Eastside Distilling Inc
For the period ended Sep 30, 2024. Filed Nov 15, 2024.
View on SEC.govAbout this filing
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.
Sep 30, 2024 · Filed Nov 15, 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 2024-06-30; filed 2024-08-14.
0001493152-24-032215
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-15.
0001493152-24-046343
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 66 current paragraphs.
32 unchanged; 19 reworded; 15 added; 20 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 4 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 (15)
Current report
On September 4, 2024, we and our subsidiary, Craft Canning + Printing (“Craft C+P”), entered into a Debt Exchange Agreement (the “Debt Agreement”), which closed on October 7, 2024, resulting in 720 barrels of spirits being assigned by the Company to Craft C+P, and Craft C+P being merged into a limited liability company owned by certain creditors of the Company. Given that the effect of the Debt Agreement meets all the initial criteria of ASC Topic 205-20,Presentation of Financial Statements – Discontinued Operations for the classification of held for sale, the assets, liabilities, and operating results of Craft C+P have been classified as held for sale as of September 30, 2024 and December 31, 2023 and for the three and nine month periods ended September 30, 2024 and 2023. The consolidated financial statements for the prior periods have been adjusted to reflect comparable information.
Current report
Subsequent to the execution of the Debt Agreement, we organized a subsidiary named “Bridgetown Spirits Corp.” (“Bridgetown”), which was incorporated on October 3, 2024, and assigned to Bridgetown the Company’s business of manufacturing and marketing spirits. Bridgetown manufactures, acquires, blends, bottles, imports, markets and sells a wide variety of alcoholic beverages under recognized brands. Bridgetown’s brands span several alcoholic beverage categories, including whiskey, vodka, rum, and tequila. Bridgetown sells products on a wholesale basis to distributors in open states and through brokers in control states.
Current report
As of September 30, 2024, our internal management financial reporting consisted of Bridgetown and corporate. The Bridgetown brands span several alcoholic beverage categories, including whiskey, vodka, rum, and tequila and are sold on a wholesale basis to distributors in open states, and to brokers in control states. Our principal area of operation is in the U.S. Pacific Northwest. Corporate consists of key executive and accounting personnel and corporate expenses such as public company and board costs, as well as interest on debt.
Current report
Bridgetown Spirits Corp.
Current report
Sales were $2.1 million and $3.1 million for the nine months ended September 30, 2024 and 2023, respectively, and $0.8 million for both the three months ended September 30, 2024 and 2023.
Current report
During the three months ended September 30, 2024, we sold 5,868 cases compared to 6,849 cases in the prior year and 65 barrels for gross proceeds of $0.1 million. We rationalize our barrel inventory by repositioning our bulk spirits portfolio for anticipated future products and forecasted demand.
Current report
Customer programs and excise taxes were $0.1 million for both the nine months ended September 30, 2024 and 2023, and minimal for both the three months ended September 30, 2024 and 2023.
Current report
General and administrative expenses were $1.1 million and $1.3 million for the nine months ended September 30, 2024 and 2023, respectively, and $0.4 million and $0.2 million for the three months ended September 30, 2024, respectively, due to a reversal of $0.1 million related to compensation expense in the third quarter of 2023.
Current report
Interest expense was $1.0 million and $0.9 million for the nine months ended September 30, 2024 and 2023, respectively, and $0.4 million and $0.2 million for the three months ended September 30, 2024 and 2023, respectively, due to the Debt Satisfaction Agreement on September 29, 2023.
Current report
Loss on Debt to Equity Conversion
Current report
On September 29, 2023, we issued to the SPV 296,722 shares of common stock and 200,000 shares of its Series C Preferred Stock. In exchange for that equity, our debts to the members of the SPV were reduced by a total of $6.5 million and we recognized a loss on the debt to equity conversion was $1.3 million for both the nine and three months ended September 30, 2023.
Current report
Net loss was $2.3 million and $3.6 million for the nine months ended September 30, 2024 and 2023, respectively, and $0.8 million and $1.8 million for the three months ended September 30, 2024 and 2023, respectively, primarily due to the Debt Satisfaction Agreement.
Current report
On October 7, 2024 we satisfied all secured debt and $2.5 million of unsecured debt by assigning ownership of Craft C+P to the creditors of that debt, who additionally surrendered to us 44,279 shares of Series C Preferred Stock. The transaction substantially reduced our debt obligations. On the same day, however, Beeline merged into our wholly-owned subsidiary. Beeline used $8.6 million of cash in operating activities during 2023 and $10.1 million of cash in operating activities during the first six months of 2024, funds that it obtained from a variety of debt and equity financing transactions.
