Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 12, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | Eastside Distilling, Inc. | |
Entity Central Index Key | 0001534708 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 10,149,252 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash | $ 959,126 | $ 342,678 |
Trade receivables | 1,312,578 | 1,324,333 |
Inventories | 10,325,191 | 12,331,133 |
Prepaid expenses and current assets | 604,358 | 397,083 |
Current assets from discontinued operations | 74,892 | |
Total current assets | 13,201,253 | 14,470,119 |
Property and equipment, net | 3,366,831 | 4,687,469 |
Right-of-use assets | 1,361,188 | 577,856 |
Intangible assets, net | 14,141,556 | 14,674,790 |
Goodwill | 28,182 | 28,182 |
Other assets, net | 787,008 | 1,165,581 |
Non-current assets from discontinued operations | 106,665 | 261,866 |
Total Assets | 32,992,683 | 35,865,863 |
Current liabilities: | ||
Accounts payable | 1,981,171 | 2,881,185 |
Accrued liabilities | 820,028 | 888,296 |
Deferred revenue | 315,775 | |
Secured trade credit facility, net of debt issuance costs | 6,381,475 | |
Deferred consideration for Azuñia acquisition (current) | 15,451,500 | |
Other current liabilities | 250,000 | |
Current portion of notes payable | 4,010,887 | 1,819,172 |
Current portion of lease liability | 540,852 | 423,671 |
Current liabilities of discontinued operations | 17,255 | 125,278 |
Total current liabilities | 29,768,943 | 6,137,602 |
Lease liability - less current portion | 883,905 | 274,863 |
Secured trade credit facility, net of debt issuance costs | 2,961,566 | |
Deferred consideration for Azuñia acquisition (long term) | 15,451,500 | |
Notes payable - less current portion and debt discount | 1,347,219 | 3,594,254 |
Non-current liabilities of discontinued operations | 78,658 | 112,760 |
Total liabilities | 32,078,725 | 28,532,545 |
Commitments and contingencies (Note 12) | ||
Stockholders' equity: | ||
Common stock, $0.0001 par value; 15,000,000 shares authorized; 10,149,252 and 9,675,028 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 1,014 | 967 |
Additional paid-in capital | 52,609,016 | 51,566,438 |
Accumulated deficit | (51,696,072) | (44,234,087) |
Total Stockholders' Equity | 913,958 | 7,333,318 |
Total Liabilities and Stockholders' Equity | $ 32,992,683 | $ 35,865,863 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 15,000,000 | 15,000,000 |
Common stock, shares issued | 10,149,252 | 9,675,028 |
Common stock, shares outstanding | 10,149,252 | 9,675,028 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Sales | $ 4,825,323 | $ 4,509,522 | $ 12,861,894 | $ 11,973,314 |
Less customer programs and excise taxes | 327,105 | 223,014 | 966,644 | 591,828 |
Net sales | 4,498,218 | 4,286,508 | 11,895,250 | 11,381,486 |
Cost of sales | 2,899,005 | 2,597,023 | 7,855,679 | 7,189,264 |
Gross profit | 1,599,213 | 1,689,485 | 4,039,571 | 4,192,222 |
Operating expenses: | ||||
Sales and marketing expenses | 890,151 | 1,819,412 | 3,733,926 | 4,372,641 |
General and administrative expenses | 2,366,307 | 3,224,038 | 6,851,577 | 8,595,051 |
Gain on disposal of property and equipment | (111,410) | (14,104) | (130,546) | (14,104) |
Total operating expenses | 3,145,048 | 5,029,346 | 10,454,957 | 12,953,588 |
Loss from operations | (1,545,835) | (3,339,861) | (6,415,386) | (8,761,366) |
Other income (expense), net | ||||
Interest expense | (247,354) | (113,287) | (874,729) | (338,599) |
Other income | 36,745 | 58 | 36,745 | 952 |
Total other expense, net | (210,609) | (113,229) | (837,984) | (337,747) |
Loss before income taxes | (1,756,444) | (3,453,090) | (7,253,370) | (9,099,113) |
Provision for income taxes | ||||
Net loss from continuing operations | (1,756,444) | (3,453,090) | (7,253,370) | (9,099,113) |
Net loss from discontinued operations | (10,577) | (91,209) | (208,615) | (337,112) |
Net loss attributable to Eastside Distilling, Inc. common shareholders | $ (1,767,021) | $ (3,544,299) | $ (7,461,985) | $ (9,436,225) |
Basic and diluted net loss per common share | $ (0.17) | $ (0.38) | $ (0.75) | $ (1.03) |
Basic and diluted weighted average common shares outstanding | 10,103,936 | 9,255,347 | 9,947,208 | 9,155,397 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (7,253,370) | $ (9,099,113) |
Loss from discontinued operations | 208,615 | 337,112 |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 1,858,145 | 1,130,912 |
Bad debt expense | 69,078 | |
Gain on disposal of assets | (130,546) | (14,104) |
Inventory allowance | 250,000 | |
Amortization of debt issuance costs | 225,967 | 18,307 |
Issuance of common stock in exchange for services by employees | 468,162 | 737,071 |
Issuance of common stock in exchange for services for 3rd parties | 234,056 | 64,248 |
Stock-based compensation | 242,607 | 510,674 |
Changes in operating assets and liabilities: | ||
Trade receivables | (57,323) | (427,409) |
Inventories | 1,755,942 | (285,020) |
Prepaid expenses and other assets | 88,310 | (163,949) |
Net ROU asset | 369,519 | 581,539 |
Accounts payable | (900,014) | (289,298) |
Accrued liabilities | (68,268) | 345,036 |
Other current liabilities | 250,000 | |
Deferred revenue | 315,775 | (52,000) |
Net lease liabilities | (426,628) | (633,201) |
Net cash used in operating activities of continuing operations | (2,708,588) | (7,562,203) |
Net cash used in operating activities of discontinued operations | (120,647) | (381,094) |
Net cash used in operating activities | (2,829,235) | (7,943,297) |
Cash Flows From Investing Activities: | ||
Acquisition of business, net of cash acquired | (1,449,917) | |
Proceeds from sale of fixed assets | 621,103 | |
Purchases of property and equipment | (413,967) | (2,330,972) |
Net cash provided by (used in) investing activities of continuing operations | 207,136 | (3,780,889) |
Net cash provided by investing activities of discontinued operations | 2,125 | |
Net cash provided by (used in) investing activities | 209,261 | (3,780,889) |
Cash Flows From Financing Activities: | ||
Issuance of common stock | 1,262,497 | |
Contributed capital | 14,000 | |
Proceeds from secured trade credit facility | 6,337,064 | |
Proceeds from notes payable | 1,538,044 | 550,000 |
Payments of principal on secured trade credit facility | (3,000,000) | |
Payments of principal on notes payable | (1,638,686) | (297,108) |
Net cash provided by financing activities | 3,236,422 | 1,529,389 |
Net increase (decrease) in cash | 616,448 | (10,194,797) |
Cash - beginning of period | 342,678 | 10,640,977 |
Cash - end of period | 959,126 | 446,180 |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid during the period for interest | 635,568 | 290,331 |
Cash paid for amounts included in measurement of lease liabilities | 518,976 | 514,403 |
Supplemental Disclosure of Non-Cash Financing Activity | ||
Warrants issued in relation to secured trade credit facility | 97,800 | |
Deferred consideration for the acquisition of Azuñia | 12,781,092 | |
Fixed assets acquired through financing | 300,000 | |
Right-of-use assets obtained in exchange for lease obligations | $ 1,152,851 | $ 1,072,018 |
Description of Business
Description of Business | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Description of Business | 1. Description of Business Eastside Distilling (the “Company,” “Eastside,” “Eastside Distilling,”, below) was incorporated under the laws of Nevada in 2004 under the name of Eurocan Holdings, Ltd. In December 2014, the Company changed its corporate name to Eastside Distilling, Inc. to reflect its acquisition of Eastside Distilling, LLC. Eastside Distilling is a manufacturer and marketer of nationally recognized alcoholic beverage brand and as Craft Canning + Bottling the West coast leader in premier mobile packaging. The Company currently employs 82 people in the United States. The Company manufactures, acquires, blends, bottles, imports and markets a wide variety of crafts spirits and cocktails under recognized brands which the Company sells on a wholesale basis to distributors. The Company’s portfolio consists of high-growth alcoholic beverage products complemented by high-end, luxury spirits, including bourbon, American whiskey, vodka, gin, rum, tequila and cocktails. In addition, the Company specializes in mobile canning and independent bottling of spirits. |
Liquidity
Liquidity | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Liquidity | 2. Liquidity Historically, the Company has funded its cash and liquidity needs through operating cash flow convertible notes, extended credit terms, and equity financings. The Company has incurred a net loss of $7.5 million for the nine months ended September 30, 2020 and has an accumulated deficit of $51.7 million as of September 30, 2020. The Company has been dependent on raising capital from debt and equity financings as well as the utilization of our inventory to meet its needs for cash flow used in operating activities. For the nine months ended September 30, 2020, the Company raised approximately $3.2 million in additional capital through debt financing (net of repayments). At September 30, 2020, the Company had $1 million of cash on hand with a negative working capital of $16.6 million. The Company’s ability to meet its ongoing operating cash needs over the next 12 months depends on reducing its operating costs, utilizing our inventory, raising additional debt or equity capital, selling assets and generating positive operating cash flow, primarily through increased sales, improved profit growth and controlling expenses. The Company intend to implement actions to improve profitability by managing expenses while continuing to increase sales. See Notes 10 and 11 to the financial statements for a description of our debt and the debt refinancing initiatives completed in the first half of 2020. If the Company is unable to obtain additional financing, or additional financing is not available on acceptable terms, it may seek to sell assets, reduce operating expenses or reduce or eliminate marketing initiatives, and take other measures that could impair its ability to be successful. Although the Company’s audited financial statements for the year ended December 31, 2019 were prepared under the assumption that the Company would continue its operations as a going concern, the report of our independent registered public accounting firm that accompanies our financial statements for the year ended December 31, 2019 contains a going concern qualification in which such firm expressed substantial doubt about the Company’s ability to continue as a going concern, based on the financial statements at that time. Specifically, as noted above, the Company has incurred operating losses since our inception, and even though the Company has reduced its operating expenses and increased its available capacity under its lines of credit, and has large inventory balances from which to draw, the Company expects to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future losses have had, and will continue to have, an adverse effect on the Company’s financial condition. If the Company cannot continue as a going concern, its stockholders would likely lose most or all of their investment in us. