Filing summary
Issuer and period: The supplied filing is Eastside Distilling, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2019—not a Beeline Holdings, Inc. filing. The mismatch between the request metadata and filing should be verified.
Business context and financial performance
Eastside produces and markets craft spirits and also provides contract bottling, canning and packaging. It reported one operating segment. Results include Craft Canning + Bottling from its January 11, 2019 acquisition.
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Sales | $4.25 million | $1.68 million | $7.94 million | $3.09 million |
| Net sales | $3.90 million | $1.52 million | $7.39 million | $2.75 million |
| Gross profit | $1.48 million | $0.76 million | $2.66 million | $1.35 million |
| Gross margin | 38% | 50% | 36% | 49% |
| Operating loss | $2.83 million | $1.80 million | $5.67 million | $3.06 million |
| Net loss | $2.95 million | $1.91 million | $5.89 million | $3.23 million |
| Loss per share | $0.32 | $0.37 | $0.65 | $0.64 |
For the first half, operating cash flow was negative $6.18 million, investing cash flow negative $3.61 million and financing cash flow negative $0.09 million. Cash fell from $10.64 million at year-end 2018 to $0.77 million at June 30, 2019. Working capital was positive $12.2 million, primarily including $11.91 million of inventory and $2.21 million of receivables.
At June 30, total liabilities were $10.71 million. Notes payable totaled $4.15 million, including $0.31 million current; the secured inventory-backed credit facility was fully drawn at $3.0 million, reported net of debt issuance costs at $2.95 million. Lease liabilities totaled $1.21 million. The company reported $33.22 million of accumulated deficit.
Changes and management commentary
- First-half sales rose approximately 157%, driven principally by Craft Canning, Redneck Riviera Whiskey and improved wholesale traction. Co-packing/private-label sales were $4.72 million, versus $0.88 million in the prior-year period.
- First-half gross margin declined to 36% from 49%. Management attributed the decline to business and product mix, higher raw-material costs and higher facility costs.
- Operating expenses increased: first-half advertising, promotional and selling expense was $2.57 million versus $1.71 million; general and administrative expense was $5.75 million versus $2.71 million. Management cited sales expansion, increased headcount and compensation, and higher depreciation and amortization; Q2 G&A also included bonuses and acquisition costs.
- Craft Canning was acquired for stated total consideration of $4.84 million, comprising cash, shares and notes. Its January 11–June 30 results included $3.77 million in sales and $0.53 million in net income including transaction costs.
- Management said it aimed to improve profitability through expense management and sales growth, and expected infrastructure investments to support improved performance through the remainder of 2019. The filing provides no quantified earnings or revenue guidance.
Liquidity, risks and unusual items
- Management stated that meeting operating cash needs over the following 12 months depended on additional debt or equity financing, positive operating cash flow, increased sales and expense control. It also intended to use inventory and receivables to support working capital. The company had not raised capital through financing activities in the first half.
- The filing describes continuing losses and negative cash flow as expected, and identifies financing availability, consumer acceptance, distributor concentration, inventory and supplier risks, competition, regulation and CBD-related legal uncertainty among material risks.
- On June 28, the company entered a recourse receivables factoring program; $155,536 of invoices remained factored at June 30. Advances carry stated charges of 2.4% for the first 30 days plus 1.44% for each additional 10-day period.
- Adoption of lease accounting on January 1, 2019 resulted in recognition of right-of-use assets and lease liabilities and a $187,353 retained-earnings adjustment.
- After quarter-end, four directors resigned on August 8, leaving the company out of compliance with certain Nasdaq board and committee independence rules; management said it intended to fill vacancies promptly. The CFO was serving as interim CEO while a permanent CEO search continued.
- After quarter-end, the company borrowed the full $300,000 under a new equipment line. The filing reports no material ongoing legal proceedings and no defaults upon senior securities.
Important facts for investors to verify
- Confirm the issuer identity: the document names Eastside Distilling, Inc., despite the Beeline Holdings metadata.
- Assess near-term liquidity and the company’s ability to secure financing or generate cash before available funds are exhausted.
- Check whether sales growth can translate into improved gross margins and lower operating losses, particularly as co-packing expands.
- Review acquisition economics, integration, debt obligations and the company’s reliance on inventory-backed borrowing.
- Confirm remediation of Nasdaq governance-independence noncompliance and the status of permanent executive leadership.