Current report
Our ability, therefore, to meet our ongoing operating cash needs over the next 12 months will depend, in part, on the success of Beeline in expanding sales and achieving cash-positive operations. In larger part, however, our ability to meet near-term operating cash needs will depend on our success in securing debt and/or equity financing as needed. On November 14, 2024, we closed on a sale of $1.9 million in secured debt, from which we gained $1.6 million in net cash before payment of the transaction costs. These funds should be adequate to fund our cash flow requirement into early 2025. The availability of additional financing will be largely dependent on the operating success of Beeline, including improved gross margins as well as operational improvements, which will be necessary to attract investors.
Current report
Total cash used in operating activities was $1.6 million during the nine months ended September 30, 2024 compared to $1.7 million used during the nine months ended September 30, 2023. The use of cash was similar, even as we lost $1.3 million more during the 2023 period, primarily because the 2023 loss included a $1.3 million loss on the debt to equity conversion that occurred during the nine months ended September 30, 2023
Removed paragraphs (20)
Previous report
This includes advanced digital can printing decoration with custom graphics and co-packing services with distinct capability and craftsmanship serving the craft beer, cider, and kombucha among other beverage segments. Craft C+P offers digital can printing to customers and co-packing services.
Previous report
Craft Canning + Printing
Previous report
Digital Can Printing
Previous report
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 report
Co-packing Facility
Previous report
We offer co-packing services for non-alcoholic canned beverages including CBD soda waters in Portland, Oregon through a mobile co-packing network and one fixed co-packing location.
Previous report
Mobile Canning
Previous report
Our mobile canning business is located in Portland, Oregon. We use extensive proprietary and data-driven quality control measures and a robust clean-in-place procedure in order to provide the best packaging service for our customers. We take great pride in helping local beverage producers expand their distribution reach by using our service to offer industry-top quality and branding.
Previous report
Spirits
Previous 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.
Previous report
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 report
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 report
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 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.
Previous report
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 report
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 report
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 report
Our ability to meet our ongoing operating cash needs over the next 12 months depends on asset sales, external financing and improving operating results. The availability of external financing will be largely dependent on improvement in performance, including higher digital can printing revenues and improved gross margins at Craft C+P as well as operational improvements in our Spirits segment.
Previous report
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 report
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.
Reworded paragraphs (19)
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 49 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. On September 4, 2024, we entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with East Acquisition Sub Inc. (“Merger Sub”) and Beeline Financial Holdings, Inc. (“Beeline”). The Merger closed on October 7, 2024, at which time Beeline became a wholly-owned subsidiary of the Company. Beeline is a mortgage technology company that operates an end-to-end, all-digital, AI-enhanced platform for homeowners and property investors.
Previous wording
Our spirits brands span several alcoholic beverage categories, including whiskey, vodka, rum and tequila. We sell our products on a wholesale basis to distributors through open states, and brokers in control states.
Current wording
Our mission is to offer great products and services in the craft beverage space. Our spirits brands span several alcoholic beverage categories, including whiskey, vodka, rum and tequila. We sell our products on a wholesale basis to distributors through open states, and brokers in control states.
Previous wording
Our strategy is to expand our two distinct businesses – Craft C+P and Spirits in our regional market where our brand equity and concentration of investment will have the greatest return. Our spirits portfolio is to be positioned as a leading regional craft spirits provider that develops brands, expands geographic presence growing revenue and cash flow. These two segments are detailed below.
Current wording
Our strategy is to expand Bridgetown in our regional market where our brand equity and concentration of investment will have the greatest return. Our spirits portfolio is to be positioned as a leading regional craft spirits provider that develops brands, expands geographic presence growing revenue and cash flow.
Previous 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% .
Current wording
Bridgetown reduced its sale of bulk barrels in the third quarter of 2024 and saw total volume decline by 12% in the quarter. The majority of the decline was driven by the reduction in distribution of Azuñia tequila as 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 down 17%.
Previous wording
Three and Six Months ended June 30, 2024 Compared to the Three and Six Months Ended June 30, 2023
Current wording
Three and Nine Months ended September 30, 2024 Compared to the Three and Nine Months ended September 30, 2023
Previous wording
Segment information is as follows for the three and six months ended June 30, 2024 and 2023:
Current wording
Segment information was as follows for the three and nine months ended September 30, 2024 and 2023:
Previous 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.