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying unaudited condensed 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 condensed 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 September 30, 2020, its operating results for the nine months ended September 30, 2020 and 2019 and its cash flows for the nine months ended September 30, 2020 and 2019. The unaudited condensed 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, 2019. Interim results are not necessarily indicative of the results that may be expected for an entire fiscal year. The condensed consolidated financial statements include the accounts of Eastside Distilling, Inc.’s wholly-owned subsidiaries, including, MotherLode LLC, Big Bottom Distilling LLC, Outlandish Beverages, LLC, Redneck Riviera Whiskey Co., LLC, Craft Canning + Bottling LLC (beginning as of January 11, 2019) and the Azuñia tequila assets (beginning September 12, 2019). All intercompany balances and transactions have been eliminated on consolidation. Segment Reporting The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity, producing, packaging, marketing and distributing alcoholic beverages and operates as one segment. The Company’s chief operating decision makers, its chief executive officer and chief financial officer, review the Company’s operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition Net sales include product sales, less customer programs and excise taxes. The Company recognizes revenue by applying the following steps in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, which include sales to the Oregon Liquor Control Commission (OLCC), the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment, other than customary rights of return. The Company excludes sales tax collected and remitted to various states from sales and cost of sales. Customer Programs Customer programs, which include customer promotional discount programs, customer incentives, and other payments, are a common practice in the alcohol beverage industry. The Company makes these payments to customers and incurs these costs to promote sales of products and to maintain competitive pricing. Amounts paid in connection with customer programs and incentives are recorded as reductions to net sales or as sales and marketing expenses in accordance with ASC 606 - Revenue from Contracts with Customers Excise Taxes The Company is responsible for compliance with the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) regulations, which includes making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual states also impose excise taxes on alcohol beverages in varying amounts. The Company calculates its excise tax expense based upon units produced and sold and on its understanding of the applicable excise tax laws. Excise taxes totaled $0.2 million and $0.2 million for the nine months ended September 30, 2020 and 2019, respectively. Cost of Sales Cost of sales consists of the costs of ingredients utilized in the production of spirits, manufacturing labor and overhead, warehousing rent, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by packaging and production costs. Shipping and Fulfillment Costs Freight costs incurred related to shipment of merchandise from the Company’s distribution facilities to customers are recorded in cost of sales. Sales and Marketing Expenses The following expenses are included in sales and marketing expenses in the accompanying condensed consolidated statements of operations: media advertising costs, promotional costs of value-added packaging, salary and benefit expenses, travel and entertainment expenses for the sales, brand and sales support workforce and promotional activity expenses. Sales and marketing costs are expensed as incurred. Sales and marketing expense totaled $3.7 million and $4.4 million for the nine months ended September 30, 2020 and 2019, respectively. General and Administrative Expenses The following expenses are included in general and administrative expenses in the accompanying condensed consolidated statements of operations: 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. General and administrative expense totaled $6.9 million and $8.6 million for the nine months ended September 30, 2020 and 2019, respectively, of which $2.7 million and $2.4 million were non-cash expenses, respectively. 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. Stock-based compensation was $0.9 and $1.3 million for the nine months ended September 30, 2020 and 2019, respectively. Discontinued Operations The Company reports discontinued operations by applying the following criteria in accordance with Accounting Standards Codification (“ASC”) Topic 205-20 – Presentation of Financial Statements – Discontinued Operations: (1) Component of an entity; (2) Held for sale criteria; (3) Strategic shift. During the first quarter of 2020, management made a strategic shift to focus the Company’s sales and marketing efforts on the nationally branded product platform, resulting in the decision to close / abandon all four of its retail tasting rooms in the Portland, Oregon area by March 31, 2020. This decision meets the criteria (1) - (3) for reporting discontinued operations, and as a result, the retail operations have been reported as discontinued operations in the accompanying unaudited condensed consolidated financial statements. In the current period, the income, expense, and cash flows from retail operations during the period they were consolidated have been classified as discontinued operations. For comparative purposes, amounts in the prior periods have been reclassified to conform to current period presentation. Additionally, the assets and liabilities from retail operations are shown on the balance sheet as assets and liabilities for discontinued operations. Income and expense related to discontinued retail operations for the nine months ended September 30, 2020 and 2019: September 30, September 30, Sales $ 148,490 $ 711,616 Less customer programs and excise taxes 46,342 266,785 Net sales 102,148 444,831 Cost of sales 64,101 213,485 Gross profit 38,047 231,346 Operating expenses: Sales and marketing expenses 2,534 21,670 General and administrative expenses 168,299 546,788 Loss on disposal of property and equipment 75,829 - Total operating expenses 246,662 568,458 Loss from operations (208,615 ) (337,112 ) Assets and liabilities related to discontinued retail operations September 30, December 31, Assets Current assets: Cash - $ 615 Trade receivables - 1,734 Inventories - 62,102 Prepaid expenses and current assets - 10,441 Total current assets - 74,892 Property and equipment, net - 86,059 Right-of-use assets 103,476 164,952 Other assets 3,189 10,855 Total Assets $ 106,665 $ 336,758 Liabilities Current liabilities: Accounts payable $ (12,748 ) $ 56,241 Accrued liabilities - 7,763 Deferred revenue - 1,734 Current portion of lease liability 30,003 59,540 Total current liabilities 17,255 125,278 Lease Liability - less current portion 78,658 112,760 Total liabilities $ 95,913 $ 238,038 Cash and Cash Equivalents Cash equivalents are considered to be highly liquid investments with maturities of three months or less at the time of the purchase. The Company had no cash equivalents at September 30, 2020 and December 31, 2019. Fair Value Measurements GAAP defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAAP permits an entity to choose to measure many financial instruments and certain other items at fair value and contains financial statement presentation and disclosure requirements for assets and liabilities for which the fair value option is elected. At September 30, 2020 and December 31, 2019, management has not elected to report any of the Company’s assets or liabilities at fair value under the “fair value option” provided by GAAP. The hierarchy of fair value valuation techniques under GAAP provides for three levels: Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, generally would require significant management judgment. The three levels for categorizing assets and liabilities under GAAP’s fair value measurement requirements are as follows: Level 1: Fair value of the asset or liability is determined using cash or unadjusted quoted prices in active markets for identical assets or liabilities. 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 at September 30, 2020 and December 31, 2019. 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 convertible notes payable. The estimated fair value of trade receivables, accounts payable, and accrued liabilities approximates their carrying value due to the short period of time to their maturities. At September 30, 2020 and December 31, 2019, the Company’s notes payable are at fixed rates and their carrying value approximates 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. Inventories Inventories primarily consist of bulk and bottled liquor, raw packaging material for bottling, raw cans for Craft Canning, and merchandise and are stated at the lower of cost or market. Cost is determined using an average costing methodology, which approximates cost under the first-in, first-out (FIFO) method. A portion of inventory is held by certain independent distributors on consignment until it is sold to a third party. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost basis of accounting for the related inventory. The Company recorded an inventory allowance of $0.3 million for obsolete inventory for the nine months ended September 30, 2020 and no write-downs of inventory for the nine months ended September 30, 2019. Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Amortization of leasehold improvements is computed using the straight-line method over the life of the lease or the useful lives of the assets, whichever is shorter. The cost and related accumulated depreciation and amortization of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current period income or expense. The costs of repairs and maintenance are expensed as incurred. Intangible Assets / Goodwill The Company accounts for long-lived assets, including property and equipment and intangible assets, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount, an impairment loss would be recognized to write down the asset to its estimated fair value. The Company performed a qualitative assessment of goodwill at September 30, 2020 and determined that goodwill was not impaired. Long-lived Assets The Company accounts for long-lived assets, including property and equipment, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount of the asset, an impairment loss would be recognized to write down the asset to its estimated fair value. Income Taxes The provision for income taxes is based on income and expenses as reported for financial statement purposes using the “asset and liability method” for accounting for deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. At September 30, 2020 and December 31, 2019, the Company established valuation allowances against its net deferred tax assets. Income tax positions that meet the “more-likely-than-not” recognition threshold are measured at the largest amount of income tax benefit that is more than 50% likely to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with income tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized income tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized income tax benefits would be classified as additional income taxes in the accompanying condensed consolidated statements of operations. There were no unrecognized income tax benefits, nor any interest and penalties associated with unrecognized income tax benefits, accrued or expensed at and for the nine months ended September 30, 2020 and 2019. The Company files federal income tax returns in the U.S. and various state income tax returns. The Company is no longer subject to examinations by the related tax authorities for the Company’s U.S. federal and state income tax returns for years prior to 2012. Comprehensive Income The Company does not have any reconciling other comprehensive income items for the nine months ended September 30, 2020 and 2019. Accounts Receivable Factoring Program The Company has entered into two accounts receivable factoring programs. One for its spirits customers (the “spirits program”) and another for its co-packing customers (the “co-packing program”). Under the programs, the Company has 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 is charged against the greater of $500,000 or the total funds advanced at a rate of 5% plus the prime rate published in the Wall Street Journal. Under the terms of both agreements, the factoring provider has full recourse against the Company should the customer fail to pay the invoice. In accordance with ASC 860, we have concluded that these agreements have met all three conditions identified in ASC 860-10-40-5 (a) – (c) and have accounted for this activity as a sale. Given the quality of the factored accounts, the Company has not recognized a recourse obligation. In certain limited instances, the Company may provide collection services on the factored accounts but does not receive any fees for acting as the collection agent, and as such, the Company has not recognized a service obligation asset or liability. The Company factored $6.7 million of invoices and incurred $0.14 million in fees associated with the factoring programs during the nine months ended September 30, 2020. At September 30, 2020, the Company had $0.9 million factored invoices outstanding. Recently Adopted Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment |
