10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number 001-37808

LONG ISLAND ICED TEA CORP.

(Exact Name of Issuer as Specified in Its Charter)

Delaware	47-2624098
(State or other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

12-1 Dubon Court, Farmingdale, NY 11735

(Address of Principal Executive Office)

(855) 542-2832

(Issuer’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if smaller reporting company)	Smaller reporting company [X]
	Emerging growth company [X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

As of November 10, 2017, 9,755,607 shares of common stock, par value $.0001 per share, were issued and outstanding.

LONG ISLAND ICED TEA CORP.

FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION	1
ITEM 1. FINANCIAL STATEMENTS	1
Condensed Consolidated Balance Sheets (Unaudited)	1
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	2
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	3
Condensed Consolidated Statements of Cash Flows (Unaudited)	4
Notes to the Condensed Consolidated Financial Statements (Unaudited)	5
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
PART II - OTHER INFORMATION	41
ITEM 1. LEGAL PROCEEDINGS	41
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	41
ITEM 6. EXHIBITS	42
SIGNATURES	43

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of
	September 30, 2017			December 31, 2016
ASSETS		(unaudited)
Current Assets:
Cash	$	429,673		$	1,249,550
Accounts receivable, net		1,556,801			1,627,058
Inventories, net		1,697,251			1,187,941
Restricted cash		-			103,603
Short term investments		-			2,389,521
Prepaid expenses and other current assets		263,820			91,072
Total current assets		3,947,545			6,648,745
Property and equipment, net		148,425			218,036
Intangible assets		170,000			22,500
Other assets		56,635			52,470
Deferred financing costs		507,794			842,533
Total assets	$	4,830,399		$	7,784,284
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	2,047,727		$	886,316
Accrued expenses		1,380,097			911,843
UBS Credit Line		-			1,280,275
Current portion of automobile loans		8,640			11,446
Current portion of equipment loan		47,910			39,979
Other current liabilities		110,576			-
Total current liabilities		3,594,950			3,129,859
Subscription payable		563,750			-
Other liabilities		30,000			30,000
Deferred rent		4,695			1,807
Long term portion of automobile loans		11,066			17,580
Long term portion of equipment  loan		3,787			36,495
Total liabilities		4,208,248			3,215,741
Commitments and contingencies, Note 8
Stockholders' Equity:
Preferred stock, par value $0.0001; authorized 1,000,000 shares; no shares issued and outstanding		-			-
Common stock, par value $0.0001; authorized 35,000,000 shares; 9,148,107 and 7,715,306 shares issued and outstanding, as of September 30, 2017 and December 31, 2016, respectively		915			772
Additional paid-in capital		25,191,297			17,575,583
Accumulated deficit		(24,570,061	)		(12,977,566	)
Accumulated other comprehensive loss		-			(30,246	)
Total stockholders' equity		622,151			4,568,543
Total liabilities and stockholders' equity	$	4,830,399		$	7,784,284

The accompanying notes are an integral part of these condensed consolidated financial statements.

 1

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Net sales	$	1,554,895		$	1,301,125		$	3,901,145		$	3,412,961
Cost of goods sold		1,486,265			1,196,790			3,663,404			3,253,278
Gross profit		68,630			104,335			237,741			159,683
Operating expenses:
General and administrative expenses		1,543,786			2,170,522			5,169,174			3,957,763
Selling and marketing expenses		2,323,472			661,247			6,308,503			2,031,873
Total operating expenses		3,867,258			2,831,769			11,477,677			5,989,636
Operating loss		(3,798,628	)		(2,727,434	)		(11,239,936	)		(5,829,953	)
Other expenses:
Other income (expense)		-			4,070			(38,986	)		4,070
Interest expense, net		(114,150	)		(579,710	)		(313,573	)		(976,427	)
Loss on inducement		-			(1,587,954	)		-			(1,587,954	)
Total other expenses		(114,150	)		(2,163,594	)		(352,559	)		(2,560,311	)
Net loss	$	(3,912,778	)	$	(4,891,028	)	$	(11,592,495	)	$	(8,390,264	)
Unrealized gain on investments		-			-			30,246			-
Comprehensive loss	$	(3,912,778	)	$	(4,891,028	)	$	(11,562,249	)	$	(8,390,264	)
Weighted average number of common shares outstanding – basic and diluted		9,076,959			6,514,295			8,529,399			5,407,036
Basic and diluted net loss per share	$	(0.43	)	$	(0.75	)	$	(1.36	)	$	(1.55	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

(unaudited)

	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Capital		Deficit			Loss			Equity
Balance at January 1, 2017		7,715,306	$	772	$	17,575,583	$	(12,977,566	)	$	(30,246	)	$	4,568,543
Issuance of common stock in connection with the January public offering, net of costs		376,340		38		1,429,702		-			-			1,429,740
Issuance of common stock in connection with the June public offering, net of costs		256,848		25		1,259,390		-			-			1,259,415
Issuance of common stock in connection with the July public offering, net of costs		462,160		46		2,134,441		-			-			2,134,487
Issuance of common stock to the Advisory Board and the Board of Directors		46,965		5		192,645		-			-			192,650
Issuance of common stock to consultants and vendors		270,488		27		1,023,392		-			-			1,023,419
Stock-based compensation - issuance of common stock to an executive officer		20,000		2		81,798		-			-			81,800
Stock-based compensation		-		-		1,238,712		-			-			1,238,712
Issuance of Big Geyser warrants		-		-		255,634		-			-			255,634
Change in unrealized loss on investment		-		-		-		-			30,246			30,246
Net loss		-		-		-		(11,592,495	)		-			(11,592,495	)
Balance at September 30, 2017		9,148,107	$	915	$	25,191,297	$	(24,570,061	)	$	-		$	622,151

The accompanying notes are an integral part of these condensed consolidated financial statements.

 3

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Nine Months Ended September 30,
	2017			2016
Cash Flows From Operating Activities
Net loss	$	(11,592,495	)	$	(8,390,264	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense		551,626			35,234
Depreciation and amortization expense		111,528			120,871
Deferred rent		2,888			(1,938	)
Loss on sale of securities		37,882			-
Severance expense charged against accounts receivable		50,000			-
Warrants issued to distributor		255,634			-
Stock-based compensation		1,320,512			1,010,820
Loss on disposal of property and equipment		-			515
Amortization of deferred financing costs		334,739			883,969
Paid-in-kind interest		-			77,805
Inducement expense		-			1,587,954
Changes in assets and liabilities:
Accounts receivable		(730,956	)		(1,141,804	)
Inventory		(459,723	)		(265,601	)
Prepaid expenses and other current assets		(40,688	)		(39,417	)
Other assets		(4,165	)		11,805
Accounts payable		1,847,072			430,620
Accrued expenses		941,754			986,023
Other current liabilities		(29,574	)		-
Total adjustments		4,188,529			3,696,856
Net cash used in operating activities		(7,403,966	)		(4,693,408	)
Cash Flows From Investing Activities
Proceeds from held-to-maturity investments		2,408,632			-
Purchases of property and equipment		(39,419	)		(9,497	)
Release of restricted cash		103,603			127,580
Purchase of short term investments		(26,747	)		(2,507,302	)
Net cash provided by (used in) investing activities		2,446,069			(2,389,219	)
Cash Flows From Financing Activities
Repayment of automobile loans		(9,320	)		(22,977	)
Repayment of equipment loans		(24,777	)		(27,232	)
Repayment of line of credit		(1,280,275	)		-
Proceeds from line of credit		-			500,000
Proceeds from the January public offering, net of costs		1,429,740			-
Proceeds from the June public offering, net of costs		1,259,415			-
Proceeds from the July public offering, net of costs		2,134,487			-
Advances from a related party		65,000			-
Proceeds from subscription payable		563,750			-
Proceeds from the Public Offering, net of costs		-			5,867,217
Proceeds from disgorgement of short swing profit		-			56,250
Proceeds from the sale of common stock and warrants, net of costs		-			861,790
Net cash provided by financing activities		4,138,020			7,235,048
Net (decrease) increase in cash		(819,877	)		152,421
Cash, beginning of period		1,249,550			207,192
Cash, end of period	$	429,673		$	359,613
Cash paid for interest	$	6,006		$	19,898
Non-cash investing and financing activities:
Issuance of common stock to consultants, vendors and customers	$	1,023,419		$	205,700
Issuance of insurance obligation in other current liabilities	$	75,150		$	-
Issuance of common stock in exchange for Brentwood line of credit and related warrants	$	-		$	1,669,376
Purchase of IP applied against outstanding accounts receivable	$	150,000		$	-
Finished goods inventory received and applied against outstanding accounts receivable	$	49,587		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

 4

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BUSINESS ORGANIZATION, LIQUIDITY AND GOING CONCERN

Business Organization

Long Island Iced Tea Corp., a Delaware corporation (“LIIT”), was formed on December 23, 2014. LIIT was formed in order to allow for the completion of mergers between Cullen Agricultural Holding Corp. (“Cullen”) and Long Island Brand Beverages LLC (“LIBB”). On December 31, 2014, LIIT entered into a merger agreement, as amended as of April 23, 2015, with Cullen, a public company, Cullen Merger Sub, Inc. (“Cullen Merger Sub”), LIBB Acquisition Sub, LLC (“LIBB Merger Sub”), LIBB and the founders of LIBB (“Founders”). Pursuant to the merger agreement, (a) Cullen Merger Sub was merged with and into Cullen, with Cullen surviving and becoming a wholly-owned subsidiary of LIIT and (b) LIBB Merger Sub was merged with and into LIBB, with LIBB surviving and becoming a wholly-owned subsidiary of LIIT (the “Mergers”). As a result of the Mergers which were consummated on May 27, 2015, LIIT consisted of its wholly owned subsidiaries, LIBB (its operating subsidiary) and Cullen and Cullen’s wholly owned subsidiaries (collectively the “Company”).

Under the merger agreement, upon consummation of the Mergers, the former holders of the LIBB membership interests (the “LIBB members”) received 2,633,334 shares of common stock of LIIT (or approximately 63%).

For accounting purposes, the Mergers were treated as an acquisition of Cullen by LIBB and as a recapitalization of LIBB, as the former LIBB members held a large percentage of LIIT’s shares and exercised significant influence over the operating and financial policies of the consolidated entity and Cullen was a public shell company at the time of the transaction. Pursuant to Accounting Standards Codification (“ASC”) 805-10-55-11 through 55-15, the merger or acquisition of a private operating company into a non-operating public shell with nominal assets is considered a capital transaction in substance rather than a business combination. As a result, the condensed consolidated balance sheets, statements of operations, and statements of cash flows of LIBB have been retroactively updated to reflect the recapitalization. Additionally, the historical condensed consolidated financial statements of LIBB are now reflected as those of the Company.

Overview

The Company is a holding company operating through its wholly-owned subsidiary, LIBB. The Company is engaged in the production and distribution of premium Non-Alcoholic ready-to-drink (“NARTD”) beverages. The Company is currently organized under its flagship brand, Long Island Iced Tea, a premium NARTD tea made from a proprietary recipe and with quality components. The Company’s mission is to provide consumers with premium beverages offered at an affordable price.

The Company aspires to be a market leader in the development of iced tea beverages that are convenient and appealing to consumers. There are two major target markets for Long Island Iced Tea: “consumers on the go” and “health conscious consumers.” “Consumers on the go” are families, employees, students and other consumers who lead a busy lifestyle. With increasingly hectic and demanding schedules, there is a need for products that are accessible and readily available. “Health conscious consumers” are individuals who are becoming more interested and better educated on what is included in their diets, causing them to shift away from the less healthy options, such as carbonated soft drinks, towards alternative beverages such as iced tea.

The Company produces a 100% brewed iced tea, using black tea leaves, purified water and natural cane sugar or sucralose. Flavors change from time to time, and have included lemon, peach, raspberry, guava, mango, diet lemon, diet peach, sweet tea, green tea and honey, half tea and half lemonade. The Company also offers lower calorie iced tea in flavor options that include mango, raspberry and peach. The Company also sells its iced tea in gallon bottles with flavor options including lemon, peach, green tea and honey, half and half lemonade, sweet tea, mango and unsweetened.

 5

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BUSINESS ORGANIZATION, LIQUIDITY AND GOING CONCERN (CONTINUED)

Overview, continued

During April 2017, the Company expanded its brand to include lemonade. Lemonade is offered in nine flavors including traditional, lime, pink lemonade, kiwi & strawberry, cherry, peach, watermelon, wild berries and strawberry and is offered at retail in 18oz. bottles.

The Company also distributes an aloe vera derived juice beverage (“ALO Juice”) in 500ml and 1.5 liter bottles. ALO Juice is offered in six flavors including original, pomegranate, mango, raspberry, pineapple and coconut. See below regarding the ALO Juice business. In addition, in order to service certain vending contracts, the Company sells snacks and other beverage products on a limited basis.

The Company sells its products to regional retail chains and to a mix of independent mid-to-large range distributors who in turn sell to retail outlets, such as big chain supermarkets, mass merchants, convenience stores, restaurants and hotels, principally in the New York, New Jersey, Connecticut and Pennsylvania markets, with expanding distribution in Florida, Virginia, Massachusetts, New Hampshire, Rhode Island and parts of the Midwest. As of September 30, 2017, the Company’s products are available in 20 states and in the Caribbean, Canada and Latin America.

The ALO Juice Business

Asset Purchase Agreement

On December 8, 2016, the Company entered into an asset purchase agreement with The Wilnah International, LLC (“Wilnah”). Julio X. Ponce (“Mr. Ponce”) is the majority interest member of Wilnah. Pursuant to the agreement, the Company intended to acquire the intellectual property (“IP”) (trade names, formulas, recipes) for ALO Juice. During September 2017, the Company determined that it would license, rather than purchase the ALO Juice IP. Accordingly, on September 18, 2017, the Company terminated the asset purchase agreement with Wilnah.

Seba Personal Guarantees

Mr. Ponce is the former majority owner of Seba Distribution LLC (“Seba”). In order to provide credit enhancement to Seba’s obligations to the Company, Seba issued notes payable to the Company which were personally guaranteed by Mr. Ponce. On March 14, 2017, Seba issued to the Company a note payable in the amount of $467,444, which Mr. Ponce, individually, has fully guaranteed (“March 2017 Note and Guarantee”) in support of certain obligations of Seba that are owed to the Company. On September 18, 2017, Seba issued to the Company a note payable in the amount of $403,216, which Mr. Ponce, individually, has fully guaranteed, and for which Julio Ponce Sr. (the father of Mr. Ponce) has guaranteed certain receivables up to $300,000 in the aggregate (“September 2017 Note and Guarantee”) in support of certain additional obligations of Seba that are owed to the Company.

Licensing Agreement – ALO Juice

On September 18, 2017, the Company entered into an exclusive perpetual licensing agreement (“Licensing Agreement”) with Wilnah granting the Company the worldwide rights to produce, distribute and sell the ALO Juice brand. As compensation to Wilnah for these rights, the Company paid an initial fee of $150,000, which was applied against the Seba accounts receivable upon the closing and has agreed to pay to Wilnah a 7.0% royalty on the Company’s gross sales of ALO Juice sales delivered to the Company’s customers after the closing of this agreement.

 6

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BUSINESS ORGANIZATION, LIQUIDITY AND GOING CONCERN (CONTINUED)

The ALO Juice Business, continued

Employment Agreement

Effective January 1, 2017, the Company had entered into an employment agreement with Mr. Ponce, to expand the Company’s sales of Long Island branded products and ALO Juice products within the Southeast U.S. and Latin American regions. On September 1, 2017, the Company terminated the employment agreement of Mr. Ponce.

On September 1, 2017, the Company entered into a separation agreement (the “Separation Agreement”) with Mr. Ponce. Mr. Ponce received as compensation under the Separation Agreement a lump sum payment of $50,000, which was applied against the Seba accounts receivable.

Sales Broker Agreement

Effective September 1, 2017, the Company entered into a broker arrangement (“Broker Arrangement”) with Mr. Ponce, whereby Mr. Ponce will be paid a commission of 2.5% on net collected revenues from the sale of the Company’s products (excluding ALO Juice) into certain distributor and retail relationships introduced by Mr. Ponce.

Seba’s Obligations to the Company

From September 18, 2017, all payments which the Company would make to Seba, Mr. Ponce, or Wilnah, pursuant to the Licensing Agreement, Separation Agreement or Broker Arrangement are to be applied first to outstanding receivables owed to the Company by Seba and then paid in cash only after such receivables have been paid in full.

Liquidity and Going Concern

The Company has been focused on the development of its brand and its infrastructure, as well as in the establishment of a network of distributors and qualified direct accounts. From inception, the Company has financed its operations through the issuance of debt and equity, and through utilizing trade credit with its vendors.

As of September 30, 2017, the Company had cash of $429,673. As of September 30, 2017, the Company had working capital of $352,595. The Company incurred net losses of $3,912,778 and $11,592,495 for the three and nine months ended September 30, 2017, respectively. As of September 30, 2017, the Company’s stockholders’ equity was $622,151.

On January 27, 2017, the Company sold 376,340 shares of the Company’s common stock in a public offering at an average price of $4.02 per share. Of the shares sold, 300,000 were sold to the public at an offering price of $4.00 while the remaining 76,340 shares were sold to officers and directors of the Company at a price of $4.10 per share. The sale of common stock generated gross proceeds of $1,513,000 and net proceeds of $1,429,740 after deducting commissions and other offering expenses.

On June 14, 2017, the Company sold 256,848 shares of the Company’s common stock in a public offering at an average price of $5.06 per share. Of the shares sold, 231,850 were sold to the public at an offering price of $5.00 while the remaining 24,998 shares were sold to officers and directors of the Company at a price of $5.60 per share. The sale of common stock generated gross proceeds of $1,299,250 and net proceeds of $1,259,415 after deducting commissions and other offering expenses.

 7

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BUSINESS ORGANIZATION, LIQUIDITY AND GOING CONCERN (CONTINUED)

Liquidity and Going Concern, continued

On July 6, 2017, the Company sold 448,160 shares of the Company’s common stock in a public offering at a price of $5.00 per share. Of the shares sold, 200,000 were sold to lead investors who, as a result of purchasing more than $500,000 in shares, each received (i) an additional number of shares of common stock equal to 7% of the total number of shares of common stock purchased by such lead investors in this offering (or an aggregate of 14,000 shares) and (ii) three-year warrants up to that number of shares of common stock equal to 20% of the total number of shares purchased by such lead investors in this offering (or warrants to purchase an aggregate of 40,000 shares). These warrants have an exercise price of $5.50 and were fully vested upon issuance. The sale of common stock generated gross proceeds of $2,240,800 and net proceeds of $2,134,487 after deducting commissions and other offering expenses.

On October 4, 2017, the Company sold 607,500 shares of the Company’s common stock in a public offering at a price of $2.05 per share. The Company received gross proceeds of $1,245,375 and estimated net proceeds of $1,235,375 after deducting other offering expenses. Each investor in the offering also received a warrant to purchase 50% of the number of shares for which such investor subscribed in the offering (or a total aggregate number of shares underlying such warrants equal to 303,750 shares). The warrants have an exercise price of $2.40 per share, subject to adjustment, and expire one year from the closing of the offering. Prior to October 1, 2017, the Company received $563,750 from this offering and accordingly, as at September 30, 2017, $563,750 is included in subscriptions payable within the condensed consolidated balance sheets.

Pursuant to a Credit and Security Agreement (the “Credit Agreement”), the Company has a revolving credit facility in an amount up to $3,500,000, subject to approval by the lender (See Note 5).

Historically, the Company has financed its operations through the raising of equity capital and through trade credit with its vendors. The Company’s ability to continue its operations and to pay its obligations when they become due is contingent upon the Company obtaining additional financing. Management’s plans include raising additional funds through equity offerings, debt financings, or other means.

The Company believes that it will be able to raise sufficient additional capital to finance the Company’s planned operating activities. There are no assurances that the Company will be able to raise such capital on terms acceptable to the Company or at all. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned market development activities, and/or consider reductions in personnel costs or other operating costs. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 8

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2016 and related notes thereto included in the Company’s Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 31, 2017.

Reclassification

Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on the previously reported net loss.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and also affect the amounts of revenues and expenses reported for each period. Actual results could differ from those which result from using such estimates. Management utilizes various other estimates, including but not limited to, assessing the collectability of accounts receivable, accrual of rebates to customers, the valuation of securities, the valuation of inventory, determining the estimated lives of long-lived assets, determining the potential impairment of intangibles, the fair value of warrants issued, the fair value of stock options, the recognition of revenue, and other legal claims and contingencies. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary.

Revenue Recognition

Revenue is stated net of sales discounts and rebates paid to customers (See Customer Marketing Programs including Sign On and Sales Incentives, below). Net sales are recognized when all of the following conditions are met: (1) the price is fixed and determinable; (2) evidence of a binding arrangement exists (generally, purchase orders); (3) products have been delivered and there is no future performance required; and (4) amounts are collectible under normal payment terms.

These conditions typically occur when the products are delivered to or picked up by the Company’s customers. For sales where certain revenue recognition criteria have not been met at the date of delivery, the Company defers recognition of such revenue and accounts receivable until such recognition criteria are met.

 9

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Customer Marketing Programs, including Sign On and Sales Incentives

The Company participates in various programs and arrangements with customers designed to incent new distribution, incent the introduction of a new product line, or to increase the sale of its products. Among these programs are arrangements under which allowances can be earned by customers for introducing a product (sign on incentives, for example), for various discounts to the end retailers or for participating in specific marketing programs. The Company believes that its participation in these programs is essential to ensuring volume and revenue growth in a competitive marketplace. Depending upon the program, those incentives are paid in either cash or the issuance of equity instruments. During the three months ended September 30, 2017 and 2016, these allowances resulted in reductions in net sales of $195,153 and $0, respectively. During the nine months ended September 30, 2017 and 2016, these allowances resulted in reductions in net sales of $596,335 and $45,165, respectively. Included in these amounts for the three and nine months ended September 30, 2017 are (income) costs of ($1,388) and $255,634, respectively, representing the non-cash costs of a sign-on incentive, presented net of mark-to-market adjustments for unvested awards related to warrants issued in connection with the signing of a distribution agreement and the first order with Big Geyser Inc. (“Big Geyser”) (See Notes 7 and 8).

Shipping and Handling Costs

Shipping and handling costs incurred to move finished goods from the Company’s sales distribution centers to customer locations are included in selling and marketing expenses within the condensed consolidated statements of operations and totaled $184,423 and $117,998, for the three months ended September 30, 2017 and 2016, respectively and $381,151 and $319,668 for the nine months ended September 30, 2017 and 2016, respectively.

Advertising

The Company expenses advertising costs as incurred. Advertising costs are included in selling and marketing expenses within the condensed consolidated statements of operations and totaled $196,758 and $84,433 for the three months ended September 30, 2017 and 2016, respectively, and $513,522 and $114,980, for the nine months ended September 30, 2017 and 2016, respectively.

Research and Development

Costs related to new product initiatives incurred were included in selling and marketing expenses within the condensed consolidated statements of operations and totaled $30,375 and $24,464 for the three months ended September 30, 2017 and 2016, respectively, and $335,101 and $143,651 for the nine months ended September 30, 2017 and 2016, respectively. Other research and development costs were included in general and administrative expenses within the condensed consolidated statements of operations and totaled $0 and $0 for the three months ended September 30, 2017 and 2016, respectively and $829 and $46,667 for the nine months ended September 30, 2017 and 2016, respectively. The other research and development expenses incurred during the three and nine months ended September 30, 2016 were incurred pursuant to an alcohol beverage development agreement which will require the Company to pay $40,000 in cash and $40,000 in common stock upon the completion of the arrangement. As of September 30, 2017, $50,000 was included in accrued expenses in the condensed consolidated balance sheet related to the 2016 arrangement.

 10

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Short-term Investments

The Company accounts for securities in accordance with accounting standards for investments in debt and equity securities. Accounting standards require investments in debt and equity securities to be classified as either “held to maturity”, “trading”, or “available-for-sale.”

The Company holds investments in marketable securities, consisting of U.S. government securities and mutual funds. The Company’s available-for-sale securities are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive (loss) income in stockholders’ equity, when applicable. During the three months ended September 30, 2017 and 2016, the unrealized gain was $0 and $0, respectively, and during the nine months ended September 30, 2017 and 2016, the unrealized gain was $30,246 and $0, respectively. Unrealized losses are charged against interest and other income/(expense), net, when a decline in fair value is determined to be other-than-temporary. The Company has not recorded any such impairment charge in the periods presented. The Company determines realized gains or losses on sale of marketable securities on a specific identification method, and records such gains or losses as interest and other income/(expense), net.

The following table sets forth the available-for-sale securities, which were fully liquidated during the nine months ended September 30, 2017:

	As of
	September 30, 2017		December 31, 2016
U.S. government securities	$	-	$	195,374
Fixed income mutual funds		-		2,194,147
	$	-	$	2,389,521

	As of December 31, 2016
	Amortized		Unrealized
	Cost		Losses			Fair Value
U. S. government securities	$	195,570	$	(196	)	$	195,374
Fixed income mutual funds		2,224,197		(30,050	)		2,194,147
Total	$	2,419,767	$	(30,246	)	$	2,389,521

The following table classifies the US government securities by maturity:

	As of
	September 30, 2017		December 31, 2016
Within one year	$	-	$	94,967
Within one to five years		-		100,407
	$	-	$	195,374

 11

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounts Receivable

The Company sells products to distributors and in certain cases directly to retailers, and extends credit, generally without requiring collateral, based on its evaluation of the customer’s financial condition. While the Company has a concentration of credit risk in the retail sector, it believes this risk is mitigated due to the diverse nature of the customers it serves, including, but not limited to, its type, geographic location, size, and beverage channel. Potential losses on the Company’s receivables are dependent on each individual customer’s financial condition and sales adjustments granted after the balance sheet date. The Company carries its trade accounts receivable at net realizable value. Accounts receivable have terms of ranging from 30 to 75 days and do not bear interest. The Company monitors its exposure to losses on receivables and maintains allowances for potential losses or adjustments. The Company determines these allowances by (1) evaluating the aging of its receivables; (2) analyzing its history of sales adjustments; and (3) reviewing its high-risk customers. Past due receivable balances are written off when the Company’s efforts have been unsuccessful in collecting the amount due. Accounts receivable are stated at the amounts management expects to collect.

Accounts receivable, net, is as follows:

	As of
	September 30, 2017			December 31, 2016
Accounts receivable, gross	$	2,232,968		$	1,859,474
Allowance for doubtful accounts		(676,167	)		(232,416	)
Accounts receivable, net	$	1,556,801		$	1,627,058

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash on deposit with financial institutions and accounts receivable. At times, the Company’s cash in banks is in excess of the FDIC insurance limit. The Company has not experienced any loss as a result of these cash deposits. These cash balances are maintained with one bank. The Company is exposed to credit risk with regard to two customers who accounted for 19% and 17%, or 36% in the aggregate, and 46% of the Company’s trade receivables as of September 30, 2017 and December 31, 2016, respectively. The account representing the 19% is further collateralized by notes receivable from Seba and personal guarantees (See Note 1). Otherwise, the Company does not generally require collateral or other security to support customer receivables.

The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, as required.

 12

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories

The Company’s inventory includes raw materials such as bottles, sweeteners, labels, flavors and packaging. Finished goods inventory consists of bottled iced tea, lemonade and ALO Juice. As of September 30, 2017 and December 31, 2016, included in inventory was finished goods inventory with a cost of approximately $95,000 and $320,000, respectively, which was delivered to a distributor, and is held in inventory until certain revenue recognition criteria are met.

The Company values its inventories at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. As of September 30, 2017 and December 31, 2016, the Company recorded reserves of $115,125 and $45,078, respectively, to reduce the cost of certain products to estimated net realizable value. The following table summarizes inventories as of the dates presented:

	As of
	September 30, 2017		December 31, 2016
Finished goods	$	853,157	$	905,642
Raw materials and supplies		844,094		282,299
Total inventories	$	1,697,251	$	1,187,941

Property and Equipment

Property and equipment is recorded at cost. Major property additions, replacements, and betterments are capitalized, while maintenance and repairs that do not extend the useful lives of an asset or add new functionality are expensed as incurred. Depreciation is recorded using the straight-line method over the respective estimated useful lives of the Company’s assets.

The estimated useful lives typically are 3 years for cold-drink containers, such as reusable fridges, wood racks, vending machines, barrels, and coolers, and are depreciated using the straight-line method over the estimated useful life of each group of equipment, as determined using the group-life method. Under this method, the Company does not recognize gains or losses on the disposal of individual units of equipment when the disposal occurs in the normal course of business. The Company capitalizes the costs of refurbishing its cold-drink containers and depreciates those costs over the estimated period until the next scheduled refurbishment or until the equipment is retired. The estimated useful lives are typically 3 to 5 years for office furniture and equipment and are depreciated on a straight-line basis. The estimated useful lives for trucks and automobiles are typically 3 to 5 years and are depreciated on a straight line basis. For the three months ended September 30, 2017 and 2016, depreciation expense was $32,322 and $39,420, respectively. For the nine months ended September 30, 2017 and 2016, depreciation expense was $109,028 and $117,118, respectively.

 13

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible Assets

Intangible assets with finite useful lives are amortized over their expected useful life. Intangible assets with useful lives are tested for impairment when circumstances indicate that there could be an impairment. Intangible assets with finite useful lives include website development costs with a net book value of $0 and $2,500 as of September 30, 2017 and December 31, 2016, respectively. The estimated useful life of the capitalized costs of the Company’s website was 3 years and was depreciated on a straight line basis. As of September 30, 2017, the cost of the website development was $15,000 and the accumulated amortization was $15,000. As of December 31, 2016, the cost of the website development was $15,000 and the accumulated amortization was $12,500. For the three months ended September 30, 2017 and 2016, amortization expense was $0 and $1,251, respectively, and $2,500 and $3,753 for the nine months ended September 30, 2017 and 2016, respectively.