Current wording
During the nine months ended September 30, 2024 and 2023, we sold 65 and 250 barrels, respectively, for gross proceeds of $0.1 million and $0.6 million, respectively. Spirits sales decreased for the nine months ended September 30, 2024 due to lower sales of tequila and bourbon. For the nine months ended September 30, 2024, spirits sold 17,431 cases compared to 19,485 cases in the prior year.
Previous 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.
Current wording
Cost of sales consists of all direct costs for raw materials, labor, overhead, packaging, and in-bound freight charges. Cost of sales were $1.5 million and $1.9 million for the nine months ended September 30, 2024 and 2023, respectively, and $0.6 million for both the three months ended September 30, 2024 and 2023. Cost of sales decreased for the nine months ended September 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 $0.3 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.
Current wording
Gross profit is calculated by subtracting the cost of products sold and services rendered from net sales. Gross profit was $0.5 million and $1.0 million for the nine months ended September 30, 2024 and 2023, respectively, and $0.2 million for both the three months ended September 30, 2024 and 2023.
Previous wording
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.
Current wording
Gross margin is gross profit stated as a percentage of net sales. Our gross margin was 25% and 34% for the nine months ended September 30, 2024 and 2023, respectively, 26% and 21% for the three months ended September 30, 2024 and 2023, respectively.
Previous wording
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 wording
Gross profit and gross margin decreased for the nine months ended September 30, 2024 primarily due to bulk spirit sales during the nine months ended September 30, 2023. Gross margin increased for the three months ended September 30, 2024 due to bulk spirits sales and continued cost savings initiatives that began in 2023 and continued into 2024.
Previous 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.
Current wording
Sales and marketing expenses were $0.7 million and $1.2 million for the nine months ended September 30, 2024 and 2023, respectively, and $0.2 million and $0.3 million for the three months ended September 30, 2024 and 2023, respectively, due to reduced headcount as part of sprits restructuring.
Previous 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.
Current wording
Preferred stock dividends were $0.1 million and $37,500 and for the nine and three months ended September 30, 2024 and 2023, respectively, representing the Series B preferred stock dividend of 6% per annum.
Previous wording
Our primary capital requirements are for cash used in operating activities and the repayment of debt. Funds for our cash and liquidity needs have historically not been generated from operations but rather from short-term credit in the form of extended payment terms from suppliers as well as proceeds from loans and the sale of convertible debt and equity. We have been dependent on raising capital from debt and equity financing to meet our operating needs.
Current wording
Through September 30, 2024, our primary capital requirements have been for cash used in operating activities and for the repayment of debt. Funds for our cash and liquidity needs have historically not been generated from operations but rather from short-term credit in the form of extended payment terms from suppliers as well as proceeds from loans and the sale of convertible debt and equity. We have been dependent on raising capital from debt and equity financing to meet our operating needs.
Previous 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.
Current wording
As a result of these historical practices, we had an accumulated deficit of $87.0 million as of September 30, 2024, having incurred a net loss of $4.1 million during the nine months ended September 30, 2024. As of September 30, 2024, we had $0.3 million of cash on hand with negative working capital of $12.6 million.
Previous wording
Our cash flow results for the six months ended June 30, 2024 and 2023 were as follows:
Current wording
Our cash flow results for the nine months ended September 30, 2024 and 2023 (which do not include any cash flows attributable to Beeline) were as follows:
Previous wording
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 wording
Total cash provided by investing activities was $0.1 million during the nine months ended September 30, 2024, representing net proceeds from the sale by Craft C+P of fixed assets. During the nine months ended September 30, 2023, cash used in investing activities was $0.1 million representing net purchases of fixed assets.
Previous wording
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.
Current wording
Total cash provided by financing activities was $1.5 million during the nine months ended September 30, 2024, consisting of $1.1 million from the sale of secured notes in May 2024 and $0.4 million from an at-the-market sale of common stock in September 2024. Total cash provided by financing activities was $1.4 million during the nine months ended September 30, 2023 primarily consisted of proceeds from the issuance of stock.
Previous 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:
Current wording
In connection with the preparation of our financial statements for the nine months ended September 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 previous paragraphs (2)
Previous report — wording carried elsewhere
Our mission is to offer great products and services in the craft beverage space.
Previous report — wording carried elsewhere
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.