Business Acquisitions
Business Acquisitions | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Business Acquisitions | 4. Business Acquisitions During the fiscal year 2019, the Company completed the following acquisitions: Craft Canning + Bottling On January 11, 2019, the Company completed the acquisition of Craft Canning + Bottling, LLC (“Craft Canning”), a Portland, Oregon-based provider of bottling and canning services. The Company’s consolidated financial statements for the nine months ended September 30, 2020 include Craft Canning’s results of operations. For the nine months ended September 30, 2019, Craft Canning’s results of operations are included from the acquisition date of January 11, 2019 through September 30, 2019. The Company’s condensed consolidated financial statements reflect the final purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. The allocation of the purchase price is as follows: Consideration given: 338,212 shares of common stock valued at $6.15 per share $ 2,080,004 Cash 2,003,200 Notes payable 761,678 Total value of acquisition $ 4,844,882 Assets and liabilities acquired: Cash $ 553,283 Trade receivables, net 625,717 Inventories, net 154,824 Prepaid expenses and current assets 250 Property and equipment, net 1,839,486 Right-of-use assets 232,884 Intangible assets - customer list 2,895,318 Other assets 26,600 Accounts payable (231,613 ) Accrued liabilities (74,389 ) Deferred revenue (52,000 ) Lease liabilities (256,375 ) Notes payable (869,103 ) Total $ 4,844,882 Intangible assets are recorded at estimated fair value, as determined by management based on available information. The fair value assigned to the customer list intangible asset was determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earning methods. The major assumptions used in arriving at the estimated identifiable intangible asset value included management’s estimates of future cash flows, discounted at an appropriate rate of return which is based on the weighted average cost of capital for both the Company and other market participants, projected customer attrition rates, as well as applicable royalty rates for comparable assets. The useful lives for intangible assets were determined based upon the remaining useful economic lives of the tangible assets that are expected to contribute directly or indirectly to future cash flows. The customer relationships estimated useful life is seven years. The Company incurred acquisition costs of $0.1 million during the nine months ended September 30, 2019 that have been recorded in general and administrative expenses on the consolidated statement of operations. The results of the Craft acquisition are included in the Company’s consolidated financial statements from the date of acquisition through September 30, 2020. The revenue and net profit of Craft operations included in our condensed consolidated statements of operations were $6.7 million and $0.7 million, for the nine months ended September 30, 2020. The revenue and net income (including transaction costs) of Craft operations included in the Company’s condensed consolidated statements of operations were $5.9 million and $0.5 million for the period from January 11, 2019 through September 30, 2019. Azuñia Tequila On September 12, 2019, the Company completed the acquisition of the Azuñia Tequila brand, the direct sales team, existing product inventory, supply chain relationships and contractual agreements from Intersect Beverage, LLC, an importer and distributor of tequila and related products. The Company’s consolidated financial statements for the nine months ended September 30, 2020 include the Azuñia Tequila assets and results of operations. The acquisition was structured as an all-stock transaction, provided that the Company may, at its election, pay a portion of the consideration in cash or by executing a three-year promissory note if the issuance of stock would require the Company to hold a vote of its stockholders under the applicable Nasdaq rules. Subject to compliance with applicable Nasdaq rules, the initial consideration, will be payable approximately 18 months following the closing and will consist of 850,000 shares of the Company’s common stock at a stipulated value of $6.00 per share, 350,000 shares of the Company’s common stock based on the Company’s stock price twelve months after the close of the transaction, and additional shares based on the Azuñia business achieving certain revenue targets and the Company’s stock price 18 months after the close of the transaction. The Company has also agreed to issue additional stock consideration (subject to compliance with applicable Nasdaq rules) of up to $1.5 million upon the Azuñia business achieving revenue of at least $9.45 million in the period commencing on the 13th month following the closing and ending on the 24th month following the closing. The Company’s consolidated financial statements reflect the final purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was allocated to the assets acquired based upon their estimated fair values on the acquisition date. The Company estimated the purchase price based on weighted probabilities of future results and recorded deferred consideration payable of $12.8 million on the acquisition date that will be remeasured to fair value at each reporting date until the contingencies are resolved, with the changes in fair value recognized in earnings. The Company remeasured the deferred consideration payable for the period ended December 31, 2019 and increased the liability by $2.7 million to a balance of $15.5 million. No adjustment was made to the deferred consideration payable for the nine-month period ended September 30, 2020. The allocation of the purchase price is as follows: Consideration given: Deferred consideration payable $ 12,781,092 Total value of acquisition $ 12,781,092 Assets acquired: Inventories, net $ 836,026 Intangible assets - brand 11,945,066 Total $ 12,781,092 Intangible assets are recorded at estimated fair value, as determined by management based on available information. The fair value assigned to the brand intangible asset was determined through the use of the market approach. The major assumptions used in arriving at the estimated identifiable intangible asset value included category averages for comparable acquisitions, including multiples of annual sales and dollars per case sold. The brand has an indefinite life and will not be amortized. The results of the Azuñia Tequila asset acquisition are included in the Company’s consolidated financial statements for the nine months ended September 30, 2020. The sales of Azuñia Tequila products included in the Company’s condensed consolidated statements of operations were $2.4 million for the nine months ended September 30, 2020. Pro Forma Financial Information The following unaudited pro forma consolidated results of operations for the nine months ended September 30, 2019 assume that both acquisitions of Craft Canning + Bottling and Azuñia Tequila were completed on January 1, 2019: 2019 Pro forma sales $ 14,536,214 Pro forma net loss (9,766,420 ) Pro forma basic and diluted net loss per share $ (0.82 ) Pro forma sales and net loss exclude retail operations that have been classified as discontinued operations. Pro forma data does not purport to be indicative of the results that would have been obtained had these events actually occurred at the beginning of the periods presented and is not intended to be a projection of future results. The share and per share data have been retroactively reflected for the acquisitions. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories | 5. Inventories Inventories consist of the following: (Dollars in thousands) September 30, 2020 December 31, 2019 Raw materials $ 8,677 $ 9,336 Finished goods 1,648 2,995 Total inventories $ 10,325 $ 12,331 |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 6. Property and Equipment Property and equipment consist of the following: (Dollars in thousands) September 30, 2020 December 31, 2019 Furniture and fixtures $ 4,369 $ 4,464 Leasehold improvements 1,640 1,654 Vehicles 779 690 Construction in progress 53 98 Total cost 6,841 6,906 Less accumulated depreciation (3,474 ) (2,219 ) Property and equipment - net $ 3,367 $ 4,687 Purchases of property and equipment totaled $0.4 million and $2.3 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. Depreciation expense totaled $1.4 million and $0.6 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. Gain on disposal of fixed assets totaled $0.1 for the nine months ended September 30, 2020 compared to nil for the same period last year. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | 7. Intangible Assets and Goodwill Intangible assets and goodwill at September 30, 2020 and December 31, 2019 consist of the following: (Dollars in thousands) September 30, 2020 December 31, 2019 Permits and licenses $ 25 $ 25 Azuñia brand 11,945 11,945 Customer lists 2,896 3,247 Goodwill 28 28 Total intangible assets and goodwill 14,894 15,245 Less accumulated amortization (724 ) (542 ) Intangible assets and goodwill - net $ 14,170 14,703 Amortization expense totaled $0.4 million and $0.5 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. The permits and licenses, Azuñia brand, and goodwill have all been determined to have indefinite life and will not be amortized. The customer lists are being amortized over a seven-year life. In the third quarter of 2020 it was determined that the customer list associated with the MotherLode, LLC acquisition no longer had value and was written off. The net value of the MotherLode, LLC customer list at the time of the write down was $176,971. |
Other Assets
Other Assets | 9 Months Ended |