Intangible assets with indefinite useful lives are tested for impairment when circumstances indicate that there could be an impairment. As of September 30, 2017, the cost of the ALO Juice IP, which has an indefinite useful life, was $150,000 (See Note 1).

Income Taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement, and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction.

In its interim financial statements, the Company follows the guidance in ASC 270, “Interim Reporting” and ASC 740 “Income Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim periods. That rate differs from U.S. statutory rates primarily as a result of valuation allowance related to the Company’s net operating loss carryforward as a result of the historical losses of the Company.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. The Company accounts for uncertain tax positions in accordance with ASC 740 —”Income Taxes”. No uncertain tax provisions have been identified. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying condensed consolidated statements of operations. Our primary tax jurisdictions are our federal, various state, and local taxes.

Generally, Federal, State and Local authorities may examine the Company’s tax returns for three years from the date of filing.

In accordance with ASC 740, the Company evaluates whether a valuation allowance should be established against the net deferred tax assets based upon the consideration of all available evidence and using a “more likely than not” standard. Significant weight is given to evidence that can be objectively verified. The determination to record a valuation allowance is based on the recent history of cumulative losses and current operating performance. In conducting the analysis, the Company utilizes an approach, which considers the current year loss, including an assessment of the degree to which any losses are driven by items that are unusual in nature and incurred to improve future profitability. In addition, the Company reviews changes in near-term market conditions and any other factors arising during the period, which may impact its future operating results.

 14

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes, continued

Internal Revenue Code Section 382 imposes limitations on the use of net operating loss carryovers (“NOLs”) when the stock ownership of one or more 5% shareholders (shareholders owning 5% or more of the Company’s outstanding capital stock) has increased on a cumulative basis by more than 50 percentage points. The Company’s preliminary analysis indicated that such shares have increased by more than 50% since the last Section 382 limitation on May 27, 2015. The Company is currently evaluating the impact of the new Section 382 limitation.

Loss per share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon the exercise of stock options, warrants and the conversion. The computation of diluted earnings per share excludes those with an exercise price in excess of the average market price of the Company’s common shares during the periods presented. The computation of diluted earnings per share excludes outstanding options, warrants and other dilutive instruments in periods where the inclusion of such instruments would be antidilutive, as provided below:

	As of September 30,
	2017		2016
Options to purchase common stock		1,074,155		465,411
Warrants to purchase common stock		1,130,570		470,570
Total potentially dilutive securities		2,204,725		935,981

Fair Value of Financial Instruments

The carrying amounts of cash, short term investments, accounts receivable, automobile and equipment loans and the UBS Credit Line (See Note 4 below) approximate fair value due to the short-term nature of these instruments. In addition, for notes payable, the Company believes that interest rates approximate prevailing rates.

ASC 820 “Fair Value Measurements and Disclosures” provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).

Fair value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.

Level 3 Significant unobservable inputs that cannot be corroborated by market data.

 15

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments, continued

Fair values for short-term money market investments are determined from quoted prices in active markets for these money market funds, and are considered to be Level 1.

The carrying value of financial instruments in the Company’s condensed consolidated financial statements are as follows:

	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2)		Significant Unobservable Inputs (Level 3)
Short-term investments at September 30, 2017	$	—	$	—	$	—
Short-term investments at December 31, 2016	$	2,389,521	$	—	$	—

Stock-based Compensation

The Company accounts for stock options granted to consultants pursuant to the accounting guidance included in ASC 505-50 “Equity-Based Payments to Non-Employees” (“ASC 505-50”). Stock-based compensation cost is measured at the grant date and at the end of each reporting period for unvested awards, based on the fair value of the award, and is recognized as expense over the consultant’s requisite service period (generally the vesting period of the equity grant). The fair value of the Company’s stock options granted to consultants are estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life.

In accordance with ASC 505-50, the Company recorded adjustments at the end of each reporting period to reflect the mark-to-market adjustment of the fair value of unvested awards granted to consultants. In connection with the mark-to-market adjustments at September 30, 2017, the Company utilized the closing price of the Company’s common stock, as quoted on the NASDAQ Stock Market LLC (“Nasdaq”), as an input to the Black Scholes option-pricing model for the fair value of its common stock.

Recent Accounting Pronouncements

In January 2016, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends the guidance in U.S. generally accepted accounting principles on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and is to be adopted by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

 16

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements, continued

In February 2016, the FASB issued new lease accounting guidance (ASU No. 2016-02, Leases). Under the new guidance, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new guidance is not applicable for leases with a term of 12 months or less. Lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

On March 30, 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. This update requires that all excess tax benefits and tax deficiencies arising from share-based payment awards should be recognized as income tax expense or benefit on the income statement. The amendment also states that excess tax benefits should be classified along with other income tax cash flows as an operating activity. In addition, an entity can make an entity-wide accounting policy election to either estimate the number of awards expected to vest or account for forfeitures as they occur. The provisions of this update are effective for annual and interim periods beginning after December 15, 2016. The Company adopted this standard effective December 31, 2016. The adoption did not have a material effect on the Company’s condensed consolidated financial statements.

In April 2016, the FASB issued ASU No. 2016-10 “Revenue from Contracts with Customers (Topic 606)”, “Identifying Performance Obligations and Licensing” (“ASU 2016-10”). ASU 2016-10 clarifies the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The provisions of this update are effective for annual and interim periods beginning after December 15, 2017, with early application permitted. The Company is continuing to evaluate the expected impact of this new revenue guidance. The Company is currently preparing its assessment of the full financial impact of the new revenue recognition guidance, including the method of adoption, and intends to adopt the guidance when it becomes effective for the Company on January 1, 2018.

In May 2016, the FASB issued ASU No. 2016-12 “Revenue from Contracts with Customers (Topic 606)”, “Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”). The core principal of ASU 2016-12 is the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The provisions of this update are effective for annual and interim periods beginning after December 15, 2017, with early application permitted. The Company is continuing to evaluate the expected impact of this new revenue guidance. The Company is currently preparing its assessment of the full financial impact of the new revenue recognition guidance, including the method of adoption, and intends to adopt the guidance when it becomes effective for the Company on January 1, 2018.

 17

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements, continued

In August 2016, the FASB issued ASU No. 2016-15 “Statement of Cash Flows (Topic 230)”, “Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). The amendments for this update provide guidance on the eight specific cash flows: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The provisions of this update are effective for annual and interim periods beginning after December 15, 2016, with early application permitted. The Company adopted this standard effective December 31, 2016. The adoption did not have a material effect on the Company’s condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business” (“ASU 2017-01”), which provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 requires entities to use a screen test to determine when an integrated set of assets and activities is not a business or if the integrated set of assets and activities needs to be further evaluated against the framework. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09 “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all of the following are met: The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified, the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and the classification of the modified award an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The provisions of this update are effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

Management’s Evaluation of Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the review, other than described in Note 1 –Business Organization, Liquidity, and Going Concern, Note 8 – Commitments and Contingencies and Note 11 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.

 18

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 3 – EQUIPMENT LOAN

On November 23, 2015, the Company entered into a reimbursement agreement with Magnum Vending Corp. (“Magnum”), an entity managed by Philip Thomas, the Company’s Chief Executive Officer and a director of the Company, and certain of his family members. In exchange for the exclusive right to stock vending machines owned by Magnum, the Company agreed to reimburse Magnum for the cost of products to stock the machines and the costs that Magnum incurred to acquire the machines including machines which were purchased with an equipment loan. The total principal amount of the payments underlying the agreement upon inception was $117,917. The reimbursements will be made in 35 monthly payments of principal and interest in the amount of $3,819 with an interest rate of 10%. Upon completion of these payments in October 2018, Magnum will transfer ownership of the vending machines to the Company. In addition, in exchange for the right to stock certain other vending machines that the Company has the right to use, the Company agreed to purchase the products required to be displayed in those vending machines from Magnum, at a price equal to Magnum’s cost for such products (See Note 10). The Company may terminate the agreement and all obligations to make future payments on ten days’ written notice to Magnum. As of September 30, 2017 and December 31, 2016, the outstanding balance on the equipment loan was $51,697 and $76,474, respectively.

NOTE 4 – UBS CREDIT LINE

On October 27, 2016, the Company entered into a credit line with UBS (The “UBS Credit Line”). The UBS Credit Line has a borrowing capacity determined by the level of the collateral pledged and bears interest at a floating rate, depending on the time requested for the borrowing. The interest is based on the ICE Swap Rate plus a margin of between 0.40% and 0.70%. As of June 30, 2017, the interest rate on the UBS Credit Line was 3.732 %. The UBS Credit Line, when drawn, is collateralized by certain of the Company’s short-term investments. As of September 30, 2017 and December 31, 2016, the outstanding balance on the line of credit was $0 and $1,280,275, respectively. As of September 30, 2017 and December 31, 2016, the Company’s borrowing capacity under the UBS Credit line was $0 and $19,725, respectively. As of July 21, 2017, the credit line has been closed.

NOTE 5 – LINE OF CREDIT – RELATED PARTIES

Brentwood LIIT Corp.

On November 23, 2015, LIIT and LIBB entered into a Credit and Security Agreement (the “Credit Agreement”), by and among LIBB, as the borrower, LIIT and LIIT (NZ) Ltd. (the “Lender”). The Lender is controlled by a related party, Eric Watson, who beneficially owned approximately 14.4% of the Company as of September 30, 2017. The Credit Agreement, which expires November 23, 2018, provides for a revolving credit facility in an amount of up to $3,500,000, subject to approval by the lender. The Available Amount may be increased, in increments of $500,000, up to the Facility Amount, and LIBB may obtain further advances, subject to the approval of the Lender.

 19

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 6 – STOCKHOLDERS’ EQUITY

2017 Issuances

On January 3, 2017, the Company issued 1,790 shares of the Company’s common stock to a product broker. The shares had a fair value of $7,500.

On January 17, 2017, the Company issued 41,965 shares of the Company’s common stock to directors of the Company. The shares were issued in satisfaction of accrued director fees and had a fair value of $175,000.

On January 30, 2017, the Company issued 61,208 shares of the Company’s common stock to consultants of the Company in satisfaction of accrued obligations and as a retainer for services to be provided. The shares were valued based upon the value of such services. The fair value was $213,550. As of September 30, 2017, $36,684 is included within prepaid expenses and other current assets in the condensed consolidated balance sheets.

On March 27, 2017, the Company’s Board of Directors approved the issuance of 5,000 and 25,000 shares of the Company’s common stock to directors and consultants, respectively, in consideration of services provided. The fair value of these shares was $112,853.

On March 27, 2017, the Company’s Board of Directors approved the issuance of 111,457 shares of the Company’s common stock to consultants of the Company in consideration of services provided. The fair value of these shares was $437,598.

On April 17, 2017, the Company issued 25,000 shares of the Company’s common stock, valued at $100,751, to an employee of the Company in consideration for services provided prior to their being employed by the Company.

On August 25, 2017, the Company issued 5,000 shares of the Company’s common stock to directors of the Company. The shares were issued in satisfaction of accrued director’s fees and had a fair value of $17,650.

On August 25, 2017, the Company issued 41,033 shares of the Company’s common stock to consultants of the Company in consideration of services provided. The fair value of these shares was $151,167.

NOTE 7 – STOCK-BASED COMPENSATION

Long-Term Equity Incentive Plans

On May 27, 2015, the Company’s board of directors adopted the 2015 Long-Term Incentive Equity Plan (“2015 Stock Option Plan”). The 2015 Stock Option Plan provides for the grant of stock options, stock appreciation rights, restricted stock and other stock-based awards to, among others, the officers, directors, employees and consultants of the Company. During January 2017, the 2015 Stock Option Plan was amended to increase the aggregate number of shares authorized for issuance by 283,333 shares to 750,000 shares.

On April 14, 2017, the Company’s board of directors adopted the 2017 Long-Term Incentive Equity Plan (“2017 Stock Option Plan”), which was approved by the Company’s stockholders on August 9, 2017. The 2017 Stock Option Plan provides for the grant of stock options, stock appreciation rights, restricted stock and other stock-based awards to, among others, the officers, directors, employees and consultants of the Company. The total number of shares reserved under the 2017 Stock Option Plan is 850,000.

 20

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7 – STOCK-BASED COMPENSATION (CONTINUED)

Stock Options

On January 5, 2017, the Company issued to various officers, directors, and employees options to purchase an aggregate of 220,867 shares of the Company’s common stock, under the 2015 Stock Option Plan. The options expire five years from the date of grant, have an exercise price of $5.00, and vest quarterly over two years, beginning on April 5, 2017. The options have a fair value of $440,698.

On January 30, 2017, pursuant to his consulting agreement, Mr. Davidson, the Company’s Executive Chairman, was granted an option to purchase 71,686 shares of the Company’s common stock (See Note 8). The option expires four and a half years from the date of grant, has an exercise price of $4.09, and vests in three equal installments on January 30, 2017, July 28, 2017, and July 28, 2018. The option has a fair value of $131,240.

On March 10, 2017, in connection with his amended and restated employment agreement, Mr. Thomas, the Company’s Chief Executive Officer (“CEO”), was granted an option to purchase 75,000 shares of the Company’s common stock, under the 2015 Stock Option Plan. The option expires five years from the date of grant and has an exercise price of $4.50 per share. The option will vest in three annual installments beginning on the date of grant. The option has a fair value of $128,062.

On March 27, 2017, as compensation, the Company issued to a director an option to purchase 70,000 shares of the Company’s common stock. The option will expire five years from the date of grant, has an exercise price of $4.50 per share, and vests in three annual installments beginning on the date of grant. The option has a fair value of $130,266.

On April 17, 2017, the Company issued to various officers, directors, and employees options to purchase an aggregate of 127,500 shares of the Company’s common stock under the 2015 Stock Option Plan and 187,647 shares of the Company’s common stock under the 2017 Stock Option Plan. The options will expire five years from the date of grant, have an exercise price of $4.50 per share, and vest in three annual installments beginning on the date of grant. The options have a fair value of $404,600.

On August 24, 2017, the Company issued an option to purchase 12,000 shares of the Company’s common stock to an employee of the Company under the 2017 Stock Option Plan. The option will expire five years from the date of grant and have an exercise price of $3.76. The option vests one-third on the date of grant and one-third in each November 2017 and 2018. The option has a fair value of $17,693.

On August 24, 2017, the Company issued an option to purchase 20,000 shares of the Company’s common stock to an employee of the Company under the 2017 Stock Option Plan. The option will expire five years from the date of grant, have an exercise price of $3.76 and be fully vested upon issuance. The option has a fair value of $29,488.

On August 24, 2017, the Company issued to employees of the Company options to purchase an aggregate of 23,500 shares of the Company’s common stock under the 2017 Stock Option Plan. The options will expire five years from the date of grant, have an exercise price of $3.76 and vest in three annual installments beginning on the date of grant. The options have a fair value of $34,649.

 21

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7 – STOCK-BASED COMPENSATION (CONTINUED)

Stock Options, continued

The Company determined the fair value of stock options granted based upon the assumptions as provided below.

	For the Nine Months Ended September 30, 2017
Stock price		$ 3.73 - $5.10
Exercise price		$ 3.76 - $5.00
Dividend yield		0%
Expected volatility		57% - 75%
Risk-Free interest rate, per annum		1.05% – 1.57%
Expected life (in years)		0.85 - 3.06

The following table summarizes the stock option activity of the Company:

	Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		425,411		$	4.93	$	3.85
Granted		808,200			4.55		1.63
Exercised		-			-		-
Expired, forfeited or cancelled		(159,456	)		4.79		1.67
Outstanding at September 30, 2017		1,074,155		$	4.66	$	2.50		3.3	$	-
Exercisable at September 30, 2017		699,963		$	4.60	$	2.79		2.7	$	-

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock.

As of September 30, 2017, there was a total of $647,084 of unrecognized compensation expense related to unvested stock options. This cost is expected to be recognized through 2019 over a weighted average period of 0.79 years.

The Company accounts for all stock-based compensation as an expense in the financial statements and associated costs are measured at the fair value of the award or the fair value of the service provided whichever is most readily determinable.

 22

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7 – STOCK-BASED COMPENSATION (CONTINUED)

Stock Warrants

On March 29, 2017, in consideration for a prior commitment for financing the Company through March 31, 2018 from a stockholder, the Company’s Board of Directors issued to this stockholder a warrant to purchase 165,000 shares of the Company’s common stock at an exercise price of $4.18 per share. This warrant has a term of one year and was fully vested upon issuance. The warrant had a grant date fair value of $172,526, which was fully charged to general and administrative expense during the three months ended March 31, 2017. The fair value of the warrant was determined utilizing the Black-Scholes option pricing model, based upon a common stock price of $4.00 per share, dividend yield of 0%, expected volatility of 70%, risk free interest rate of 1.00%, and an expected life in years of 1.00.

On May 12, 2017, in consideration for a prior commitment for financing the Company through May 15, 2018 from a stockholder, the Company’s Board of Directors issued to this stockholder a warrant to purchase 20,000 shares of the Company’s common stock at an exercise price of $4.90 per share. This warrant has a term of one year and was fully vested upon issuance. The warrant had a grant date fair value of $22,039, which was fully charged to general and administrative expense during the three months ended June 30, 2017. The fair value of the warrant was determined utilizing the Black-Scholes option pricing model, based upon a common stock price of $4.87 per share, dividend yield of 0%, expected volatility of 57%, risk free interest rate of 1.11%, and an expected life in years of 1.00.

On April 24, 2017, in connection with a distribution agreement with Big Geyser (the “Big Geyser Distribution Agreement”) (see Note 8), the Company issued a warrant to purchase 85,000 shares of the Company’s common stock at an exercise price of $4.50 per share. The warrant vests depending on certain sales levels achieved by that distributor. The warrant has an expiration date of April 23, 2022. The warrant had a grant date fair value of $226,134. For the three months ended September 30, 2017, the Company recognized expense of $1,503 and a reduction of the second quarter incentive by $2,891 due to mark-to-market adjustments, resulting in a net reduction of expense of $1,388, related to this warrant. For the nine months ended September 30, 2017, the Company recognized expense of $2,896, related to this warrant.

On April 24, 2017, in connection with the same distribution agreement, the Company issued a second warrant to purchase 95,000 shares of the Company’s common stock at an exercise price that will be equal to the average of the closing prices of the common stock for the thirty consecutive trading days ending on April 23, 2018 (or the 30 days preceding the beginning of the measurement period for this warrant). The warrant vests depending on certain sales levels achieved by that distributor during the period April 24, 2018 through April 23, 2019. The warrant has an expiration date of April 23, 2022. The initial valuation of this warrant will not occur until the measurement period begins on April 24, 2018.

On April 24, 2017, in connection with the same distribution agreement, the Company issued a warrant to purchase 145,000 shares of the Company’s common stock at an exercise price of $4.50 per share. The warrant vests as follows for certain milestones being achieved: 95,000 shares upon the receipt of the first purchase order of the Company’s iced tea products, 25,000 shares upon the receipt of the first purchase order of the Company’s lemonade products, and 25,000 shares upon the receipt of the first purchase order for half-gallon containers of the Company’s products. The warrant has an expiration date of April 23, 2022. The warrant had a grant date fair value of $385,758. For the three and nine months ended September 30, 2017, the Company recorded expense of $0 and $252,738, respectively, related to this warrant.

 23

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7 – STOCK-BASED COMPENSATION (CONTINUED)

Stock Warrants, continued

On July 6, 2017, in connection with the public offering the Company issued warrants to purchase an aggregate of 40,000 shares of the Company’s common stock to lead investors (See Note 1).

On August 16, 2017, in connection with the Big Geyser Distribution Agreement, the Company issued a warrant to purchase 110,000 shares of the Company’s common stock at an exercise price that will be equal to the average of the closing prices of common stock for the thirty consecutive trading days ending on April 23, 2019 (or the 30 days preceding the beginning of the measurement period for this warrant). The warrant vests depending on certain sales levels achieved by that distributor during the period April 24, 2019 through April 23, 2020. The warrant has an expiration date of April 23, 2022. The initial valuation of this warrant will not occur until the measurement period begins on April 24, 2019.

The following table summarizes the common stock warrant activity of the Company:

	Number of shares		Weighted average exercise price		Weighted average contractual life (years)
Outstanding - January 1, 2017		470,570	$	5.95		-
Issued		660,000	$	4.49		-
Expired		-	$	-		-
Outstanding September 30, 2017		1,130,570	$	5.23		2.5
Exercisable at September 30, 2017		790,570	$	5.36		1.7

Stock-Based Compensation Expense

The following tables summarize total stock-based compensation costs recognized for the three and nine months ended September 30, 2017 and 2016:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Stock options	$	279,603	$	438,113	$	1,044,147	$	740,820
Warrants		-		-		194,565		30,000
Common Stock		-		-		81,800		240,000
Total	$	279,603	$	438,113	$	1,320,512	$	1,010,820

The total amount of stock-based compensation was reflected within the statements of operations and comprehensive loss as:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
General and administrative	$	259,460	$	412,439	$	966,705	$	853,859
Sales and marketing		20,143		25,674		353,807		156,961
Total	$	279,603	$	438,113	$	1,320,512	$	1,010,820

 24

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is involved in various claims and legal actions arising from time to time in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters in the ordinary course of business will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Legal costs related to these matters are expensed as they are incurred.

On August 1, 2014, an action was filed by LIBB in the Supreme Court in the State of New York entitled Long Island Brand Beverages LLC v. Revolution Marketing, LLC (“Revolution”) and Ascent Talent, Model Promotion Ltd. LIBB is seeking damages of $10,000,000 for several claims including breach of contract and fraud occurring during 2014. Revolution has filed a counterclaim for breach of contract and related causes of action, claiming damages in the sum of $310,880, and seeking punitive damages of $5,000,000. Ascent has filed a pre-answer motion to dismiss LIBB’s complaint. LIBB filed papers in opposition and the motion was submitted by March 9, 2015. In addition, Revolution has filed a motion to amend its answer to include cross-claims against Ascent which were not asserted in its original answer of record. On February 5, 2016, the Court rendered a decision. The motion to dismiss was denied with the exception of two claims which the Court dismissed. In the same decision, the Court granted a separate motion filed by Revolution to amend its answer to include cross-claims against Ascent. On June 23, 2017, both defendants filed motions to dismiss based upon delays in producing documents, which were fully submitted. On August 7, 2017, oral arguments were held. Thereafter, the court denied the motions to dismiss and each of the parties has completed their discovery. On October 6, 2017, the Company filed a Note of Issue and Certificate of Readiness. The case has been certified by the court as ready for trial. The Company is currently awaiting defendants’ summary judgement motions.

Brokerage Arrangements

The Company maintains arrangements with sales brokers who help with bringing new distributors and retail outlets to the Company. These sales brokers receive a commission for these services. Commissions to these brokers ranged from 1-5% of sales. In addition, the Company sells its products through alternative vending channels. Commissions resulting from sales through these channels were $19,151 and $(1,174) for the three months ended September 30, 2017 and 2016, respectively, and $50,648 and $54,436 for the nine months ended September 30, 2017 and 2016, respectively.

 25

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 8 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Employment Agreements

On March 10, 2017, the Company entered into an amended and restated employment agreement with Mr. Thomas. The amended employment agreement has a term that runs until December 31, 2019. Mr. Thomas will receive a base salary of $250,000, was paid $83,000 upon the signing of the agreement, and is eligible for paid incentive bonuses from the Company. Pursuant to the agreement, Mr. Thomas was also granted an option to purchase 75,000 shares of the Company’s common stock (See Note 7).

On April 18, 2017, the Company entered into an employment agreement with Virginia Morris to serve as the Company’s Chief Sales & Marketing Officer. Ms. Morris’s primary responsibilities will be driving the growth agenda for the Company’s entire portfolio of brands and overseeing key sales and marketing functions including brand management, channel strategy development and execution, and product innovation. Pursuant to the employment agreement, Ms. Morris was awarded an option to purchase 27,500 shares of the Company’s common stock under the 2015 Stock Option Plan, and an additional option to purchase 42,500 shares of the Company’s common stock under the 2017 Stock Option Plan. The options have an exercise price of $4.50 and vest annually in three equal installments beginning on the date of grant. Ms. Morris was also awarded 25,000 shares of the Company’s common stock prior to the execution of her employment agreement for services provided to the Company (See Note 7).

On September 1, 2017, the Company terminated the employment agreement with Ms. Morris. Pursuant to the employment agreement, Ms. Morris was entitled to receive severance of two months of her base salary. In lieu of cash, Ms. Morris and the Company agreed that Ms. Morris would be issued 22,000 shares of the Company’s common stock for accrued severance. As of September 30, 2017, the Company included $52,149 in accrued expenses within the condensed consolidated balance sheets related to Ms. Morris’s severance. On September 1, 2017, in connection with her termination, Ms. Morris’s option to purchase 70,000 shares of the Company’s common stock became fully vested. This option will expire if not exercised by September 1, 2018.

Separation Agreement

On July 11, 2017, the Company entered into a separation agreement with Richard Allen, the Company’s Chief Financial Officer. Pursuant to the separation agreement, Mr. Allen would continue as the Company’s Chief Financial Officer until August 15, 2017. Pursuant to the separation agreement, the Company was obligated to pay Mr. Allen $61,668 in two installments on or about July 18, 2017 and on or about August 22, 2017. The Company paid the first cash portion on August 4, 2017, and on September 17, 2017, Mr. Allen agreed to accept 15,000 shares in lieu of the second cash payment. In addition, 50% of his unvested stock options vested immediately and together with previously vested portions of such options will be exercisable until May 15, 2018. The separation agreement contains provisions for protection of the Company’s confidential information and certain non-competition restrictions.

 26

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 8 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Consulting Agreements

Julian Davidson

On June 6, 2016, the Company entered into an amendment to the consulting agreement with Julian Davidson which provides for him to serve as the Company’s Executive Chairman. Either Mr. Davidson or the Company may terminate the consulting agreement with 30 days’ prior written notice. Pursuant to the consulting agreement, as in effect prior to its amendment and restatement as described below, the Company (a) paid to Mr. Davidson $10,000 per month, and (b) granted to Mr. Davidson 1,667 shares of common stock per month (an aggregate of 4,302 shares). The consulting agreement, as amended, contains provisions for protection of the Company’s intellectual property and confidentiality and non-competition restrictions for Mr. Davidson (generally imposing restrictions during the term of the consulting agreement, on (i) ownership or management of, or employment or consultation with, competing companies, (ii) soliciting employees to terminate their employment (iii) soliciting business from the Company’s customers, and (iv) soliciting prospective acquisition and investment candidates for purposes of acquiring or investing in such entity).

On August 18, 2016, the Company entered into a second amendment to the consulting agreement with Julian Davidson. The amendment modified the condition that was required to be satisfied for certain changes in the compensation payable to Mr. Davidson under the consulting agreement to take effect. After the amendment, upon the Company completing an equity raise with gross proceeds of at least $6,900,000, the monthly cash fee to Mr. Davidson increases to $20,000 per month, the monthly stock grant to Mr. Davidson is eliminated and Mr. Davidson receives a one-time cash bonus of $95,000 and a one-time grant of 50,000 shares of the Company’s common stock. The amendment also modified the compensation that will be payable to Mr. Davidson under his agreement. Mr. Davidson is entitled to receive an option to purchase 4% of the fully diluted common stock outstanding immediately after the Offering, or 286,744 shares of the Company’s common stock. On August 18, 2016, the Company granted to Mr. Davidson an option to purchase 286,744 shares of common stock.

On October 5, 2016, the Company entered into an amended and restated consulting agreement with Julian Davidson (“Davidson Amendment”), effective as of September 29, 2016, which provides for him to continue to serve as the Company’s Executive Chairman.

On October 2, 2017, the Company agreed to pay Mr. Davidson, in lieu of a cash bonus of $165,000 due to him under his existing compensation arrangements (i) a one-time stock bonus of 48,000 shares of the Company’s common stock and (ii) a deferred cash payment of $65,000 to be made at a time determined by the Compensation Committee of the Company’s Board of Directors, but no later than December 31, 2017, with no interest to accrue on such payment obligation. The shares of the Company’s common stock were granted under the Company’s 2017 Long-Term Incentive Equity Plan.

 27

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 8 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Investor Relations

On March 1, 2017, the Company entered into a consulting agreement with an investor relations and communications firm. The agreement commenced on March 1, 2017 for an initial term of two months. The agreement was renewed for the month of May 2017 and may be renewed on a monthly basis by the Company. The agreement shall terminate in 180 days from the date of the agreement. In consideration for services, the Company shall pay (a) $15,000 in cash on the signing of the contract and $15,000 on the 5^th day of each month thereafter, (b) up to $135,000 in ancillary budget (at the Company’s discretion) due each month for the balance of the contract, (c) issue 10,000 shares of common stock upon the execution of the agreement and issue a 10,000 shares of common stock on the 5^th day of each month of the agreement until termination or renewal of this agreement, and (d) the reimbursements of pre-approved travel or other expenses monthly.

On October 1, 2017, the Company entered into a master service agreement with the investor relations and communications firm. The agreement commenced on October 1, 2017 for an initial term of two months. The agreement may be renewed monthly by the Company up to a maximum of 180 days from the date of the agreement. In consideration of services, the only adjustment from the March 1, 2017 agreement is that the number of shares to be issued on the 5^th day of each month was increased to 15,000.

