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Ironclad Distillery

Small-batch bourbon distillery & tasting room

374%

Investors

237

Time to Invest

Security Offered

Preferred Shares

Minimum Investment: $102.19

  • 2017 American Distilling Institute Award winner (Bronze Medal – Bourbon Category)i

  • Opened a tasting room and distillery shop in March 2018 using proceeds from its first equity crowdfunding raise

  • In 2018, generated $264,591 in total revenue, up 82.75% year-over-year

  • More than 2,700 gallons of bourbon currently aging in its barrel room, expected to be released starting in early 2020

Terms

Security Type: Series Seed II Preferred Stock

Round Size: Min: $50,008.07 Max: $534,992.52

Price per Share: $9.29

Pre-money Valuation: $2.5 million

Liquidation Preference: 1x

Conversion Provisions: Convertible into one share of Common Stock (subject to proportional adjustments for stock splits, stock dividends, and the like) at any time at the option of the holder.

Perks

Investors that purchase the first Sixteen Thousand One Hundred Forty Six (16,146) shares of Series Seed II Preferred Stock and thereby fund the first One Hundred Fifty Thousand Dollars ($150,000) will benefit from a twenty-five percent (25%) discount and pay a purchase price of Six Dollars and Ninety Seven Cents ($6.97) per share.

Note: Investors who purchase the first 16,146 shares will be have their investments adjusted after the closing of the Offering to receive the 25% discount. 

Additional Perks

Ironclad Distillery will provide the following “perks” to investors in addition to the shares purchased, at each level of investment defined below, after shares are issued to the investor. All perk thresholds are inclusive of previous perk thresholds.

$100+ A hand-stamped postcard and Ironclad bumper sticker

$500+ An exclusive, specially-designed owner’s T-Shirt for our MicroVentures’ investors

$1,000+ Become an honorary member of our Iron Fist Cocktail Club for one year

$2,500+ Your name inscribed on our investors’ wall

$5,000+ A signed, limited-edition bottle of Ironclad Small Batch Bourbon to be picked up at the distillery

$10,000+ An invitation for you and a friend to an investors-only party at the distillery on a future TBA date

$25,000+ An interactive two-hour private tour of the distillery for twelve with our head distiller, plus we’ll outfit each of you with an Ironclad T-shirt

$50,000+ Assistant distiller for a day. Sit in on one of our distilling days and learn all about what we do.

Overview

Opportunity

Over the past several years, there has been a shift in U.S. adult beverage drinking habits from beer towards spirits. American whiskey, in particular, has been a key driver of that growth.  Additionally, local distilleries have helped fuel the trend, generating $3.7 billion in 2017, up 29.9% year-over-year. In 2017, total investment in the craft spirit companies reached $593 million, up 49% from the $398 million invested in 2016.

Ironclad Distillery has been making authentic small-batch bourbon whiskey since it began production of its first bourbon in 2015. The distillery’s name comes from the historic Civil War battle that was the first combat between ironclad warships—the USS Monitor and the CSS Virginia—which took place within sight of the distillery.

In June 2017, Ironclad Distillery successfully raised roughly $450,000 in its first equity crowdfunding campaign through MicroVentures’ funding portal First Democracy VC. With proceeds from that offering, the Ironclad team built a tasting room and distillery store within its 30,000 square-foot warehouse, acquired new equipment to expand its production capabilities, and released several limited-quantity bourbons. 

The company has more than 2,700 gallons of bourbon currently aging in its barrel room. In 2019, the company plans to expand its distribution, market its product on a broader scale across Virginia and into new states and purchase additional materials so it can keep its production chain moving.

Press

Product

Small-Batch Bourbon

Ironclad’s signature product is its small-batch bourbon whiskey which is made ─ from grain to bottle ─ one batch at a time.

Ironclad seeks to bring together tradition, innovation, and design to make its bourbon. With respect to tradition, Ironclad ferments, double-distills, ages, and bottles all under one roof. Ironclad also aims to highlight the best of Virginia by sourcing select grains from a family farm in Charles City. Ironclad’s signature small-batch bourbon is made from local Virginia corn, wheat, and rye, along with malted barley, and aged in new, American oak charred barrels. It is characterized by the brackish air from Virginia’s James River and balanced with the sweet caramelized oak sap from small barrels. Each batch is double distilled in a 500-gallon stainless steel vat utilizing a Scotch bonnet and four-plate column still and aged for two summers. The result is a sweet opening and a dry spice pop that’s equally suited for drinking straight up or in cocktails.