Sep. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets | 8. Other Assets Other assets consist of the following: (Dollars in thousands) September 30, 2020 December 31, 2019 Product branding $ 949 $ 809 Notes receivable - 450 Deposits 60 43 Total other assets 1,009 1,302 Less accumulated amortization (219 ) (136 ) Other assets - net $ 790 $ 1,166 As of September 30, 2020, the Company had $0.9 million of capitalized costs related to services provided for the rebranding of its existing product line and branding of new product lines. This amount is being amortized over a seven-year life. Amortization expense totaled $0.08 million and $0.05 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. In September 2020, the Company had received the remaining balance of the notes receivable from Wineonline.com. The deposits represent office lease deposits. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Leases | 9. Leases The Company has various lease agreements in place for facilities and equipment. Terms of these leases include, in some instances, scheduled rent increases, renewals, purchase options, and maintenance costs, and vary by lease. These lease obligations expire at various dates through 2025. The Company determines if an arrangement is a lease at inception. The Company does not currently have any finance leases. As the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate based on information available at commencement to determine the present value of the lease payments. Right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term. In September 2020, the Company entered into two new lease agreements for canning and bottling production facilities in Seattle and Denver. Both leases contain fixed payments that increase over the term of their respective agreement. As of September 30, 2020, the amount of right-of-use assets and lease liabilities were both $1.4 million. Aggregate lease expense for the nine months ended September 30, 2020 was $0.5 million, consisting of $0.4 million in operating lease expense for lease liabilities and $0.1 million in short-term lease cost. Maturities of lease liabilities as of September 30, 2020 are as follows: Operating Weighted- Average Remaining Term in Years 2020 $ 158,821 2021 580,380 2022 353,509 2023 266,045 Thereafter 250,798 Total lease payments 1,609,553 Less imputed interest (based on 6.6% weighted- average discount rate (184,796 ) Present value of lease liability $ 1,424,757 3.4 |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | 10. Notes Payable Notes payable consists of the following: September 30, December 31, Notes payable bearing interest at 5.00%. The notes’ principal, plus any accrued and unpaid interest is due May 1, 2021. Interest is paid monthly. 2,300,000 2,300,000 Notes payable bearing interest at 1.00%. The notes’ principal, plus any accrued and unpaid interest is due May 1, 2022. Loan payments are deferred six months from start of loan. 1,049,317 - Notes payable bearing interest at 1.00%. The notes’ principal, plus any accrued and unpaid interest is due May 1, 2022. Loan payments are deferred six months from start of loan. 395,437 - Convertible note payable bearing interest at 9.00%. The note principal, plus any accrued and unpaid interest is due December 31, 2020. The note has a voluntary conversion feature where in the event of an equity offering of at least $1,000,000 at a purchase price of at least $4.25 (subject to adjustment), the noteholder shall have the right to participate in the financing by converting all outstanding principal and accrued and unpaid interest on this note into the securities to be sold in the offering. 125,000 254,075 Notes payable bearing interest at 5.00%. Principal and accrued interest is payable in six equal installments on each six-month anniversary of the issuance date of January 11, 2019. The notes are secured by the security interests and are subordinate to the Company’s senior indebtedness. 367,138 649,774 Promissory note payable bearing interest of 5.2%. The note has a 46-month term with maturity in May 2023. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 141,362 176,571 Promissory note payable bearing interest of 4.45%. The note has a 34-month term with maturity in May 2022. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning and includes debt covenants requiring a Current Ratio of 1.75 to 1.00 and a Debt Service Coverage Ratio of 1.25 to 1.00. Craft Canning must also provide annual financial statements and tax returns. Craft Canning was in compliance with all debt covenants as of September 30, 2020. 189,045 265,509 Promissory note payable under a revolving line of credit bearing variable interest starting at 5.5%. The note has a 15-month term with principal and accrued interest due in lump sum in October 2020. The borrowing limit is $250,000. The note is secured by the assets of Craft Canning. 141,000 50,000 Promissory note payable bearing interest of 4.14%. The note has a 60-month term with maturity in July 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 155,728 183,202 Promissory note payable bearing interest of 3.91%. The note has a 60-month term with maturity in August 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 239,979 281,802 Promissory note payable bearing interest of 3.96%. The note has a 60-month term with maturity in November 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 254,100 295,463 Secured line of credit promissory note for a revolving line of credit in the aggregate principal amount of $2,000,000. The Note matures on April 15, 2020 and may be prepaid in whole or in part at any time without penalty or premium. Repayment of the Note is subject to acceleration in the event of an event of default. The Company may use the proceeds to purchase tequila for its Azuñia product line and for general corporate purposes, as approved by the Holder. The obligations of the Company under the Note are secured by certain inventory of the Company and its subsidiaries and the Company’s membership interests in Craft Canning. In addition, the Note is guaranteed by the Company’s subsidiaries Craft Canning and Big Bottom Distilling. The Note and the accompanying guaranty restrict Craft Canning from incurring any new indebtedness, other than trade debt incurred in the ordinary course of business, until the Note is repaid in full. The obligations under the Note are subordinate and junior in right and priority of payment to the Company’s obligations under the Company’s Credit and Security Agreement with the KFK Children’s Trust dated May 10, 2018. The Note was paid in full in January 2020. - 946,640 Promissory notes payable bearing interest between 2.99% - 3.14%. The notes have 60-month terms with maturity dates between February 2019 – June 2020. Principal and accrued interest are paid monthly. The notes are secured by the specific vehicle underlying the loan. The Note was paid in full in July 2020. - 10,390 Total notes payable 5,358,106 5,413,426 Less current portion (4,010,887 ) (1,819,172 ) Long-term portion of notes payable $ 1,347,219 $ 3,594,254 The Company paid $0.2 million and $0.1 million in interest on notes for the nine months ended September 30, 2020 and 2019, respectively. Maturities on notes payable as of September 30, 2020, are as follows: Year ending December 31: 2020 $ 503,689 2021 4,079,584 2022 701,242 Thereafter 323,591 $ 5,608,106 |
Secured Credit Facility
Secured Credit Facility | 9 Months Ended |
Sep. 30, 2020 | |
Line of Credit Facility [Abstract] | |
Secured Credit Facility | 11. Secured Credit Facility On January 15, 2020, the Company entered into a loan agreement (the “ Loan Agreement Borrowers Borrower Lender Loan The Loan matures on January 14, 2021 (the “ Maturity Date The Loan bears interest at a rate equal to the prime rate plus a spread of 2.49%, adjusted quarterly. Accrued interest is payable monthly, with the final installment of interest being due and payable on the Maturity Date. The Borrowers are also obligated to pay a servicing fee, unused commitment fee and origination fee in connection with the Loan. The Company paid $0.3 million in interest as of September 30, 2020. The Loan Agreement contains affirmative and negative covenants that include covenants restricting each Company’s ability to, among other things, incur indebtedness, grant liens, dispose of assets, merge or consolidate, make investments, or enter into restrictive agreements, subject to certain exceptions. The obligations of the Borrowers under the Loan Agreement are secured by substantially all of their respective assets, except for accounts receivable and certain other specified excluded property. The Loan Agreement includes customary events of default that include among other things, non-payment defaults, covenant defaults, inaccuracy of representations and warranties, cross default to material indebtedness, bankruptcy and insolvency defaults and change in control defaults. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default under the Loan Agreement at a per annum rate equal to 2.00% above the applicable interest rate. In connection with the Loan Agreement, the Company issued to the Lender a warrant to purchase up to 100,000 shares of the Company’s common stock at an initial exercise price of $3.9425 per share (the “ Warrant On January 16, 2020, in connection with the Company’s consummation of the Loan Agreement, Eastside repaid in full and terminated the Secured Line of Credit Promissory Note that Eastside had issued to TQLA, LLC (“ Holder TQLA Note On May 13, 2020, Live Oak Banking Company (the “Lender”) notified the Company that it was in technical default under certain covenants in a loan agreement, dated January 15, 2020, between the Company, Motherlode LLC, Big Bottom Distilling, LLC, Craft Canning + Bottling LLC, Redneck Riviera Whiskey Co., LLC, Outlandish Beverages LLC, and Live Oak Bank (the “Loan Agreement”). Those technical defaults included the failure to timely deliver information and its belief that the Company owed certain taxes and did not relate to any failure to pay amounts owing under the Loan Agreement. The Loan Agreement provides that upon an event of default, the Lender may, at its option, declare the entire loan to be immediately due and payable. Further, a default interest rate may apply on all obligations during the existence of an event of default at a per annum rate equal to 2.00% above the applicable interest rate. On June 3, 2020 the Company entered into a Second Modification to Loan Agreement (“Modification”) with the Lender agreeing to waive the technical defaults upon the satisfaction of certain conditions by September 30, 2020. The Company complied with these conditions and was compliant with the terms of the Loan Agreement and Modification as of November 12, 2020. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 12. Commitments and Contingencies Legal Matters The Company is not currently subject to any material legal proceedings; however, it could be subject to legal proceedings and claims from time to time in the ordinary course of its business, or legal proceedings it considered immaterial may in the future become material. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and can divert management resources. |
Net Loss Per Common Share