Distribution Agreements

On March 14, 2017, the Company entered into the Big Geyser Distribution Agreement. Big Geyser became the exclusive distributor of the Company’s iced tea products in certain regions. The agreement became effective on April 24, 2017 and covers retail locations in the New York City metro region, including the five boroughs of New York City, Long Island, Westchester and Putnam County (See Note 7).

 28

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 8 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Leases

On June 6, 2014, the Company entered into a lease agreement for its principal office and warehouse space in Hicksville, NY. The lease commenced on July 1, 2014 and was expired on August 31, 2017.

On July 14, 2017, the Company entered into a lease agreement for its principal office and warehouse space in Farmingdale, NY. The lease commenced on August 15, 2017 and extends through September 30, 2022. The Company has the option to extend the lease for an additional three years.

Rent expense for the three months ended September 30, 2017 and 2016 was $22,219 and $15,428, respectively, and for the nine months ended September 30, 2017 and 2016 was $44,817 and $36,510, respectively.

Total future minimum payments required under the Farmingdale lease are as follows:

Year Ended December 31,
2017 (three months)	$	24,749
2018		99,984
2019		102,983
2020		106,073
2021		109,255
Thereafter		83,564
Total	$	526,608

In addition, the Company utilizes public warehouse space for its inventory. Public storage expense for the three months ended September 30, 2017 and 2016 was $26,761 and $22,662, respectively, and for the nine months ended September 30, 2017 and 2016 was $39,741 and $76,493, respectively.

NOTE 9 – MAJOR CUSTOMERS AND VENDORS

For the three months ended September 30, 2017 and 2016, two customers accounted for 28% and 14%, or 42% in the aggregate, and three customers accounted for 22%, 11% and 11%, or 44% in the aggregate, of the Company’s net sales, respectively. For the nine months ended September 30, 2017 and 2016, two customers accounted for 21% and 12%, or 33% in the aggregate, and three customers accounted for 13%, 12% and 10%, or 35% in the aggregate, of the Company’s net sales, respectively.

For the three months ended September 30, 2017 and 2016, four vendors accounted for 22%, 21%, 12% and 12%, or 67% in the aggregate, and five vendors accounted for 19%, 17%, 17%, 15% and 10%, or 78% in the aggregate, of purchases, respectively. For the nine months ended September 30, 2017 and 2016, two vendors accounted for 35% and 20%, or 55% in the aggregate, and four vendors accounted for 20%, 17%, 16% and 16%, or 69% in the aggregate, of purchases, respectively.

 29

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 10 - RELATED PARTIES

The Company recorded revenue related to sales to an entity owned by an immediate family member of Philip Thomas, CEO, stockholder, and member of the Board of Directors. Mr. Thomas is also an employee of this entity. For the three months ended September 30, 2017 and 2016, sales to this related party were $0 and $426, respectively. For the nine months ended September 30, 2017 and 2016, sales to this related party were $879 and $3,063, respectively. As of September 30, 2017 and December 31, 2016, there was $879 and $0, respectively, due from this related party which was included in accounts receivable in the condensed consolidated balance sheets. The Company also purchases product at cost, from this entity to supplement certain vending sales. For the three months ended September 30, 2017 and 2016, the Company purchased $6,616 and $0, respectively, and for the nine months ended September 30, 2017 and 2016, the Company purchased $14,631 and $17,514, respectively, of product from this entity. As of September 30, 2017 and December 31, 2016, the outstanding balance due to this entity included in accounts payable was $0 and $10,043, respectively.

As of September 30, 2017 and December 31, 2016, the Company is indebted to Mr. Thomas in the amounts of $65,000 and $0, respectively, for a short-term loan to the Company. This loan is included in other current liabilities within the condensed consolidated balance sheets.

On March 27, 2017, the Company issued an option to purchase 70,000 shares of the Company’s common stock to a party who was, until October 5, 2017, a member of the Board of Directors, in connection with services provided to the Company beyond the Board of Director duties of this Director. As of September 30, 2017 and December 31, 2016 accounts payable and accrued expenses to a company wholly owned by this former director were $10,237 and $4,032, respectively.

For the three and nine months ended September 30, 2017, the Company incurred expenses of $18,000 and $30,000, respectively, related to an entity whose majority shareholder is Eric Watson, who beneficially owned approximately 14.4% of the Company as of September 30, 2017. As of September 30, 2017 and December 31, 2016, accounts payable due to this entity were $19,410 and $0.

NOTE 11 – SUBSEQUENT EVENTS

NASDAQ Notice

On October 9, 2017, the Company received a notice from the Listing Qualifications Department of the Nasdaq Stock Market (“NASDAQ”). The notice stated that the Company’s enterprise market value fell below the minimum NASDAQ threshold for thirty consecutive business days. The Company has 180 calendar days from the notice date to regain compliance with this standard by exceeding the minimum threshold for ten consecutive business days. The notification has no effect on the listing of the Company’s common stock at this time.

 30

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this quarterly report to “we,” “us”, or “our” or to “our company” or “the Company” refer to Long Island Iced Tea Corp., a holding company, and its wholly owned subsidiaries, including Long Island Brand Beverages LLC (“LIBB”) and Cullen Agricultural Holding Corp. (“Cullen”).

The information disclosed in this quarterly report, and the information incorporated by reference herein, include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained are based on our current expectations and beliefs concerning future developments and their potential effects on us and speak only as of the date of such statement. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in this Item 2 of Part I of this quarterly report and in Item 1A of Part I of our annual report on Form 10-K filed on March 31, 2017. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

The following discussion should be read in conjunction with our condensed consolidated interim financial statements and footnotes thereto contained in this quarterly report.

Overview

We are a holding company operating through our wholly-owned subsidiary, LIBB. We are engaged in the production and distribution of premium Non-Alcoholic ready-to-drink (“NARTD”) beverages. We are currently organized under our flagship brand, Long Island Iced Tea, a premium NARTD tea made from a proprietary recipe and with quality components. Our mission is to provide consumers with premium beverages offered at an affordable price.

We aspire to be a market leader in the development of beverages that are convenient and appealing to consumers. There are two major target markets for our beverages: “consumers on the go” and “health conscious consumers.” “Consumers on the go” are families, employees, students and other consumers who lead a busy lifestyle. With increasingly hectic and demanding schedules, there is a need for products that are accessible and readily available. “Health conscious consumers” are individuals who are becoming more interested and better educated on what is included in their diets, causing them to shift away from options perceived as less healthy, such as carbonated soft drinks, towards alternative beverages such as iced tea.

We continually seek to expand our product line. Our current products include iced tea, lemonade and aloe vera juice.

We produce a 100% brewed iced tea, using black tea leaves, purified water and natural cane sugar or sucralose. Flavors change from time to time, and have included lemon, peach, raspberry, guava, mango, diet lemon, diet peach, sweet tea, green tea and honey, half tea and half lemonade. We also offer lower calorie iced tea in flavor options that include mango, raspberry and peach. We also sell the iced tea in gallon bottles with flavor options including lemon, peach, green tea and honey, half and half lemonade, sweet tea, mango and unsweetened.

During April 2017, we expanded our brand to include lemonade. Lemonade is offered in nine flavors including traditional, lime, pink lemonade, kiwi & strawberry, cherry, peach, watermelon, wild berries and strawberry and is offered at retail in 18oz. bottles.

We also distribute an aloe vera derived juice beverage (“ALO Juice”) in 500ml and 1.5 liter bottles. ALO Juice is offered in six flavors including original, pomegranate, mango, raspberry, pineapple and coconut. Our plans for ALO Juice include increasing brand support through our existing sales and marketing team, ultimately accelerating points of distribution throughout current (and future) distributor and retail partnerships alongside our flagship iced tea and lemonade products. In addition, in order to service certain vending contracts, we sell snacks and other beverage products on a limited basis.

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We are also seeking to better develop emerging markets, as well as expand our overall geographic footprint. The United States (“US”) market represents approximately $7 billion of a global $57 billion NARTD international market (Sources: Euromonitor international, “Versatility of NARTD Tea Generates Bright Spot in Global Soft Drinks”, 2014, and Euromonitor International “NARTD in the US”, February 2017). The recognition globally of our flagship ‘Long Island Iced Tea’ brand makes international expansion a key business objective. We continue to retain the consulting services of an international beverage specialist, and have during the quarter, applied additional consulting resources to look at opportunities in Northeast Asia. During 2017, we announced the appointment of a New Zealand base distributor, and an Australian based distributor as well as an Australian based co-packer with capability to produce products for Australasia and into Asia. We have also focused on the development of markets in South America, and have announced expansion into Costa Rica, Columbia, Honduras, Ecuador and other Latin American countries. We also worked alongside existing distributor partnerships in Puerto Rico, Canada and South Korea to further expand distribution points throughout their respective markets. Additional 2017 developments include new retail partnerships opened with supermarket chains such as Pueblos and Supermax in Puerto Rico and Loblaws in Canada, and multiple reorders received from the South Korean distributor.

We were incorporated on December 23, 2014 in the State of Delaware. Our corporate offices are located at 12-1 Dubon Court, Farmingdale, NY 11735 and our telephone number at that location is (855) 542-2832.

Recent Developments

January 2017 Offering

In January 2017, we consummated a public offering (the “January 2017 Offering”) of an aggregate of 376,340 shares of our common stock, through Alexander Capital, L.P., as placement agent, pursuant to the terms of a selling agent agreement, dated January 25, 2017, with the placement agent and subscription agreements with each of the investors in the offering. Of the aggregate number of shares sold, 300,000 shares were sold to the public at a price of $4.00 per share and 76,340 of the shares were sold to our officers and directors at a price of $4.10 per share, the most recent closing bid price of the common stock at the time the officers and directors executed their subscription agreements. The offering generated gross proceeds of $1,513,000 and net proceeds of $1,429,740, after payment of the placement agent fees and other offering expenses.

The offering was made pursuant to our existing shelf registration statement on Form S-3 (File No. 333-213874), which was filed with the Securities and Exchange Commission (“SEC”) on September 30, 2016 and declared effective by the SEC on October 14, 2016 (the “Shelf Registration”), and is described in more detail in a prospectus supplement dated January 27, 2017 and the accompanying base prospectus dated October 14, 2016 (the “Base Prospectus”).

June 2017 Offering

In July 2017, we consummated a public offering (the “July 2017 Offering”) of an aggregate of 448,160 shares of our common stock, through Alexander Capital, L.P., as placement agent, pursuant to subscription agreements with each of the investors in the offering. The shares were sold at a price of $5.00 per share. Of the shares sold, 200,000 were sold to lead investors who, as a result of purchasing more than $500,000 in shares, each received (i) an additional number of shares of common stock equal to 7% of the total number of shares of common stock purchased by such lead investors in this offering (or an aggregate of 14,000 shares) and (ii) three-year warrants up to that number of shares of common stock equal to 20% of the total number of shares purchased by such lead investors in this offering (or warrants to purchase an aggregate of 40,000 shares). These warrants have an exercise price of $5.50 and were fully vested upon issuance. The sale of common stock generated gross proceeds of $2,240,800 and net proceeds of $2,134,487 after deducting commissions and other offering expenses.

The offering was made pursuant to our Shelf Registration, and is described in more detail in a prospectus supplement dated June 14, 2017 and the accompanying Base Prospectus.

July 2017 Offering

In July 2017, we consummated a public offering (the “July 2017 Offering”) of an aggregate of 448,160 shares of our common stock, through Alexander Capital, L.P., as placement agent, pursuant to subscription agreements with each of the investors in the offering. The shares were sold at a price of $5.00 per share. Of the shares sold, 200,000 were sold to lead investors who, upon the purchase of $500,000 or more, received (i) an additional number of shares of common stock equal to 7% of the total number of shares of common stock purchased by such lead investors in this offering (or an aggregate of 14,000 shares) and (ii) three-year warrants up to that number of shares of common stock equal to 20% of the total number of shares purchased by such lead investors in this offering (or warrants to purchase an aggregate of 40,000 shares). These warrants have an exercise price of $5.50 and are fully vested upon issuance. The sale of common stock generated gross proceeds of $2,240,800 and net proceeds of $2,134,487 after deducting commissions and other offering expenses.

The offering was made pursuant to our Shelf Registration, and is described in more detail in a prospectus supplement dated July 6, 2017 and the accompanying Base Prospectus.

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October 2017 Offering

In October 2017, we consummated a public offering (the “October 2017 Offering”) of an aggregate of 607,500 shares of our common stock. The shares were sold at a price of $2.05 per share. The sale of common stock generated gross proceeds of $1,245,375 and estimated net proceeds of $1,235,375 after deducting expenses. Each investor in the offering also received a warrant to purchase 50% of the number of shares for which such investor subscribed in the offering (or a total aggregate number of shares underlying such warrants equal to 303,750 shares). The warrants have an exercise price of $2.40 per share, subject to adjustment, and expire one year from the closing of the offering.

The offering was made pursuant to our Shelf Registration, and is described in more detail in a prospectus supplement dated September 27, 2017 and the accompanying Base Prospectus.

Brooklyn Sports and Entertainment

Nassau Veterans Memorial Coliseum

On February 16, 2017, we formed an alliance with Brooklyn Sports and Entertainment to become the official iced tea of Nassau Veterans Memorial Coliseum presented by New York Community Bank. We have the exclusive iced tea serving rights in the venue including all concession stands and luxury suites. The alliance also includes high profile interior and exterior light-emitting diode (“LED”) branding, as well as digital and retail promotional opportunities. After a complete refurbishment, the venue reopened on April 5, 2017.

Barclays Center

On September 21, 2017, we expanded our alliance with Brooklyn Sports and Entertainment to become the official iced tea of Barclays Center. We have the exclusive iced tea serving rights in the venue including all concession stands and luxury suites. The alliance also includes high profile interior and exterior LED branding, as well as digital and retail promotional opportunities.

Lemonade

On March 14, 2017, we announced the expansion of our brand to include lemonade. The Original Long Island Brand™ Lemonade range consists of nine real-fruit flavors, and is offered at retail in 18oz bottles. This premium lemonade is intended to be differentiated from other lemonade beverages in the US market. It is made with 100% raw cane sugar and non-GMO ingredients that incorporate the “better-for-you” attributes that are prominent within our iced tea brand, and will complement Long Island Iced Tea®. Product became available in select markets during the second quarter of 2017. It is our objective to grow market share and offer this product alongside our iced tea products.

Big Geyser Strategic Distribution Partnership

On March 14, 2017, we entered into a long-term strategic distribution agreement, in certain regions, with Big Geyser, a large independent non-alcoholic beverage distributor in metro New York, pursuant to which Big Geyser became the exclusive distributor of our iced tea bottle products in the region. The agreement became effective on April 24, 2017 and covers retail locations in the New York City metro region, including the five boroughs of New York City, Long Island, Westchester and Putnam County. This distribution coverage will provide the potential to significantly increase our distribution footprint and allow us to streamline our business and brings additional focus to building our brand. As part of the distribution agreement, we have issued warrants to Big Geyser in the second and third quarters which vest upon the achievement of certain performance targets.

ALO Juice

On September 18, 2017, we entered into an exclusive perpetual licensing agreement (“Licensing Agreement”) with The Wilnah International, LLC (“Wilnah”) ALO Juice brand owners, providing us with worldwide rights to produce, distribute and sell the ALO Juice brand. As compensation to Wilnah for these rights, we paid an initial fee of $150,000, which was applied against the Seba accounts receivable upon the closing and have agreed to pay to Wilnah a 7.0% royalty on our gross sales of ALO Juice sales delivered to our customers after the closing of this agreement. We believe that ALO Juice complements our “better for you” beverage strategy, and as such, we intend to further leverage and grow the ALO Juice brand and distribution.

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Highlights

We generate income through the sale of our beverage products. The following are highlights of our operating results for the three and nine months ended September 30, 2017:

● Net sales. During the three months ended September 30, 2017, we had net sales of $1,554,895 representing, an increase of $253,770 over the three months ended September 30, 2016. The increase is due principally to revenue improvements in iced tea and the introduction of lemonade, offset by declines in gallons and Alo Juice. During the nine months ended September 30, 2017, we had net sales of $3,901,145, an increase of $488,184 over the nine months ended September 30, 2016.

● Margin. Our gross profit percentage decreased by 4% and our gross profit decreased by $35,705 for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. Our gross profit percentage increased by 1% and our gross profit increased by $78,058 for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. The decrease for the three months ended September 30, 2017 was principally attributable to increases in discounts and allowances. The increase for the nine months ended September 30, 2017 was primarily due to improvements in our gallon iced tea and lemonade product lines.

● Operating expenses. During the three months ended September 30, 2017, our operating expenses were $3,867,258, representing an increase of $1,035,489 as compared to the three months ended September 30, 2016. During the nine months ended September 30, 2017, our operating expenses were $11,477,677, representing an increase of $5,488,041 as compared to the nine months ended September 30, 2016. The increase in operating expenses related primarily to increased payroll (including stock-based compensation), Strategy Committee and Board of Directors fees, professional fees and services, freight, advertising, bad debt expense and product development.

Historically, our cash generated from operations has not been sufficient to meet our expenses. During 2017, we have principally financed our business through the sale of equity interests. During the nine months ended September 30, 2017, our cash flows used in operating activities were $7,403,966, our net cash provided by investing activities was $2,446,069 and our net cash provided by financing activities was $4,138,020. We had working capital of $352,595 as of September 30, 2017.

In order to execute our long-term growth strategy, we expect to continue to raise additional funds through equity offerings, debt financings, or other means. There are no assurances that we will be able to raise such funds on acceptable terms or at all. See Sources of Liquidity and Going Concern in item 2 of this report.

Uncertainties and Trends in Our Business

We believe that the key uncertainties and trends in our business are as follows:

● We believe that using various marketing tools, which may result in significant advertising expenses, will be necessary to increase product awareness in order to compete with our competitors, including large and well established brands with access to significant capital resources.

● Customer trends and tastes can change for a variety of reasons including health consciousness, government regulations and variation in demographics. We will need to be able to adapt to changing preferences in the future.

● Our sales growth is dependent upon maintaining our relationships with existing and future customers who may generate substantial portions of our revenue. These include sales to retailers where there may be concentrations.

● Our sales are subject to seasonality. Our sales are typically the strongest in the summer months.

● We are currently involved in litigation. Please refer to Item 1 of Part II of this Form 10-Q. There are no assurances that there will be successful outcomes to these matters.

● Our portfolio includes a gallon iced tea product line featuring six of our existing flavors. The Company’s gallon iced tea product line has previously sold below cost. There are no assurances we will be successful in increasing margins on this product line.

● We operate in highly competitive markets.

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● Costs for our raw materials may increase substantially.

● Our intellectual property rights could be infringed upon or we could infringe upon the intellectual property rights of others.

● Adverse events regarding licensed intellectual property, including termination of distribution rights, could harm our business.

● We have experienced cash losses from operations and our ability to grow and compete in the future will be adversely affected if adequate capital is not available to us.

● We have a limited operating history.

Please refer to risks factors described in Item 1A of Part I of our annual report on Form 10-K filed on March 31, 2017.

Accounting Policies

The preparation of the financial statements in conformity with United States Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in these consolidated financial statements. We believe that, of our significant accounting policies (see Note 2 of the condensed consolidated financial statements included in this quarterly report), the following policies are the most critical.

Revenue Recognition

Revenue is stated net of sales discounts, rebates paid to customers, establishment incentives, placement fees and returns. Net sales are recognized when all of the following conditions are met: (1) the price is fixed and determined; (2) evidence of a binding arrangement exists (generally, purchase orders); (3) products have been delivered and there is no future performance required; and (4) amounts are collectible under normal payment terms. These conditions typically occur when the products are delivered to or picked up by the Company’s customers. For sales where certain revenue recognition criteria have not been met at the date of delivery, the Company defers recognition of such revenue until such recognition criteria are met.

Customer Marketing Programs and Sales Incentives

The Company participates in various programs and arrangements with customers designed to increase the sale of its products. Among these programs are arrangements under which allowances can be earned by customers for attaining agreed upon sales levels or for participating in specific marketing programs. The Company believes that its participation in these programs is essential to ensuring volume and revenue growth in a competitive marketplace. The costs of all these various programs are recorded as a reduction of sales in the financial statements.

Additionally, the Company may be required to occasionally pay fees to its customers (“Placement Fees”) in order to place its products in the customers’ stores. In most cases, the Placement Fees carry no further benefit or minimum revenue guarantee other than the right to place the Company’s product in the customers’ stores. The Placement Fees are recorded as a reduction of sales. If, at the time the Placement Fees are recognized in the statement of operations, the Company has cumulative negative sales with that particular customer, such negative sales are reclassified and recorded as a part of selling and marketing expense.

Accounts Receivable

The Company sells products to distributors and directly to retailers, and extends credit, generally without requiring collateral, based on its evaluation of the customer’s financial condition. Potential losses on the Company’s receivables are dependent on each individual customer’s financial condition and sales adjustments granted after the balance sheet date. The Company carries its trade accounts receivable at net realizable value. Typically, accounts receivable have terms of net 30 days and do not bear interest. The Company monitors its exposure to losses on receivables and maintains allowances for potential losses or adjustments. The Company determines these allowances by (1) evaluating the aging of its receivables; (2) analyzing its history of sales adjustments; and (3) reviewing its high-risk customers. Past due receivable balances are written off when the Company’s efforts have been unsuccessful in collecting the amount due. Accounts receivable are stated at the amounts management expects to collect. For sales where certain revenue recognition criteria have not been met at the date of delivery, the Company defers recognition of such accounts receivable until such recognition criteria are met.

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Inventories

The Company’s inventory includes raw materials such as bottles, sweeteners, labels, flavors and packaging. Finished goods inventory consists of bottled and packaged iced tea, lemonade and ALO Juice. The Company values its inventories at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. Included in inventory at September 30, 2017 and December 31, 2016, was finished goods inventory with a cost of approximately $95,000 and $320,000, respectively which was delivered to a distributor, and is held in inventory until revenue recognition criteria are met.

Results of Operations

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Net sales	$	1,554,895		$	1,301,125		$	3,901,145		$	3,412,961
Cost of goods sold		1,486,265			1,196,790			3,663,404			3,253,278
Gross profit		68,630			104,335			237,741			159,683
Operating expenses:
General and administrative expenses		1,543,786			2,170,522			5,169,174			3,957,763
Selling and marketing expenses		2,323,472			661,247			6,308,503			2,031,873
Total operating expenses		3,867,258			2,831,769			11,477,677			5,989,636
Operating Loss		(3,798,628	)		(2,727,434	)		(11,239,936	)		(5,829,953	)
Other expenses:
Other income (expense)		-			4,070			(38,986	)		4,070
Interest expense, net		(114,150	)		(579,710	)		(313,573	)		(976,427	)
Loss on inducement		-			(1,587,954	)		-			(1,587,954	)
Net loss	$	(3,912,778	)	$	(4,891,028	)	$	(11,592,495	)	$	(8,390,264	)

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Comparison of the Three Months Ended September 30, 2017 and 2016

Net Sales and Gross Profit

Net sales for the three months ended September 30, 2017 increased by $253,770, or 20%, to $1,554,895 as compared to $1,301,125 for the three months ended September 30, 2016. The increase is driven by $390,953 of lemonade sales and an increase of $242,189 in 18/20oz iced tea sales. This was partially offset by a $238,300 decline in sales of our ALO Juice product line.

Gross profit decreased by $35,705, or 34%, to $68,630 for the three months ended September 30, 2017 from $104,335 for the three months ended September 30, 2016. The change in gross profit amount consisted of a decrease of approximately $40,000 in gross profit for iced tea sold in gallons, and a decrease in gross profit of approximately $57,000 for ALO Juice, offset by an increase in gross profit of approximately $75,000 on sales of lemonade. Our gross profit percentage decreased by approximately 4% for the three months ended September 30, 2017, as compared to 2016, on account of increases in discounts and allowances.

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2017 decreased by $626,736, or 29%, to $1,543,786 as compared to $2,170,522 for the three months ended September 30, 2016. We incurred a decrease of $656,826 in stock-based compensation costs. The remainder of the cost increases are primarily related to costs incurred in support of the expansion of the business, including increases in rent and storage fees, insurance costs, website and internet costs.

Selling and marketing expenses

Selling and marketing expenses for the three months ended September 30, 2017 increased by $1,662,225, or 251%, to $2,323,472 as compared to $661,247 for the three months ended September 30, 2016. The increase was principally the result of key management hires to expand the capabilities of the sales and marketing organization, strategic spending in support of brand and investor awareness and increases in freight out and other costs consistent with the revenue growth. Specifically, our personnel cost increased by approximately $457,000 in connection with the hiring of additional sales and marketing staff, our brand awareness investor and public relations costs increased by $662,600 due to increased investor relation spending, and we increased advertising expense by $179,775.

Interest expense, net

Interest expense, net, for the three months ended September 30, 2017 decreased by $465,560, or 80%, to $114,150 as compared to $579,710 for the three months ended September 30, 2016. Interest expense for the three months ended September 30, 2017, principally consisted of the amortization of deferred financing costs of $111,580.

Comparison of the Nine Months Ended September 30, 2017 and 2016

Net Sales and Gross Profit

Net sales for the nine months ended September 30, 2017 increased by $488,184, or 14%, to $3,901,145 as compared to $3,412,961 for the nine months ended September 30, 2016. The increase was primarily due to the introduction of the lemonade flagship brand in the second quarter, which contributed $592,526 to the increase in net sales. Net sales of our ALO Juice during the nine months ended September 30, 2017 decreased by $147,352 to $648,381 as compared to $795,733 for the nine months ended September 30, 2016. Net sales of our 18/20oz. iced tea product increased by $200,981 after a decrease to net sales of $255,634 on account of a non-cash incentive to Big Geyser in the nine months ended September 30, 2017.

Gross profit increased by $78,058, or 49%, to $237,741 for the nine months ended September 30, 2017 from $159,683 for the nine months ended September 30, 2016. The change in gross profit consisted of an increase of approximately $190,000 in gross profit for iced tea sold in gallons, an increase in gross profit of approximately $114,000 for lemonade, a decrease in gross profit of approximately $29,000 in sales of ALO Juice and a decrease in gross profit of approximately $115,000 for iced tea sold in 18/20oz. Our gross profit percentage increased to approximately 6% for the nine months ended September 30, 2017 as compared to approximately 5% for the nine months ended September 30, 2016, on account of improvements in gallons and the introduction of lemonade.

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General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2017 increased by $1,211,411, or 31%, to $5,169,174 as compared to $3,957,763 for the nine months ended September 30, 2016. This increase was principally the result of our efforts to build out our management and support team to support our growth and enhance our corporate governance. Specifically, we incurred costs of approximately $826,000 associated with accounting, other consulting and legal in support of the business expansion and complexity. We incurred bad debt charges of $516,392. These were principally off-set by a decrease in our personnel costs of $271,855 and a decrease in stock-based compensation costs of $142,543. The remainder of the cost increases are primarily related to costs incurred in support of the expansion of the business, including increases in rent and storage fees, insurance costs, website and internet costs.

Selling and marketing expenses

Selling and marketing expenses for the nine months ended September 30, 2017 increased by $4,276,630, or 210%, to $6,308,503 as compared to $2,031,873 for the nine months ended September 30, 2016. The increase was principally the result of key management hires to expand the capabilities of the sales and marketing organization, strategic spending in support of brand and investor awareness and increases in freight out and other costs consistent with the revenue growth. Specifically, our personnel cost increased by $1,226,182 in connection with the hiring of additional sales and marketing. We incurred an increase of $206,906 in stock-based compensation costs and an increase of $462,501 in advertising expenses. Our brand awareness investor and public relations costs increased by $1,429,195 due to new investor relations agreements and increased spending. We incurred an increase of $191,450 in connection with our new product initiatives and ALO Juice development.

Interest expense, net

Interest expense, net for the nine months ended September 30, 2017 decreased by $662,854, or 68%, to $313,573 as compared to $976,427 for the nine months ended September 30, 2016. Interest expense for the nine months ended September 30, 2017, principally consisted of the amortization of deferred financing costs of $334,739. Interest expense was offset by interest and dividend income on investments of $20,358.

Liquidity and Capital Resources

Sources of Liquidity and Going Concern

The following table provides an overview of our borrowing agreements as of September 30, 2017:

Description of Debt	Holder	Interest Rate		Balance at September 30, 2017
Line of Credit	Brentwood LIIT Inc.	Prime Plus 7.5	%	$	-
Automobile loans	Various	3.59% to 10.74	%	$	19,706
Equipment Loan Reimbursement Agreement	Magnum Vending Corp.	10.0	%	$	51,697

Historically, our cash generated from operations has not been sufficient to meet our expenses. We have financed our operations principally through the raising of equity capital, debt and through trade credit with our vendors. Our ability to continue our operations and to pay our obligations when they become due is contingent upon obtaining additional financing. Management’s plans include raising additional funds through equity offerings, debt financings, or other means.

We believe that we will be able to raise sufficient additional capital to finance our planned operating activities, although there are no assurances that we will be able to raise such capital on terms acceptable to the Company or at all. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned market development activities, and/or consider reductions in personnel costs or other operating costs. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements included in Part I, Item 1 of this report do not include any adjustments that might result from the outcome of these uncertainties.

