Business Context and Reporting Period
This Form 8-K is filed by Eastside Distilling, Inc. (trading symbol: EAST) on August 20, 2020. The report addresses a regulatory notice received from the Nasdaq Stock Market regarding the company's compliance with continued listing standards.
Key Financial Metrics
- Stockholder's Equity: $2,444,048 as of June 30, 2020.
- Minimum Equity Requirement: $2,500,000 per Nasdaq Listing Rule 5550(b)(1).
- Deficit: $55,952 below the minimum threshold.
- Payroll Protection Program (PPP) Loan: Approximately $1,400,000 (pending forgiveness).
- Projected Expense Reduction: Approximately $2,000,000 per year via downsizing sales and marketing.
Material Changes and Events
On August 20, 2020, Nasdaq notified the registrant of non-compliance with Listing Rule 5550(b)(1) due to insufficient stockholder's equity. This is a material event triggering a requirement to submit a compliance plan within 45 calendar days.
Outlook, Management Commentary, and Risks
Management intends to regain compliance by increasing stockholder's equity through the following actions:
- Obtaining forgiveness of the PPP loan.
- Downsizing the sales and marketing force to reduce annual expenses.
- Pursuing continued growth in revenue and gross profits.
- Potential strategic acquisitions, asset dispositions, or equity capital infusions.
Timeline: The company must submit a definitive plan to Nasdaq by October 9, 2020. If accepted, Nasdaq may grant an extension of up to 180 days to evidence compliance. An update will be provided during the third-quarter 2020 financial results conference call.
Investor Verification Checklist
- Verify the status of the PPP loan forgiveness application and its impact on equity.
- Confirm the timeline and details of the sales and marketing downsizing plan.
- Monitor the submission of the compliance plan to Nasdaq by October 9, 2020.
- Review the upcoming third-quarter 2020 financial results for updates on the compliance strategy.