Net Loss Per Common Share | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Net Loss Per Common Share | 13. Net Loss per Common Share Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, without considering any dilutive items. Diluted net loss per common share is computed by dividing net loss by the sum of the weighted average number of common shares outstanding and the potential number of any dilutive common shares outstanding during the period. Potentially dilutive securities consist of the incremental common stock issuable upon exercise of stock options and convertible notes. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. There were no dilutive common shares at September 30, 2020 and 2019. The numerators and denominators used in computing basic and diluted net loss per common share in 2020 and 2019 are as follows: Three months ended September 30 2020 2019 Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator) $ (1,767,021 ) $ (3,544,357 ) Weighted average shares (denominator) 10,103,936 9,255,347 Basic and diluted net loss per common share $ (0.17 ) $ (0.38 ) Nine months ended September 30, 2020 2019 Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator) $ (7,461,985 ) $ (9,436,225 ) Weighted average shares (denominator) 9,947,208 9,155,397 Basic and diluted net loss per common share $ (0.75 ) $ (1.03 ) |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | 14. Stockholders’ Equity Common Stock Paid-in Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance, December 31, 2019 9,675,028 $ 967 $ 51,566,438 $ (44,234,087 ) $ 7,333,318 Issuance of common stock for services by third parties 170,944 17 234,039 - 234,056 Issuance of common stock for services by employees 303,280 30 468,132 - 468,162 Amortization of non-deal warrant grants - - 18,791 - 18,791 Issuance of warrants for secured credit facility - - 97,800 - 97,800 Stock-based compensation - - 223,816 - 223,816 Net loss attributable to common shareholders - - - (7,461,985 ) (7,461,985 ) Balance, September 30, 2020 10,149,252 $ 1,014 $ 52,609,016 $ (51,696,072 ) $ 913,958 Issuance of Common Stock In January 2020, the Company issued 90,798 shares of common stock to directors, employees, and consultants for stock-based compensation of $290,547. The shares were valued using the closing share price of our common stock on the date of grant of $3.20 per share. On April 6, 2020, the Company issued 216,363 shares of common stock under the 2016 Equity Incentive Plan to directors, employees, and consultants for stock-based compensation of $238,800. The shares were valued using the closing share price of the Company’s common stock on the date of the grant, $1.10 per share. On May 22, 2020, the Company issued 45,553 shares of common stock to consultants for stock-based compensation of $72,885. The shares were valued using the closing share price of our common stock on the date of grant of $1.60 per share. On May 28, 2020, 10,704 shares of common stock were retired that had previously been issued to an employee. The shares were valued at the cost at the time of issuance, ranging from $3.20 to $7.94. On July 17, 2020, the Company issued 73,010 shares of common stock under the 2016 Equity Incentive Plan to directors and employees for stock-based compensation of $87,000. The shares were valued using the closing share price of the Company’s common stock on the date of the grant, $1.08 per share. On July 24, 2020, the Company issued 19,955 shares of common stock under the 2016 Equity Incentive Plan to employees for stock-based compensation of $38,125. The shares were valued using the closing share price of the Company’s common stock on the date of the grant, $1.22 per share. On August 21, 2020, the Company issued 19,955 shares of common stock under the 2016 Equity Incentive Plan to employees for stock-based compensation of $43,125. The shares were valued using the closing share price of the Company’s common stock on the date of the grant, $1.38 per share. On September 8, 2020, the Company issued 19,294 shares of common stock under the 2016 Equity Incentive Plan to employees for stock-based compensation of $42,188. The shares were valued using the closing share price of the Company’s common stock on the date of the grant, $1.35 per share. Stock-Based Compensation On September 8, 2016, the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”). Pursuant to the terms of the plan, on January 1, 2020, the number of shares available for grant under the 2016 Plan reset to 2,887,005 shares, equal to 8% of the number of outstanding shares of the Company’s capital stock, calculated on an as-converted basis, on December 31 of the preceding calendar year, and then added to the prior year plan amount. As of September 30, 2020, there have been 640,825 options and 1,061,174 restricted stock units (“RSUs”) issued under the 2016 Plan, with vesting schedules varying between immediate and five (5) years from the grant date. On January 29, 2015, the Company adopted the 2015 Stock Incentive Plan (the 2015 Plan). The total number of shares available for the grant of either stock options or compensation stock under the 2015 Plan is 50,000 shares, subject to adjustment. The exercise price per share of each stock option will not be less than 20 percent of the fair market value of the Company’s common stock on the date of grant. At September 30, 2020, there were 5,417 options issued under the Plan outstanding, which options vest at the rate of at least 25 percent in the first year, starting 6-months after the grant date, and 75% in year two. The Company also issues, from time to time, options that are not registered under a formal option plan. At September 30, 2020, there were no options outstanding that were not issued under the Plans. A summary of all stock option activity at and for the nine months ended September 30, 2020 is presented below: # of Options Weighted- Exercise Outstanding at December 31, 2019 784,101 $ 5.65 Options granted - $ - Options exercised - $ - Options canceled (218,001 ) $ 6.76 Outstanding at September 30, 2020 566,100 $ 5.22 Exercisable at September 30, 2020 454,767 $ 5.05 The aggregate intrinsic value of options outstanding at September 30, 2020 was $0. At September 30, 2020, there were 113,833 unvested options with an aggregate grant date fair value of $278,660. The unvested options will vest in accordance with the vesting schedule in each respective option agreement, which varies between immediate and five (5) years from the grant date. The aggregate intrinsic value of unvested options at September 30, 2020 was $0. During the nine months ended September 30, 2020, 69,431 options became vested. The Company uses the Black-Scholes valuation model to measure the grant-date fair value of stock options. The grant-date fair value of stock options issued to employees is recognized on a straight-line basis over the requisite service period. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments as the underlying stock-based awards vest. To determine the fair value of stock options using the Black-Scholes valuation model, the calculation takes into consideration the effect of the following: ● Exercise price of the option ● Fair value of the Company’s common stock on the date of grant ● Expected term of the option ● Expected volatility over the expected term of the option ● Risk-free interest rate for the expected term of the option The calculation includes several assumptions that require management’s judgment. The expected term of the options is calculated using the simplified method described in GAAP. The simplified method defines the expected term as the average of the contractual term and the vesting period. Estimated volatility is derived from volatility calculated using historical closing prices of common shares of similar entities whose share prices are publicly available for the expected term of the options. The risk-free interest rate is based on the U.S. Treasury constant maturities in effect at the time of grant for the expected term of the options. The Company did not issue any additional options during the nine months ended September 30, 2020. For the nine months ended September 30, 2020 and 2019, total stock compensation expense related to stock options was $223,816 and $596,852, respectively. At September 30, 2020, the total compensation cost related to stock options not yet recognized is approximately $935,755, which is expected to be recognized over a weighted-average period of approximately 2.11 years. Warrants During the nine months ended September 30, 2020, the Company issued an aggregate of 100,000 common stock warrants in connection with the Secured Credit Facility from Live Oak Bank. The estimated fair value of the warrants of $97,800 was recorded as debt issuance cost and will be amortized to interest expense over the maturity period of the secured credit facility, with $73,350 recorded in the nine months ended September 30, 2020. Warrants issued to three shareholders during 2017 and 2018 vest quarterly for 3 years and resulted in $18,791 worth of amortization expense for the nine months ending September 30, 2020. The estimated fair value of the warrants at issuance was based on a combination of closing market trading price on the date of issuance for the warrants, and the Black-Scholes option-pricing model using the weighted-average assumptions below: Volatility 40 % Risk-free interest rate 1.54 % Expected term (in years) 5.0 Expected dividend yield - Fair value of common stock $ 3.20 No warrants were exercised during the nine months ended September 30, 2020. A summary of activity in warrants is as follows: Warrants Weighted Weighted Aggregate Outstanding at December 31, 2019 736,559 1.18 years $ 6.95 $ - Nine months ended September 30, 2020: Granted 100,000 4.79 years $ 3.94 $ - Exercised - - $ - - Forfeited and cancelled (556,281 ) 0.53 years $ 7.51 - Outstanding at September 30, 2020 280,278 2.84 years $ 4.76 $ - |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 15. Related Party Transactions The following is a description of transactions since January 1, 2019 as to which the amount involved exceeds the lesser of $120,000 or one percent (1%) of the average of our total assets at year-end for the last two completed fiscal years which was $311,118 and in which any related person has or will have a direct or indirect material interest, other than equity, compensation, termination and other arrangements. On June 11, 2019, the Company’s Board appointed Owen Lingley to the Board to fill an existing vacancy on the Board effective immediately. Owen Lingley is the founder of Craft Canning, LLC, which was acquired by the Company on January 11, 2019 and subsequently changed its name to Craft Canning + Bottling LLC. In connection with the acquisition of Craft Canning, Mr. Lingley received $1,843,200 in cash, 338,212 shares of common stock of the Company and a promissory note in the aggregate principal amount of $731,211, which bears interest at a rate of 5% per annum and matures on January 11, 2022. The shares acquired by Mr. Lingley in connection with the acquisition of Craft Canning are subject to a one-year lock-up restriction and have “piggyback” registration rights effective after the one-year lock-up. Mr. Lingley resigned from the Board on November 18, 2019. In addition, the Company also issued to Mr. Lingley a warrant to purchase 146,262 shares of common stock of the Company at $7.80 per share and an exercise period of three years. The shares of common stock issuable upon exercise of the warrant will be subject to the same “piggyback” registration rights as the shares received in connection with the acquisition of Craft Canning, described above. Following the acquisition of Craft Canning, Mr. Lingley became non-executive Chairman of Craft Canning and was party to a consulting agreement with the Company. Under his consulting agreement with the Company, Mr. Lingley was to receive annual cash compensation of $75,000 per year. Mr. Lingley resigned as non-executive Chairman of Craft Canning in January 2020, and under the terms of his consulting agreement 146,262 warrants were cancelled. On October 24, 2019, the Company’s Board appointed Stephanie Kilkenny to the Board to fill an existing vacancy on the Board effective immediately. Mrs. Kilkenny was the former managing director of Azuñia Tequila, and together with her spouse, owns and controls TQLA, LLC (“TQLA”), the majority owner of Intersect Beverage, LLC. In connection with the acquisition of Azuñia Tequila from Intersect Beverage, LLC, TQLA is entitled to receive up to 93.88% of the aggregate consideration payable under the asset purchase agreement. Subject to compliance with applicable Nasdaq rules, the aggregate initial consideration will be payable approximately 18 months following the closing and will consist of 850,000 