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Line of Credit

Brentwood LIIT Corp-Line of Credit

On November 23, 2015, we entered into the Credit and Security Agreement (the “Credit Agreement”) with LIBB and Brentwood LIIT, Inc. (“Brentwood”). Brentwood is controlled by a related party, Eric Watson, who beneficially owns approximately 14.4% of our outstanding common stock as of September 30, 2017. The Credit Agreement, which expires on November 23, 2018, provides for a revolving credit facility in an amount of up to $3,500,000, with funding subject to approval by Brentwood. As of September 30, 2017 and December 31, 2016, there was no amount outstanding under the Credit Agreement.

UBS Line of Credit

On October 27, 2016, we entered into a credit line with UBS (The “UBS Credit Line”). The UBS Credit Line has a borrowing capacity determined by the level of the collateral pledged and bears interest at a floating rate, depending on the time requested for the borrowing. The interest is based on the ICE Swap Rate plus a margin of between 0.40% and 0.70%. As of June 30, 2017, the interest rate on the UBS Credit Line was 3.732 %. The UBS Credit Line, when drawn, is collateralized by certain of our short-term investments. As of September 30, 2017 and December 31, 2016, the outstanding balance on the line of credit was $0 and $1,280,275, respectively. As of September 30, 2017 and December 31, 2016, our borrowing capacity under the UBS Credit line was $0 and $19,725, respectively. At July 21, 2017, the credit line was closed.

Magnum Vending Corp

On November 23, 2015, we entered into a reimbursement agreement with Magnum Vending Corp. (“Magnum”), an entity managed by Philip Thomas, our Chief Executive Officer and one of our directors, and certain of his family members. In exchange for the exclusive right to stock vending machines owned by Magnum, we agreed to reimburse Magnum for the cost of products to stock the machines and the costs that Magnum incurred to acquire the machines including machines which were purchased with an equipment loan. The total principal amount of the payments underlying the agreement upon inception was $117,917. The reimbursements will be made in 35 monthly payments of principal and interest in the amount of $3,819 with an interest rate of 10%. Upon completion of these payments in October 2018, Magnum will transfer ownership of the vending machines to us. As of September 30, 2017 and December 31, 2016, $51,697 and $76,474, respectively, of principal and interest were outstanding under the agreement.

Private Placements

In January 2017, we consummated the January 2017 Offering of an aggregate of 376,340 shares of our common stock, through Alexander Capital, L.P., as placement agent, pursuant to the terms of a selling agent agreement, dated January 25, 2017, with the placement agent and subscription agreements with each of the investors in the offering. Of the aggregate number of shares sold, 300,000 shares were sold to the public at a price of $4.00 per share and 76,340 of the shares were sold to our officers and directors at a price of $4.10 per share, the most recent closing bid price of the common stock at the time the officers and directors executed their subscription agreements. The offering generated total net proceeds, after payment of the placement agent fees and other offering expenses, of $1,429,740.

In June 2017, we consummated the June 2017 Offering of an aggregate of 256,848 shares of our common stock, through Alexander Capital, L.P., as placement agent, pursuant to subscription agreements with each of the investors in the offering. Of the aggregate number of shares sold, 231,850 shares were sold to the public at a price of $5.00 per share and 24,998 of the shares were sold to our officers and directors at a price of $5.60 per share, the most recent closing bid price of the common stock at the time the officers and directors executed their subscription agreements. The offering generated gross proceeds of $1,299,250 and net proceeds of $1,259,415, after payment of the placement agent fees and other offering expenses.

In July 2017, we consummated the July 2017 Offering of an aggregate of 448,160 shares of our common stock, through Alexander Capital, L.P., as placement agent, pursuant to subscription agreements with each of the investors in the offering. The shares were sold at a price of $5.00 per share. Of the shares sold, 200,000 were sold to lead investors who, as a result of purchasing more than $500,000 in shares, each received (i) an additional number of shares of common stock equal to 7% of the total number of shares of common stock purchased by such lead investors in this offering (or an aggregate of 14,000 shares) and (ii) three-year warrants up to that number of shares of common stock equal to 20% of the total number of shares purchased by such lead investors in the offering (or warrants to purchase an aggregate of 40,000 shares). These warrants have an exercise price of $5.50 and are fully vested upon issuance. The sale of common stock generated gross proceeds of $2,240,800 and net proceeds of $2,134,487 after deducting commissions and other offering expenses.

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In October, we consummated the October 2017 Offering of an aggregate of 607,500 shares of our common stock in a public offering at a price of $2.05 per share. We received gross proceeds of $1,245,375 and estimated net proceeds of $1,235,375 after deducting commissions and other offering expenses. Each investor in the offering also received a warrant to purchase 50% of the number of shares for which such investor subscribed in the offering (or a total aggregate number of shares underlying such warrants equal to 303,750 shares). The warrants have an exercise price of $2.40 per share, subject to adjustment, and expire one year from the closing of the offering. Prior to October 1, 2017, we received $563,750 from this offering and accordingly, as at September 30, 2017, $563,750 is included in subscriptions payable within the condensed consolidated balance sheets.

Cash flows

Net cash used in operating activities

Net cash used in operating activities was $7,403,966 for the nine months ended September 30, 2017 as compared to net cash used in operating activities of $4,693,408 for the nine months ended September 30, 2016. Cash used in operating activities for the nine months ended September 30, 2017 was primarily the result of a net loss of $11,592,495. The net loss was offset primarily by non-cash charges of $2,664,809, consisting principally of $1,320,512 of stock based compensation, $551,626 of bad debt expense and $334,739 of amortization of deferred financing costs. The cash used in operating activities decreased on account of a $1,847,072 and $941,754 increase in accounts payable and accrued expenses, respectively, and increased due to an increase of $730,956 in accounts receivable. Cash used in operating activities for the nine months ended September 30, 2016 was primarily the result of the net loss of $8,390,264 offset by non-cash charges of $3,715,230.

Net cash provided by (used in) investing activities

Net cash provided by investing activities was $2,446,069 for the nine months ended September 30, 2017 as compared to net cash provided by investing activities of $2,389,219 for the nine months ended September 30, 2016. Net cash provided by investing activities for the nine months ended September 30, 2017 consisted principally of the proceeds from the sales of short-term investment securities of $2,408,632. Cash used in investing activities for the nine months ended September 30, 2016 resulted primarily from the purchase of short-term investments of $2,507,302.

Net cash provided by financing activities

Net cash provided by financing activities was $4,138,020 for the nine months ended September 30, 2017 as compared to net cash provided by financing activities of $7,235,048 for the nine months ended September 30, 2016. Cash flows from financing activities were primarily the result of $1,429,740 from the net proceeds of our January 2017 Offering, $1,259,415 from the net proceeds of our June 2017 Offering and $2,134,487 from the net proceeds of our July 2017 Offering. Net cash used in financing activities consisted of repayments of the UBS Line of Credit of $1,280,275. Cash provided by financing activities for the nine months ended September 30, 2016, was primarily due to $5,867,217 in net proceeds from an equity offering.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Executive Chairman, as appropriate to allow timely decisions regarding required disclosures. As required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer (our principal executive officer) and our Executive Chairman (our principal financial officer) carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017. Based on this evaluation, our Chief Executive Officer and Executive Chairman concluded that our disclosure controls and procedures (as defined in paragraph (e) of Rules 13a-15 and 15d-15 under the Exchange Act) were not effective as of September 30, 2017 due to a material weakness in our internal control over financial reporting as described below.

A material weakness is defined within the Public Company Accounting Oversight Board’s Auditing Standard No. 5, as a deficiency or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We determined that our internal control over financial reporting had the following material weaknesses:

● Due to the small size of the Company, the Company does not maintain sufficient segregation of duties to ensure the processing, review and authorization of all transactions including non-routine transactions.

● Our processes lacked timely and complete reviews and analysis of information used to prepare our financial statements and disclosures in accordance with accounting principles generally accepted in the United States of America.

Because disclosure controls and procedures include those components of internal control over financial reporting that provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, management determined that its disclosure controls and procedures were not effective as a result of the foregoing material weaknesses in its internal control over financial reporting. The Company is evaluating these weaknesses to determine the appropriate remedy.

Changes in Internal Control over Financial Reporting

On August 15, 2017, Rich Allen the Company’s Chief Financial Officer, resigned. On September 27, 2017, Julian Davidson, the Company’s Executive Chairman and board member, assumed the additional responsibilities of Principal Financial Officer and Principal Accounting Officer. There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the fiscal quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various claims and legal actions arising from time to time in the ordinary course of business. In the opinion of our management, the ultimate disposition of these matters in the ordinary course of business will not have a material adverse effect on our financial position, results of operations or cash flows.

In addition, we are involved in the following legal action:

● Revolution Marketing, LLC. On August 1, 2014, an action was filed by LIBB in the Supreme Court in the State of New York entitled Long Island Brand Beverages LLC v. Revolution Marketing, LLC and Ascent Talent, Model Promotion Ltd. LIBB is seeking damages of $10,000,000 for several claims including breach of contract and fraud occurring during 2014. Revolution has filed a counterclaim for breach of contract and related causes of action, claiming damages in the sum of $310,880, and seeking punitive damages of $5,000,000. Ascent has filed a pre-answer motion to dismiss LIBB’s complaint. LIBB filed papers in opposition to the motion to dismiss. In addition, Revolution has filed a motion to amend its answer to include cross-claims against Ascent which were not asserted in its original answer of record. On February 5, 2016, the Court rendered a decision, denying the motion to dismiss with the exception of two claims which the Court dismissed. In the same decision, the Court granted a separate motion filed by Revolution seeking to amend its answer to include cross claims against Ascent. On June 23, 2017, both defendants filed motions to dismiss based upon delays in producing documents, which were fully submitted. On August 7, 2017, oral arguments were held. Thereafter, the court denied the motions to dismiss and each of the parties has completed their discovery. On October 6, 2017, the Company filed a Note of Issue and Certificate of Readiness. The case has been certified by the court as ready for trial. We are currently awaiting defendants’ summary judgement motions.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the fiscal quarter ended September 30, 2017, we issued a warrant to purchase 110,000 shares of our common stock to a distributor. The exercise price of the warrant will be equal to the average of the closing prices of our common stock for the thirty consecutive trading days ending on April 23, 2019.

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ITEM 6. EXHIBITS

(a) Exhibits:

Exhibit No.	Description
10.1	Separation Agreement with Richard Allen
31.1	Section 302 Certification by Chief Executive Officer.
31.2	Section 302 Certification by Chief Accounting Officer.
32	Section 906 Certification by Chief Executive Officer and Chief Accounting Officer.
101	Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2017, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity, (iv) Condensed Consolidated Statement of Cash Flows and (v) Notes to Unaudited Condensed Consolidated Financial Statements, as blocks of text and in detail.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 13, 2017

LONG ISLAND ICED TEA CORP.
By:	/s/ Julian Davidson
Name:	Julian Davidson
Title:	Executive Chairman (Principal Financial Officer and Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

SEPARATION AGREEMENT

THIS SEPARATION AGREEMENT (“Agreement”) is made as of this 8 day of July, 2017 (the “Execution Date”) and entered into by and between Richard Allen, a resident of the State of New York (“Employee”), on the one hand, and Long Island Iced Tea Corp., a Delaware corporation (the “Company”), on the other hand. The Employee and the Company may be collectively referred to herein as the “Parties” or individually as “Party.”

RECITALS

WHEREAS, the Employee has been employed by the Company and in connection with such employment has served as Chief Financial Officer of the Company and has held comparable positions with the Company’s subsidiaries;

WHEREAS, pursuant to the terms, conditions and agreements set forth herein and except as otherwise provided herein, the Parties now mutually desire to provide for the termination of the Employee’s employment with the Company and each of its subsidiaries and affiliates;

WHEREAS, by and through this Agreement, the Parties desire to address fully, finally and forever all matters between them arising up to and through the Execution Date, including, but not limited to, any matters arising out of the Employee’s employment with the Company and any subsidiary thereof and/or the termination of the foregoing;

NOW THEREFORE, in consideration of the agreements contained herein as well as other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of the Parties agrees as follows:

1. Termination of Employment. The Employee’s employment as Chief Financial Officer of the Company shall be terminated effective as of August 15, 2017 (the “End Date”). In addition, effective as of the End Date, to the extent not previously terminated, the Employee hereby resigns from any and all offices and directorships he may hold with the Company and each of its subsidiaries and affiliates, and agrees to take any other actions reasonably required to effectuate the foregoing.

2. Termination of Prior Agreements. Except as otherwise provided herein, the Employment Agreement by and between the Company and the Employee, dated as of June 1, 2016 (the “Employment Agreement”), is hereby terminated in its entirety effective as of the End Date, along with all rights, obligations and responsibilities of the parties thereunder. Within five (5) business days after the Company obtains shareholder approval of its 2017 Long-Term Incentive Equity Plan, the Company shall issue 8,333 shares of the Company’s common stock, par value $0.0001 per share, to Employee in accordance with Section 3.6(a) of the Employment Agreement. Prior to the End Date, (a) the Company hereby covenants and agrees that it shall not terminate the Employment Agreement for “Cause” (as defined in the Employment Agreement) pursuant to clause (a) of the definition thereof; and (b) the Employee hereby covenants and agrees that it shall not terminate the Employment Agreement for “Good Reason” (as defined in the Employment Agreement). Each other agreement between the Employee and any of the Company and its subsidiaries and affiliates, other than this Agreement and the Option Agreements and Indemnification Agreement (each as defined below), are hereby terminated in all respects effective as of the End Date, provided that each of the Option Agreements (as defined below) shall have been executed and be effective on the End Date.

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3. New Agreements. On the End Date, the Employee and the Company will execute option agreements in the forms attached hereto as Exhibit A-1, Exhibit A-2 and Exhibit A-3 (collectively, the “Option Agreements”).

4. Payments and Continuation of Benefits. The Parties agree that the Employee shall be entitled to receive the following, subject to the following terms and conditions:

(a) Accrued Obligations. In accordance with its normal payroll practices, the Company shall (i) pay to the Employee all unpaid salary and vacation accrued but not paid through the End Date, and (ii) reimburse to the Employee all reasonable outstanding reimbursable expenses incurred by the Employee and submitted to the Company prior to the End Date in accordance with the Company’s applicable policies and practices, to the extent not reimbursed prior to the End Date.

(b) Severance. In consideration of and subject to and conditioned upon (A) the Employee’s execution and non-revocation of the First Release (as defined below), with respect to clause (i) below, and the Second Release (as defined below), with respect to clause (ii) below, and (B) the Employee’s continued compliance with Sections 5 and 6, the Company shall pay or provide the following to the Employee (collectively, the “Severance”):

(i) a single payment of $30,834, such amount to be paid to the Employee in one lump sum cash payment no later than the fifth (5^th) business day following the expiration of the revocation period provided in the First Release;

(ii) a single payment of $30,834, such amount to be paid to the Employee in one lump sum cash payment no later than the fifth (5^th) business day following the expiration of the revocation period provided in the Second Release; and

(iii) the Company shall provide continued enrollment of the Employee and, if enrolled as of the date hereof, his family (the “Enrolled Persons”) from the End Date through the earliest to occur of (A) December 31, 2017, or (B) such time as Enrolled Persons become eligible for coverage under another “group health plan” (within the meaning of Internal Revenue Code Section 4980B), at the same level of benefits (including deductibles and co-pays) and at Company’s sole cost and expense, in the group health plans in which the Employee was enrolled immediately prior to the Execution Date, as may be adjusted in a manner applicable to plan participants generally.

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To the extent that any Severance payments or benefits would become due or payable after the End Date but prior to the expiration of the revocation period applicable under the Second Release, such payments shall be delayed until (and subject to and conditioned upon) the expiration of such revocation period, and shall be paid as soon as practicable thereafter (assuming that the Second Release has not been revoked).

(c) Exclusivity of Benefits. Except as expressly provided in this Section 4 and in the Option Agreements and the Indemnification Agreement, after the End Date, the Employee shall not be entitled to any additional payments or benefits in connection with his employment with the Company or any of its subsidiaries or affiliates, or the termination thereof or under or in connection with any contract, agreement or understanding between the Employee and any of the foregoing. Except as expressly provided herein, all employee benefits and perquisites provided or funded in whole or in part by the Company or any of its subsidiaries or affiliates shall cease as of the End Date.

(d) Payment Upon Death of The Employee. If the Employee dies during any period during which payments pursuant to this Section 4 are to be made, payments for the remainder of such period following his death shall be made to his spouse or, if provided for by will or otherwise by law, to his heirs.

5. Confidential Information and Trade Secrets. As consideration for and to induce the Company to enter into this Agreement and to pay the Severance, the Employee hereby covenants and agrees to the provisions set forth below:

(a) Except as the Board of Directors of the Company may expressly authorize or direct in writing, the Employee agrees that he will not at any time for any reason, either directly or indirectly, (i) copy, reproduce, divulge, disclose or communicate to any person or entity, in any manner whatsoever, any Confidential Information (as defined below), (ii) remove from the custody and control of the Company any physical or electronic manifestation of the Confidential Information or (iii) utilize, or permit others to utilize, any Confidential Information for any reason. All Confidential Information, including all physical or electronic manifestations thereof, shall be the exclusive property of the Company, whether or not prepared, compiled or obtained by the Employee or by the Company prior to the Employee’s employment.

(b) “Confidential Information” shall mean all information and trade secrets relating to or used in the business and operations of the Company and its subsidiaries and affiliates (including, but not limited to, marketing methods and procedures, customer lists, sources of supplies and materials, business systems and procedures, information regarding its financial matters, or any other information concerning the personnel, operations, trade secrets, know how, or business or planned business of the Company and its subsidiaries and affiliates), whether prepared, compiled, developed or obtained by the Employee or by the Company and its subsidiaries and affiliates prior to or during the Employee’s employment with the Company or any of its subsidiaries or affiliates, that is treated by the Company as confidential or proprietary or is reasonably considered by the Company to be confidential or proprietary. Notwithstanding the foregoing, “Confidential Information” shall not include information independently developed by the Employee prior to his initial engagement as a consultant to the Company.

(c) The provisions of Section 5(a) shall not apply to: (i) Confidential Information that is public knowledge other than as a result of a breach of the Employee’s obligation of confidence; or (ii) Confidential Information disclosed under a requirement of law or as directed by applicable legal authority having jurisdiction over the Employee, provided that the Employee shall deliver written notice to the Company of such required disclosure and afford the Company the opportunity to legally curtail such disclosure within the time period required for disclosure. All protections in this Section 5 for the benefit of the Company shall be deemed to include its subsidiaries and affiliates.

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6. Non-Solicitation, Non-Disparagement and Non-Competition.

(a) As consideration for and to induce the Company to enter into this Agreement and to pay the Severance, the Employee hereby covenants and agrees that for a period commencing on the Execution Date and ending on the date that is two (2) months after the End Date (“Restriction Period”), he will not:

(i) solicit to employ or knowingly permit any company or any business directly or indirectly controlled by him to solicit to employ any person who was employed by the Company or any of its subsidiaries or affiliates at or within the prior nine (9) months, or in any manner seek to induce any such person to leave his or her employment, it being understood that a general advertisement seeking employees shall not be deemed to be such solicitation;

(ii) hold himself out as an employee, agent or representative of the Company or any of its subsidiaries or affiliates;

(iii) engage or participate in, directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity), any business or other activity pertaining to products that were being sold by the Company, or were in research or under development by the Company, at any time during the Employee’s employment with the Company, if such business or activity is located within seventy-five (75) miles of any market in which Company currently operates or has current, actively pursued plans to conduct operations as of the End Date; or

(iv) except with the prior written consent of the Company, engage with any customers doing business with the Company during Employee’s employment with the Company that are current customers of the Company on the Execution Date.

(b) The Employee and the Company hereby covenant and agree that at no time, whether during or after the Restriction Period, will either party shall make any statement, publicly or privately, to any individual or entity, including, without limitation, clients, customers, employees, financial or credit institutions or news agencies, in any case, which could reasonably be expected to disparage, defame, libel or slander the other party or any of its subsidiaries or affiliates or any of their respective employees, officers or directors, as applicable.

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7. Remedies Upon Breach. The Employee acknowledges that the Company may suffer substantial damage which will be difficult to compute and that the remedies at law will be inadequate if the Employee should violate any of the covenants or other obligations contained in Sections 5 or 6 hereof, and that the restrictions in Sections 5 and 6 of this Agreement are reasonable and necessary for the protection of the legitimate business interests of the Company and its subsidiaries and affiliates. Accordingly, the Parties agree that the Company shall be entitled to the remedies of injunction and/or specific performance (in addition to any other remedies, at law or in equity, as may be available), and the Company shall not be required to post a bond in connection therewith.

8. Indemnification. Nothing herein shall impair or affect any indemnification rights provided in the Company’s certificate of incorporation or bylaws, nor shall the Company take any actions to limit or modify the indemnification rights provided to the Employee thereunder without the prior written consent of the Employee. Further, the Parties acknowledge and agree that the Company’s duties and obligations under the indemnification agreement between the parties, dated as of June 1, 2016 (the “Indemnification Agreement”), shall continue in full force and effect following the End Date pursuant to the terms and conditions contained therein.

9. Releases.

(a) The Employee agrees that, as a condition to the Employee’s right to receive the Severance:

(i) within the timeframe specified in the release of claims attached hereto as Exhibit B-1 (the “First Release”), the Employee shall execute, deliver to the Company and thereafter shall not revoke the First Release; and

(ii) within the timeframe specified in the release of claims attached hereto as Exhibit B-2 (the “Second Release,” and together with the First Release, the “Releases”), the Employee shall execute, deliver to the Company and thereafter shall not revoke the Second Release.

10. No Admission. This Agreement shall not in any way be construed as an admission by the Company or any of its subsidiaries or affiliates of any liability whatsoever or as an admission by any of the foregoing of any acts of wrongdoing or discrimination against the Employee or any other persons. In fact, each of the foregoing entities specifically disclaims, on behalf of itself, its subsidiaries and affiliates, any liability to and wrongdoing or discrimination against the Employee or any other persons.

11. Confidentiality. Except as otherwise required by law, the Employee and the Company agree not to disclose the terms of this Agreement or the substance of the discussions preceding this Agreement to any other person; provided, however, that this Section 11 shall not apply to:

(a) The Employee’s communications to his attorneys, accountants and/or financial advisors,

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(b) the Company’s communications to any third party with a legitimate business need to know, as determined in the Company’s reasonable and good faith discretion (such as its attorneys, accountants, auditors and/or financial advisors), and

(c) disclosure by the Company, to the extent required by applicable U.S. federal securities laws,

as long as the recipients of the disclosure, prior to disclosure (except in situations to which Section 11(c) applies), first agree not to disclose such information to anyone else. In addition, if the Employee is required by law to disclose any of the terms of this Agreement or the substance of the discussions preceding this Agreement to any other person, the Employee will provide written notice to the Company in advance of such disclosure, and will cooperate with the Company to prevent or limit such disclosure.

12. Cooperation. The Employee agrees to reasonably cooperate with the Company with respect to all matters arising during or related to his employment about which he has personal knowledge because of his employment with the Company, including but not limited to all matters (formal or informal) in connection with any government investigation, internal investigations, litigation (potential or ongoing), administrative, regulatory, or other proceeding which currently exists, or which may have arisen prior to or arises following the signing of the Agreement. Such cooperation will include, but not be limited to, the Employee’s willingness to be interviewed by representatives of the Company, and to participate in such proceedings by deposition or testimony. The Employee understands that the Company will reimburse him for his reasonable out-of-pocket expenses (including attorney’s fees and legal costs) incurred in connection with such cooperation.

13. Binding Effect. This Agreement shall be binding upon the Employee, his heirs, representatives, executors, administrators, successors, and assigns, and upon the Company and its successors, parents, affiliated companies, and assigns. If either Party violates any provision of this Agreement, the other Party may present this Agreement to any court of competent jurisdiction for the purpose of obtaining legal and equitable relief.

14. Governing Law. This Agreement is deemed by the Parties to be made and entered into in the State of New York. It shall be interpreted, enforced, and governed under the laws of New York, without regard to any provision of the doctrine of conflicts of laws of such state. Any action or proceeding arising under or with respect to this Agreement shall be brought in a federal or state court having jurisdiction located in the County of New York, State of New York.

15. Severability. If any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to exceed the limitations permitted by applicable law, as determined by such court in such action, then the provisions will be deemed reformed to apply to the maximum limitations permitted by applicable law and the Parties hereby expressly acknowledge their desire that in such event such action be taken. Notwithstanding the foregoing, the Parties further agree that if any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions shall remain in full force and effect and in no way shall be affected, impaired or invalidated.

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16. Section 409A of the Code. If at any time the Company determines that any payment under this Agreement may be or become subject to the imposition of taxes under Internal Revenue Code Section 409A, the Company shall have the right, in its sole discretion and upon providing written notice to the Employee, to adopt such amendments to this Agreement or take such other actions (including amendments and actions with retroactive effect) as the Company determines are necessary or appropriate to (a) exempt the payments provided hereunder according to Internal Revenue Code Section 409A and/or preserve the intended tax treatment of such payments, or (b) comply with the requirements of Internal Revenue Code Section 409A. Any such amendments by the Company shall have no cumulative adverse financial impact upon the Employee. In no event whatsoever shall the Company or any of the other Releasees (as defined in the Release) be liable for any additional tax, interest or penalties that may be imposed on the Employee by Internal Revenue Code Section 409A or any damages for failing to comply with Code Section 409A.

17. Withholding. The Company shall withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

18. Reliance. The Employee hereby acknowledges that he has not relied on any information provided or statements made by the Company, or any of its agents, representatives, or attorneys that are not contained in this Agreement. In return for executing this Agreement, the Employee is receiving only the consideration described in this Agreement.

19. Entire Agreement. This Agreement, the Option Agreements and the Indemnification Agreement contain the entire agreement between the Parties, and, except as otherwise provided herein, this Agreement and the Option Agreements and the Indemnification Agreement supersede any other oral or written agreements or understandings between the Parties, including without limitation the Employment Agreement.

20. Amendments. All modifications and amendments to this Agreement must be made in writing and signed by the Parties.

21. Waiver. No delay or omission by the Parties in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by a Party on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.

22. Captions. The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.

23. Proper Authorization; Due Execution. The Company represents and warrants to the Employee that this Agreement has been approved by its Board of Directors and that the officer signing on its behalf below has been fully authorized to do so.

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24. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together constitute one and the same instrument. The execution of this Agreement may be by actual or facsimile signature.

25. Further Assurances. From time to time, each of the Parties shall execute, acknowledge, and deliver any instruments or documents reasonably necessary to carry out the purposes of this Agreement.

26. No Third-Party Beneficiaries. Nothing in this Agreement, express or implied, shall confer on any person, other than the Parties to this Agreement, any right or remedy of any nature whatsoever.

27. Return of Property and Materials. The Employee will, at the Company’s request, promptly deliver to the Company all Company property and all memoranda, notes, records, reports, customer lists, manuals, drawings and other documents (and all copies thereof) relating to the business of the Company and its subsidiaries and affiliates and all property associated therewith, which the Employee may now possess or have under his control.

28. No Future Employment. The Employee agrees not to seek future employment with the Company.

29. Review and Approval. The Parties hereto acknowledge that they have each had adequate and legally sufficient time to review and seek legal guidance concerning this Agreement. The Employee specifically has been advised to consult with an attorney concerning this Agreement. The Employee understands the rights that are waived by this Agreement, including rights under the Age Discrimination in Employment Act. Specifically, the Employee acknowledges that he has had at least 21 days to consider this Agreement. If the Employee chooses to execute this Agreement prior to the end of 21 days, it is solely his choice.

30. Cancellation upon Written Notice. The Employee may revoke his signature on this Agreement and the Release within seven days following his signing of either Release by sending notice to the Company, either by certified mail, return receipt requested, or overnight delivery so that the notice arrives before the expiration of the seven day revocation period. The Employee understands and agrees that if he either Release within either seven day revocation period, the Company is not obligated to fulfill the obligations contained in this Agreement.

31. Voluntary Execution and Waiver. The Employee further represents and warrants that he freely negotiated the terms of this Agreement and that he enters into it and executes it and the Release voluntarily. The Employee understands that this is a voluntary waiver of any claims under the laws and orders stated in the Release that relate in any way to his employment with, complaints about, compensation due, or separation from the Company or any of its subsidiaries or affiliates.

32. Whistleblower Provision. No clause in the Agreement, including all provisions relating to confidentiality, shall be interpreted as restricting or prohibiting, in any way, the Employee’s right to voluntarily communicate with the Securities and Exchange Commission or receiving monetary recovery or a whistleblower award from the Securities and Exchange Commission for related disclosures.

This Separation Agreement becomes effective as of the date all Parties have executed below and the revocation period described in the First Release has expired without the Employee’s revocation; provided, that Sections 1, 2, 3, 4(a) and 4(b)(ii) shall not apply unless Employee remains employed by the Company through the End Date.

[Signatures are on Following Page]

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[Signature Page to Separation Agreement]

EMPLOYEE:

/s/ Richard B. Allen	Date:	July 8, 2017
RICHARD ALLEN

COMPANY:

LONG ISLAND ICED TEA CORP.
By:	/s/ Julian Davidson	Date:	July 8, 2017
	Name: Julian Davidson
	Title: Executive Chairman

EXHIBIT B-1

GENERAL RELEASE¹

For valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned does hereby release and forever discharge the “Releasees” hereunder, consisting of Long Island Iced Tea Corp., a Delaware corporation (the “Company”), and each of its affiliates and subsidiaries, and each of their present and former partners, associates, affiliates, subsidiaries, successors, heirs, assigns, agents, directors, officers, employees, shareholders, representatives, lawyers, lenders, insurers, and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, losses, costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called “Claims”), which the undersigned now has or may hereafter have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof.

