Eastside Distilling Inc
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
BLNE$0.61+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-13.
0001493152-24-018888
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001493152-24-032215
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 73 previous paragraphs and 73 current paragraphs.
45 unchanged; 22 reworded; 5 added; 6 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
Sales were $5.5 million and $5.6 million for the six months ended June 30, 2024 and 2023, respectively, and $3.1 million and $2.8 million for the three months ended June 30, 2024 and 2023, respectively.
Current report
Craft C+P’s gross profit and gross margin increased for the six and three months ended June 30, 2024 primarily due to continued growth in digital can printing volumes. Craft C+P margins were impacted by significant growth of new customers, scrap and production inefficiencies.
Current report
Gross profit and gross margin decreased for the six months ended June 30, 2024 primarily due to bulk spirit sales during the six months ended June 30, 2023. Gross profit and gross margin increased for the three months ended June 30, 2024 due to cost savings initiatives that began in 2023 and continued into the first six months of 2024.
Current report
Total cash provided by investing activities was $0.1 million during the six months ended June 30, 2024 and 2023 representing net proceeds from the sale of fixed assets.
Current report
Total cash provided by financing activities was $1.1 million during the six months ended June 30, 2024 related to net proceeds from our secured credit facilities. Total cash provided by financing activities was $0.7 million during the six months ended June 30, 2023 primarily consisted of proceeds from the issuance of stock.
Removed paragraphs (6)
Previous report
At the beginning of 2023, we started a restructuring plan to lower costs and prepare the brands for reinvestment. While a substantial amount of our raw materials, such as our whiskey, is owned and not susceptible to price inflation, the inflated prices of shipping and other materials, such as glass, are expected to continue through 2024.
Previous report
Sales were $2.5 million and $2.9 million for the three months ended March 31, 2024 and 2023, respectively.
Previous report
Craft C+P’s gross margin increased for the three months ended March 31, 2024 primarily due to continued growth in can printing activities. Margins were negatively impacted by incremental expense in the quarter required to continue to improve production throughput and sustain a 24-hour 7 day a week printing schedule. Margins were also negatively impacted by scrap and inflated can prices.
Previous report
Gross margin decreased for the three months ended March 31, 2024 primarily due to sales of bulk spirits in 2023 and a greater mix of lower margin products in 2024.
Previous report
Our investing activities in the three months ended March 31, 2024 or 2023 were minimal.
Previous report
There were no financing activities during the three months ended March 31, 2024 or 2023.
Reworded paragraphs (22)
Previous wording
Eastside Distilling, Inc. (the “Company,” “Eastside Distilling,” “we,” “us,” or “our,” below) was incorporated under the laws of Nevada in 2004 under the name of Eurocan Holdings, Ltd. In December 2014, we changed our corporate name to Eastside Distilling, Inc. to reflect our acquisition of Eastside Distilling, LLC. We operate in two segments. Our Craft Canning + Printing (“Craft C+P”) segment provides digital can printing to customers in the craft beverage industry operating throughout the Pacific Northwest as well as other states. We also provide mobile canning services to the craft beverage industry in Oregon. In addition to these services we offer co-packing services from a single fixed site in Portland, Oregon. Our Spirits segment manufactures, blends, bottles, markets and sells a wide variety of alcoholic beverages under recognized brands in 23 U.S. states. Across both businesses we employ 46 people in the United States.
Current wording
Eastside Distilling, Inc. (the “Company,” “Eastside Distilling,” “we,” “us,” or “our,” below) was incorporated under the laws of Nevada in 2004 under the name of Eurocan Holdings, Ltd. In December 2014, we changed our corporate name to Eastside Distilling, Inc. to reflect our acquisition of Eastside Distilling, LLC. We operate in two segments. Our Craft Canning + Printing (“Craft C+P”) segment provides digital can printing to customers in the craft beverage industry operating throughout the Pacific Northwest as well as other states. We also provide mobile canning services to the craft beverage industry in Oregon. In addition to these services we offer co-packing services from a single fixed site in Portland, Oregon. Our Spirits segment manufactures, blends, bottles, markets and sells a wide variety of alcoholic beverages under recognized brands in 23 U.S. states. Across both businesses we employ 49 people in the United States.
Previous wording
We operate an innovative digital can printing facility that allows us to digitally print high quality graphics on aluminum beverage cans. This technology offers greater flexibility than traditional decoration methods and initially was directed toward smaller craft beverage manufacturers seeking custom graphics of limited releases, vintages, partnerships, and special events. This investment in digital printing at Craft C+P allows us the ability to offer unparalleled customization and flexibility to craft beverage producers seeking direct printing for canning projects of all sizes, while having an annual production capacity of over 20 million cans. One of Craft C+P’s many goals for 2024 is to significantly increase its production capacity.
Current wording
We operate an innovative digital can printing facility that allows us to digitally print high quality graphics on aluminum beverage cans. This technology offers greater flexibility than traditional decoration methods and initially was directed toward smaller craft beverage manufacturers seeking custom graphics of limited releases, vintages, partnerships, and special events. This investment in digital printing at Craft C+P allows us the ability to offer unparalleled customization and flexibility to craft beverage producers seeking direct printing for canning projects of all sizes, while having an annual production capacity of over 20 million cans.