Ironclad’s hand-dipped, goldenrod yellow wax seal, along with its bold font, is specifically designed to catch the eyes of customers as they peruse the liquor shelf. The necker features handwritten batch notes – a nod to the bourbon’s handcrafted origin. The flip side features a printed copy of a newspaper headline from the day after the 1862 Civil War maritime battle with a grainy image of the ironclad CSS Virginia/Merrimac. Peeling the bottle label away uncovers the original blueprint of the ironclad USS Monitor, which was permitted for use by The Mariners’ Museum and Park in Newport News, Virginia.

 

Unique Bourbons

Bourbon Finished in Coffee Casks

125 PROOF / 375mL

Single-barrel-distilled from Virginia corn, wheat, and rye, along with malted barley, then finished for three months in used Missouri white oak barrels that originally flavored espresso beans in Norfolk, Virginia.  Aroma has notes of chocolate from the coffee beans and an aromatic spice. Bottled at cask strength yet finishes smooth. Limited quantities. Only available at the Ironclad Distillery Shop.

Bourbon Finished in Maple Syrup Casks

94 PROOF / 375mL

Featuring Ironclad’s signature four-grain bourbon, finished for six months in used barrels that originally flavored pure maple syrup in Waddington, New York. The maple syrup imparts a subtle sweetness, with toasted wood and baking spice notes. Limited quantities. Only available at the Ironclad Distillery Shop but soon to be available in Virginia ABC stores.

Bourbon Finished in Honey Casks

96 PROOF / 375mL

Featuring Ironclad’s signature four-grain bourbon and finished for six months in used barrels that originally flavored all-natural, pepper-infused honey from Richmond, Virginia. This unique bourbon has notes of fruity spice followed by a honey sweetness to mellow the chili heat. Limited quantities. Only available at the Ironclad Distillery Shop.

To produce its unique finished bourbons, Ironclad has partnered with family-owned businesses in Virginia and New York to supply its barrels:

  • Coffee Casks: Vessel Craft Coffee (Norfolk, Virginia)
  • Maple Syrup Casks: Sweeter Creations Sugar House (Waddington, New York)
  • Honey Casks: AR’s Hot Southern Honey (Richmond, Virginia)

Straight Bourbon

Ironclad also produces a straight bourbon. Similar to its signature small-batch bourbon, the straight bourbon uses Virginia corn, wheat, and rye along with malted barley, and is double-distilled in a five-hundred-gallon steam heated combination still. It is aged for a minimum of two years in new, American white oak barrels. The bourbon is sold in a larger bottle (750mL) and has a slightly higher alcohol content (95 PROOF) than its small-batch counterpart.

BarrelTag

Virgin (unused) oak barrels are responsible for giving bourbon its color and unique flavor. Unfortunately, after aging bourbon for months or years, these barrels cannot be used again to make bourbon, though they can be resold for other uses. That’s why each barrel used by Ironclad is given a unique number or BarrelTag. When the barrel is emptied, Ironclad writes this ID on each bottle filled using that barrel. Purchasers can then register on the Ironclad website to track that barrel to see whether it ends up in a brewery, is used to age other spirits like rum, scotch, or even becomes an eclectic piece of furniture in someone’s house.

Tasting Room and Distillery Shop

Ironclad Distillery is located within the longstanding S.W. Holt & Co. warehouse, which was built in 1913. The warehouse is family-owned and totals 30,000 square feet. With proceeds from its last equity crowdfunding raise, Ironclad built a tasting room and distillery store within the space. The tasting room space includes plush seating, a cozy lounge, and a large tasting bar where customers can order seasonal and traditional bourbon cocktails. Ironclad built the space with a “rustic-luxe” aesthetic that features tufted leather, warm rugs, vintage chandeliers, exposed brick and concrete, and a farmhouse-worth of reclaimed wood.