The Claims released herein include, without limiting the generality of the foregoing, any Claims in any way arising out of, based upon, or related to the undersigned’s employment by the Releasees, or any of them, or the termination thereof, including, without limitation, any claim for wages, salary, commissions, bonuses, incentive payments, profit-sharing payments, expense reimbursements, leave, vacation, separation pay or other benefits; any claim for benefits under any stock option, restricted stock or other equity-based incentive plan of the Releasees, or any of them (or any related agreement to which any Releasee is a party); any alleged breach of any express or implied contract of employment; any alleged torts or other alleged legal restrictions on any Releasee’s right to terminate the employment of the undersigned; any alleged violation of any federal, state or local statute or ordinance including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Age Discrimination in Employment Act (including the Older Workers’ Benefit Protection Act), the Equal Pay Act, the Family and Medical Leave Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the National Labor Relations Act, each as amended; and any and all claims under the laws of any state, county, municipality, or other governmental subdivision of the United States or any state, including but not limited to the State of New York.

Notwithstanding the foregoing, this Release shall not operate to release any Claims which the undersigned may have to payments or benefits under Section 4 of that certain Separation Agreement, dated as of July [8], 2017, between the Company and the undersigned (the “Separation Agreement”), to which this Release is attached, or under the Option Agreements or the Indemnification Agreement referenced therein, or under Section 3 of the Employment Agreement referenced therein that have accrued on or prior to the date hereof.

IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:

¹ This First Release will be signed within the timeframe set forth below.

(1) HE IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THE SEPARATION AGREEMENT AND THIS RELEASE;

(2) HE HAS 21 DAYS FROM HIS RECEIPT OF THE SEPARATION AGREEMENT AND THIS RELEASE TO CONSIDER BOTH BEFORE SIGNING THEM; AND

(3) HE HAS 7 DAYS AFTER SIGNING THE SEPARATION AGREEMENT AND THIS RELEASE TO REVOKE HIS SIGNATURE, AND THE SEPARATION AGREEMENT AND THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION PERIOD PROVIDED HE DOES NOT EXERCISE HIS RIGHT TO REVOKE.

The undersigned represents and warrants that there has been no assignment or other transfer of any interest in any Claim which he may have against Releasees, or any of them, and the undersigned agrees to indemnify and hold the Releasees, and each of them, harmless from any Claims against the Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against the undersigned under this indemnity.

The undersigned agrees that if he hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then the undersigned shall pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim, to the fullest extent permitted by law.

The undersigned further understands and agrees that neither the payment of any sum of money nor the execution of the Separation Agreement or this Release shall constitute or be construed as an admission of any liability or wrongdoing whatsoever by the Releasees, or any of them, who have consistently taken the position that they have no liability whatsoever to the undersigned.

The undersigned acknowledges that different or additional facts may be discovered in addition to what is now known or believed to be true by him with respect to the matters released in this Release, and the undersigned agrees that the Separation Agreement and this Release shall be and remain in effect in all respects as a complete and final release of the matters released, notwithstanding any different or additional facts.

IN WITNESS WHEREOF, the undersigned has executed this Release this 8^th day of July, 2017.

/s/ Richard B. Allen

RICHARD ALLEN

EXHIBIT B-2

GENERAL RELEASE²

For valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned does hereby release and forever discharge the “Releasees” hereunder, consisting of Long Island Iced Tea Corp., a Delaware corporation (the “Company”), and each of its affiliates and subsidiaries, and each of their present and former partners, associates, affiliates, subsidiaries, successors, heirs, assigns, agents, directors, officers, employees, shareholders, representatives, lawyers, lenders, insurers, and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, losses, costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called “Claims”), which the undersigned now has or may hereafter have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof.

The Claims released herein include, without limiting the generality of the foregoing, any Claims in any way arising out of, based upon, or related to the undersigned’s employment by the Releasees, or any of them, or the termination thereof, including, without limitation, any claim for wages, salary, commissions, bonuses, incentive payments, profit-sharing payments, expense reimbursements, leave, vacation, separation pay or other benefits; any claim for benefits under any stock option, restricted stock or other equity-based incentive plan of the Releasees, or any of them (or any related agreement to which any Releasee is a party); any alleged breach of any express or implied contract of employment; any alleged torts or other alleged legal restrictions on any Releasee’s right to terminate the employment of the undersigned; any alleged violation of any federal, state or local statute or ordinance including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Age Discrimination in Employment Act (including the Older Workers’ Benefit Protection Act), the Equal Pay Act, the Family and Medical Leave Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the National Labor Relations Act, each as amended; and any and all claims under the laws of any state, county, municipality, or other governmental subdivision of the United States or any state, including but not limited to the State of New York.

Notwithstanding the foregoing, this Release shall not operate to release any Claims which the undersigned may have to payments or benefits under Section 4 of that certain Separation Agreement, dated as of July [●], 2017, between the Company and the undersigned (the “Separation Agreement”), to which this Release is attached, or under the Option Agreements or the Indemnification Agreement referenced therein.

IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:

 ² This Second Release will be signed within the timeframe set forth below but not before the End Date.

(1) HE IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THE SEPARATION AGREEMENT AND THIS RELEASE;

(2) HE HAS 21 DAYS FROM HIS RECEIPT OF THE SEPARATION AGREEMENT AND THIS RELEASE TO CONSIDER BOTH BEFORE SIGNING THEM; AND

(3) HE HAS 7 DAYS AFTER SIGNING THE SEPARATION AGREEMENT AND THIS RELEASE TO REVOKE HIS SIGNATURE, AND THE SEPARATION AGREEMENT AND THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION PERIOD PROVIDED HE DOES NOT EXERCISE HIS RIGHT TO REVOKE.

The undersigned represents and warrants that there has been no assignment or other transfer of any interest in any Claim which he may have against Releasees, or any of them, and the undersigned agrees to indemnify and hold the Releasees, and each of them, harmless from any Claims against the Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against the undersigned under this indemnity.

The undersigned agrees that if he hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then the undersigned shall pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim, to the fullest extent permitted by law.

The undersigned further understands and agrees that neither the payment of any sum of money nor the execution of the Separation Agreement or this Release shall constitute or be construed as an admission of any liability or wrongdoing whatsoever by the Releasees, or any of them, who have consistently taken the position that they have no liability whatsoever to the undersigned.

The undersigned acknowledges that different or additional facts may be discovered in addition to what is now known or believed to be true by him with respect to the matters released in this Release, and the undersigned agrees that the Separation Agreement and this Release shall be and remain in effect in all respects as a complete and final release of the matters released, notwithstanding any different or additional facts.

IN WITNESS WHEREOF, the undersigned has executed this Release this ___ day of __________, 2017.

RICHARD ALLEN

EX-31.1

Exhibit 31.1

FORM OF CERTIFICATION

PURSUANT TO RULE 13a-14 AND 15d-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

CERTIFICATIONS

I, Philip Thomas, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Long Island Iced Tea Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2017	/s/ Philip Thomas
	Philip Thomas
	Director and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

FORM OF CERTIFICATION

PURSUANT TO RULE 13a-14 AND 15d-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

CERTIFICATIONS

I, Julian Davidson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Long Island Iced Tea Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2017	/s/ Julian Davidson
	Julian Davidson
	Executive Chairman (Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Long Island Iced Tea Corp. on Form 10-Q for the quarterly period ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Dated: November 13, 2017

/s/ Philip Thomas
Name:	Philip Thomas
Title:	Chief Executive Officer (Principal Executive Officer)

Dated: November 13, 2017

/s/ Julian Davidson
Name:	Julian Davidson
Title:	Executive Director (Principal Financial Officer and Principal Accounting Officer)

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 10, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	Long Island Iced Tea Corp.
Entity Central Index Key	0001629261
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		9,755,607
Trading Symbol	LTEA
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current Assets:
Cash	$ 429,673	$ 1,249,550
Accounts receivable, net	1,556,801	1,627,058
Inventories, net	1,697,251	1,187,941
Restricted cash		103,603
Short term investments		2,389,521
Prepaid expenses and other current assets	263,820	91,072
Total current assets	3,947,545	6,648,745
Property and equipment, net	148,425	218,036
Intangible assets	170,000	22,500
Other assets	56,635	52,470
Deferred financing costs	507,794	842,533
Total assets	4,830,399	7,784,284
Current Liabilities:
Accounts payable	2,047,727	886,316
Accrued expenses	1,380,097	911,843
UBS Credit Line		1,280,275
Current portion of automobile loans	8,640	11,446
Current portion of equipment loan	47,910	39,979
Other current liabilities	110,576
Total current liabilities	3,954,950	3,129,859
Subscription payable	563,750
Other liabilities	30,000	30,000
Deferred rent	4,695	1,807
Long term portion of automobile loans	11,066	17,580
Long term portion of equipment  loan	3,787	36,495
Total liabilities	4,208,248	3,215,741
Stockholders' Equity:
Preferred stock, par value $0.0001; authorized 1,000,000 shares; no shares issued and outstanding
Common stock, par value $0.0001; authorized 35,000,000 shares; 9,148,107 and 7,715,306 shares issued and outstanding, as of September 30, 2017 and December 31, 2016, respectively	915	772
Additional paid-in capital	25,191,297	17,575,583
Accumulated deficit	(24,570,061)	(12,977,566)
Accumulated other comprehensive loss		(30,246)
Total stockholders' equity	622,151	4,568,543
Total liabilities and stockholders' equity	$ 4,830,399	$ 7,784,284

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	35,000,000	35,000,000
Common stock, shares, issued	9,148,107	7,715,306
Common stock, shares, outstanding	9,148,107	7,715,306

XML

Condensed Consolidated Statements of Operations and Other Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Net sales	$ 1,554,895	$ 1,301,125	$ 3,901,145	$ 3,412,961
Cost of goods sold	1,486,265	1,196,790	3,663,404	3,253,278
Gross profit	68,630	104,335	237,741	159,683
Operating expenses:
General and administrative expenses	1,543,786	2,170,522	5,169,174	3,957,763
Selling and marketing expenses	2,323,472	661,247	6,308,503	2,031,873
Total operating expenses	3,867,258	2,831,769	11,477,677	5,989,636
Operating loss	(3,798,628)	(2,727,434)	(11,239,936)	(5,829,953)
Other expenses:
Other income (expense)		4,070	(38,986)	4,070
Interest expense, net	(114,150)	(579,710)	(313,573)	(976,427)
Loss on inducement		(1,587,954)		(1,587,954)
Total other expenses	(114,150)	(2,163,594)	(352,559)	(2,560,311)
Net loss	(3,912,778)	(4,891,028)	(11,592,495)	(8,390,264)
Unrealized gain on investments			30,246
Comprehensive loss	$ (3,912,778)	$ (4,891,028)	$ (11,562,249)	$ (8,390,264)
Weighted average number of common shares outstanding – basic and diluted	9,076,959	6,514,295	8,529,399	5,407,036
Basic and diluted net loss per share	$ (0.43)	$ (0.75)	$ (1.36)	$ (1.55)

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($)	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss [Member]	Total
Balance at Dec. 31, 2016	$ 772	$ 17,575,583	$ (12,977,566)	$ (30,246)	$ 4,568,543
Balance, shares at Dec. 31, 2016	7,715,306
Issuance of common stock in connection with the January public offering, net of costs	$ 38	1,429,702			1,429,740
Issuance of common stock in connection with the January public offering, net of costs, shares	376,340
Issuance of common stock in connection with the June public offering, net of costs	$ 25	1,259,390			1,259,415
Issuance of common stock in connection with the June public offering, net of costs, shares	256,848
Issuance of common stock in connection with the July public offering, net of costs	$ 46	2,134,441			2,134,487
Issuance of common stock in connection with the July public offering, net of costs, shares	462,160
Issuance of common stock to the advisory board and board of directors	$ 5	192,645			192,650
Issuance of common stock to the advisory board and board of directors, shares	46,965
Issuance of common stock to consultants and vendors	$ 27	1,023,392			1,023,419
Issuance of common stock to consultants and vendors, shares	270,488
Stock-based compensation - issuance of common stock to an executive officer	$ 2	81,798			81,800
Stock-based compensation - issuance of common stock to an executive officer, shares	20,000
Stock-based compensation		1,238,712			1,238,712
Stock-based compensation, shares
Issuance of Big Geyser warrant		255,634			255,634
Change in unrealized loss on investment				30,246	30,246
Net loss			(11,592,495)		(11,592,495)
Balance at Sep. 30, 2017	$ 915	$ 25,191,297	$ (24,570,061)		$ 622,151
Balance, shares at Sep. 30, 2017	9,148,107

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash Flows From Operating Activities
Net loss	$ (11,592,495)	$ (8,390,264)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense	551,626	35,234
Depreciation and amortization expense	111,528	120,871
Deferred rent	2,888	(1,938)
Loss on sale of securities	37,882
Severance expense charged against accounts receivable	50,000
Warrants issued to distributor	255,634
Stock-based compensation	1,320,512	1,010,820
Loss on disposal of property and equipment		515
Amortization of deferred financing costs	334,739	883,969
Paid-in-kind interest		77,805
Inducement expense		1,587,954
Changes in assets and liabilities:
Accounts receivable	(730,956)	(1,141,804)
Inventory	(459,723)	(265,601)
Prepaid expenses and other current assets	(40,688)	(39,417)
Other assets	(4,165)	11,805
Accounts payable	1,847,072	430,620
Accrued expenses	941,754	986,023
Other current liabilities	(29,574)
Total adjustments	4,188,529	3,696,856
Net cash used in operating activities	(7,403,966)	(4,693,408)
Cash Flows From Investing Activities
Proceeds from held-to-maturity investments	2,408,632
Purchases of property and equipment	(39,419)	(9,497)
Release of restricted cash	103,603	127,580
Purchase of short term investments	(26,747)	(2,507,302)
Net cash provided by (used in) investing activities	2,446,069	(2,389,219)
Cash Flows From Financing Activities
Repayment of automobile loans	(9,320)	(22,977)
Repayment of equipment loans	(24,777)	(27,232)
Repayment of line of credit	(1,280,275)
Proceeds from line of credit		500,000
Proceeds from the January public offering, net of costs	1,429,740
Proceeds from the June public offering, net of costs	1,259,415
Proceeds from the July public offering, net of costs	2,134,487
Advances from a related party	65,000
Proceeds from subscription payable	563,750
Proceeds from the Public Offering, net of costs		5,867,217
Proceeds from disgorgement of short swing profit		56,250
Proceeds from the sale of common stock and warrants, net of costs		861,790
Net cash provided by financing activities	4,138,020	7,235,048
Net (decrease) increase in cash	(819,877)	152,421
Cash, beginning of period	1,249,550	207,192
Cash, end of period	429,673	359,613
Cash paid for interest	6,006	19,898
Non-cash investing and financing activities:
Issuance of common stock to consultants, vendors and customers	1,023,419	205,700
Issuance of insurance obligation in other current liabilities	75,150
Issuance of common stock in exchange for Brentwood line of credit and related warrants		1,669,376
Purchase of IP applied against outstanding accounts receivable	150,000
Finished goods inventory received and applied against outstanding accounts receivable	$ 49,587

XML

Business Organization, Liquidity and Going Concern

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business Organization, Liquidity and Going Concern

NOTE 1 – BUSINESS ORGANIZATION, LIQUIDITY AND GOING CONCERN

Business Organization

Long Island Iced Tea Corp., a Delaware corporation (“LIIT”), was formed on December 23, 2014. LIIT was formed in order to allow for the completion of mergers between Cullen Agricultural Holding Corp. (“Cullen”) and Long Island Brand Beverages LLC (“LIBB”). On December 31, 2014, LIIT entered into a merger agreement, as amended as of April 23, 2015, with Cullen, a public company, Cullen Merger Sub, Inc. (“Cullen Merger Sub”), LIBB Acquisition Sub, LLC (“LIBB Merger Sub”), LIBB and the founders of LIBB (“Founders”). Pursuant to the merger agreement, (a) Cullen Merger Sub was merged with and into Cullen, with Cullen surviving and becoming a wholly-owned subsidiary of LIIT and (b) LIBB Merger Sub was merged with and into LIBB, with LIBB surviving and becoming a wholly-owned subsidiary of LIIT (the “Mergers”). As a result of the Mergers which were consummated on May 27, 2015, LIIT consisted of its wholly owned subsidiaries, LIBB (its operating subsidiary) and Cullen and Cullen’s wholly owned subsidiaries (collectively the “Company”).

Under the merger agreement, upon consummation of the Mergers, the former holders of the LIBB membership interests (the “LIBB members”) received 2,633,334 shares of common stock of LIIT (or approximately 63%).

For accounting purposes, the Mergers were treated as an acquisition of Cullen by LIBB and as a recapitalization of LIBB, as the former LIBB members held a large percentage of LIIT’s shares and exercised significant influence over the operating and financial policies of the consolidated entity and Cullen was a public shell company at the time of the transaction. Pursuant to Accounting Standards Codification (“ASC”) 805-10-55-11 through 55-15, the merger or acquisition of a private operating company into a non-operating public shell with nominal assets is considered a capital transaction in substance rather than a business combination. As a result, the condensed consolidated balance sheets, statements of operations, and statements of cash flows of LIBB have been retroactively updated to reflect the recapitalization. Additionally, the historical condensed consolidated financial statements of LIBB are now reflected as those of the Company.

Overview

The Company is a holding company operating through its wholly-owned subsidiary, LIBB. The Company is engaged in the production and distribution of premium Non-Alcoholic ready-to-drink (“NARTD”) beverages. The Company is currently organized under its flagship brand, Long Island Iced Tea, a premium NARTD tea made from a proprietary recipe and with quality components. The Company’s mission is to provide consumers with premium beverages offered at an affordable price.

The Company aspires to be a market leader in the development of iced tea beverages that are convenient and appealing to consumers. There are two major target markets for Long Island Iced Tea: “consumers on the go” and “health conscious consumers.” “Consumers on the go” are families, employees, students and other consumers who lead a busy lifestyle. With increasingly hectic and demanding schedules, there is a need for products that are accessible and readily available. “Health conscious consumers” are individuals who are becoming more interested and better educated on what is included in their diets, causing them to shift away from the less healthy options, such as carbonated soft drinks, towards alternative beverages such as iced tea.

The Company produces a 100% brewed iced tea, using black tea leaves, purified water and natural cane sugar or sucralose. Flavors change from time to time, and have included lemon, peach, raspberry, guava, mango, diet lemon, diet peach, sweet tea, green tea and honey, half tea and half lemonade. The Company also offers lower calorie iced tea in flavor options that include mango, raspberry and peach. The Company also sells its iced tea in gallon bottles with flavor options including lemon, peach, green tea and honey, half and half lemonade, sweet tea, mango and unsweetened.

During April 2017, the Company expanded its brand to include lemonade. Lemonade is offered in nine flavors including traditional, lime, pink lemonade, kiwi & strawberry, cherry, peach, watermelon, wild berries and strawberry and is offered at retail in 18oz. bottles.

The Company also distributes an aloe vera derived juice beverage (“ALO Juice”) in 500ml and 1.5 liter bottles. ALO Juice is offered in six flavors including original, pomegranate, mango, raspberry, pineapple and coconut. See below regarding the ALO Juice business. In addition, in order to service certain vending contracts, the Company sells snacks and other beverage products on a limited basis.

The Company sells its products to regional retail chains and to a mix of independent mid-to-large range distributors who in turn sell to retail outlets, such as big chain supermarkets, mass merchants, convenience stores, restaurants and hotels, principally in the New York, New Jersey, Connecticut and Pennsylvania markets, with expanding distribution in Florida, Virginia, Massachusetts, New Hampshire, Rhode Island and parts of the Midwest. As of September 30, 2017, the Company’s products are available in 20 states and in the Caribbean, Canada and Latin America.

The ALO Juice Business

Asset Purchase Agreement

On December 8, 2016, the Company entered into an asset purchase agreement with The Wilnah International, LLC (“Wilnah”). Julio X. Ponce (“Mr. Ponce”) is the majority interest member of Wilnah. Pursuant to the agreement, the Company intended to acquire the intellectual property (“IP”) (trade names, formulas, recipes) for ALO Juice. During September 2017, the Company determined that it would license, rather than purchase the ALO Juice IP. Accordingly, on September 18, 2017, the Company terminated the asset purchase agreement with Wilnah.

Seba Personal Guarantees

Mr. Ponce is the former majority owner of Seba Distribution LLC (“Seba”). In order to provide credit enhancement to Seba’s obligations to the Company, Seba issued notes payable to the Company which were personally guaranteed by Mr. Ponce. On March 14, 2017, Seba issued to the Company a note payable in the amount of $467,444, which Mr. Ponce, individually, has fully guaranteed (“March 2017 Note and Guarantee”) in support of certain obligations of Seba that are owed to the Company. On September 18, 2017, Seba issued to the Company a note payable in the amount of $403,216, which Mr. Ponce, individually, has fully guaranteed, and for which Julio Ponce Sr. (the father of Mr. Ponce) has guaranteed certain receivables up to $300,000 in the aggregate (“September 2017 Note and Guarantee”) in support of certain additional obligations of Seba that are owed to the Company.

Licensing Agreement – ALO Juice

On September 18, 2017, the Company entered into an exclusive perpetual licensing agreement (“Licensing Agreement”) with Wilnah granting the Company the worldwide rights to produce, distribute and sell the ALO Juice brand. As compensation to Wilnah for these rights, the Company paid an initial fee of $150,000, which was applied against the Seba accounts receivable upon the closing and has agreed to pay to Wilnah a 7.0% royalty on the Company’s gross sales of ALO Juice sales delivered to the Company’s customers after the closing of this agreement.

Employment Agreement

Effective January 1, 2017, the Company had entered into an employment agreement with Mr. Ponce, to expand the Company’s sales of Long Island branded products and ALO Juice products within the Southeast U.S. and Latin American regions. On September 1, 2017, the Company terminated the employment agreement of Mr. Ponce.

On September 1, 2017, the Company entered into a separation agreement (the “Separation Agreement”) with Mr. Ponce. Mr. Ponce received as compensation under the Separation Agreement a lump sum payment of $50,000, which was applied against the Seba accounts receivable.

Sales Broker Agreement

Effective September 1, 2017, the Company entered into a broker arrangement (“Broker Arrangement”) with Mr. Ponce, whereby Mr. Ponce will be paid a commission of 2.5% on net collected revenues from the sale of the Company’s products (excluding ALO Juice) into certain distributor and retail relationships introduced by Mr. Ponce.

Seba’s Obligations to the Company

From September 18, 2017, all payments which the Company would make to Seba, Mr. Ponce, or Wilnah, pursuant to the Licensing Agreement, Separation Agreement or Broker Arrangement are to be applied first to outstanding receivables owed to the Company by Seba and then paid in cash only after such receivables have been paid in full.

Liquidity and Going Concern

The Company has been focused on the development of its brand and its infrastructure, as well as in the establishment of a network of distributors and qualified direct accounts. From inception, the Company has financed its operations through the issuance of debt and equity, and through utilizing trade credit with its vendors.

As of September 30, 2017, the Company had cash of $429,673. As of September 30, 2017, the Company had working capital of $352,595. The Company incurred net losses of $3,912,778 and $11,592,495 for the three and nine months ended September 30, 2017, respectively. As of September 30, 2017, the Company’s stockholders’ equity was $622,151.

On January 27, 2017, the Company sold 376,340 shares of the Company’s common stock in a public offering at an average price of $4.02 per share. Of the shares sold, 300,000 were sold to the public at an offering price of $4.00 while the remaining 76,340 shares were sold to officers and directors of the Company at a price of $4.10 per share. The sale of common stock generated gross proceeds of $1,513,000 and net proceeds of $1,429,740 after deducting commissions and other offering expenses.

On June 14, 2017, the Company sold 256,848 shares of the Company’s common stock in a public offering at an average price of $5.06 per share. Of the shares sold, 231,850 were sold to the public at an offering price of $5.00 while the remaining 24,998 shares were sold to officers and directors of the Company at a price of $5.60 per share. The sale of common stock generated gross proceeds of $1,299,250 and net proceeds of $1,259,415 after deducting commissions and other offering expenses.

On July 6, 2017, the Company sold 448,160 shares of the Company’s common stock in a public offering at a price of $5.00 per share. Of the shares sold, 200,000 were sold to lead investors who, as a result of purchasing more than $500,000 in shares, each received (i) an additional number of shares of common stock equal to 7% of the total number of shares of common stock purchased by such lead investors in this offering (or an aggregate of 14,000 shares) and (ii) three-year warrants up to that number of shares of common stock equal to 20% of the total number of shares purchased by such lead investors in this offering (or warrants to purchase an aggregate of 40,000 shares). These warrants have an exercise price of $5.50 and were fully vested upon issuance. The sale of common stock generated gross proceeds of $2,240,800 and net proceeds of $2,134,487 after deducting commissions and other offering expenses.

On October 4, 2017, the Company sold 607,500 shares of the Company’s common stock in a public offering at a price of $2.05 per share. The Company received gross proceeds of $1,245,375 and estimated net proceeds of $1,235,375 after deducting other offering expenses. Each investor in the offering also received a warrant to purchase 50% of the number of shares for which such investor subscribed in the offering (or a total aggregate number of shares underlying such warrants equal to 303,750 shares). The warrants have an exercise price of $2.40 per share, subject to adjustment, and expire one year from the closing of the offering. Prior to October 1, 2017, the Company received $563,750 from this offering and accordingly, as at September 30, 2017, $563,750 is included in subscriptions payable within the condensed consolidated balance sheets.

Pursuant to a Credit and Security Agreement (the “Credit Agreement”), the Company has a revolving credit facility in an amount up to $3,500,000, subject to approval by the lender (See Note 5).

Historically, the Company has financed its operations through the raising of equity capital and through trade credit with its vendors. The Company’s ability to continue its operations and to pay its obligations when they become due is contingent upon the Company obtaining additional financing. Management’s plans include raising additional funds through equity offerings, debt financings, or other means.

The Company believes that it will be able to raise sufficient additional capital to finance the Company’s planned operating activities. There are no assurances that the Company will be able to raise such capital on terms acceptable to the Company or at all. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned market development activities, and/or consider reductions in personnel costs or other operating costs. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2016 and related notes thereto included in the Company’s Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 31, 2017.

Reclassification

Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on the previously reported net loss.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and also affect the amounts of revenues and expenses reported for each period. Actual results could differ from those which result from using such estimates. Management utilizes various other estimates, including but not limited to, assessing the collectability of accounts receivable, accrual of rebates to customers, the valuation of securities, the valuation of inventory, determining the estimated lives of long-lived assets, determining the potential impairment of intangibles, the fair value of warrants issued, the fair value of stock options, the recognition of revenue, and other legal claims and contingencies. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary.

Revenue Recognition

Revenue is stated net of sales discounts and rebates paid to customers (See Customer Marketing Programs including Sign On and Sales Incentives, below). Net sales are recognized when all of the following conditions are met: (1) the price is fixed and determinable; (2) evidence of a binding arrangement exists (generally, purchase orders); (3) products have been delivered and there is no future performance required; and (4) amounts are collectible under normal payment terms.

These conditions typically occur when the products are delivered to or picked up by the Company’s customers. For sales where certain revenue recognition criteria have not been met at the date of delivery, the Company defers recognition of such revenue and accounts receivable until such recognition criteria are met.

Customer Marketing Programs, including Sign On and Sales Incentives

The Company participates in various programs and arrangements with customers designed to incent new distribution, incent the introduction of a new product line, or to increase the sale of its products. Among these programs are arrangements under which allowances can be earned by customers for introducing a product (sign on incentives, for example), for various discounts to the end retailers or for participating in specific marketing programs. The Company believes that its participation in these programs is essential to ensuring volume and revenue growth in a competitive marketplace. Depending upon the program, those incentives are paid in either cash or the issuance of equity instruments. During the three months ended September 30, 2017 and 2016, these allowances resulted in reductions in net sales of $195,153 and $0, respectively. During the nine months ended September 30, 2017 and 2016, these allowances resulted in reductions in net sales of $596,335 and $45,165, respectively. Included in these amounts for the three and nine months ended September 30, 2017 are (income) costs of ($1,388) and $255,634, respectively, representing the non-cash costs of a sign-on incentive, presented net of mark-to-market adjustments for unvested awards related to warrants issued in connection with the signing of a distribution agreement and the first order with Big Geyser Inc. (“Big Geyser”) (See Notes 7 and 8).

Shipping and Handling Costs

Shipping and handling costs incurred to move finished goods from the Company’s sales distribution centers to customer locations are included in selling and marketing expenses within the condensed consolidated statements of operations and totaled $184,423 and $117,998, for the three months ended September 30, 2017 and 2016, respectively and $381,151 and $319,668 for the nine months ended September 30, 2017 and 2016, respectively.

Advertising

The Company expenses advertising costs as incurred. Advertising costs are included in selling and marketing expenses within the condensed consolidated statements of operations and totaled $196,758 and $84,433 for the three months ended September 30, 2017 and 2016, respectively, and $513,522 and $114,980, for the nine months ended September 30, 2017 and 2016, respectively.

Research and Development

Costs related to new product initiatives incurred were included in selling and marketing expenses within the condensed consolidated statements of operations and totaled $30,375 and $24,464 for the three months ended September 30, 2017 and 2016, respectively, and $335,101 and $143,651 for the nine months ended September 30, 2017 and 2016, respectively. Other research and development costs were included in general and administrative expenses within the condensed consolidated statements of operations and totaled $0 and $0 for the three months ended September 30, 2017 and 2016, respectively and $829 and $46,667 for the nine months ended September 30, 2017 and 2016, respectively. The other research and development expenses incurred during the three and nine months ended September 30, 2016 were incurred pursuant to an alcohol beverage development agreement which will require the Company to pay $40,000 in cash and $40,000 in common stock upon the completion of the arrangement. As of September 30, 2017, $50,000 was included in accrued expenses in the condensed consolidated balance sheet related to the 2016 arrangement.

