Eastside Distilling, Inc. Files 10-Q for Q1 2024

TL;DR

<b>Eastside Distilling, Inc. has filed its Q1 2024 10-Q report, detailing its financial performance and operational status.</b>

AI Summary

Eastside Distilling, Inc. (BLNE) filed a Quarterly Report (10-Q) with the SEC on May 13, 2024. Eastside Distilling, Inc. filed its 10-Q report for the period ending March 31, 2024. The filing covers the first quarter of fiscal year 2024. The company's principal executive offices are located at 2321 NE Argyle Street, Unit D, Portland, OR 97211. Eastside Distilling, Inc. was formerly known as Eurocan Holdings Ltd. until November 10, 2011. The company is incorporated in Nevada and operates within the Beverages sector (SIC 2080).

Why It Matters

For investors and stakeholders tracking Eastside Distilling, Inc., this filing contains several important signals. This 10-Q filing provides investors with the latest quarterly financial data, including revenue, net income, and balance sheet information, crucial for assessing the company's current health and future prospects. Understanding the details within this report allows stakeholders to evaluate the company's financial position, operational efficiency, and any potential risks or opportunities that have emerged in the first quarter of 2024.

Risk Assessment

Risk Level: — Eastside Distilling, Inc. shows moderate risk based on this filing. The filing is a standard 10-Q report, which typically contains routine financial disclosures and does not indicate any immediate or significant new risks.

Analyst Insight

Review the detailed financial statements and management's discussion and analysis within the 10-Q to understand the company's performance trends and strategic direction.

Key Numbers

• 2024-03-31 — Reporting Period End Date (The 10-Q covers the period ending on this date.)
• 2024-05-13 — Filing Date (The date the 10-Q was filed with the SEC.)
• 2023-03-31 — Prior Year Period End Date (Comparative period end date for Q1 2023.)

Key Players & Entities

• Eastside Distilling, Inc. (company) — Filer of the 10-Q report.
• Eurocan Holdings Ltd. (company) — Former name of Eastside Distilling, Inc.
• 2024-03-31 (date) — End of the reporting period for the 10-Q.
• 2024-05-13 (date) — Filing date of the 10-Q.
• Portland, OR (location) — Location of the company's business and mailing address.

FAQ

Risk Factors

• Customer Concentration Risk [medium — financial]: The company faces customer concentration risk, with one customer accounting for a significant portion of accounts receivable as of March 31, 2024.
• Supplier Concentration Risk [medium — financial]: Sales revenue is subject to supplier concentration risk, with one distributor representing a significant portion of sales revenue for the period ending March 31, 2024.

Industry Context

Eastside Distilling operates in the alcoholic beverage industry, specifically focusing on spirits production and distribution.

Regulatory Implications

The filing is a standard SEC Form 10-Q, which adheres to regulations set forth by the Securities and Exchange Commission for quarterly financial reporting.

What Investors Should Do

1. Analyze the detailed financial statements for revenue trends and profitability.
2. Assess the impact of customer and supplier concentration risks on future revenue.
3. Review management's discussion and analysis for strategic initiatives and outlook.

Key Dates

• 2024-03-31: Quarterly Period End — End of the reporting period for the 10-Q filing.
• 2024-05-13: Filing Date — Date the 10-Q was officially submitted to the SEC.

Year-Over-Year Comparison

This is the initial 10-Q filing for the fiscal year 2024, providing the first set of quarterly financial data for the year.

Key Financial Figures

• $0.0001 — ction 12(b) of the Act: Common Stock, $0.0001 par value EAST The Nasdaq Stock Mar

Filing Documents

• form10-q.htm (10-Q) — 798KB
• ex31-1.htm (EX-31.1) — 12KB
• ex32-1.htm (EX-32.1) — 5KB
• form10-q_001.jpg (GRAPHIC) — 6KB
• form10-q_002.jpg (GRAPHIC) — 9KB
• 0001493152-24-018888.txt (&nbsp;) — 5164KB
• east-20240331.xsd (EX-101.SCH) — 49KB
• east-20240331_cal.xml (EX-101.CAL) — 68KB
• east-20240331_def.xml (EX-101.DEF) — 196KB
• east-20240331_lab.xml (EX-101.LAB) — 370KB
• east-20240331_pre.xml (EX-101.PRE) — 293KB
• form10-q_htm.xml (XML) — 652KB

— FINANCIAL INFORMATION

PART I— FINANCIAL INFORMATION 3 Item 1.