shares of Company common stock at a stipulated value of $6.00 per share, 350,000 shares of Company common stock based on the Company’s stock price twelve months after the close of the transaction, and additional shares based on the Azuñia business achieving certain revenue targets and the Company’s stock price 18 months after the close of the transaction. The Company has also agreed to issue additional stock consideration (subject to compliance with applicable Nasdaq rules) of up to $1.5 million upon the Azuñia business achieving revenue of at least $9.45 million in the period commencing on the 13th month following the closing and ending on the 24th month following the closing. In addition, on September 16, 2019, the Company entered into a Subscription Agreement with Stephanie Kilkenny’s spouse, Patrick J. Kilkenny as Trustee For Patrick J. Kilkenny Revocable Trust (the “Kilkenny Trust”), in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder, pursuant to which the Company agreed to issue and sell to the Kilkenny Trust an aggregate of 55,555 units at a per unit price of $4.50. Each unit consists of one share of the Company’s common stock and a three-year warrant to acquire 0.5 shares of common stock at an exercise price of $5.50 per share. Effective November 29, 2019, the Company issued to TQLA, LLC, a California limited liability company (“Holder”), a Secured Line of Credit Promissory Note (the “Note”) for a revolving line of credit in the aggregate principal amount of $2,000,000. The Note matures on April 15, 2020 and may be prepaid in whole or in part at any time without penalty or premium. Repayment of the Note is subject to acceleration in the event of an event of default. The Company may use the proceeds to purchase tequila for its Azuñia product line and for general corporate purposes, as approved by the Holder. As of December 31, 2019, the Company had borrowed $946,640 on the Note. Stephanie Kilkenny, a director of the Company, owns and controls TQLA, LLC with her spouse. The Company’s Audit Committee approved the transaction. The Note was paid in full in January 2020. In August 2020, the Company entered into discussions with Intersect Beverage, LLC (“Intersect”) and TQLA, LLC to address potential changes to the deferred consideration for the Azuñia acquisition and received a deposit of $250,000 in cash. No assurances can be given the discussions with Intersect will lead to a final agreement in which case the Company would have to return the cash deposit. The Company believes that the foregoing transactions were in its best interests. Consistent with Section 78.140 of the Nevada Revised Statutes, it is the Company’s current policy that all transactions between it and its officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are approved by vote of the stockholders, or are fair to the Company as a corporation as of the time it is authorized, approved or ratified by the Board. The Company will continue to conduct an appropriate review of all related party transactions and potential conflicts of interest on an ongoing basis. The Company’s audit committee has the authority and responsibility to review, approve and oversee any transaction between the Company and any related person and any other potential conflict of interest situation on an ongoing basis, in accordance with Company policies and procedures in effect from time to time. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | 16. Subsequent Events On October 29, 2020, the Company announced its intent to divest its Redneck Riviera Spirits business. The Company signed a non-binding term sheet between Eastside and Rich Marks, LLC, Redneck Riviera Whiskey Co, LLC, John D. Rich Tisa Trust and Redneck Spirits Group, LLC (collectively the buyers referred to as “RSG”). RSG will pay a termination fee as well as purchase certain assets from the Company which could include raw materials and finished goods. The total consideration is estimated to be $8.1 million inclusive of a $3 million dollar termination fee and the remainder of proceeds from selling RSG raw materials and finished goods. The divesture is subject to negotiation and execution of definitive agreements. In November 2020, Intersect Beverage, LLC (“Intersect”) and TQLA, LLC (“TQLA”) sent the Company a second deposit bringing the total outstanding amount deposited to $500,000. No assurances can be given the Company’s discussions with Intersect and TQLA will lead to a final agreement to change the deferred consideration for the Azuñia acquisition, nor that the deposits will be applied to that Agreement. If the Company is unable to reach a satisfactory agreement with Intersect and TQLA it would be required to return the cash deposit. On October 31, 2020, the Company consolidated its headquarters with the Craft Canning + Bottling office and operating facility in Portland, Oregon. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation The accompanying unaudited condensed 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 condensed 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 September 30, 2020, its operating results for the nine months ended September 30, 2020 and 2019 and its cash flows for the nine months ended September 30, 2020 and 2019. The unaudited condensed 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, 2019. Interim results are not necessarily indicative of the results that may be expected for an entire fiscal year. The condensed consolidated financial statements include the accounts of Eastside Distilling, Inc.’s wholly-owned subsidiaries, including, MotherLode LLC, Big Bottom Distilling LLC, Outlandish Beverages, LLC, Redneck Riviera Whiskey Co., LLC, Craft Canning + Bottling LLC (beginning as of January 11, 2019) and the Azuñia tequila assets (beginning September 12, 2019). All intercompany balances and transactions have been eliminated on consolidation. |
Segment Reporting | Segment Reporting The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity, producing, packaging, marketing and distributing alcoholic beverages and operates as one segment. The Company’s chief operating decision makers, its chief executive officer and chief financial officer, review the Company’s operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance. |
Use of Estimates | Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Revenue Recognition | Revenue Recognition Net sales include product sales, less customer programs and excise taxes. The Company recognizes revenue by applying the following steps in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, which include sales to the Oregon Liquor Control Commission (OLCC), the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment, other than customary rights of return. The Company excludes sales tax collected and remitted to various states from sales and cost of sales. |
Customer Programs | Customer Programs Customer programs, which include customer promotional discount programs, customer incentives, and other payments, are a common practice in the alcohol beverage industry. The Company makes these payments to customers and incurs these costs to promote sales of products and to maintain competitive pricing. Amounts paid in connection with customer programs and incentives are recorded as reductions to net sales or as sales and marketing expenses in accordance with ASC 606 - Revenue from Contracts with Customers |
Excise Taxes | Excise Taxes The Company is responsible for compliance with the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) regulations, which includes making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual states also impose excise taxes on alcohol beverages in varying amounts. The Company calculates its excise tax expense based upon units produced and sold and on its understanding of the applicable excise tax laws. Excise taxes totaled $0.2 million and $0.2 million for the nine months ended September 30, 2020 and 2019, respectively. |
Cost of Sales | Cost of Sales Cost of sales consists of the costs of ingredients utilized in the production of spirits, manufacturing labor and overhead, warehousing rent, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by packaging and production costs. |
Shipping and Fulfillment Costs | Shipping and Fulfillment Costs Freight costs incurred related to shipment of merchandise from the Company’s distribution facilities to customers are recorded in cost of sales. |
Sales and Marketing Expenses | Sales and Marketing Expenses The following expenses are included in sales and marketing expenses in the accompanying condensed consolidated statements of operations: media advertising costs, promotional costs of value-added packaging, salary and benefit expenses, travel and entertainment expenses for the sales, brand and sales support workforce and promotional activity expenses. Sales and marketing costs are expensed as incurred. Sales and marketing expense totaled $3.7 million and $4.4 million for the nine months ended September 30, 2020 and 2019, respectively. |
General and Administrative Expenses | General and Administrative Expenses The following expenses are included in general and administrative expenses in the accompanying condensed consolidated statements of operations: 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. General and administrative expense totaled $6.9 million and $8.6 million for the nine months ended September 30, 2020 and 2019, respectively, of which $2.7 million and $2.4 million were non-cash expenses, respectively. |
Stock-Based Compensation | 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. Stock-based compensation was $0.9 and $1.3 million for the nine months ended September 30, 2020 and 2019, respectively. |
Discontinued Operations | Discontinued Operations The Company reports discontinued operations by applying the following criteria in accordance with Accounting Standards Codification (“ASC”) Topic 205-20 – Presentation of Financial Statements – Discontinued Operations: (1) Component of an entity; (2) Held for sale criteria; (3) Strategic shift. During the first quarter of 2020, management made a strategic shift to focus the Company’s sales and marketing efforts on the nationally branded product platform, resulting in the decision to close / abandon all four of its retail tasting rooms in the Portland, Oregon area by March 31, 2020. This decision meets the criteria (1) - (3) for reporting discontinued operations, and as a result, the retail operations have been reported as discontinued operations in the accompanying unaudited condensed consolidated financial statements. In the current period, the income, expense, and cash flows from retail operations during the period they were consolidated have been classified as discontinued operations. For comparative purposes, amounts in the prior periods have been reclassified to conform to current period presentation. Additionally, the assets and liabilities from retail operations are shown on the balance sheet as assets and liabilities for discontinued operations. Income and expense related to discontinued retail operations for the nine months ended September 30, 2020 and 2019: September 30, September 30, Sales $ 148,490 $ 711,616 Less customer programs and excise taxes 46,342 266,785 Net sales 102,148 444,831 Cost of sales 64,101 213,485 Gross profit 38,047 231,346 Operating expenses: Sales and marketing expenses 2,534 21,670 General and administrative expenses 168,299 546,788 Loss on disposal of property and equipment 75,829 - Total operating expenses 246,662 568,458 Loss from operations (208,615 ) (337,112 ) Assets and liabilities related to discontinued retail operations September 30, December 31, Assets Current assets: Cash - $ 615 Trade receivables - 1,734 Inventories - 62,102 Prepaid expenses and current assets - 10,441 Total current assets - 74,892 Property and equipment, net - 86,059 Right-of-use assets 103,476 164,952 Other assets 3,189 10,855 Total Assets $ 106,665 $ 336,758 Liabilities Current liabilities: Accounts payable $ (12,748 ) $ 56,241 Accrued liabilities - 7,763 Deferred revenue - 1,734 Current portion of lease liability 30,003 59,540 Total current liabilities 17,255 125,278 Lease Liability - less current portion 78,658 112,760 Total liabilities $ 95,913 $ 238,038 |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash equivalents are considered to be highly liquid investments with maturities of three months or less at the time of the purchase. The Company had no cash equivalents at September 30, 2020 and December 31, 2019. |