Short-term Investments

The Company accounts for securities in accordance with accounting standards for investments in debt and equity securities. Accounting standards require investments in debt and equity securities to be classified as either “held to maturity”, “trading”, or “available-for-sale.”

The Company holds investments in marketable securities, consisting of U.S. government securities and mutual funds. The Company’s available-for-sale securities are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive (loss) income in stockholders’ equity, when applicable. During the three months ended September 30, 2017 and 2016, the unrealized gain was $0 and $0, respectively, and during the nine months ended September 30, 2017 and 2016, the unrealized gain was $30,246 and $0, respectively. Unrealized losses are charged against interest and other income/(expense), net, when a decline in fair value is determined to be other-than-temporary. The Company has not recorded any such impairment charge in the periods presented. The Company determines realized gains or losses on sale of marketable securities on a specific identification method, and records such gains or losses as interest and other income/(expense), net.

The following table sets forth the available-for-sale securities, which were fully liquidated during the nine months ended September 30, 2017:

	As of
	September 30, 2017		December 31, 2016
U.S. government securities	$	-	$	195,374
Fixed income mutual funds		-		2,194,147
	$	-	$	2,389,521

	As of December 31, 2016
	Amortized		Unrealized
	Cost		Losses			Fair Value
U. S. government securities	$	195,570	$	(196	)	$	195,374
Fixed income mutual funds		2,224,197		(30,050	)		2,194,147
Total	$	2,419,767	$	(30,246	)	$	2,389,521

The following table classifies the US government securities by maturity:

	As of
	September 30, 2017		December 31, 2016
Within one year	$	-	$	94,967
Within one to five years		-		100,407
	$	-	$	195,374

Accounts Receivable

The Company sells products to distributors and in certain cases directly to retailers, and extends credit, generally without requiring collateral, based on its evaluation of the customer’s financial condition. While the Company has a concentration of credit risk in the retail sector, it believes this risk is mitigated due to the diverse nature of the customers it serves, including, but not limited to, its type, geographic location, size, and beverage channel. Potential losses on the Company’s receivables are dependent on each individual customer’s financial condition and sales adjustments granted after the balance sheet date. The Company carries its trade accounts receivable at net realizable value. Accounts receivable have terms of ranging from 30 to 75 days and do not bear interest. The Company monitors its exposure to losses on receivables and maintains allowances for potential losses or adjustments. The Company determines these allowances by (1) evaluating the aging of its receivables; (2) analyzing its history of sales adjustments; and (3) reviewing its high-risk customers. Past due receivable balances are written off when the Company’s efforts have been unsuccessful in collecting the amount due. Accounts receivable are stated at the amounts management expects to collect.

Accounts receivable, net, is as follows:

	As of
	September 30, 2017			December 31, 2016
Accounts receivable, gross	$	2,232,968		$	1,859,474
Allowance for doubtful accounts		(676,167	)		(232,416	)
Accounts receivable, net	$	1,556,801		$	1,627,058

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash on deposit with financial institutions and accounts receivable. At times, the Company’s cash in banks is in excess of the FDIC insurance limit. The Company has not experienced any loss as a result of these cash deposits. These cash balances are maintained with one bank. The Company is exposed to credit risk with regard to two customers who accounted for 19% and 17%, or 36% in the aggregate, and 46% of the Company’s trade receivables as of September 30, 2017 and December 31, 2016, respectively. The account representing the 19% is further collateralized by notes receivable from Seba and personal guarantees (See Note 1). Otherwise, the Company does not generally require collateral or other security to support customer receivables.

The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, as required.

Inventories

The Company’s inventory includes raw materials such as bottles, sweeteners, labels, flavors and packaging. Finished goods inventory consists of bottled iced tea, lemonade and ALO Juice. As of September 30, 2017 and December 31, 2016, included in inventory was finished goods inventory with a cost of approximately $95,000 and $320,000, respectively, which was delivered to a distributor, and is held in inventory until certain revenue recognition criteria are met.

The Company values its inventories at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. As of September 30, 2017 and December 31, 2016, the Company recorded reserves of $115,125 and $45,078, respectively, to reduce the cost of certain products to estimated net realizable value. The following table summarizes inventories as of the dates presented:

	As of
	September 30, 2017		December 31, 2016
Finished goods	$	853,157	$	905,642
Raw materials and supplies		844,094		282,299
Total inventories	$	1,697,251	$	1,187,941

Property and Equipment

Property and equipment is recorded at cost. Major property additions, replacements, and betterments are capitalized, while maintenance and repairs that do not extend the useful lives of an asset or add new functionality are expensed as incurred. Depreciation is recorded using the straight-line method over the respective estimated useful lives of the Company’s assets.

The estimated useful lives typically are 3 years for cold-drink containers, such as reusable fridges, wood racks, vending machines, barrels, and coolers, and are depreciated using the straight-line method over the estimated useful life of each group of equipment, as determined using the group-life method. Under this method, the Company does not recognize gains or losses on the disposal of individual units of equipment when the disposal occurs in the normal course of business. The Company capitalizes the costs of refurbishing its cold-drink containers and depreciates those costs over the estimated period until the next scheduled refurbishment or until the equipment is retired. The estimated useful lives are typically 3 to 5 years for office furniture and equipment and are depreciated on a straight-line basis. The estimated useful lives for trucks and automobiles are typically 3 to 5 years and are depreciated on a straight line basis. For the three months ended September 30, 2017 and 2016, depreciation expense was $32,322 and $39,420, respectively. For the nine months ended September 30, 2017 and 2016, depreciation expense was $109,028 and $117,118, respectively.

Intangible Assets

Intangible assets with finite useful lives are amortized over their expected useful life. Intangible assets with useful lives are tested for impairment when circumstances indicate that there could be an impairment. Intangible assets with finite useful lives include website development costs with a net book value of $0 and $2,500 as of September 30, 2017 and December 31, 2016, respectively. The estimated useful life of the capitalized costs of the Company’s website was 3 years and was depreciated on a straight line basis. As of September 30, 2017, the cost of the website development was $15,000 and the accumulated amortization was $15,000. As of December 31, 2016, the cost of the website development was $15,000 and the accumulated amortization was $12,500. For the three months ended September 30, 2017 and 2016, amortization expense was $0 and $1,251, respectively, and $2,500 and $3,753 for the nine months ended September 30, 2017 and 2016, respectively.

Intangible assets with indefinite useful lives are tested for impairment when circumstances indicate that there could be an impairment. As of September 30, 2017, the cost of the ALO Juice IP, which has an indefinite useful life, was $150,000 (See Note 1).

Income Taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement, and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction.

In its interim financial statements, the Company follows the guidance in ASC 270, “Interim Reporting” and ASC 740 “Income Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim periods. That rate differs from U.S. statutory rates primarily as a result of valuation allowance related to the Company’s net operating loss carryforward as a result of the historical losses of the Company.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. The Company accounts for uncertain tax positions in accordance with ASC 740 —”Income Taxes”. No uncertain tax provisions have been identified. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying condensed consolidated statements of operations. Our primary tax jurisdictions are our federal, various state, and local taxes.

Generally, Federal, State and Local authorities may examine the Company’s tax returns for three years from the date of filing.

In accordance with ASC 740, the Company evaluates whether a valuation allowance should be established against the net deferred tax assets based upon the consideration of all available evidence and using a “more likely than not” standard. Significant weight is given to evidence that can be objectively verified. The determination to record a valuation allowance is based on the recent history of cumulative losses and current operating performance. In conducting the analysis, the Company utilizes an approach, which considers the current year loss, including an assessment of the degree to which any losses are driven by items that are unusual in nature and incurred to improve future profitability. In addition, the Company reviews changes in near-term market conditions and any other factors arising during the period, which may impact its future operating results.

Internal Revenue Code Section 382 imposes limitations on the use of net operating loss carryovers (“NOLs”) when the stock ownership of one or more 5% shareholders (shareholders owning 5% or more of the Company’s outstanding capital stock) has increased on a cumulative basis by more than 50 percentage points. The Company’s preliminary analysis indicated that such shares have increased by more than 50% since the last Section 382 limitation on May 27, 2015. The Company is currently evaluating the impact of the new Section 382 limitation.

Loss per share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon the exercise of stock options, warrants and the conversion. The computation of diluted earnings per share excludes those with an exercise price in excess of the average market price of the Company’s common shares during the periods presented. The computation of diluted earnings per share excludes outstanding options, warrants and other dilutive instruments in periods where the inclusion of such instruments would be antidilutive, as provided below:

	As of September 30,
	2017		2016
Options to purchase common stock		1,074,155		465,411
Warrants to purchase common stock		1,130,570		470,570
Total potentially dilutive securities		2,204,725		935,981

Fair Value of Financial Instruments

The carrying amounts of cash, short term investments, accounts receivable, automobile and equipment loans and the UBS Credit Line (See Note 4 below) approximate fair value due to the short-term nature of these instruments. In addition, for notes payable, the Company believes that interest rates approximate prevailing rates.

ASC 820 “Fair Value Measurements and Disclosures” provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).

Fair value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.

Level 3 Significant unobservable inputs that cannot be corroborated by market data.

Fair values for short-term money market investments are determined from quoted prices in active markets for these money market funds, and are considered to be Level 1.

The carrying value of financial instruments in the Company’s condensed consolidated financial statements are as follows:

	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2)		Significant Unobservable Inputs (Level 3)
Short-term investments at September 30, 2017	$	—	$	—	$	—
Short-term investments at December 31, 2016	$	2,389,521	$	—	$	—

Stock-based Compensation

The Company accounts for stock options granted to consultants pursuant to the accounting guidance included in ASC 505-50 “Equity-Based Payments to Non-Employees” (“ASC 505-50”). Stock-based compensation cost is measured at the grant date and at the end of each reporting period for unvested awards, based on the fair value of the award, and is recognized as expense over the consultant’s requisite service period (generally the vesting period of the equity grant). The fair value of the Company’s stock options granted to consultants are estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life.

In accordance with ASC 505-50, the Company recorded adjustments at the end of each reporting period to reflect the mark-to-market adjustment of the fair value of unvested awards granted to consultants. In connection with the mark-to-market adjustments at September 30, 2017, the Company utilized the closing price of the Company’s common stock, as quoted on the NASDAQ Stock Market LLC (“Nasdaq”), as an input to the Black Scholes option-pricing model for the fair value of its common stock.

Recent Accounting Pronouncements

In January 2016, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends the guidance in U.S. generally accepted accounting principles on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and is to be adopted by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

In February 2016, the FASB issued new lease accounting guidance (ASU No. 2016-02, Leases). Under the new guidance, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new guidance is not applicable for leases with a term of 12 months or less. Lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

On March 30, 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. This update requires that all excess tax benefits and tax deficiencies arising from share-based payment awards should be recognized as income tax expense or benefit on the income statement. The amendment also states that excess tax benefits should be classified along with other income tax cash flows as an operating activity. In addition, an entity can make an entity-wide accounting policy election to either estimate the number of awards expected to vest or account for forfeitures as they occur. The provisions of this update are effective for annual and interim periods beginning after December 15, 2016. The Company adopted this standard effective December 31, 2016. The adoption did not have a material effect on the Company’s condensed consolidated financial statements.

In April 2016, the FASB issued ASU No. 2016-10 “Revenue from Contracts with Customers (Topic 606)”, “Identifying Performance Obligations and Licensing” (“ASU 2016-10”). ASU 2016-10 clarifies the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The provisions of this update are effective for annual and interim periods beginning after December 15, 2017, with early application permitted. The Company is continuing to evaluate the expected impact of this new revenue guidance. The Company is currently preparing its assessment of the full financial impact of the new revenue recognition guidance, including the method of adoption, and intends to adopt the guidance when it becomes effective for the Company on January 1, 2018.

In May 2016, the FASB issued ASU No. 2016-12 “Revenue from Contracts with Customers (Topic 606)”, “Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”). The core principal of ASU 2016-12 is the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The provisions of this update are effective for annual and interim periods beginning after December 15, 2017, with early application permitted. The Company is continuing to evaluate the expected impact of this new revenue guidance. The Company is currently preparing its assessment of the full financial impact of the new revenue recognition guidance, including the method of adoption, and intends to adopt the guidance when it becomes effective for the Company on January 1, 2018.

In August 2016, the FASB issued ASU No. 2016-15 “Statement of Cash Flows (Topic 230)”, “Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). The amendments for this update provide guidance on the eight specific cash flows: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The provisions of this update are effective for annual and interim periods beginning after December 15, 2016, with early application permitted. The Company adopted this standard effective December 31, 2016. The adoption did not have a material effect on the Company’s condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business” (“ASU 2017-01”), which provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 requires entities to use a screen test to determine when an integrated set of assets and activities is not a business or if the integrated set of assets and activities needs to be further evaluated against the framework. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09 “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all of the following are met: The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified, the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and the classification of the modified award an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The provisions of this update are effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

Management’s Evaluation of Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the review, other than described in Note 1 –Business Organization, Liquidity, and Going Concern, Note 8 – Commitments and Contingencies and Note 11 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.

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Equipment Loan

9 Months Ended

Sep. 30, 2017

Equipment Loan [Abstract]

Equipment Loan

NOTE 3 – EQUIPMENT LOAN

On November 23, 2015, the Company entered into a reimbursement agreement with Magnum Vending Corp. (“Magnum”), an entity managed by Philip Thomas, the Company’s Chief Executive Officer and a director of the Company, and certain of his family members. In exchange for the exclusive right to stock vending machines owned by Magnum, the Company agreed to reimburse Magnum for the cost of products to stock the machines and the costs that Magnum incurred to acquire the machines including machines which were purchased with an equipment loan. The total principal amount of the payments underlying the agreement upon inception was $117,917. The reimbursements will be made in 35 monthly payments of principal and interest in the amount of $3,819 with an interest rate of 10%. Upon completion of these payments in October 2018, Magnum will transfer ownership of the vending machines to the Company. In addition, in exchange for the right to stock certain other vending machines that the Company has the right to use, the Company agreed to purchase the products required to be displayed in those vending machines from Magnum, at a price equal to Magnum’s cost for such products (See Note 10). The Company may terminate the agreement and all obligations to make future payments on ten days’ written notice to Magnum. As of September 30, 2017 and December 31, 2016, the outstanding balance on the equipment loan was $51,697 and $76,474, respectively.

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UBS Credit Line

9 Months Ended

Sep. 30, 2017

Line of Credit Facility [Abstract]

UBS Credit Line

NOTE 4 – UBS CREDIT LINE

On October 27, 2016, the Company entered into a credit line with UBS (The “UBS Credit Line”). The UBS Credit Line has a borrowing capacity determined by the level of the collateral pledged and bears interest at a floating rate, depending on the time requested for the borrowing. The interest is based on the ICE Swap Rate plus a margin of between 0.40% and 0.70%. As of June 30, 2017, the interest rate on the UBS Credit Line was 3.732 %. The UBS Credit Line, when drawn, is collateralized by certain of the Company’s short-term investments. As of September 30, 2017 and December 31, 2016, the outstanding balance on the line of credit was $0 and $1,280,275, respectively. As of September 30, 2017 and December 31, 2016, the Company’s borrowing capacity under the UBS Credit line was $0 and $19,725, respectively. As of July 21, 2017, the credit line has been closed.

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Line of Credit - Related Parties

9 Months Ended

Sep. 30, 2017

Line Of Credit - Related Parties

Line of Credit - Related Parties

NOTE 5 – LINE OF CREDIT – RELATED PARTIES

Brentwood LIIT Corp.

On November 23, 2015, LIIT and LIBB entered into a Credit and Security Agreement (the “Credit Agreement”), by and among LIBB, as the borrower, LIIT and LIIT (NZ) Ltd. (the “Lender”). The Lender is controlled by a related party, Eric Watson, who beneficially owned approximately 14.4% of the Company as of September 30, 2017. The Credit Agreement, which expires November 23, 2018, provides for a revolving credit facility in an amount of up to $3,500,000, subject to approval by the lender. The Available Amount may be increased, in increments of $500,000, up to the Facility Amount, and LIBB may obtain further advances, subject to the approval of the Lender.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2017

Stockholders' Equity Note [Abstract]

Stockholders' Equity

NOTE 6 – STOCKHOLDERS’ EQUITY

2017 Issuances

On January 3, 2017, the Company issued 1,790 shares of the Company’s common stock to a product broker. The shares had a fair value of $7,500.

On January 17, 2017, the Company issued 41,965 shares of the Company’s common stock to directors of the Company. The shares were issued in satisfaction of accrued director fees and had a fair value of $175,000.

On January 30, 2017, the Company issued 61,208 shares of the Company’s common stock to consultants of the Company in satisfaction of accrued obligations and as a retainer for services to be provided. The shares were valued based upon the value of such services. The fair value was $213,550. As of September 30, 2017, $36,684 is included within prepaid expenses and other current assets in the condensed consolidated balance sheets.

On March 27, 2017, the Company’s Board of Directors approved the issuance of 5,000 and 25,000 shares of the Company’s common stock to directors and consultants, respectively, in consideration of services provided. The fair value of these shares was $112,853.

On March 27, 2017, the Company’s Board of Directors approved the issuance of 111,457 shares of the Company’s common stock to consultants of the Company in consideration of services provided. The fair value of these shares was $437,598.

On April 17, 2017, the Company issued 25,000 shares of the Company’s common stock, valued at $100,751, to an employee of the Company in consideration for services provided prior to their being employed by the Company.

On August 25, 2017, the Company issued 5,000 shares of the Company’s common stock to directors of the Company. The shares were issued in satisfaction of accrued director’s fees and had a fair value of $17,650.

On August 25, 2017, the Company issued 41,033 shares of the Company’s common stock to consultants of the Company in consideration of services provided. The fair value of these shares was $151,167.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

NOTE 7 – STOCK-BASED COMPENSATION

Long-Term Equity Incentive Plans

On May 27, 2015, the Company’s board of directors adopted the 2015 Long-Term Incentive Equity Plan (“2015 Stock Option Plan”). The 2015 Stock Option Plan provides for the grant of stock options, stock appreciation rights, restricted stock and other stock-based awards to, among others, the officers, directors, employees and consultants of the Company. During January 2017, the 2015 Stock Option Plan was amended to increase the aggregate number of shares authorized for issuance by 283,333 shares to 750,000 shares.

On April 14, 2017, the Company’s board of directors adopted the 2017 Long-Term Incentive Equity Plan (“2017 Stock Option Plan”), which was approved by the Company’s stockholders on August 9, 2017. The 2017 Stock Option Plan provides for the grant of stock options, stock appreciation rights, restricted stock and other stock-based awards to, among others, the officers, directors, employees and consultants of the Company. The total number of shares reserved under the 2017 Stock Option Plan is 850,000.

Stock Options

On January 5, 2017, the Company issued to various officers, directors, and employees options to purchase an aggregate of 220,867 shares of the Company’s common stock, under the 2015 Stock Option Plan. The options expire five years from the date of grant, have an exercise price of $5.00, and vest quarterly over two years, beginning on April 5, 2017. The options have a fair value of $440,698.

On January 30, 2017, pursuant to his consulting agreement, Mr. Davidson, the Company’s Executive Chairman, was granted an option to purchase 71,686 shares of the Company’s common stock (See Note 8). The option expires four and a half years from the date of grant, has an exercise price of $4.09, and vests in three equal installments on January 30, 2017, July 28, 2017, and July 28, 2018. The option has a fair value of $131,240.

On March 10, 2017, in connection with his amended and restated employment agreement, Mr. Thomas, the Company’s Chief Executive Officer (“CEO”), was granted an option to purchase 75,000 shares of the Company’s common stock, under the 2015 Stock Option Plan. The option expires five years from the date of grant and has an exercise price of $4.50 per share. The option will vest in three annual installments beginning on the date of grant. The option has a fair value of $128,062.

On March 27, 2017, as compensation, the Company issued to a director an option to purchase 70,000 shares of the Company’s common stock. The option will expire five years from the date of grant, has an exercise price of $4.50 per share, and vests in three annual installments beginning on the date of grant. The option has a fair value of $130,266.

On April 17, 2017, the Company issued to various officers, directors, and employees options to purchase an aggregate of 127,500 shares of the Company’s common stock under the 2015 Stock Option Plan and 187,647 shares of the Company’s common stock under the 2017 Stock Option Plan. The options will expire five years from the date of grant, have an exercise price of $4.50 per share, and vest in three annual installments beginning on the date of grant. The options have a fair value of $404,600.

On August 24, 2017, the Company issued an option to purchase 12,000 shares of the Company’s common stock to an employee of the Company under the 2017 Stock Option Plan. The option will expire five years from the date of grant and have an exercise price of $3.76. The option vests one-third on the date of grant and one-third in each November 2017 and 2018. The option has a fair value of $17,693.

On August 24, 2017, the Company issued an option to purchase 20,000 shares of the Company’s common stock to an employee of the Company under the 2017 Stock Option Plan. The option will expire five years from the date of grant, have an exercise price of $3.76 and be fully vested upon issuance. The option has a fair value of $29,488.

On August 24, 2017, the Company issued to employees of the Company options to purchase an aggregate of 23,500 shares of the Company’s common stock under the 2017 Stock Option Plan. The options will expire five years from the date of grant, have an exercise price of $3.76 and vest in three annual installments beginning on the date of grant. The options have a fair value of $34,649.

The Company determined the fair value of stock options granted based upon the assumptions as provided below.

	For the Nine Months Ended September 30, 2017
Stock price		$ 3.73 - $5.10
Exercise price		$ 3.76 - $5.00
Dividend yield		0%
Expected volatility		57% - 75%
Risk-Free interest rate, per annum		1.05% – 1.57%
Expected life (in years)		0.85 - 3.06

The following table summarizes the stock option activity of the Company:

	Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		425,411		$	4.93	$	3.85
Granted		808,200			4.55		1.63
Exercised		-			-		-
Expired, forfeited or cancelled		(159,456	)		4.79		1.67
Outstanding at September 30, 2017		1,074,155		$	4.66	$	2.50		3.3	$	-
Exercisable at September 30, 2017		699,963		$	4.60	$	2.79		2.7	$	-

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock.

As of September 30, 2017, there was a total of $647,084 of unrecognized compensation expense related to unvested stock options. This cost is expected to be recognized through 2019 over a weighted average period of 0.79 years.

The Company accounts for all stock-based compensation as an expense in the financial statements and associated costs are measured at the fair value of the award or the fair value of the service provided whichever is most readily determinable.

Stock Warrants

On March 29, 2017, in consideration for a prior commitment for financing the Company through March 31, 2018 from a stockholder, the Company’s Board of Directors issued to this stockholder a warrant to purchase 165,000 shares of the Company’s common stock at an exercise price of $4.18 per share. This warrant has a term of one year and was fully vested upon issuance. The warrant had a grant date fair value of $172,526, which was fully charged to general and administrative expense during the three months ended March 31, 2017. The fair value of the warrant was determined utilizing the Black-Scholes option pricing model, based upon a common stock price of $4.00 per share, dividend yield of 0%, expected volatility of 70%, risk free interest rate of 1.00%, and an expected life in years of 1.00.

On May 12, 2017, in consideration for a prior commitment for financing the Company through May 15, 2018 from a stockholder, the Company’s Board of Directors issued to this stockholder a warrant to purchase 20,000 shares of the Company’s common stock at an exercise price of $4.90 per share. This warrant has a term of one year and was fully vested upon issuance. The warrant had a grant date fair value of $22,039, which was fully charged to general and administrative expense during the three months ended June 30, 2017. The fair value of the warrant was determined utilizing the Black-Scholes option pricing model, based upon a common stock price of $4.87 per share, dividend yield of 0%, expected volatility of 57%, risk free interest rate of 1.11%, and an expected life in years of 1.00.

On April 24, 2017, in connection with a distribution agreement with Big Geyser (the “Big Geyser Distribution Agreement”) (see Note 8), the Company issued a warrant to purchase 85,000 shares of the Company’s common stock at an exercise price of $4.50 per share. The warrant vests depending on certain sales levels achieved by that distributor. The warrant has an expiration date of April 23, 2022. The warrant had a grant date fair value of $226,134. For the three months ended September 30, 2017, the Company recognized expense of $1,503 and a reduction of the second quarter incentive by $2,891 due to mark-to-market adjustments, resulting in a net reduction of expense of $1,388, related to this warrant. For the nine months ended September 30, 2017, the Company recognized expense of $2,896, related to this warrant.

On April 24, 2017, in connection with the same distribution agreement, the Company issued a second warrant to purchase 95,000 shares of the Company’s common stock at an exercise price that will be equal to the average of the closing prices of the common stock for the thirty consecutive trading days ending on April 23, 2018 (or the 30 days preceding the beginning of the measurement period for this warrant). The warrant vests depending on certain sales levels achieved by that distributor during the period April 24, 2018 through April 23, 2019. The warrant has an expiration date of April 23, 2022. The initial valuation of this warrant will not occur until the measurement period begins on April 24, 2018.

On April 24, 2017, in connection with the same distribution agreement, the Company issued a warrant to purchase 145,000 shares of the Company’s common stock at an exercise price of $4.50 per share. The warrant vests as follows for certain milestones being achieved: 95,000 shares upon the receipt of the first purchase order of the Company’s iced tea products, 25,000 shares upon the receipt of the first purchase order of the Company’s lemonade products, and 25,000 shares upon the receipt of the first purchase order for half-gallon containers of the Company’s products. The warrant has an expiration date of April 23, 2022. The warrant had a grant date fair value of $385,758. For the three and nine months ended September 30, 2017, the Company recorded expense of $0 and $252,738, respectively, related to this warrant.

On July 6, 2017, in connection with the public offering the Company issued warrants to purchase an aggregate of 40,000 shares of the Company’s common stock to lead investors (See Note 1).

On August 16, 2017, in connection with the Big Geyser Distribution Agreement, the Company issued a warrant to purchase 110,000 shares of the Company’s common stock at an exercise price that will be equal to the average of the closing prices of common stock for the thirty consecutive trading days ending on April 23, 2019 (or the 30 days preceding the beginning of the measurement period for this warrant). The warrant vests depending on certain sales levels achieved by that distributor during the period April 24, 2019 through April 23, 2020. The warrant has an expiration date of April 23, 2022. The initial valuation of this warrant will not occur until the measurement period begins on April 24, 2019.

The following table summarizes the common stock warrant activity of the Company:

	Number of shares		Weighted average exercise price		Weighted average contractual life (years)
Outstanding - January 1, 2017		470,570	$	5.95		-
Issued		660,000	$	4.49		-
Expired		-	$	-		-
Outstanding September 30, 2017		1,130,570	$	5.23		2.5
Exercisable at September 30, 2017		790,570	$	5.36		1.7

Stock-Based Compensation Expense

The following tables summarize total stock-based compensation costs recognized for the three and nine months ended September 30, 2017 and 2016:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Stock options	$	279,603	$	438,113	$	1,044,147	$	740,820
Warrants		-		-		194,565		30,000
Common Stock		-		-		81,800		240,000
Total	$	279,603	$	438,113	$	1,320,512	$	1,010,820

The total amount of stock-based compensation was reflected within the statements of operations and comprehensive loss as:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
General and administrative	$	259,460	$	412,439	$	966,705	$	853,859
Sales and marketing		20,143		25,674		353,807		156,961
Total	$	279,603	$	438,113	$	1,320,512	$	1,010,820

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is involved in various claims and legal actions arising from time to time in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters in the ordinary course of business will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Legal costs related to these matters are expensed as they are incurred.

On August 1, 2014, an action was filed by LIBB in the Supreme Court in the State of New York entitled Long Island Brand Beverages LLC v. Revolution Marketing, LLC (“Revolution”) and Ascent Talent, Model Promotion Ltd. LIBB is seeking damages of $10,000,000 for several claims including breach of contract and fraud occurring during 2014. Revolution has filed a counterclaim for breach of contract and related causes of action, claiming damages in the sum of $310,880, and seeking punitive damages of $5,000,000. Ascent has filed a pre-answer motion to dismiss LIBB’s complaint. LIBB filed papers in opposition and the motion was submitted by March 9, 2015. In addition, Revolution has filed a motion to amend its answer to include cross-claims against Ascent which were not asserted in its original answer of record. On February 5, 2016, the Court rendered a decision. The motion to dismiss was denied with the exception of two claims which the Court dismissed. In the same decision, the Court granted a separate motion filed by Revolution to amend its answer to include cross-claims against Ascent. On June 23, 2017, both defendants filed motions to dismiss based upon delays in producing documents, which were fully submitted. On August 7, 2017, oral arguments were held. Thereafter, the court denied the motions to dismiss and each of the parties has completed their discovery. On October 6, 2017, the Company filed a Note of Issue and Certificate of Readiness. The case has been certified by the court as ready for trial. The Company is currently awaiting defendants’ summary judgement motions.

Brokerage Arrangements

The Company maintains arrangements with sales brokers who help with bringing new distributors and retail outlets to the Company. These sales brokers receive a commission for these services. Commissions to these brokers ranged from 1-5% of sales. In addition, the Company sells its products through alternative vending channels. Commissions resulting from sales through these channels were $19,151 and $(1,174) for the three months ended September 30, 2017 and 2016, respectively, and $50,648 and $54,436 for the nine months ended September 30, 2017 and 2016, respectively.