Additional details seek to please both discerning bourbon fans and history enthusiasts. The wall beside the tasting bar is lined with historical photographs, including various ironclad ships from the Monitor to the Albemarle. The Distillery shop, where customers can purchase Ironclad’s entire line of bourbon products, also features bourbon-related goods and historical souvenirs related to the ironclad warships. Purchased items are wrapped in reproduced newspaper headlines from the day after the Battle of the Ironclads from the Civil War. A piece of artwork showcased at the entrance features a quote taken from one of the many letters written home by a sailor onboard the Civil War’s USS Monitor.


Ironclad also hosts various private events, release parties, and tastings at its tasting room. This includes unique events such as its first annual “Nog-Off,” which was hosted this past December, where visitors got to taste and vote for their favorite eggnogs, made by Ironclad staff. Proceeds were donated to the winner's charity of choice. The company also hosted its Hot! Bourbon, Bees & Breasts: Fried Chicken Festival in November.

Use of Proceeds and Product Roadmap

Ironclad is looking to market its product on a broader scale across Virginia and into new states, as well as raise additional working capital to purchase materials to keep its production chain moving. Additionally, the company hopes to be able to expand the tasting room to enable the use of space for larger events. The company plans to open the area in the front of the building that is under roof to a seating area for cigar smokers and to add some extra seating areas.

Over the next two years, Ironclad is planning to expand distribution of its bourbon across Virginia and into other states. Up to this point, the distillery has had limited volume available to expand much beyond Virginia. With new production capacity, Ironclad will seek to expand within Virginia and begin out-of-state distribution.

Since August 2018, after having acquired new equipment, Ironclad has been putting 457 gallons of bourbon in barrels each month. However, the distillery now needs capital to buy additional barrels, grain, and utilities as the barreled product ages and becomes ready for bottling. Historically, Ironclad has primarily relied on 15-gallon barrels because they “age” faster relative to 30- and 53-gallon barrels. Ironclad ages its bourbon in 15-gallon barrels for 14 to 16 months. The company plans to fully transition to a combination of 30- and 53-gallon barrels, which it has already begun. By 2020, Ironclad would like to stop using 15-gallon barrels, thereby reducing its barrel cost substantially, as these smaller barrels cost just as much as the larger ones.

The distillery more than 2,700 gallons of bourbon currently aging in its barrel room. Its goal is to saturate Virginia’s ABC (Alcoholic Beverage Control) stores, gain more shelf space, and gain positions in new stores. In addition, it would like to find a distributor to help expand into one additional state during 2019. In 2020, Ironclad hopes to move into additional states with this same distributor. However, in order to first penetrate the remaining Virginia ABC stores, Ironclad plans to expand its marketing efforts by setting up additional tastings and hiring more sales staff.

Business Model

Ironclad Bourbon is currently available in select Virginia ABC stores. It retails for $38.69 for a 375 ML bottle. Beginning in April 2019, the distillery plans to distribute its Maple Syrup Barrel Finished Bourbon through select Virginia ABC stores at a retail price of $45.99 for a 375 ML bottle.

Ironclad Distillery also generates revenue from branded merchandise sales (e.g. hats and t-shirts), barrel sales, private events, tastings, and retail sales through local Navy Exchange stores.

User Traction

Since sales began in October 2016, Ironclad has sold out of inventory every month. As of December 2018, the distillery has sold over 13,000 bottles. In 2018, the company sold 6,141 bottles, including several batches of its new releases. Between October 2016 and December 2017, it sold 7,246 bottles. Bottle sales were limited by production, which Ironclad hopes to ramp up with the addition of more barrels, grain, and utilities purchased through funds from this offering.

The following is the current inventory aging in Ironclad’s barrel room as of December 2018:

  • 76 15-gallon barrels
  • 38 30-gallon barrels
  • 4 53-gallon barrels

Historical Financials

Note: The financial statements for 2016 and 2017 that are attached as Exhibit A to the Form C have been reviewed by an independent CPA. The financial statements for 2018 have not been reviewed.  

In 2018, Ironclad generated $264,591 in total revenue, up 83% year-over-year. 2017 revenue totaled $144,765, which was up from $51,535 in 2016.