Fair Value Measurements | Fair Value Measurements GAAP defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAAP permits an entity to choose to measure many financial instruments and certain other items at fair value and contains financial statement presentation and disclosure requirements for assets and liabilities for which the fair value option is elected. At September 30, 2020 and December 31, 2019, management has not elected to report any of the Company’s assets or liabilities at fair value under the “fair value option” provided by GAAP. The hierarchy of fair value valuation techniques under GAAP provides for three levels: Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, generally would require significant management judgment. The three levels for categorizing assets and liabilities under GAAP’s fair value measurement requirements are as follows: Level 1: Fair value of the asset or liability is determined using cash or unadjusted quoted prices in active markets for identical assets or liabilities. 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 at September 30, 2020 and December 31, 2019. 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 convertible notes payable. The estimated fair value of trade receivables, accounts payable, and accrued liabilities approximates their carrying value due to the short period of time to their maturities. At September 30, 2020 and December 31, 2019, the Company’s notes payable are at fixed rates and their carrying value approximates 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. |
Inventories | Inventories Inventories primarily consist of bulk and bottled liquor, raw packaging material for bottling, raw cans for Craft Canning, and merchandise and are stated at the lower of cost or market. Cost is determined using an average costing methodology, which approximates cost under the first-in, first-out (FIFO) method. A portion of inventory is held by certain independent distributors on consignment until it is sold to a third party. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost basis of accounting for the related inventory. The Company recorded an inventory allowance of $0.3 million for obsolete inventory for the nine months ended September 30, 2020 and no write-downs of inventory for the nine months ended September 30, 2019. |
Property and Equipment | Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Amortization of leasehold improvements is computed using the straight-line method over the life of the lease or the useful lives of the assets, whichever is shorter. The cost and related accumulated depreciation and amortization of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current period income or expense. The costs of repairs and maintenance are expensed as incurred. |
Intangible Assets / Goodwill | Intangible Assets / Goodwill The Company accounts for long-lived assets, including property and equipment and intangible assets, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount, an impairment loss would be recognized to write down the asset to its estimated fair value. The Company performed a qualitative assessment of goodwill at September 30, 2020 and determined that goodwill was not impaired. |
Long-lived Assets | Long-lived Assets The Company accounts for long-lived assets, including property and equipment, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount of the asset, an impairment loss would be recognized to write down the asset to its estimated fair value. |
Income Taxes | Income Taxes The provision for income taxes is based on income and expenses as reported for financial statement purposes using the “asset and liability method” for accounting for deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. At September 30, 2020 and December 31, 2019, the Company established valuation allowances against its net deferred tax assets. Income tax positions that meet the “more-likely-than-not” recognition threshold are measured at the largest amount of income tax benefit that is more than 50% likely to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with income tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized income tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized income tax benefits would be classified as additional income taxes in the accompanying condensed consolidated statements of operations. There were no unrecognized income tax benefits, nor any interest and penalties associated with unrecognized income tax benefits, accrued or expensed at and for the nine months ended September 30, 2020 and 2019. The Company files federal income tax returns in the U.S. and various state income tax returns. The Company is no longer subject to examinations by the related tax authorities for the Company’s U.S. federal and state income tax returns for years prior to 2012. |
Comprehensive Income | Comprehensive Income The Company does not have any reconciling other comprehensive income items for the nine months ended September 30, 2020 and 2019. |
Accounts Receivable Factoring Program | Accounts Receivable Factoring Program The Company has entered into two accounts receivable factoring programs. One for its spirits customers (the “spirits program”) and another for its co-packing customers (the “co-packing program”). Under the programs, the Company has 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 is charged against the greater of $500,000 or the total funds advanced at a rate of 5% plus the prime rate published in the Wall Street Journal. Under the terms of both agreements, the factoring provider has full recourse against the Company should the customer fail to pay the invoice. In accordance with ASC 860, we have concluded that these agreements have met all three conditions identified in ASC 860-10-40-5 (a) – (c) and have accounted for this activity as a sale. Given the quality of the factored accounts, the Company has not recognized a recourse obligation. In certain limited instances, the Company may provide collection services on the factored accounts but does not receive any fees for acting as the collection agent, and as such, the Company has not recognized a service obligation asset or liability. The Company factored $6.7 million of invoices and incurred $0.14 million in fees associated with the factoring programs during the nine months ended September 30, 2020. At September 30, 2020, the Company had $0.9 million factored invoices outstanding. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Discontinued Retail Operations | Income and expense related to discontinued retail operations for the nine months ended September 30, 2020 and 2019: September 30, September 30, Sales $ 148,490 $ 711,616 Less customer programs and excise taxes 46,342 266,785 Net sales 102,148 444,831 Cost of sales 64,101 213,485 Gross profit 38,047 231,346 Operating expenses: Sales and marketing expenses 2,534 21,670 General and administrative expenses 168,299 546,788 Loss on disposal of property and equipment 75,829 - Total operating expenses 246,662 568,458 Loss from operations (208,615 ) (337,112 ) Assets and liabilities related to discontinued retail operations September 30, December 31, Assets Current assets: Cash - $ 615 Trade receivables - 1,734 Inventories - 62,102 Prepaid expenses and current assets - 10,441 Total current assets - 74,892 Property and equipment, net - 86,059 Right-of-use assets 103,476 164,952 Other assets 3,189 10,855 Total Assets $ 106,665 $ 336,758 Liabilities Current liabilities: Accounts payable $ (12,748 ) $ 56,241 Accrued liabilities - 7,763 Deferred revenue - 1,734 Current portion of lease liability 30,003 59,540 Total current liabilities 17,255 125,278 Lease Liability - less current portion 78,658 112,760 Total liabilities $ 95,913 $ 238,038 |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisition Assets and Liabilities | The allocation of the purchase price is as follows: Consideration given: 338,212 shares of common stock valued at $6.15 per share $ 2,080,004 Cash 2,003,200 Notes payable 761,678 Total value of acquisition $ 4,844,882 Assets and liabilities acquired: Cash $ 553,283 Trade receivables, net 625,717 Inventories, net 154,824 Prepaid expenses and current assets 250 Property and equipment, net 1,839,486 Right-of-use assets 232,884 Intangible assets - customer list 2,895,318 Other assets 26,600 Accounts payable (231,613 ) Accrued liabilities (74,389 ) Deferred revenue (52,000 ) Lease liabilities (256,375 ) Notes payable (869,103 ) Total $ 4,844,882 |
Schedule of Allocation of Purchase Price | The allocation of the purchase price is as follows: Consideration given: Deferred consideration payable $ 12,781,092 Total value of acquisition $ 12,781,092 Assets acquired: Inventories, net $ 836,026 Intangible assets - brand 11,945,066 Total $ 12,781,092 |
Schedule of Pro Forma Financial Information | The following unaudited pro forma consolidated results of operations for the nine months ended September 30, 2019 assume that both acquisitions of Craft Canning + Bottling and Azuñia Tequila were completed on January 1, 2019: 2019 Pro forma sales $ 14,536,214 Pro forma net loss (9,766,420 ) Pro forma basic and diluted net loss per share $ (0.82 ) |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consist of the following: (Dollars in thousands) September 30, 2020 December 31, 2019 Raw materials $ 8,677 $ 9,336 Finished goods 1,648 2,995 Total inventories $ 10,325 $ 12,331 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consist of the following: (Dollars in thousands) September 30, 2020 December 31, 2019 Furniture and fixtures $ 4,369 $ 4,464 Leasehold improvements 1,640 1,654 Vehicles 779 690 Construction in progress 53 98 Total cost 6,841 6,906 Less accumulated depreciation (3,474 ) (2,219 ) Property and equipment - net $ 3,367 $ 4,687 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets and Goodwill | Intangible assets and goodwill at September 30, 2020 and December 31, 2019 consist of the following: (Dollars in thousands) September 30, 2020 December 31, 2019 Permits and licenses $ 25 $ 25 Azuñia brand 11,945 11,945 Customer lists 2,896 3,247 Goodwill 28 28 Total intangible assets and goodwill 14,894 15,245 Less accumulated amortization (724 ) (542 ) Intangible assets and goodwill - net $ 14,170 14,703 |
Other Assets (Tables)