Employment Agreements

On March 10, 2017, the Company entered into an amended and restated employment agreement with Mr. Thomas. The amended employment agreement has a term that runs until December 31, 2019. Mr. Thomas will receive a base salary of $250,000, was paid $83,000 upon the signing of the agreement, and is eligible for paid incentive bonuses from the Company. Pursuant to the agreement, Mr. Thomas was also granted an option to purchase 75,000 shares of the Company’s common stock (See Note 7).

On April 18, 2017, the Company entered into an employment agreement with Virginia Morris to serve as the Company’s Chief Sales& Marketing Officer. Ms. Morris’s primary responsibilities will be driving the growth agenda for the Company’s entire portfolio of brands and overseeing key sales and marketing functions including brand management, channel strategy development and execution, and product innovation. Pursuant to the employment agreement, Ms. Morris was awarded an option to purchase 27,500 shares of the Company’s common stock under the 2015 Stock Option Plan, and an additional option to purchase 42,500 shares of the Company’s common stock under the 2017 Stock Option Plan. The options have an exercise price of $4.50 and vest annually in three equal installments beginning on the date of grant. Ms. Morris was also awarded 25,000 shares of the Company’s common stock prior to the execution of her employment agreement for services provided to the Company (See Note 7).

On September 1, 2017, the Company terminated the employment agreement with Ms. Morris. Pursuant to the employment agreement, Ms. Morris was entitled to receive severance of two months of her base salary. In lieu of cash, Ms. Morris and the Company agreed that Ms. Morris would be issued 22,000 shares of the Company’s common stock for accrued severance. As of September 30, 2017, the Company included $52,149 in accrued expenses within the condensed consolidated balance sheets related to Ms. Morris’s severance. On September 1, 2017, in connection with her termination, Ms. Morris’s option to purchase 70,000 shares of the Company’s common stock became fully vested. This option will expire if not exercised by September 1, 2018.

Separation Agreement

On July 11, 2017, the Company entered into a separation agreement with Richard Allen, the Company’s Chief Financial Officer. Pursuant to the separation agreement, Mr. Allen would continue as the Company’s Chief Financial Officer until August 15, 2017. Pursuant to the separation agreement, the Company was obligated to pay Mr. Allen $61,668 in two installments on or about July 18, 2017 and on or about August 22, 2017. The Company paid the first cash portion on August 4, 2017, and on September 17, 2017, Mr. Allen agreed to accept 15,000 shares in lieu of the second cash payment. In addition, 50% of his unvested stock options vested immediately and together with previously vested portions of such options will be exercisable until May 15, 2018. The separation agreement contains provisions for protection of the Company’s confidential information and certain non-competition restrictions.

Consulting Agreements

Julian Davidson

On June 6, 2016, the Company entered into an amendment to the consulting agreement with Julian Davidson which provides for him to serve as the Company’s Executive Chairman. Either Mr. Davidson or the Company may terminate the consulting agreement with 30 days’ prior written notice. Pursuant to the consulting agreement, as in effect prior to its amendment and restatement as described below, the Company (a) paid to Mr. Davidson $10,000 per month, and (b) granted to Mr. Davidson 1,667 shares of common stock per month (an aggregate of 4,302 shares). The consulting agreement, as amended, contains provisions for protection of the Company’s intellectual property and confidentiality and non-competition restrictions for Mr. Davidson (generally imposing restrictions during the term of the consulting agreement, on (i) ownership or management of, or employment or consultation with, competing companies, (ii) soliciting employees to terminate their employment (iii) soliciting business from the Company’s customers, and (iv) soliciting prospective acquisition and investment candidates for purposes of acquiring or investing in such entity).

On August 18, 2016, the Company entered into a second amendment to the consulting agreement with Julian Davidson. The amendment modified the condition that was required to be satisfied for certain changes in the compensation payable to Mr. Davidson under the consulting agreement to take effect. After the amendment, upon the Company completing an equity raise with gross proceeds of at least $6,900,000, the monthly cash fee to Mr. Davidson increases to $20,000 per month, the monthly stock grant to Mr. Davidson is eliminated and Mr. Davidson receives a one-time cash bonus of $95,000 and a one-time grant of 50,000 shares of the Company’s common stock. The amendment also modified the compensation that will be payable to Mr. Davidson under his agreement. Mr. Davidson is entitled to receive an option to purchase 4% of the fully diluted common stock outstanding immediately after the Offering, or 286,744 shares of the Company’s common stock. On August 18, 2016, the Company granted to Mr. Davidson an option to purchase 286,744 shares of common stock.

On October 5, 2016, the Company entered into an amended and restated consulting agreement with Julian Davidson (“Davidson Amendment”), effective as of September 29, 2016, which provides for him to continue to serve as the Company’s Executive Chairman.

On October 2, 2017, the Company agreed to pay Mr. Davidson, in lieu of a cash bonus of $165,000 due to him under his existing compensation arrangements (i) a one-time stock bonus of 48,000 shares of the Company’s common stock and (ii) a deferred cash payment of $65,000 to be made at a time determined by the Compensation Committee of the Company’s Board of Directors, but no later than December 31, 2017, with no interest to accrue on such payment obligation. The shares of the Company’s common stock were granted under the Company’s 2017 Long-Term Incentive Equity Plan.

Investor Relations

On March 1, 2017, the Company entered into a consulting agreement with an investor relations and communications firm. The agreement commenced on March 1, 2017 for an initial term of two months. The agreement was renewed for the month of May 2017 and may be renewed on a monthly basis by the Company. The agreement shall terminate in 180 days from the date of the agreement. In consideration for services, the Company shall pay (a) $15,000 in cash on the signing of the contract and $15,000 on the 5^th day of each month thereafter, (b) up to $135,000 in ancillary budget (at the Company’s discretion) due each month for the balance of the contract, (c) issue 10,000 shares of common stock upon the execution of the agreement and issue a 10,000 shares of common stock on the 5^th day of each month of the agreement until termination or renewal of this agreement, and (d) the reimbursements of pre-approved travel or other expenses monthly.

On October 1, 2017, the Company entered into a master service agreement with the investor relations and communications firm. The agreement commenced on October 1, 2017 for an initial term of two months. The agreement may be renewed monthly by the Company up to a maximum of 180 days from the date of the agreement. In consideration of services, the only adjustment from the March 1, 2017 agreement is that the number of shares to be issued on the 5^th day of each month was increased to 15,000.

Distribution Agreements

On March 14, 2017, the Company entered into the Big Geyser Distribution Agreement. Big Geyser became the exclusive distributor of the Company’s iced tea products in certain regions. The agreement became effective on April 24, 2017 and covers retail locations in the New York City metro region, including the five boroughs of New York City, Long Island, Westchester and Putnam County (See Note 7).

Leases

On June 6, 2014, the Company entered into a lease agreement for its principal office and warehouse space in Hicksville, NY. The lease commenced on July 1, 2014 and was expired on August 31, 2017.

On July 14, 2017, the Company entered into a lease agreement for its principal office and warehouse space in Farmingdale, NY. The lease commenced on August 15, 2017 and extends through September 30, 2022. The Company has the option to extend the lease for an additional three years.

Rent expense for the three months ended September 30, 2017 and 2016 was $22,219 and $15,428, respectively, and for the nine months ended September 30, 2017 and 2016 was $44,817 and $36,510, respectively.

Total future minimum payments required under the Farmingdale lease are as follows:

Year Ended December 31,
2017 (three months)	$	24,749
2018		99,984
2019		102,983
2020		106,073
2021		109,255
Thereafter		83,564
Total	$	526,608

In addition, the Company utilizes public warehouse space for its inventory. Public storage expense for the three months ended September 30, 2017 and 2016 was $26,761 and $22,662, respectively, and for the nine months ended September 30, 2017 and 2016 was $39,741 and $76,493, respectively.

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Major Customers and Vendors

9 Months Ended

Sep. 30, 2017

Risks and Uncertainties [Abstract]

Major Customers and Vendors

NOTE 9 – MAJOR CUSTOMERS AND VENDORS

For the three months ended September 30, 2017 and 2016, two customers accounted for 28% and 14%, or 42% in the aggregate, and three customers accounted for 22%, 11% and 11%, or 44% in the aggregate, of the Company’s net sales, respectively. For the nine months ended September 30, 2017 and 2016, two customers accounted for 21% and 12%, or 33% in the aggregate, and three customers accounted for 13%, 12% and 10%, or 35% in the aggregate, of the Company’s net sales, respectively.

For the three months ended September 30, 2017 and 2016, four vendors accounted for 22%, 21%, 12% and 12%, or 67% in the aggregate, and five vendors accounted for 19%, 17%, 17%, 15% and 10%, or 78% in the aggregate, of purchases, respectively. For the nine months ended September 30, 2017 and 2016, two vendors accounted for 35% and 20%, or 55% in the aggregate, and four vendors accounted for 20%, 17%, 16% and 16%, or 69% in the aggregate, of purchases, respectively.

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Related Parties

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related Parties

NOTE 10 - RELATED PARTIES

The Company recorded revenue related to sales to an entity owned by an immediate family member of Philip Thomas, CEO, stockholder, and member of the Board of Directors. Mr. Thomas is also an employee of this entity. For the three months ended September 30, 2017 and 2016, sales to this related party were $0 and $426, respectively. For the nine months ended September 30, 2017 and 2016, sales to this related party were $879 and $3,063, respectively. As of September 30, 2017 and December 31, 2016, there was $879 and $0, respectively, due from this related party which was included in accounts receivable in the condensed consolidated balance sheets. The Company also purchases product at cost, from this entity to supplement certain vending sales. For the three months ended September 30, 2017 and 2016, the Company purchased $6,616 and $0, respectively, and for the nine months ended September 30, 2017 and 2016, the Company purchased $14,631 and $17,514, respectively, of product from this entity. As of September 30, 2017 and December 31, 2016, the outstanding balance due to this entity included in accounts payable was $0 and $10,043, respectively.

As of September 30, 2017 and December 31, 2016, the Company is indebted to Mr. Thomas in the amounts of $65,000 and $0, respectively, for a short-term loan to the Company. This loan is included in other current liabilities within the condensed consolidated balance sheets.

On March 27, 2017, the Company issued an option to purchase 70,000 shares of the Company’s common stock to a party who was, until October 5, 2017, a member of the Board of Directors, in connection with services provided to the Company beyond the Board of Director duties of this Director. As of September 30, 2017 and December 31, 2016 accounts payable and accrued expenses to a company wholly owned by this former director were $10,237 and $4,032, respectively.

For the three and nine months ended September 30, 2017, the Company incurred expenses of $18,000 and $30,000, respectively, related to an entity whose majority shareholder is Eric Watson, who beneficially owned approximately 14.4% of the Company as of September 30, 2017. As of September 30, 2017 and December 31, 2016, accounts payable due to this entity were $19,410 and $0.

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

NOTE 11 – SUBSEQUENT EVENTS

NASDAQ Notice

On October 9, 2017, the Company received a notice from the Listing Qualifications Department of the Nasdaq Stock Market (“NASDAQ”). The notice stated that the Company’s enterprise market value fell below the minimum NASDAQ threshold for thirty consecutive business days. The Company has 180 calendar days from the notice date to regain compliance with this standard by exceeding the minimum threshold for ten consecutive business days. The notification has no effect on the listing of the Company’s common stock at this time.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2016 and related notes thereto included in the Company’s Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 31, 2017.

Reclassification

Reclassification

Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on the previously reported net loss.

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and also affect the amounts of revenues and expenses reported for each period. Actual results could differ from those which result from using such estimates. Management utilizes various other estimates, including but not limited to, assessing the collectability of accounts receivable, accrual of rebates to customers, the valuation of securities, the valuation of inventory, determining the estimated lives of long-lived assets, determining the potential impairment of intangibles, the fair value of warrants issued, the fair value of stock options, the recognition of revenue, and other legal claims and contingencies. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary.

Revenue Recognition

Revenue Recognition

Revenue is stated net of sales discounts and rebates paid to customers (See Customer Marketing Programs including Sign On and Sales Incentives, below). Net sales are recognized when all of the following conditions are met: (1) the price is fixed and determinable; (2) evidence of a binding arrangement exists (generally, purchase orders); (3) products have been delivered and there is no future performance required; and (4) amounts are collectible under normal payment terms.

These conditions typically occur when the products are delivered to or picked up by the Company’s customers. For sales where certain revenue recognition criteria have not been met at the date of delivery, the Company defers recognition of such revenue and accounts receivable until such recognition criteria are met.

Customer Marketing Programs, including Sign On and Sales Incentives

Customer Marketing Programs, including Sign On and Sales Incentives

The Company participates in various programs and arrangements with customers designed to incent new distribution, incent the introduction of a new product line, or to increase the sale of its products. Among these programs are arrangements under which allowances can be earned by customers for introducing a product (sign on incentives, for example), for various discounts to the end retailers or for participating in specific marketing programs. The Company believes that its participation in these programs is essential to ensuring volume and revenue growth in a competitive marketplace. Depending upon the program, those incentives are paid in either cash or the issuance of equity instruments. During the three months ended September 30, 2017 and 2016, these allowances resulted in reductions in net sales of $195,153 and $0, respectively. During the nine months ended September 30, 2017 and 2016, these allowances resulted in reductions in net sales of $596,335 and $45,165, respectively. Included in these amounts for the three and nine months ended September 30, 2017 are (income) costs of ($1,388) and $255,634, respectively, representing the non-cash costs of a sign-on incentive, presented net of mark-to-market adjustments for unvested awards related to warrants issued in connection with the signing of a distribution agreement and the first order with Big Geyser Inc. (“Big Geyser”) (See Notes 7 and 8).

Shipping and Handling Costs

Shipping and Handling Costs

Shipping and handling costs incurred to move finished goods from the Company’s sales distribution centers to customer locations are included in selling and marketing expenses within the condensed consolidated statements of operations and totaled $184,423 and $117,998, for the three months ended September 30, 2017 and 2016, respectively and $381,151 and $319,668 for the nine months ended September 30, 2017 and 2016, respectively.

Advertising

Advertising

The Company expenses advertising costs as incurred. Advertising costs are included in selling and marketing expenses within the condensed consolidated statements of operations and totaled $196,758 and $84,433 for the three months ended September 30, 2017 and 2016, respectively, and $513,522 and $114,980, for the nine months ended September 30, 2017 and 2016, respectively.

Research and Development

Research and Development

Costs related to new product initiatives incurred were included in selling and marketing expenses within the condensed consolidated statements of operations and totaled $30,375 and $24,464 for the three months ended September 30, 2017 and 2016, respectively, and $335,101 and $143,651 for the nine months ended September 30, 2017 and 2016, respectively. Other research and development costs were included in general and administrative expenses within the condensed consolidated statements of operations and totaled $0 and $0 for the three months ended September 30, 2017 and 2016, respectively and $829 and $46,667 for the nine months ended September 30, 2017 and 2016, respectively. The other research and development expenses incurred during the three and nine months ended September 30, 2016 were incurred pursuant to an alcohol beverage development agreement which will require the Company to pay $40,000 in cash and $40,000 in common stock upon the completion of the arrangement. As of September 30, 2017, $50,000 was included in accrued expenses in the condensed consolidated balance sheet related to the 2016 arrangement.

Short-term Investments

Short-term Investments

The Company accounts for securities in accordance with accounting standards for investments in debt and equity securities. Accounting standards require investments in debt and equity securities to be classified as either “held to maturity”, “trading”, or “available-for-sale.”

The Company holds investments in marketable securities, consisting of U.S. government securities and mutual funds. The Company’s available-for-sale securities are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive (loss) income in stockholders’ equity, when applicable. During the three months ended September 30, 2017 and 2016, the unrealized gain was $0 and $0, respectively, and during the nine months ended September 30, 2017 and 2016, the unrealized gain was $30,246 and $0, respectively. Unrealized losses are charged against interest and other income/(expense), net, when a decline in fair value is determined to be other-than-temporary. The Company has not recorded any such impairment charge in the periods presented. The Company determines realized gains or losses on sale of marketable securities on a specific identification method, and records such gains or losses as interest and other income/(expense), net.

The following table sets forth the available-for-sale securities, which were fully liquidated during the nine months ended September 30, 2017:

	As of
	September 30, 2017		December 31, 2016
U.S. government securities	$	-	$	195,374
Fixed income mutual funds		-		2,194,147
	$	-	$	2,389,521

	As of December 31, 2016
	Amortized		Unrealized
	Cost		Losses			Fair Value
U. S. government securities	$	195,570	$	(196	)	$	195,374
Fixed income mutual funds		2,224,197		(30,050	)		2,194,147
Total	$	2,419,767	$	(30,246	)	$	2,389,521

The following table classifies the US government securities by maturity:

	As of
	September 30, 2017		December 31, 2016
Within one year	$	-	$	94,967
Within one to five years		-		100,407
	$	-	$	195,374

Accounts Receivable

Accounts Receivable

The Company sells products to distributors and in certain cases directly to retailers, and extends credit, generally without requiring collateral, based on its evaluation of the customer’s financial condition. While the Company has a concentration of credit risk in the retail sector, it believes this risk is mitigated due to the diverse nature of the customers it serves, including, but not limited to, its type, geographic location, size, and beverage channel. Potential losses on the Company’s receivables are dependent on each individual customer’s financial condition and sales adjustments granted after the balance sheet date. The Company carries its trade accounts receivable at net realizable value. Accounts receivable have terms of ranging from 30 to 75 days and do not bear interest. The Company monitors its exposure to losses on receivables and maintains allowances for potential losses or adjustments. The Company determines these allowances by (1) evaluating the aging of its receivables; (2) analyzing its history of sales adjustments; and (3) reviewing its high-risk customers. Past due receivable balances are written off when the Company’s efforts have been unsuccessful in collecting the amount due. Accounts receivable are stated at the amounts management expects to collect.

Accounts receivable, net, is as follows:

	As of
	September 30, 2017			December 31, 2016
Accounts receivable, gross	$	2,232,968		$	1,859,474
Allowance for doubtful accounts		(676,167	)		(232,416	)
Accounts receivable, net	$	1,556,801		$	1,627,058

Concentrations of Credit Risk

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash on deposit with financial institutions and accounts receivable. At times, the Company’s cash in banks is in excess of the FDIC insurance limit. The Company has not experienced any loss as a result of these cash deposits. These cash balances are maintained with one bank. The Company is exposed to credit risk with regard to two customers who accounted for 19% and 17%, or 36% in the aggregate, and 46% of the Company’s trade receivables as of September 30, 2017 and December 31, 2016, respectively. The account representing the 19% is further collateralized by notes receivable from Seba and personal guarantees (See Note 1). Otherwise, the Company does not generally require collateral or other security to support customer receivables.

The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, as required.

Inventories

Inventories

The Company’s inventory includes raw materials such as bottles, sweeteners, labels, flavors and packaging. Finished goods inventory consists of bottled iced tea, lemonade and ALO Juice. As of September 30, 2017 and December 31, 2016, included in inventory was finished goods inventory with a cost of approximately $95,000 and $320,000, respectively, which was delivered to a distributor, and is held in inventory until certain revenue recognition criteria are met.

The Company values its inventories at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. As of September 30, 2017 and December 31, 2016, the Company recorded reserves of $115,125 and $45,078, respectively, to reduce the cost of certain products to estimated net realizable value. The following table summarizes inventories as of the dates presented:

	As of
	September 30, 2017		December 31, 2016
Finished goods	$	853,157	$	905,642
Raw materials and supplies		844,094		282,299
Total inventories	$	1,697,251	$	1,187,941

Property and Equipment

Property and Equipment

Property and equipment is recorded at cost. Major property additions, replacements, and betterments are capitalized, while maintenance and repairs that do not extend the useful lives of an asset or add new functionality are expensed as incurred. Depreciation is recorded using the straight-line method over the respective estimated useful lives of the Company’s assets.

The estimated useful lives typically are 3 years for cold-drink containers, such as reusable fridges, wood racks, vending machines, barrels, and coolers, and are depreciated using the straight-line method over the estimated useful life of each group of equipment, as determined using the group-life method. Under this method, the Company does not recognize gains or losses on the disposal of individual units of equipment when the disposal occurs in the normal course of business. The Company capitalizes the costs of refurbishing its cold-drink containers and depreciates those costs over the estimated period until the next scheduled refurbishment or until the equipment is retired. The estimated useful lives are typically 3 to 5 years for office furniture and equipment and are depreciated on a straight-line basis. The estimated useful lives for trucks and automobiles are typically 3 to 5 years and are depreciated on a straight line basis. For the three months ended September 30, 2017 and 2016, depreciation expense was $32,322 and $39,420, respectively. For the nine months ended September 30, 2017 and 2016, depreciation expense was $109,028 and $117,118, respectively.

Intangible Assets

Intangible Assets

Intangible assets with finite useful lives are amortized over their expected useful life. Intangible assets with useful lives are tested for impairment when circumstances indicate that there could be an impairment. Intangible assets with finite useful lives include website development costs with a net book value of $0 and $2,500 as of September 30, 2017 and December 31, 2016, respectively. The estimated useful life of the capitalized costs of the Company’s website was 3 years and was depreciated on a straight line basis. As of September 30, 2017, the cost of the website development was $15,000 and the accumulated amortization was $15,000. As of December 31, 2016, the cost of the website development was $15,000 and the accumulated amortization was $12,500. For the three months ended September 30, 2017 and 2016, amortization expense was $0 and $1,251, respectively, and $2,500 and $3,753 for the nine months ended September 30, 2017 and 2016, respectively.

Intangible assets with indefinite useful lives are tested for impairment when circumstances indicate that there could be an impairment. As of September 30, 2017, the cost of the ALO Juice IP, which has an indefinite useful life, was $150,000 (See Note 1).

Income Taxes

Income Taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement, and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction.

In its interim financial statements, the Company follows the guidance in ASC 270, “Interim Reporting” and ASC 740 “Income Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim periods. That rate differs from U.S. statutory rates primarily as a result of valuation allowance related to the Company’s net operating loss carryforward as a result of the historical losses of the Company.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. The Company accounts for uncertain tax positions in accordance with ASC 740 —”Income Taxes”. No uncertain tax provisions have been identified. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying condensed consolidated statements of operations. Our primary tax jurisdictions are our federal, various state, and local taxes.

Generally, Federal, State and Local authorities may examine the Company’s tax returns for three years from the date of filing.

In accordance with ASC 740, the Company evaluates whether a valuation allowance should be established against the net deferred tax assets based upon the consideration of all available evidence and using a “more likely than not” standard. Significant weight is given to evidence that can be objectively verified. The determination to record a valuation allowance is based on the recent history of cumulative losses and current operating performance. In conducting the analysis, the Company utilizes an approach, which considers the current year loss, including an assessment of the degree to which any losses are driven by items that are unusual in nature and incurred to improve future profitability. In addition, the Company reviews changes in near-term market conditions and any other factors arising during the period, which may impact its future operating results.

Internal Revenue Code Section 382 imposes limitations on the use of net operating loss carryovers (“NOLs”) when the stock ownership of one or more 5% shareholders (shareholders owning 5% or more of the Company’s outstanding capital stock) has increased on a cumulative basis by more than 50 percentage points. The Company’s preliminary analysis indicated that such shares have increased by more than 50% since the last Section 382 limitation on May 27, 2015. The Company is currently evaluating the impact of the new Section 382 limitation.

Loss Per Share

Loss per share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon the exercise of stock options, warrants and the conversion. The computation of diluted earnings per share excludes those with an exercise price in excess of the average market price of the Company’s common shares during the periods presented. The computation of diluted earnings per share excludes outstanding options, warrants and other dilutive instruments in periods where the inclusion of such instruments would be antidilutive, as provided below:

	As of September 30,
	2017		2016
Options to purchase common stock		1,074,155		465,411
Warrants to purchase common stock		1,130,570		470,570
Total potentially dilutive securities		2,204,725		935,981

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amounts of cash, short term investments, accounts receivable, automobile and equipment loans and the UBS Credit Line (See Note 4 below) approximate fair value due to the short-term nature of these instruments. In addition, for notes payable, the Company believes that interest rates approximate prevailing rates.

ASC 820 “Fair Value Measurements and Disclosures” provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).

Fair value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.

Level 3 Significant unobservable inputs that cannot be corroborated by market data.

Fair values for short-term money market investments are determined from quoted prices in active markets for these money market funds, and are considered to be Level 1.

The carrying value of financial instruments in the Company’s condensed consolidated financial statements are as follows:

	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2)		Significant Unobservable Inputs (Level 3)
Short-term investments at September 30, 2017	$	—	$	—	$	—
Short-term investments at December 31, 2016	$	2,389,521	$	—	$	—

Stock-based Compensation

Stock-based Compensation

The Company accounts for stock options granted to consultants pursuant to the accounting guidance included in ASC 505-50 “Equity-Based Payments to Non-Employees” (“ASC 505-50”). Stock-based compensation cost is measured at the grant date and at the end of each reporting period for unvested awards, based on the fair value of the award, and is recognized as expense over the consultant’s requisite service period (generally the vesting period of the equity grant). The fair value of the Company’s stock options granted to consultants are estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life.

In accordance with ASC 505-50, the Company recorded adjustments at the end of each reporting period to reflect the mark-to-market adjustment of the fair value of unvested awards granted to consultants. In connection with the mark-to-market adjustments at September 30, 2017, the Company utilized the closing price of the Company’s common stock, as quoted on the NASDAQ Stock Market LLC (“Nasdaq”), as an input to the Black Scholes option-pricing model for the fair value of its common stock. 

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In January 2016, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends the guidance in U.S. generally accepted accounting principles on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and is to be adopted by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

In February 2016, the FASB issued new lease accounting guidance (ASU No. 2016-02, Leases). Under the new guidance, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new guidance is not applicable for leases with a term of 12 months or less. Lessor accounting is largely unchanged. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

On March 30, 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. This update requires that all excess tax benefits and tax deficiencies arising from share-based payment awards should be recognized as income tax expense or benefit on the income statement. The amendment also states that excess tax benefits should be classified along with other income tax cash flows as an operating activity. In addition, an entity can make an entity-wide accounting policy election to either estimate the number of awards expected to vest or account for forfeitures as they occur. The provisions of this update are effective for annual and interim periods beginning after December 15, 2016. The Company adopted this standard effective December 31, 2016. The adoption did not have a material effect on the Company’s condensed consolidated financial statements.

In April 2016, the FASB issued ASU No. 2016-10 “Revenue from Contracts with Customers (Topic 606)”, “Identifying Performance Obligations and Licensing” (“ASU 2016-10”). ASU 2016-10 clarifies the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The provisions of this update are effective for annual and interim periods beginning after December 15, 2017, with early application permitted. The Company is continuing to evaluate the expected impact of this new revenue guidance. The Company is currently preparing its assessment of the full financial impact of the new revenue recognition guidance, including the method of adoption, and intends to adopt the guidance when it becomes effective for the Company on January 1, 2018.

In May 2016, the FASB issued ASU No. 2016-12 “Revenue from Contracts with Customers (Topic 606)”, “Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”). The core principal of ASU 2016-12 is the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The provisions of this update are effective for annual and interim periods beginning after December 15, 2017, with early application permitted. The Company is continuing to evaluate the expected impact of this new revenue guidance. The Company is currently preparing its assessment of the full financial impact of the new revenue recognition guidance, including the method of adoption, and intends to adopt the guidance when it becomes effective for the Company on January 1, 2018.

In August 2016, the FASB issued ASU No. 2016-15 “Statement of Cash Flows (Topic 230)”, “Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). The amendments for this update provide guidance on the eight specific cash flows: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The provisions of this update are effective for annual and interim periods beginning after December 15, 2016, with early application permitted. The Company adopted this standard effective December 31, 2016. The adoption did not have a material effect on the Company’s condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business” (“ASU 2017-01”), which provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 requires entities to use a screen test to determine when an integrated set of assets and activities is not a business or if the integrated set of assets and activities needs to be further evaluated against the framework. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09 “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all of the following are met: The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified, the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and the classification of the modified award an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The provisions of this update are effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

Management's Evaluation of Subsequent Events

Management’s Evaluation of Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the review, other than described in Note 1 –Business Organization, Liquidity, and Going Concern, Note 8 – Commitments and Contingencies and Note 11 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Schedule of Available for Sale Securities

The following table sets forth the available-for-sale securities, which were fully liquidated during the nine months ended September 30, 2017:

	As of
	September 30, 2017		December 31, 2016
U.S. government securities	$	-	$	195,374
Fixed income mutual funds		-		2,194,147
	$	-	$	2,389,521

Schedule of Unrealized Losses on Investments

	As of December 31, 2016
	Amortized		Unrealized
	Cost		Losses			Fair Value
U. S. government securities	$	195,570	$	(196	)	$	195,374
Fixed income mutual funds		2,224,197		(30,050	)		2,194,147
Total	$	2,419,767	$	(30,246	)	$	2,389,521

Schedule of US Government Securities by Maturity

The following table classifies the US government securities by maturity:

	As of
	September 30, 2017		December 31, 2016
Within one year	$	-	$	94,967
Within one to five years		-		100,407
	$	-	$	195,374

Schedule of Accounts Receivable

Accounts receivable, net, is as follows:

	As of
	September 30, 2017			December 31, 2016
Accounts receivable, gross	$	2,232,968		$	1,859,474
Allowance for doubtful accounts		(676,167	)		(232,416	)
Accounts receivable, net	$	1,556,801		$	1,627,058

Schedule of Inventories

The following table summarizes inventories as of the dates presented:

	As of
	September 30, 2017		December 31, 2016
Finished goods	$	853,157	$	905,642
Raw materials and supplies		844,094		282,299
Total inventories	$	1,697,251	$	1,187,941

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The computation of diluted earnings per share excludes outstanding options, warrants and other dilutive instruments in periods where the inclusion of such instruments would be antidilutive, as provided below:

	As of September 30,
	2017		2016
Options to purchase common stock		1,074,155		465,411
Warrants to purchase common stock		1,130,570		470,570
Total potentially dilutive securities		2,204,725		935,981

Schedule of Fair Value of Financial Assets and Liabilities

The carrying value of financial instruments in the Company’s condensed consolidated financial statements are as follows:

	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2)		Significant Unobservable Inputs (Level 3)
Short-term investments at September 30, 2017	$	—	$	—	$	—
Short-term investments at December 31, 2016	$	2,389,521	$	—	$	—

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Stock Based Compensation (Tables)

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Fair Value of Stock Options Assumptions

The Company determined the fair value of stock options granted based upon the assumptions as provided below.