Financial Statements

Financial Statements 3 Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 3 Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 4 Consolidated Statements of Stockholders' Equity (Deficit) for the Three Months Ended March 31, 2024 and 2023 5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 6 Notes to the Consolidated Financials Statements 7 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 28 Item 4

Controls and Procedures

Controls and Procedures 28

— OTHER INFORMATION

PART II— OTHER INFORMATION 28 Item 1

Legal Proceedings

Legal Proceedings 28 Item 1A

Risk Factors

Risk Factors 29 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 29 Item 3. Defaults Upon Senior Securities 29 Item 4. Mine Safety Disclosures 29 Item 5. Other Information 29 Item 6. Exhibits 29

SIGNATURES

SIGNATURES 30 2 PART I: FINANCIAL INFORMATION ITEM 1 – FINANCIAL STATEMENTS Eastside Distilling, Inc. and Subsidiaries Consolidated Balance Sheets ( Dollars in thousands, except shares and per share amounts) March 31, 2024 December 31, 2023 (unaudited) Assets Current assets: Cash $ 336 $ 403 Trade receivables, net 673 559 Inventories 3,189 3,212 Prepaid expenses and other current assets 498 363 Total current assets 4,696 4,537 Property and equipment, net 4,571 4,768 Right-of-use assets 2,388 2,602 Intangible assets, net 4,902 5,005 Other assets, net 465 568 Total Assets $ 17,022 $ 17,480 Liabilities and Stockholders' Equity (Deficit) Current liabilities: Accounts payable $ 2,392 $ 2,076 Accrued liabilities 739 575 Deferred revenue 66 88 Current portion of secured credit facilities, related party 2,680 - Current portion of secured credit facilities, net of debt issuance costs 364 - Current portion of notes payable 8,079 486 Current portion of notes payable, related party 92 92 Current portion of lease liabilities 903 888 Other current liability, related party 587 - Total current liabilities 15,902 4,205 Lease liabilities, net of current portion 1,596 1,824 Secured credit facilities, related party - 2,700 Secured credit facilities, net of debt issuance costs - 342 Notes payable, net of current portion - 7,556 Total liabilities 17,498 16,627 Commitments and contingencies (Note 13) - - Stockholders' equity (deficit): Common stock, $ 0.0001 par value; 6,000,000 shares authorized as of March 31, 2024 and December 31, 2023; and 1,707,751 shares and 1,705,987 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively - - Preferred stock, $ 0.0001 par value; 100,000,000 shares authorized; 2,500,000 Series B shares issued and outstanding as of both March 31, 2024 and December 31, 2023 - - Preferred stock, $ 0

