell) many brands and specialty products besides our core whiskeys, vodka and gins. Some early concepts of these will include a unique infused rum, a complex mixology-focused liqueur, and Ready To Drink (RTD) canned cocktails..
Milestones
Skeptic Distillery Co. was incorporated in the State of Illinois in October 2014.
Since then, we have:
Historical Results of Operations
Liquidity & Capital Resources
After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is at least 12 months before we need to raise further capital.
We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.
We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.
Runway & Short/Mid Term Expenses
To date, the company has been financed with $395,426.67 in debt and $25,000 in equity.
Skeptic Distillery Co. cash in hand is $15,285.62, as of October 2019. Over the last three months, revenues have averaged $3,307/month, cost of goods sold has averaged $1,281/month, and operational expenses have averaged $18,175/month, for an average burn rate of $16,149 per month. Our intent is to be profitable in 9 months.
Our financials are not reflective of our imminent growth. Due to the nature of the three tier distribution system, it is inherently difficult to gain traction with distribution partners during the first year of sales. Our first few months of distributor sales were not reflective of expectations. While we expect to continue operating at a loss in the immediate future, we have several things going for us in our favor. Operating expenses have not been high, except for some recent legal expenses, and have stayed relatively constant since last year, sales are increasing steadily at around 50% month over month as we have improved our distributor relationship dramatically within the past 60 days, interest in our brand is growing quickly, and we are not relying on this capital to improve our existing sales channels which are already growing. Rather, this fund raise is required to develop new revenue streams that will complement and boost the existing vodka and gin products and add to the bottom line.
We anticipate revenues to increase significantly in the next 6-9 months, regardless of this capital raise. Expenses are expected to go up slightly (around $2,000.00 per month) when we lease additional space to accommodate the equipment and warehouse space for whiskey and the tasting room. If the capital raise were unsuccessful, the company would delay plans for whiskey production and the tasting room until sufficient revenues are generated with the existing products. While this would slow growth significantly, it will not prevent it. Karl has the ability to float the company using funds from a stock sale at his former company, even if it were to experience zero growth, for another 24 months. Karl also has other business ventures which are poised to begin generating some passive income beginning around December/January of 2019/2020.
1 | The company is very early in its operating history. Accordingly, the Company’s operations are subject to all the risks inherent in the establishment of a new business enterprise, including potential operating losses. Any investment in the Company must be considered in light of the risks, expenses and difficulties frequently encountered by companies in an early stage of development in new and rapidly evolving markets. The likelihood of the success of the Company must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the growth of a new business. |
2 | We have not been profitable yet, and believe we will continue to incur net losses for another fiscal year. We may require additional capital in the future, which we may not be able to obtain on acceptable terms, or at all. Our inability to raise such capital, as needed, on beneficial terms or at all could restrict our future growth, severely limit our operations or cause us to curtail or terminate our operations. |
3 | The U.S. Government could enact legislation prohibiting the production, sales and consumption of alcohol, which would be detrimental to our business. |
4 | The U.S. Government could fail to extend or make permanent the Federal Excise Tax reduction, which lowered the $13.55 Federal excise tax rate to $2.70 per proof gallon. This tax is set to expire at the end of this year, though legislation is currently being sponsored to extend it and make it permanent. If this fails to become enacted, our cash flow and profitability will be negatively affected. |
5 | The distilled beverages industry is fiercely competitive. The company will face competition from other craft distillers as well as mass market distilleries and conglomerates with much larger marketing budgets. |
6 | Cost of ingredients and raw materials may fluctuate. Increased costs for packaging materials and ingredients could negatively impact our margins, cash flow, financial projections and reduce our overall revenues. |
7 | Aspects of our business and our products may be regulated at the local, state, and federal levels. Our products may be subject to state, local and Federal environmental laws and regulations, including those relating to the handling and storage of hazardous materials. We and our products may also be subject to significant governmental regulation relating to labor conditions, safety in the workplace, healthcare and other human resource issues. The nature and scope of future legislation, regulations and programs cannot be predicted. While we anticipate that we and our products will be in compliance with all applicable governmental regulations, there still may be risks that such laws and regulations may change with respect to present or future operations. Such additional costs would increase the cost of investments and operations and decrease the demand for products and services. We and our products will be ultimately responsible for compliance with such regulations and for obtaining and maintaining all required permits and licenses. Such compliance may be time consuming and costly, and such expenses may materially affect our future ability to break even or generate profits. |