Previous wording
During March 31, 2024, Craft C+P printed 4.8 million cans compared to 2.5 million during the first quarter of 2023. We have improved our efficiency and throughput of production compared to the prior year period. In addition, Craft C+P has won significant new business from a number of beverage manufacturers during 2024. Spirits did not sell any bulk barrels in the first quarter of 2024 and saw total volume decline by 4% in the quarter. This is an improvement from the previous twelve months and is driven by strategic pricing moves in key markets.
Current wording
During the quarter ended June 30, 2024, Craft C+P printed 6.0 million cans compared to 4.2 million during the second quarter of 2023. Craft improved production efficiency compared to the prior year period. In addition, Craft C+P has won significant new business from beverage manufacturers during 2024. Spirits sold minimal bulk barrels in the second quarter of 2024 and saw total volume decline by 12% in the quarter. The majority of the decline was driven by the reduction of distribution of Azuñia tequila as the we realigned the brand with new distribution partners. Spirits case shipments in the quarter were down -12% with Portland Potato Vodka down -6% and Burnside -17% .
Previous wording
Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023
Current wording
Three and Six Months ended June 30, 2024 Compared to the Three and Six Months Ended June 30, 2023
Previous wording
Segment information is as follows for the three months ended March 31, 2024 and 2023:
Current wording
Segment information is as follows for the three and six months ended June 30, 2024 and 2023:
Previous wording
Sales increased 27% for the three months ended March 31, 2024 attributable to growth in digital can printing sales, partially offset by reduced mobile service revenues and the sales of undecorated cans that have been replaced with digital printing sales. Craft printed 4.8 million cans in the quarter compared to 2.5 million cans in the prior year. The increase was a result of incremental sales to both existing and new customers and improved throughput of production.
Current wording
Sales increased 24% and 22% for the six and three months ended June 30, 2024, respectively, attributable to growth in digital can printing sales, partially offset by reduced mobile service. Craft printed 10.7 million and 6.0 million cans during the six and three months ended June 30, 2024, respectively, compared to 6.7 million and 4.2 million cans during the six and three months ended June 30, 2023. The increase was a result of incremental sales to both existing and new customers and improved throughput of production.
Previous wording
Spirits sales decreased for the three months ended March 31, 2024. The primary reason for the reduction was significant bulk spirits sales that we completed during 2023. For the three months ended March 31, 2023, we sold 250 barrels for gross proceeds of $0.6 million. In the first quarter of 2024, spirits sold 5,684 cases compared to 5,941 in the prior year, which included a large one-time direct-to-retail sale of 164 cases of Burnside. We have focused investment in spirits on profitable sales channels and regions. As a result, tequila sales decreased through last year and into this year.
Current wording
Spirits sales decreased during the six months ended June 30, 2024 primarily because during the six months ended June 30, 2023 we sold 250 barrels for gross proceeds of $0.6 million, and we sold no barrels during the six months ended June 30, 2024. Spirits sales decreased for the three months ended June 30, 2024 due to market conditions. For the six months ended June 30, 2024, spirits sold 11,563 cases compared to 12,635 cases in the prior year, which included a large one-time direct-to-retail sale of 164 cases of Burnside.
Previous wording
Customer programs and excise taxes were $0.1 million and $25,754 for the three months ended March 31, 2024 and 2023, respectively. Craft C+P discounts were higher for the three months ended March 31, 2024 as we on-boarded customers with larger printing runs. Spirits discounts were lower for the three months ended March 31, 2024 due to lower sales volumes.
Current wording
Customer programs and excise taxes were $0.2 million and $0.1 million for the six months ended June 30, 2024 and 2023, respectively, and $0.1 million for both the three months ended June 30, 2024 and 2023. Craft C+P discounts were higher for the six and three months ended June 30, 2024 as we offered tiered discounting to printed sales customers. Spirits discounts were higher for the three and six months ended June 30, 2024 due to competitive pricing moves.
Previous wording
Cost of sales consists of all direct costs related to both spirits and canning for raw materials, service, labor, overhead, packaging, and in-bound freight charges. Cost of sales were $2.2 million and $2.2 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Cost of sales consists of all direct costs related to both spirits and digital can printing for raw materials, service, labor, overhead, packaging, and in-bound freight charges. Cost of sales were $5.0 million and $4.8 million for the six months ended June 30, 2024 and 2023, respectively, and $2.8 million and $2.6 million for the three months ended June 30, 2024 and 2023, respectively.
Previous wording
Cost of sales increased in the quarter due to higher can volume and incremental inventory costs. We also invested in spare parts in anticipation of higher volumes later in the year.
Current wording
Cost of sales increased in the quarter due to higher can volume and incremental inventory costs. We also continue to invest in spare parts, which are expensed and not capitalized. Incremental production volumes required both investment to improve production inefficiencies and increases in scrap.