In 2018, Ironclad’s expenses (including costs of goods sold and operating expenses) totaled $314,101, up 98% year-over-year. Costs of goods sold (COGS) totaled $102,009 (~30%) and operating expenses totaled $269,654 (~70%). In 2017, expenses totaled $158,360.

In 2018, Ironclad generated a net operating loss of $49,510, compared to a net operating loss of $32,521 in 2017. The company generated a quarterly profit in Q3 2018, led by strong sales ($72,083). Ironclad’s sales did increase further into Q4 2018 ($87,661), but it generated a net loss as more capital was spent to expand inventory, increase marketing, and make equipment repairs.

Industry

Industry and Market Analysis

Distilled spirits gained market share relative to beer for the eighth consecutive year in 2017. In 2017, suppliers reported that distilled spirits sales rose by 4% year-over-year, with total sales worth $26.2 billion. Total volume rose 2.6% to 226 million cases, up 5.8 million cases from the prior year. Furthermore, the distilled spirits market has been primarily driven by growth in high-end premium and super premium products—bottles that retail for at least $20.iv

In 2017, vodka—the largest product category—accounted for almost one-third of total spirits volume, with 71.3 million cases sold. Total vodka sales generated $6.2 billion in revenue, up 3% year-over-year. Volume sales of American whiskey increased 6.4% year-over-year to 23.2 million cases sold in 2017, while revenue increased 8.1% to $3.4 billion. The high-end category (bottles retailing between $20 and $30) was the largest source of revenue for American whiskey, generating $2 billion (up 7.2% year-over-year), while the super-premium category (bottles retailing for over $30) generated $551 million (up 18% year-over-year).v

Local distilleries have contributed to the overall growth in the distilled spirits market. In 2017, the craft spirits industry generated $3.7 billion in retail sales, up 29.9% from the prior year. Overall volume reached nearly 7.2 million cases in 2017, up 23.7% from 2016. As of August 2018, there were 1,835 active craft distillers in the U.S., up 16% over the past 12 months. The largest concentrations of distilleries were primarily in the West, mostly in California, Washington, and Colorado, and in the South, mostly in Texas. The investments in craft distillery expansion have also increased. In 2017, total investment in the sector reached $593 million, up 49% from the $398 million invested in 2016.vi

As of August 2018, 92% of craft distillers were defined as small producers. Yet, because small distilleries produce a limited quantity of spirits—usually single batches at a time—they accounted for just 13% of the craft spirit cases sold in 2017. For these small distillers, generating revenue in-state is especially important, as home state sales represented 92% of their total sales. Out-of-state and international sales accounted for just 10% of their total business.vii

As of January 2018, Viriginia had 57 active distilleries, plus seven pending licensing, which represents an increase of 375% since 2012. According the Virginia Distiller’s Association (VDA), these distillers’ generated a statewide economic impact of $163 million in 2017, up 57% from the previous year. This includes roughly $60 million wages as well as more than $46 million in revenue generated by the 296,741 tourists that visited in 2017. The number of tourists and revenue generated by them both increased 55% year-over-year. Total spirits sales by Virginia distilleries reached $14.57 million in 2017, up 30% from the previous year. Additionally, the VDA projected that distillers would spend $85.7 million in capital investments between 2018 and 2020.viii

Competitors

There are several notable bourbon producers in the U.S., including, but not limited to: Blanton’s, Buffalo Trace, Bulleit®, Four Roses®, Jim Beam®, Knob Creek®, Maker’s Mark®, and Woodford Reserve®.

Ironclad Distillery directly competes with several Virginia-based distillers that also sell their small-batch bourbon at Virginia ABC stores:

A. Smith Bowman

Founded in 1934, A. Smith Bowman started as a small, family-owned American distillery. The distillery produces small-batch whiskey, bourbon, rum, vodka, and gin.ix The distillery is now owned by the Sazerac Company, which is the parent company for Buffalo Trace. Smith Bowman was founded in 1934 and was acquired by Buffalo Trace in 2003.x The Bowman Brothers Virginia Straight Bourbon retails for $29.99 (750 ml), and the John J Bowman Virginia Straight Bourbon retails for $47.99 (750 ml).xi