8 | Our future success depends on the efforts of a small management team. The loss of services of the members of the management team may have an adverse effect on the company. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business. |
9 | Investing in a business through this investment model is a decision with inherent risks associated with it. Be aware that you could potentially lose a part or all of your investment. There are no guarantees that the company will succeed. Do not invest what you can not afford to lose. |
10 | Some of our supplies come from other countries (for example: our closures come from Italy and our bottles come from Mexico). If a trade embargo, military conflict, natural disaster or any other issue affecting trade arises which impacts our ability to obtain goods from these countries, this could affect our ability to produce our products in a timely manner and at a reasonable cost, which could hurt our cash flow and capacity to do business. |
11 | Our success depends upon the efforts and abilities of our senior management team, other key employees, and a high-quality employee base, as well as our ability to attract, motivate, reward, and retain them. We do not currently maintain, though we do intend to obtain key man insurance, on the life of the two primary owners of the company. Difficulties in hiring or retaining key executive or employee talent, or the unexpected loss of experienced employees could have an adverse impact on our business performance. In addition, we could experience business disruption and/or increased costs related to organizational changes, reductions in workforce, or other cost-cutting measures. Our failure to attract or retain key executive or employee talent could adversely affect our business. |
12 | The company is currently involved in a lawsuit, caption: Nicholas Fourkas, Plaintiff v. Karl Loepke, and individual; and Skeptic Distillery Co., a corporation, Defendants, No. 19 CH 08576 filed in the Circuit Court of Cook County, Illinois, County Department, Chancery Division. The case will require expending time and expenses defending the case and the outcome is uncertain. |
Director | Occupation | Joined |
---|---|---|
Joseph Iannarelli | Real Estate Investor @ Self-Employed | 2019 |
Officer | Title | Joined |
---|---|---|
Karl C Loepke | President Secretary Treasurer | 2014 |
Holder | Securities Held | Voting Power |
---|---|---|
Karl C Loepke | 1,000 Common Stock | 100.0% |
Date | Amount | Security |
---|---|---|
$0 | Revenue Share | |
01/2019 | $136,694 | Loan |
12/2018 | $258,732 | Loan |
Lender | Issued | Amount | Oustanding | Interest | Maturity | Current? |
---|---|---|---|---|---|---|
Karl Loepke | 12/31/2018 | $258,732 | $258,732 | 3.31% | 12/31/2022 | Yes |
Karl Loepke | 01/01/2019 | $136,694 | $136,695 | 3.31% | 12/31/2023 | Yes |
Name | Karl Loepke |
Amount Invested | $258,732 |
Transaction type | Loan |
Issued | 12/31/2018 |
Outstanding principal plus interest | $258,732 as of 10/2019 |
Interest | 3.31 per annum |
Maturity | 12/31/2022 |
Outstanding | Yes |
Current with payments | Yes |
Relationship | President |
Payment is not due until the maturity date. The note is subordinate to all non-shareholder debt and will only be paid or extended based on the profitability and overall financial health of the corporation at the time. | |
Name | Karl Loepke |
Amount Invested | $136,695 |
Transaction type | Loan |
Issued | 01/01/2019 |
Outstanding principal plus interest | $136,695 as of 10/2019 |
Interest | 3.31 per annum |
Maturity | 12/31/2023 |
Outstanding | Yes |
Current with payments | Yes |
Relationship | President |
This debt will be rolled into a new promissory note on the same terms as the $258,732.03 note at the end of 2019, with a maturity date set to 12/31/2023. It will be subordinate to all non-shareholder debt and will only be paid based on the profitability and overall financial health of the corporation at that time. | |
$50,000 | $45k will be used to begin purchasing the fabricated parts of the still ($20k), accessory plumbing, clamps, flanges, gaskets, chiller coil fabrication parts and other non mechanical equipment. Because it takes 3 - 4 months to secure these parts, we'll be in a better position to complete our buildout later in the year with these funds. $5k towards operating capital and Wefunder fees (7% of the raise total). These are the primary intended uses of the capital. |
$500,000 | $150,000.00 towards custom, continuous column, vacuum whiskey still and support equipment (e.g. tank, pumps, piping, etc.), $25,000.00 towards raw materials and inventory, $100,000.00 towards operating capital, $225,000.00 towards tasting room build-out, facility improvement, new support and sales staff and Wefunder fees (7% of the raise total). |
Class of Security | Securities (or Amount) Authorized |
Securities (or Amount) Outstanding |
Voting Rights |
---|---|---|---|
Common Stock | 100,000.00 | 333 | No |
Common Stock | 1,000.00 | 1,000.00 | Yes |
The Securities and Exchange Commission hosts the official Form C on their EDGAR web site.
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