Previous wording
Cost of sales decreased for the three months ended March 31, 2024 due to lower bulk spirits and distributor sales, in addition to lower tequila volumes and a shift to a higher mix of vodka sales.
Current wording
Cost of sales decreased for the six and three months ended June 30, 2024 due to lower bulk spirits and distributor sales, in addition to lower tequila pricing and raw material savings.
Previous wording
Gross profit is calculated by subtracting the cost of products sold and services rendered from net sales. Gross profit was $0.2 million and $0.6 million for the three months ended March 31, 2024 and 2023, respectively. Bulk sales gross profit was $0.2 million for the three months ended March 31, 2023. Gross margin is gross profit stated as a percentage of net sales. Our gross margin was 8% and 22% for the three months ended March 31, 2024 and 2023, respectively. The prior years gross profit was positively impacted by high margins related to bulk spirits sales.
Current wording
Gross profit is calculated by subtracting the cost of products sold and services rendered from net sales. Gross profit was $0.3 million and $0.7 million for the six months ended June 30, 2024 and 2023, respectively, and $0.2 million and $26,272 for the three months ended June 30, 2024 and 2023, respectively.
Previous wording
Sales and marketing expenses were $0.3 million and $0.5 million for the three months ended March 31, 2024 and 2023, respectively, due to reduced headcount.
Current wording
Sales and marketing expenses were $0.5 million and $0.9 million for the six months ended June 30, 2024 and 2023, respectively, and $0.3 million and $0.4 million for the three months ended June 30, 2024 and 2023, respectively, due to lower marketing expenses and reduced headcount as part of spirits restructuring.
Previous wording
General and administrative expenses were $1.1 million and $1.4 million for the three months ended March 31, 2024 and 2023, respectively, primarily due to the related costs of closing unprofitable operations, including reducing staff and exiting leasing agreements at Craft C+P.
Current wording
General and administrative expenses were $2.3 million and $2.6 million for the six months ended June 30, 2024 and 2023, respectively, and $1.2 million for both the three months ended June 30, 2024 and 2023 primarily due to the related costs of closing unprofitable operations and exiting leasing agreements at Craft C+P.
Previous wording
Interest expense was $0.2 million and $0.3 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Interest expense was $0.6 million and $0.7 million for the six months ended June 30, 2024 and 2023, respectively, and $0.3 million for both the three months ended June 30, 2024 and 2023.
Previous wording
Net loss was $1.3 million and $1.6 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Net loss was $2.8 million and $3.2 million for the six months ended June 30, 2024 and 2023, respectively, and $1.5 million and $1.6 million for the three months ended June 30, 2024 and 2023, respectively.
Previous wording
Preferred stock dividends were $37,500 million for both three months ended March 31, 2024 and 2023, representing the Series B preferred stock dividend of 6% per annum.
Current wording
Preferred stock dividends were $75,000 and $37,500 for the six and three months ended June 30, 2024 and 2023, respectively, representing the Series B preferred stock dividend of 6% per annum.
Previous wording
We had an accumulated deficit of $84.0 million as of March 31, 2024, having incurred a net loss of $1.3 million during the three months ended March 31, 2024. As of March 31, 2024, we had $0.3 million of cash on hand with negative working capital of $11.2 million.
Current wording
We had an accumulated deficit of $85.6 million as of June 30, 2024, having incurred a net loss of $2.8 million during the six months ended June 30, 2024. As of June 30, 2024, we had $0.4 million of cash on hand with negative working capital of $12.2 million.
Previous wording
We have deferred paying interest in the first quarter of 2024 and are engaged in discussions with creditors to resolve a number of outstanding issues. There can be no assurances that we will successfully conclude these discussions and have the cash resources to fund operations.
Current wording
We have deferred paying interest during 2024 and are engaged in discussions with creditors to resolve a number of outstanding issues. There can be no assurances that we will successfully conclude these discussions and have the cash resources to fund operations.
Previous wording
Our cash flow results for the three months ended March 31, 2024 and 2023 were as follows:
Current wording
Our cash flow results for the six months ended June 30, 2024 and 2023 were as follows:
Previous wording
Total cash used in operating activities was $0.1 million during the three months ended March 31, 2024 compared to $0.4 million used during the three months ended March 31, 2023 primarily due to decreases in net losses.
Current wording
Total cash used in operating activities was $1.2 million during the six months ended June 30, 2024 compared to $0.7 million used during the six months ended June 30, 2023 primarily due to higher accrued interest and amortization of debt issuance costs.
Previous wording
In connection with the preparation of our financial statements for the three months ended March 31, 2024, there was one accounting estimate we made that was subject to a high degree of uncertainty and was critical to our results, as follows:
Current wording
In connection with the preparation of our financial statements for the six months ended June 30, 2024, there was one accounting estimate we made that was subject to a high degree of uncertainty and was critical to our results, as follows:
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Gross margin is gross profit stated as a percentage of net sales. Our gross margin was 6% and 12% for the six months ended June 30, 2024 and 2023, respectively, 5% and 1% for the three months ended June 30, 2024 and 2023, respectively.