Dome & Spear Distillery

Founded by the McCauley family in 2014, Dome & Spear Distillery produces hand-crafted, small-batch bourbon whiskey. It is the first licensed distillery in Campbell County and is named after the old wrought iron “dome and spear” fencing that surrounds some historic buildings in the area. Dome & Spear uses locally grown Virginia corn and other American-sourced grains. Each batch is distilled twice and aged in new charred oak barrels. McCauley’s Virginia Bourbon Whiskey retails for $36.99 (750 ml).xii

Filibuster Distillery

Founded in 2013, Filibuster produces a “Dual-Cask” Bourbon, which is aged in American oak casks and then finished in white-wine seasoned French oak barrels. The distillery also produces rye, gin, and other whiskey varieties.  The Filibuster Bourbon retails for $46.99 (750 ml) at the Virginia ABC store.xiv  Filibuster also distributes its products across 18 U.S. states.xv

KO Distilling

Founded in 2013, KO Distilling released its first spirit—Bare Knuckle American Wheat Whiskey—in November 2016. Currently, its produces three varieties of gin and four whiskeys, including the Bare Knuckle Straight Bourbon Whiskey.xvi Its bourbon is made with 70% corn, 20% wheat, and 10% malted barley, all locally sourced, and is double-distilled and aged for at least two years in American White Oak barrels from Kentucky. A 750ml bottle of Bare Knuckle Bourbon Whiskey retails for $39.99.xvii

Reservoir Distillery

Founded in 2008, Reservoir Distillery produces bourbon, rye whiskey, and wheat whiskey. Its bourbon is made from 100% corn. The Distillery also produces several limited edition bourbons and collaborations with local breweries.xviii Reservoir Bourbon retails for $84.29 for a 750ml bottle or $42.19 for a 375ml bottle.xix Reservoir can be purchased through Virginia ABC stores and is distributed in several U.S. states.xx

 

Team

Owen King

Chief Operating Officer

Owen wrestled and played football in high school in Pennsylvania and was recruited by Millersville University to play defensive end, where he earned a bachelor’s degree in Communications. Following college, and after a brief stint working in Nantucket, Owen moved to Virginia to join his father’s business and be closer to friends and family. He shares the family love of bourbon, and when the opportunity to get involved in making bourbon presented itself, he immersed himself in books and distillery visits. He loves talking about, making, and drinking bourbon.

Stephen King

President

Stephen graduated from the University of Missouri with a bachelor’s degree in Economics. His first job was as a foreman in one of U.S. Steel’s mills. On his first day, he was put in charge of 75 men who, on average, were more than twice his age. When it became apparent that “old guard” companies that helped build this country were losing viability, he went to work for a progressive mini-mill in South Carolina, rising in the ranks to Assistant Superintendent. An opportunity arose for Stephen to move back to Pennsylvania to run a division of a copper tubing company, and he eventually managed each division from manufacturing to sales to executive management. Along the way, he spent three years as Director of all Copper Tubing operations in Mexico and earned an MBA from the University of Maryland.

Afterwards, Stephen and his family moved to Virginia and bought a restoration franchise repairing homes after floods and fires. During this time, he became interested in seeing what it would take to make bourbon, a product that his family loved. After visiting several distilleries and extensively researching the growing popularity of craft distilleries, he enlisted the help of his youngest son to begin making bourbon. After 10 years of restoring homes, he sold the business and dedicated his time to making great tasting, high-quality bourbon.

Kara King

Chief Marketing Officer

Kara was homecoming queen of her high school, played soccer and volleyball, and never failed to do everything creatively. After visiting several American University campuses, she opted for the American University of Paris (France). She spent four years soaking up the European culture and graduated with a degree in Journalism. Upon her return to the U.S., she went to work for Liz Claiborne and eventually Vincent Partners in New York City. An opportunity came for Kara to move to Los Angeles to work for Lucky Brand Jeans, and, later, another opportunity took her to Lands’ End in Wisconsin and then back to NYC to work with LOFT. But the allure of bourbon overtook her, and she joined her father and brother to make bourbon. Recently, she was elected to a two-year term as Vice President of the Virginia Distillers Association.

Discussion

Endnotes

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