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements March 31, 2024 (Unaudited) 3. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying unaudited consolidated financial statements for Eastside Distilling, Inc. and subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements in accordance with GAAP have been condensed or eliminated as permitted under the SEC's rules and regulations. In management's opinion, the unaudited consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company's financial position as of March 31, 2024, its operating results for the three months ended March 31, 2024 and 2023 and its cash flows for the three months ended March 31, 2024 and 2023. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Interim results are not necessarily indicative of the results that may be expected for an entire fiscal year. The consolidated financial statements include the accounts of Eastside Distilling, Inc.'s wholly-owned subsidiaries, including Craft Canning + Bottling, LLC (doing business as Craft Canning + Printing) and its wholly-owned subsidiary Galactic Unicorn Packaging, LLC (the Company's acquired fixed co-packing assets). All intercompany balances and transactions have been eliminated on consolidation. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements March 31, 2024 (Unaudited) Cost of Sales Cost of sales consists of all direct costs related to both spirits and canning for service, labor, overhead, packaging, and in-bound freight charges. Raw materials account for the largest portion of the cost of sales, followed by packaging and production costs. Sales and Marketing Expenses Sales and marketing expenses consist of sponsorships, agency fees, digital media, salary and benefit expenses, travel and entertainment expenses. Sales and marketing costs are expensed as incurred. Advertising expenses totaled $ 26,327 and $ 0.1 million for the three months ended March 31, 2024 and 2023, respectively. General and Administrative Expenses General and administrative expenses consist of salary and benefit expenses, travel and entertainment expenses for executive and administrative staff, rent and utilities, professional fees, insurance, and amortization and depreciation expense. General and administrative costs are expensed as incurred. Stock-Based Compensation The Company recognizes as compensation expense all stock-based awards issued to employees. The compensation cost is measured based on the grant-date fair value of the related stock-based awards and is recognized over the service period of stock-based awards, which is generally the same as the vesting period. The fair value of stock options is determined using the Black-Scholes valuation model, which estimates the fair value of each award on the date of grant based on a variety of assumptions including expected stock price volatility, expected terms of the awards, risk-free interest rate, and dividend rates, if applicable. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments at the end of each reporting period and as the underlying stock-based awards vest. Concentrations Financial instruments that potentially subject the

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements March 31, 2024 (Unaudited) Level 2: Fair value of the asset or liability is determined using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Fair value of the asset or liability is determined using unobservable inputs that are significant to the fair value measurement and reflect management's own assumptions regarding the applicable asset or liability. None of the Company's assets or liabilities were measured at fair value as of March 31, 2024 or December 31, 2023. However, GAAP requires the disclosure of fair value information about financial instruments that are not measured at fair value. Financial instruments consist principally of trade receivables, accounts payable, accrued liabilities, notes payable, and the secured credit facilities. The estimated fair value of trade receivables, accounts payable, and accrued liabilities approximate their carrying value due to the short period of time to their maturities. As of March 31, 2024 and December 31, 2023, the principal amounts of the Company's notes approximate fair value. Items Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities acquired in a business acquisition are valued at fair value at the date of acquisition due to having indefinite lives. The Company, on an annual basis, tests the indefinite life assets for impairment. If an indefinite life asset is found to be impaired, then the Company will estimate its useful life and amortize the asset over the remainder of its useful life. Inventories Inventories primarily consist of bulk and bottled liquor and raw materials and are stated at the lower of cost or market. Cost is determined using an average

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements March 31, 2024 (Unaudited) Comprehensive Income The Company did not have any other comprehensive income items in either the three months ended March 31, 2024 or 2023. Accounts Receivable Factoring Program The Company had two accounts receivable factoring programs: one for its spirits customers (the "spirits program") that had a zero balance as of March 31, 2024 and another for its co-packing customers (the "co-packing program") that terminated in August 2023. Under the programs, the Company had the option to sell certain customer account receivables in advance of payment for 75 % (spirits program) or 85 % (co-packing program) of the amount due. When the customer remits payment, the Company receives the remaining balance. For the spirits program, interest is charged on the advanced 75% payment at a rate of 2.4% for the first 30 days plus 1.44% for each additional ten-day period. For the co-packing program, interest was charged against the greater of $ 0.5 million or the total funds advanced at a rate of 1 % plus the prime rate published in the Wall Street Journal. Under the terms of both agreements, the factoring provider had full recourse against the Company should the customer fail to pay the invoice. In accordance with ASC Topic 860 – Transfers and Servicing , the Company has concluded that these agreements have met all three conditions identified in ASC Topic 860-10-40-5 (a) – (c) and have accounted for this activity as a sale. Given the quality of the factored accounts, the Company had not recognized a recourse obligation. In certain limited instances, the Company may provide collectio

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