	For the Nine Months Ended September 30, 2017
Stock price		$ 3.73 - $5.10
Exercise price		$ 3.76 - $5.00
Dividend yield		0%
Expected volatility		57% - 75%
Risk-Free interest rate, per annum		1.05% – 1.57%
Expected life (in years)		0.85 - 3.06

Schedule of Stock Option Activity

The following table summarizes the stock option activity of the Company:

	Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		425,411		$	4.93	$	3.85
Granted		808,200			4.55		1.63
Exercised		-			-		-
Expired, forfeited or cancelled		(159,456	)		4.79		1.67
Outstanding at September 30, 2017		1,074,155		$	4.66	$	2.50		3.3	$	-
Exercisable at September 30, 2017		699,963		$	4.60	$	2.79		2.7	$	-

Schedule of Warrant Activity

The following table summarizes the common stock warrant activity of the Company:

	Number of shares		Weighted average exercise price		Weighted average contractual life (years)
Outstanding - January 1, 2017		470,570	$	5.95		-
Issued		660,000	$	4.49		-
Expired		-	$	-		-
Outstanding September 30, 2017		1,130,570	$	5.23		2.5
Exercisable at September 30, 2017		790,570	$	5.36		1.7

Schedule of Stock Based Compensation Expense

The following tables summarize total stock-based compensation costs recognized for the three and nine months ended September 30, 2017 and 2016:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Stock options	$	279,603	$	438,113	$	1,044,147	$	740,820
Warrants		-		-		194,565		30,000
Common Stock		-		-		81,800		240,000
Total	$	279,603	$	438,113	$	1,320,512	$	1,010,820

The total amount of stock-based compensation was reflected within the statements of operations and comprehensive loss as:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
General and administrative	$	259,460	$	412,439	$	966,705	$	853,859
Sales and marketing		20,143		25,674		353,807		156,961
Total	$	279,603	$	438,113	$	1,320,512	$	1,010,820

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Payments

Total future minimum payments required under the Farmingdale lease are as follows:

Year Ended December 31,
2017 (three months)	$	24,749
2018		99,984
2019		102,983
2020		106,073
2021		109,255
Thereafter		83,564
Total	$	526,608

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Business Organization, Liquidity and Going Concern (Details Narrative) - USD ($)								3 Months Ended		9 Months Ended
	Sep. 18, 2017	Sep. 02, 2017	Jul. 06, 2017	Jun. 14, 2017	Jun. 14, 2017	Jan. 27, 2017	May 27, 2015	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Mar. 14, 2017	Dec. 31, 2016
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Cash								$ 429,673		$ 429,673
Working capital								352,595		352,595
Net loss								3,912,778	$ 4,891,028	11,592,495	$ 8,390,264
Stockholders' equity								622,151		622,151			$ 4,568,543
Proceeds from public offering, net of costs										1,429,740
Proceeds from subscription payable										563,750
Subscription payable								$ 563,750		$ 563,750
Public Offering [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Common stock shares sold			448,160	256,848		376,340
Common stock shares offering price per share			$ 5.00	$ 5.06	$ 5.06	$ 4.02
Gross proceeds from sale of common stock				$ 1,299,250		$ 1,513,000
Proceeds from public offering, net of costs				$ 1,259,415		$ 1,429,740
Public Offering [Member] | October 4, 2017 [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Common stock shares sold										607,500
Common stock shares offering price per share								$ 2.05		$ 2.05
Gross proceeds from sale of common stock										$ 1,245,375
Proceeds from public offering, net of costs										1,235,375
Public Offering [Member] | Officer And Director [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Common stock shares sold				24,998		76,340
Sale of stock price, per share				$ 5.60	$ 5.60	$ 4.10
Public Offering One [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Common stock shares sold					231,850	300,000
Sale of stock price, per share				$ 5.00	$ 5.00	$ 4.00
Broker Arrangement [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Percentage of commission paid on net collected revenues		2.50%
Credit and Security Agreement [Member] | Revolving Credit Facility [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Line of credit facility, maximum borrowing capacity								$ 3,500,000		$ 3,500,000
Mr. Ponce [Member] | Separation Agreement [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Compensation payment		$ 50,000
Wilnah [Member] | Licensing Agreement [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Payment of initial fee	$ 150,000
Percentage of royalty on gross sales	7.00%
Investors [Member] | Public Offering [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Common stock shares sold			200,000
Gross proceeds from sale of common stock			$ 2,240,800
Proceeds from public offering, net of costs			2,134,487
Number of threshold in share purchases that triggers the receipt of additional shares			$ 500,000
Additional number of shares purchased by investors, percent			7.00%
Number of purchaser purchases more than, shares			14,000
Warrant term			3 years
Number of shares of common stock percentage			20.00%
Warrants to purchase of common stock shares			40,000
Warrants exercise price per share			$ 5.50
Investors [Member] | Public Offering [Member] | October 4, 2017 [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Warrant term										1 year
Warrants to purchase of common stock shares								303,750		303,750
Warrants exercise price per share								$ 2.40		$ 2.40
Percentage of warrant to purchase of number of shares								50.00%		50.00%
Seba Distribution LLC [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Note payable												$ 467,444
Seba Distribution LLC [Member] | Mr. Ponce [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Personal guarantee amount	$ 403,216
Seba Distribution LLC [Member] | Julio Ponce Sr [Member] | Maximum [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Personal guarantee amount	$ 300,000
Common Stock [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Number of common stock shares issued for membership interests during the period							2,633,334
Percentage of shares to be received excluding working capital adjustment							63.00%
Net loss
Stockholders' equity								$ 915		$ 915			$ 772

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Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Warrants issued to distributor	$ (1,388)		$ 255,634
Shipping, handling and transportation costs	184,423	$ 117,998	381,151	319,668
Advertising costs	196,758	84,433	513,522	114,980
Research and development expense	30,375	24,464	335,101	143,651
General and administrative expenses	0	0	829	46,667
Research and development arrangement, contract to perform for others, costs incurred, gross		40,000		40,000
Accrued liabilities	50,000		50,000
Unrealized gain on investment			30,246
Inventory finished goods	95,000		95,000		$ 320,000
Inventory valuation reserves	115,125		115,125		$ 45,078
Depreciation expense	$ 32,322	$ 39,420	$ 109,028	$ 117,118
Equity method investment, ownership percentage	5.00%		5.00%
Shareholders [Member]
Equity method investment, ownership percentage		5.00%		5.00%
Trade Receivables [Member] | Seba Distribution LLC [Member]
Concentration risk, percentage			19.00%
Trade Receivables [Member] | Customer One [Member]
Concentration risk, percentage			19.00%
Trade Receivables [Member] | Customer Two [Member]
Concentration risk, percentage			17.00%
Trade Receivables [Member] | Two Customers [Member]
Concentration risk, percentage			36.00%		46.00%
Common Stock [Member]
Expected product development cost		$ 40,000		$ 40,000
Unrealized gain on investment
Customer Relationships [Member]
Reduction in net sales	$ 195,153	0	$ 596,335	45,165
Cold-Drink Containers [Member]
Property, plant and equipment, estimated useful lives			3 years
Furniture And Equipment [Member] | Minimum [Member]
Property, plant and equipment, estimated useful lives			3 years
Furniture And Equipment [Member] | Maximum [Member]
Property, plant and equipment, estimated useful lives			5 years
Trucks and Automobiles [Member] | Minimum [Member]
Property, plant and equipment, estimated useful lives			3 years
Trucks and Automobiles [Member] | Maximum [Member]
Property, plant and equipment, estimated useful lives			5 years
Website [Member]
Finite-lived intangible assets, net	0		$ 0		$ 2,500
Finite-lived intangible assets, gross	15,000		15,000		15,000
Finite-lived intangible assets, accumulated amortization	15,000		15,000		$ 12,500
Amortization expense	0	$ 1,251	$ 2,500	$ 3,753
Intangible assets estimated useful life			3 years
Intellectual Property [Member]
Indefinite-lived intangible assets	$ 150,000		$ 150,000

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Summary of Significant Accounting Policies - Schedule of Available for Sale Securities (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Available for sale securities		$ 2,389,521
US Government Securities [Member]
Available for sale securities		195,374
Fixed Income Mutual Funds [Member]
Available for sale securities		$ 2,194,147

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Summary of Significant Accounting Policies - Schedule of Unrealized Losses on Investments (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Sep. 30, 2017
Amortized Cost	$ 2,419,767
Unrealized Losses	(30,246)
Fair Value	2,389,521
US Government Securities [Member]
Amortized Cost	195,570
Unrealized Losses	(196)
Fair Value	195,374
Fixed Income Mutual Funds [Member]
Amortized Cost	2,224,197
Unrealized Losses	(30,050)
Fair Value	$ 2,194,147

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Summary of Significant Accounting Policies - Schedule of US Government Securities by Maturity (Details) - US Government Securities [Member] - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Within one year		$ 94,967
Within one to five years		100,407
Total		$ 195,374

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Summary of Significant Accounting Policies - Schedule of Accounts Receivable (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Accounting Policies [Abstract]
Accounts receivable, gross	$ 2,232,968	$ 1,859,474
Allowance for doubtful accounts	(676,167)	(232,416)
Accounts receivable, net	$ 1,556,801	$ 1,627,058

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Summary of Significant Accounting Policies - Schedule of Inventories (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Accounting Policies [Abstract]
Finished goods	$ 853,157	$ 905,642
Raw materials and supplies	844,094	282,299
Total inventories	$ 1,697,251	$ 1,187,941

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Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Total potentially dilutive securities	2,204,725	935,981
Options To Purchase Common Stock [Member]
Total potentially dilutive securities	1,074,155	465,411
Warrants To Purchase Common Stock [Member]
Total potentially dilutive securities	1,130,570	470,570

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Summary of Significant Accounting Policies - Schedule of Fair Value of Financial Assets and Liabilities (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Short-term investments		$ 2,389,521
Level 1 [Member]
Short-term investments		2,389,521
Level 2 [Member]
Short-term investments
Level 3 [Member]
Short-term investments

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Equipment Loan (Details Narrative)	Nov. 23, 2015 USD ($) Installments	Sep. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)
Short-term Debt [Line Items]
Debt instrument, face amount	$ 117,917
Number of monthly installments | Installments	35
Debt instrument, periodic payment, total	$ 3,819
Debt instrument, interest rate during period	10.00%
Equipment Loan [Member]
Short-term Debt [Line Items]
Loans payable, total		$ 51,697	$ 76,474

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USB Credit Line (Details Narrative) - USD ($)		6 Months Ended
	Oct. 27, 2016	Jun. 30, 2017	Sep. 30, 2017	Dec. 31, 2016
Line of credit interest rate percentage		3.732%
Line of credit				$ 1,280,275
UBS Bank [Member]
Line of credit interest rate description	ICE Swap Rate plus a margin of between 0.40% and 0.70%
Line of credit facility, borrowing capacity			$ 0	$ 19,725

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Line of Credit - Related Parties (Details Narrative) - USD ($)	Nov. 23, 2015	Sep. 30, 2017
Line of Credit Facility [Line Items]
Beneficially owned percentage		5.00%
Credit and Security Agreement [Member] | Brentwood LIIT Corp [Member]
Line of Credit Facility [Line Items]
Beneficially owned percentage		14.40%
Line of credit facility, maximum borrowing capacity		$ 3,500,000
Line of credit facility, capacity available	$ 500,000
Expires date	Nov. 23, 2018

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Stockholders' Equity (Details Narrative) - USD ($)							9 Months Ended
	Aug. 25, 2017	Apr. 17, 2017	Mar. 27, 2017	Jan. 30, 2017	Jan. 17, 2017	Jan. 03, 2017	Sep. 30, 2017	Dec. 31, 2016
Stock issued during the period, value							$ 1,429,740
Prepaid expenses and other current assets							263,820	$ 91,072
Stock issued during period for services, value							1,023,419
Product Broker [Member]
Stock issued during the period, share						1,790
Stock issued during the period, value						$ 7,500
Directors [Member]
Stock issued during the period, share	4,000				41,965
Stock issued during the period, value	$ 17,650				$ 175,000
Stock issued during period for services, shares			5,000
Consultants [Member]
Stock issued during the period, share				61,208
Stock fair value				$ 213,550
Prepaid expenses and other current assets							$ 36,684
Stock issued during period for services, shares			25,000
Directors and Consultants [Member]
Stock issued during period for services, value			$ 112,853
Consultants One [Member]
Stock issued during period for services, shares			111,457
Stock issued during period for services, value			$ 437,598
Employee [Member]
Stock issued during period for services, shares		25,000
Stock issued during period for services, value		$ 100,751
Consultants Two [Member]
Stock issued during period for services, shares	41,733
Stock issued during period for services, value	$ 151,167

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Stock Based Compensation (Details Narrative) - USD ($)											3 Months Ended			9 Months Ended
	Aug. 24, 2017	May 12, 2017	Apr. 24, 2017	Apr. 17, 2017	Apr. 16, 2017	Mar. 29, 2017	Mar. 27, 2017	Mar. 10, 2017	Jan. 30, 2017	Jan. 05, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Sep. 30, 2017	Aug. 16, 2017	Jul. 06, 2017	Apr. 14, 2017	Jan. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options to purchase shares of common stock														808,200
Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price														$ 4.55
Dividend yield														0.00%
General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of warrant												$ 22,039	$ 172,526
Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee service share-based compensation, nonvested awards, compensation not yet recognized, stock options											$ 647,084			$ 647,084
Employee service share-based compensation, nonvested awards, compensation cost not yet recognized, period for recognition														9 months 14 days
Big Geyser Distribution Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of warrant to purchase shares of common stock			85,000
Warrant exercise per share			$ 4.50
Fair value of warrant			$ 226,134
Warrant expiration date			Apr. 23, 2022
Recognized amortization of warrants											1,503	$ 2,891
Big Geyser Distribution Agreement [Member] | Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Recognized amortization of warrants											1,388			$ 2,896
Big Geyser Distribution Agreement 1 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of warrant to purchase shares of common stock			95,000												110,000
Warrant expiration date			Apr. 23, 2022		Apr. 23, 2022
Warrant vests description					The warrant vests depending on certain sales levels achieved by that distributor during the period April 24, 2019 through April 23, 2020. The warrant has an expiration date of April 23, 2022. The initial valuation of this warrant will not occur until the measurement period begins on April 24, 2019.
Big Geyser Distribution Agreement 2 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of warrant to purchase shares of common stock			145,000
Warrant exercise per share			$ 4.50
Fair value of warrant			$ 385,758
Warrant expiration date			Apr. 23, 2022
Recognized amortization of warrants											$ 0			$ 252,738
Warrant vests description			The warrant vests as follows for certain milestones being achieved: 95,000 shares upon the receipt of the first purchase order of the Company’s iced tea products, 25,000 shares upon the receipt of the first purchase order of the Company’s lemonade products, and 25,000 shares upon the receipt of the first purchase order for half-gallon containers of the Company’s products.
Officers, Directors, and Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expire year				5 years
Fair value of options				$ 404,600
Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price				$ 4.50
Mr. Davidson [Member] | Consulting Agreements [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expire year									4 years 6 months
Fair value of options									$ 131,240
Number of options to purchase shares of common stock									71,686
Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price									$ 4.09
Option vested period									vests in three equal installments on January 30, 2017, July 28, 2017, and July 28, 2018.
Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expire year							5 years
Fair value of options							$ 130,266
Number of options to purchase shares of common stock							70,000
Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price							$ 4.50
Board of Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of option of shares							70,000
Number of warrant to purchase shares of common stock		20,000				165,000
Warrant exercise per share		$ 4.90				$ 4.18
Warrant term		1 year				1 year
Fair value assumptions share price per share		$ 4.87				$ 4.00
Dividend yield		0.00%				0.00%
Expected volatility		57.00%				70.00%
Risk-Free interest rate		1.11%				1.00%
Expected life		1 year				1 year
Investor [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of warrant to purchase shares of common stock																40,000
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price											$ 3.76			$ 3.76
Fair value assumptions share price per share											3.73			$ 3.73
Expected volatility														57.00%
Risk-Free interest rate														1.05%
Expected life														10 months 6 days
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price											5.00			$ 5.00
Fair value assumptions share price per share											$ 5.10			$ 5.10
Expected volatility														75.00%
Risk-Free interest rate														1.57%
Expected life														3 years 22 days
2015 Stock Option Plan [Member] | Officers, Directors, and Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of option of shares										220,867
Option expire year										5 years
Exercise price										$ 5.00
Option vested period										2 years
Fair value of options										$ 440,698
Number of options to purchase shares of common stock				127,500
2015 Stock Option Plan [Member] | Mr. Thomas [Member] | Employment Agreements [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expire year								5 years
Fair value of options								$ 128,062
Number of options to purchase shares of common stock								75,000
Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price								$ 4.50
2015 Stock Option Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of option of shares																		283,333
2015 Stock Option Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of option of shares																		750,000
2017 Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares reserved under stock option plan																	850,000
Option expire year	5 years
Fair value of options	$ 17,693
Number of options to purchase shares of common stock	12,000
Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price	$ 3.76
Option vested period	The option vests one-third on the date of grant and one-third in each November 2017 and 2018
2017 Stock Option Plan [Member] | Officers, Directors, and Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options to purchase shares of common stock				187,647
2017 Stock Option Plan [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expire year	5 years
Fair value of options	$ 34,649
Number of options to purchase shares of common stock	23,500
Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price	$ 3.76
2017 Stock Option Plan One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expire year	5 years
Fair value of options	$ 29,488
Number of options to purchase shares of common stock	20,000
Share-based compensation arrangements by share-based payment award, options, grants in period, weighted average exercise price	$ 3.76

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Stock Based Compensation - Schedule of Fair Value of Stock Option Assumptions (Details)	9 Months Ended
	Sep. 30, 2017 $ / shares
Dividend yield	0.00%
Minimum [Member]
Stock price	$ 3.73
Exercise price	$ 3.76
Expected volatility	57.00%
Risk-Free interest rate, per annum	1.05%
Expected life (in years)	10 months 6 days
Maximum [Member]
Stock price	$ 5.10
Exercise price	$ 5.00
Expected volatility	75.00%
Risk-Free interest rate, per annum	1.57%
Expected life (in years)	3 years 22 days

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Stock Based Compensation - Schedule of Stock Option Activity (Details)	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Number of shares, Outstanding beginning balance | shares	425,411
Number of shares, Granted | shares	808,200
Number of shares, Exercised | shares
Number of shares, Expired, forfeited or cancelled | shares	(159,456)
Number of shares, Outstanding ending balance | shares	1,074,155
Number of shares, Exercisable | shares	699,963
Weighted Average Exercise Price, Outstanding beginning balance	$ 4.93
Weighted Average Exercise Price, Granted	4.55
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Expired, forfeited or cancelled	4.79
Weighted Average Exercise Price, Outstanding ending balance	4.66
Weighted Average Exercise Price, Exercisable	4.60
Weighted Average Grant Date Fair Value, Outstanding beginning balance	3.85
Weighted Average Grant Date Fair Value, Granted	1.63
Weighted Average Grant Date Fair Value, Exercised
Weighted Average Grant Date Fair Value, Expired, forfeited or cancelled	1.62
Weighted Average Grant Date Fair Value, Outstanding ending balance	2.50
Weighted Average Grant Date Fair Value, Exercisable	$ 2.79
Weighted Average Remaining Contractual Term (Years)	3 years 3 months 19 days
Weighted Average Exercisable Contractual Term (Years)	2 years 8 months 12 days
Weighted Average Outstanding Aggregate Intrinsic Value | $
Weighted Average Exercisable Aggregate Intrinsic Value | $

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Stock Based Compensation - Schedule of Warrant Activity (Details) - Warrants [Member]	9 Months Ended
	Sep. 30, 2017 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares, Outstanding beginning balance | shares	470,570
Number of shares, Issued | shares	660,000
Number of shares, Expired | shares
Number of shares, Outstanding ending balance | shares	1,130,570
Number of shares, Exercisable | shares	790,570
Weighted Average Exercise Price, Outstanding beginning balance | $ / shares	$ 5.95
Weighted Average Exercise Price, Issued | $ / shares	4.49
Weighted Average Exercise Price, Expired | $ / shares
Weighted Average Exercise Price, Outstanding ending balance | $ / shares	5.23
Weighted Average Exercise Price, Exercisable | $ / shares	$ 5.36
Weighted Average Remaining Contractual Term (Years)	2 years 6 months
Weighted Average Remaining Contractual Term (Years), Exercisable	1 year 8 months 12 days

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Stock Based Compensation - Schedule of Stock Based Compensation Expense (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Stock-based compensation	$ 279,603	$ 438,113	$ 1,320,512	$ 1,010,820
General and Administrative [Member]
Stock-based compensation	259,460	412,439	966,705	853,859
Sales and Marketing [Member]
Stock-based compensation	20,143	25,674	353,807	156,961
Stock Options [Member]
Stock-based compensation	279,603	438,113	1,044,147	740,820
Warrants [Member]
Stock-based compensation			194,565	30,000
Common Stock [Member]
Stock-based compensation			$ 81,800	$ 240,000

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Commitments and Contingencies (Details Narrative) - USD ($)												3 Months Ended		9 Months Ended
	Oct. 02, 2017	Sep. 02, 2017	Aug. 24, 2017	Jul. 11, 2017	Apr. 18, 2017	Mar. 10, 2017	Mar. 01, 2017	Aug. 18, 2016	Jun. 06, 2016	Aug. 01, 2014	Jun. 06, 2014	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Commitments And Contingencies [Line Items]
Loss contingency, damages sought, value										$ 10,000,000
Commissions resulting from sales, value												$ 19,151	$ (1,174)	$ 50,648	$ 54,436
Stock options issued during period, shares														808,200
Option exercise price														$ 4.55
Accrued expenses												50,000		$ 50,000
Operating leases, rent expense												22,219	15,428	44,817	36,510
Public storage expense												26,761	$ 22,662	$ 39,741	$ 76,493
2017 Stock Option Plan [Member]
Commitments And Contingencies [Line Items]
Stock options issued during period, shares			12,000
Option exercise price			$ 3.76
Consulting Agreement [Member] | Investor Relations and Communications Firm [Member]
Commitments And Contingencies [Line Items]
Cash payments on fifth day of each month							$ 15,000
Consulting Agreement [Member] | Investor Relations and Communications Firm [Member] | October 1, 2017 [Member]
Commitments And Contingencies [Line Items]
Stock options issued during period, shares														15,000
Consulting Agreement [Member] | Signing of the Contract [Member] | Investor Relations and Communications Firm [Member]
Commitments And Contingencies [Line Items]
Base salary							15,000
Consulting Agreement [Member] | Balance of Contract [Member] | Investor Relations and Communications Firm [Member]
Commitments And Contingencies [Line Items]
Base salary							$ 135,000
Consulting Agreement [Member] | Execution of Agreement [Member] | Investor Relations and Communications Firm [Member]
Commitments And Contingencies [Line Items]
Stock options issued during period, shares							10,000
Execution of Agreement [Member] | Investor Relations and Communications Firm [Member]
Commitments And Contingencies [Line Items]
Cash payments on fifth day of each month							$ 10,000
Lease Agreement [Member]
Commitments And Contingencies [Line Items]
Lease expire date											Aug. 31, 2017
Chief Sales & Marketing Officer [Member] | Employment Agreement [Member]
Commitments And Contingencies [Line Items]
Option exercise price					$ 4.50
Chief Sales & Marketing Officer [Member] | Employment Agreement [Member] | 2015 Stock Option Plan [Member]
Commitments And Contingencies [Line Items]
Option to purchase, shares					27,500
Chief Sales & Marketing Officer [Member] | Employment Agreement [Member] | 2017 Stock Option Plan [Member]
Commitments And Contingencies [Line Items]
Option to purchase, shares					42,500
Julian Davidson [Member] | Consulting Agreement [Member]
Commitments And Contingencies [Line Items]
Option to purchase, shares								286,744
Number of employee common stock an aggregate, shares									4,302
Consulting fees per month									$ 10,000
Number of employee shares issued, per month									1,667
Gross proceeds of sale of securities								$ 6,900,000
Monthly cash fee increase								20,000
Officers' compensation								$ 95,000
One-time grant shares								50,000
Option Purchase of common stock percentage								4.00%
Julian Davidson [Member] | Board of Directors [Member]
Commitments And Contingencies [Line Items]
Number of common stock shares issued for one time stock bonus	48,000
Cash bonus	$ 165,000
Deferred cash payment	$ 65,000
Minimum [Member]
Commitments And Contingencies [Line Items]
Percentage of brokerage commissions														1.00%
Maximum [Member]
Commitments And Contingencies [Line Items]
Percentage of brokerage commissions														5.00%
Revolution Marketing [Member] | Breach of Contract [Member]
Commitments And Contingencies [Line Items]
Loss contingency, damages sought, value										310,880
Revolution Marketing [Member] | Punitive Damages [Member]
Commitments And Contingencies [Line Items]
Loss contingency, damages sought, value										$ 5,000,000
Mr. Thomas [Member] | Amended and Restated Employment Agreement [Member]
Commitments And Contingencies [Line Items]
Agreement term, description						The amended employment agreement has a term that runs until December 31, 2019.
Base salary						$ 250,000
Stock options issued during period, shares						75,000
Mr. Thomas [Member] | Amended and Restated Employment Agreement [Member] | Signing of the Agreement [Member]
Commitments And Contingencies [Line Items]
Base salary						$ 83,000
Ms. Morris [Member] | Employment Agreement [Member]
Commitments And Contingencies [Line Items]
Agreement term, description		Pursuant to the employment agreement, Ms. Morris was entitled to receive severance of two months of her base salary.
Number of common stock shares issued for accrued severance		22,000
Accrued expenses												$ 52,149		$ 52,149
Option to purchase of common stock unvested		70,000
Option to purchase of common stock forfeited		23,333
Ms. Morris [Member] | Chief Sales & Marketing Officer [Member] | Employment Agreement [Member]
Commitments And Contingencies [Line Items]
Number of shares issued for services					25,000
Two Installments [Member] | Mr.Allen [Member] | Separation Agreement [Member]
Commitments And Contingencies [Line Items]
Stock options issued during period, shares				15,000
Payments due to related party				$ 61,668
Percentage unvested stock option				50.00%

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Commitments and Contingencies - Schedule of Future Minimum Payments (Details)	Sep. 30, 2017 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2017	$ 24,749
2018	99,984
2019	102,983
2020	106,073
2021	109,255
Thereafter	83,564
Total	$ 526,608

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Major Customers and Vendors (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Customer One [Member] | Sales Revenue, Net [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	28.00%	22.00%	21.00%	13.00%
Customer Two [Member] | Sales Revenue, Net [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	14.00%	11.00%	12.00%	12.00%
Two Customers [Member] | Sales Revenue, Net [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	42.00%		33.00%
Customer Three [Member] | Sales Revenue, Net [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage		11.00%		10.00%
Three Customers [Member] | Sales Revenue, Net [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage		44.00%		35.00%
Vendors One [Member] | Cost of Goods, Total [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	22.00%	19.00%	35.00%	20.00%
Vendors Two [Member] | Cost of Goods, Total [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	21.00%	17.00%	20.00%	17.00%
Vendors Three [Member] | Cost of Goods, Total [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	12.00%	17.00%		16.00%
Vendors Four [Member] | Cost of Goods, Total [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	12.00%	15.00%		16.00%
Four Vendors [Member] | Cost of Goods, Total [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	67.00%			69.00%
Vendors Five [Member] | Cost of Goods, Total [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage		10.00%
Five Vendors [Member] | Cost of Goods, Total [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage		78.00%
Two Vendors [Member] | Cost of Goods, Total [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage			55.00%

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Related Parties (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Mar. 27, 2017	Dec. 31, 2016
Related Party Transaction [Line Items]
Related party transaction purchases from related party	$ 6,616	$ 0	$ 14,631	$ 17,514
Ownership percentage	5.00%		5.00%
Mr. Thomas [Member]
Related Party Transaction [Line Items]
Indebted amount	$ 65,000		$ 65,000			$ 0
Board of Directors [Member]
Related Party Transaction [Line Items]
Number of options approved to purchase shares of common stock					70,000
Former Directors [Member]
Related Party Transaction [Line Items]
Accounts payable and accrued expenses related parties	10,237		10,237			4,032
Eric Watson [Member]
Related Party Transaction [Line Items]
Accounts payable to related parties	19,410		19,410			0
Accounts Payable [Member]
Related Party Transaction [Line Items]
Due to related parties	0		0			10,043
Immediate Family Member of Management or Principal Owner [Member]
Related Party Transaction [Line Items]
Revenue from related parties	0	$ 426	879	$ 3,063
Accounts receivable related parties	879		879			$ 0
Eric Watson [Member]
Related Party Transaction [Line Items]
Incurred expenses	$ 18,000		$ 30,000
Ownership percentage	14.40%		14.40%