Other Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Other Assets | Other assets consist of the following: (Dollars in thousands) September 30, 2020 December 31, 2019 Product branding $ 949 $ 809 Notes receivable - 450 Deposits 60 43 Total other assets 1,009 1,302 Less accumulated amortization (219 ) (136 ) Other assets - net $ 790 $ 1,166 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Schedule of Maturities of Operating Lease Liabilities | Maturities of lease liabilities as of September 30, 2020 are as follows: Operating Weighted- Average Remaining Term in Years 2020 $ 158,821 2021 580,380 2022 353,509 2023 266,045 Thereafter 250,798 Total lease payments 1,609,553 Less imputed interest (based on 6.6% weighted- average discount rate (184,796 ) Present value of lease liability $ 1,424,757 3.4 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable | Notes payable consists of the following: September 30, December 31, Notes payable bearing interest at 5.00%. The notes’ principal, plus any accrued and unpaid interest is due May 1, 2021. Interest is paid monthly. 2,300,000 2,300,000 Notes payable bearing interest at 1.00%. The notes’ principal, plus any accrued and unpaid interest is due May 1, 2022. Loan payments are deferred six months from start of loan. 1,049,317 - Notes payable bearing interest at 1.00%. The notes’ principal, plus any accrued and unpaid interest is due May 1, 2022. Loan payments are deferred six months from start of loan. 395,437 - Convertible note payable bearing interest at 9.00%. The note principal, plus any accrued and unpaid interest is due December 31, 2020. The note has a voluntary conversion feature where in the event of an equity offering of at least $1,000,000 at a purchase price of at least $4.25 (subject to adjustment), the noteholder shall have the right to participate in the financing by converting all outstanding principal and accrued and unpaid interest on this note into the securities to be sold in the offering. 125,000 254,075 Notes payable bearing interest at 5.00%. Principal and accrued interest is payable in six equal installments on each six-month anniversary of the issuance date of January 11, 2019. The notes are secured by the security interests and are subordinate to the Company’s senior indebtedness. 367,138 649,774 Promissory note payable bearing interest of 5.2%. The note has a 46-month term with maturity in May 2023. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 141,362 176,571 Promissory note payable bearing interest of 4.45%. The note has a 34-month term with maturity in May 2022. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning and includes debt covenants requiring a Current Ratio of 1.75 to 1.00 and a Debt Service Coverage Ratio of 1.25 to 1.00. Craft Canning must also provide annual financial statements and tax returns. Craft Canning was in compliance with all debt covenants as of September 30, 2020. 189,045 265,509 Promissory note payable under a revolving line of credit bearing variable interest starting at 5.5%. The note has a 15-month term with principal and accrued interest due in lump sum in October 2020. The borrowing limit is $250,000. The note is secured by the assets of Craft Canning. 141,000 50,000 Promissory note payable bearing interest of 4.14%. The note has a 60-month term with maturity in July 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 155,728 183,202 Promissory note payable bearing interest of 3.91%. The note has a 60-month term with maturity in August 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 239,979 281,802 Promissory note payable bearing interest of 3.96%. The note has a 60-month term with maturity in November 2024. Principal and accrued interest are paid in accordance with a monthly amortization schedule. The note is secured by the assets of Craft Canning. 254,100 295,463 Secured line of credit promissory note for a revolving line of credit in the aggregate principal amount of $2,000,000. The Note matures on April 15, 2020 and may be prepaid in whole or in part at any time without penalty or premium. Repayment of the Note is subject to acceleration in the event of an event of default. The Company may use the proceeds to purchase tequila for its Azuñia product line and for general corporate purposes, as approved by the Holder. The obligations of the Company under the Note are secured by certain inventory of the Company and its subsidiaries and the Company’s membership interests in Craft Canning. In addition, the Note is guaranteed by the Company’s subsidiaries Craft Canning and Big Bottom Distilling. The Note and the accompanying guaranty restrict Craft Canning from incurring any new indebtedness, other than trade debt incurred in the ordinary course of business, until the Note is repaid in full. The obligations under the Note are subordinate and junior in right and priority of payment to the Company’s obligations under the Company’s Credit and Security Agreement with the KFK Children’s Trust dated May 10, 2018. The Note was paid in full in January 2020. - 946,640 Promissory notes payable bearing interest between 2.99% - 3.14%. The notes have 60-month terms with maturity dates between February 2019 – June 2020. Principal and accrued interest are paid monthly. The notes are secured by the specific vehicle underlying the loan. The Note was paid in full in July 2020. - 10,390 Total notes payable 5,358,106 5,413,426 Less current portion (4,010,887 ) (1,819,172 ) Long-term portion of notes payable $ 1,347,219 $ 3,594,254 |
Schedule of Maturities on Notes Payable | Maturities on notes payable as of September 30, 2020, are as follows: Year ending December 31: 2020 $ 503,689 2021 4,079,584 2022 701,242 Thereafter 323,591 $ 5,608,106 |
Net Loss Per Common Share (Tabl
Net Loss Per Common Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Net Loss Per Common Share | The numerators and denominators used in computing basic and diluted net loss per common share in 2020 and 2019 are as follows: Three months ended September 30 2020 2019 Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator) $ (1,767,021 ) $ (3,544,357 ) Weighted average shares (denominator) 10,103,936 9,255,347 Basic and diluted net loss per common share $ (0.17 ) $ (0.38 ) Nine months ended September 30, 2020 2019 Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator) $ (7,461,985 ) $ (9,436,225 ) Weighted average shares (denominator) 9,947,208 9,155,397 Basic and diluted net loss per common share $ (0.75 ) $ (1.03 ) |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Schedule of Stockholders' Equity | Common Stock Paid-in Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance, December 31, 2019 9,675,028 $ 967 $ 51,566,438 $ (44,234,087 ) $ 7,333,318 Issuance of common stock for services by third parties 170,944 17 234,039 - 234,056 Issuance of common stock for services by employees 303,280 30 468,132 - 468,162 Amortization of non-deal warrant grants - - 18,791 - 18,791 Issuance of warrants for secured credit facility - - 97,800 - 97,800 Stock-based compensation - - 223,816 - 223,816 Net loss attributable to common shareholders - - - (7,461,985 ) (7,461,985 ) Balance, September 30, 2020 10,149,252 $ 1,014 $ 52,609,016 $ (51,696,072 ) $ 913,958 |
Summary of Stock Option Activity | A summary of all stock option activity at and for the nine months ended September 30, 2020 is presented below: # of Options Weighted- Exercise Outstanding at December 31, 2019 784,101 $ 5.65 Options granted - $ - Options exercised - $ - Options canceled (218,001 ) $ 6.76 Outstanding at September 30, 2020 566,100 $ 5.22 Exercisable at September 30, 2020 454,767 $ 5.05 |
Schedule of Weighted-average Assumptions for Warrants | The estimated fair value of the warrants at issuance was based on a combination of closing market trading price on the date of issuance for the warrants, and the Black-Scholes option-pricing model using the weighted-average assumptions below: Volatility 40 % Risk-free interest rate 1.54 % Expected term (in years) 5.0 Expected dividend yield - Fair value of common stock $ 3.20 |
Summary of Warrant Activity | No warrants were exercised during the nine months ended September 30, 2020. A summary of activity in warrants is as follows: Warrants Weighted Weighted Aggregate Outstanding at December 31, 2019 736,559 1.18 years $ 6.95 $ - Nine months ended September 30, 2020: Granted 100,000 4.79 years $ 3.94 $ - Exercised - - $ - - Forfeited and cancelled (556,281 ) 0.53 years $ 7.51 - Outstanding at September 30, 2020 280,278 2.84 years $ 4.76 $ - |
Liquidity (Details Narrative)
Liquidity (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Net loss | $ (1,756,444) | $ (3,453,090) | $ (7,253,370) | $ (9,099,113) | |
Accumulated deficit | (51,696,072) | (51,696,072) | $ (44,234,087) | ||
Cash from combination of equity and debt | 3,236,422 | $ 1,529,389 | |||
Cash on hand | 959,126 | 959,126 | $ 342,678 | ||
Negative working capital | $ 16,600,000 | $ 16,600,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)Number | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
Number of operating segments | Number | 1 | ||||
Customer programs and incentives paid | $ 700,000 | $ 400,000 | |||
Excise taxes | 200,000 | 200,000 | |||
Sales and marketing expense | 3,700,000 | 4,400,000 | |||
General and administrative expense | $ 2,366,307 | $ 3,224,038 | 6,851,577 | 8,595,051 | |
General and administrative non-cash expense | 2,700,000 | 2,400,000 | |||
Stock-based compensation | 242,607 | 510,674 | |||
Cash equivalents | |||||
Inventory allowances | $ 300,000 | 300,000 | |||
Inventory write-downs | |||||
Income tax likelihood, description | More than 50% | ||||
Unrecognized income tax benefit, interest and penalties | |||||
Payment of account receivables in advance percentage | 75.00% | ||||
Concentration risk percentage description | Under the programs, the Company has 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. | ||||
Interest charged on advance payment, rate | 5.00% | ||||
Interest charged on advance payment amount | $ 500,000 | ||||
Factored invoices | 6,700,000 | ||||
Factoring fee amount | 1,400,000 | ||||
Outstanding factored invoices | $ 900,000 | $ 900,000 | |||
Minimum [Member] | |||||
Property and equipment estimated useful lives | 3 years | ||||
Maximum [Member] | |||||
Property and equipment estimated useful lives | 7 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Discontinued Retail Operations (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | |||
Sales | $ 148,490 | $ 711,616 | |
Less customer programs and excise taxes | 46,342 | 266,785 | |
Net sales | 102,148 | 444,831 | |
Cost of sales | 64,101 | 213,485 | |
Gross profit | 38,047 | 231,346 | |
Sales and marketing expenses | 2,534 | 21,670 | |
General and administrative expenses | 168,299 | 546,788 | |
Loss on disposal of property and equipment | 75,829 | ||
Total operating expenses | 246,662 | 568,458 | |
Loss from operations | (208,615) | $ (337,112) | |
Cash | $ 615 | ||
Trade receivables | 1,734 | ||
Inventories | 62,102 | ||
Prepaid expenses and current assets | 10,441 | ||
Total current assets | 74,892 | ||
Property and equipment, net | 86,059 | ||
Right-of-use assets | 103,476 | 164,952 | |
Other assets | 3,189 | 10,855 | |
Total Assets | 106,665 | 336,758 | |
Accounts payable | (12,748) | 56,241 | |
Accrued liabilities | 7,763 | ||
Deferred revenue | 1,734 | ||
Current portion of lease liability | 30,003 | 59,540 | |
Total current liabilities | 17,255 | 125,278 | |
Lease Liability - less current portion | 78,658 | 112,760 | |
Total liabilities | $ 95,913 | $ 238,038 |
Business Acquisitions (Details
Business Acquisitions (Details Narrative) - USD ($) | Sep. 12, 2019 | Jan. 11, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2019 | Jan. 10, 2019 |
Sales | $ 4,498,218 | $ 4,286,508 | $ 11,895,250 | $ 11,381,486 | |||||
Net income | (1,756,444) | $ (3,453,090) | (7,253,370) | (9,099,113) | |||||
Deferred Consideration for Azuñia acquisition (Long Term) | $ 15,451,500 | ||||||||
Craft Canning and Big Bottom Distillery, LLC [Member] | |||||||||
Acquisitions costs | $ 100,000 | ||||||||
Sales | 67,000,000 | ||||||||
Net income | 700,000 | ||||||||
Stock issued during period, shares, acquisitions | 338,212 | ||||||||
Acquisition price per share | $ 6.15 | ||||||||
Azunia Tequila [Member] | |||||||||
Sales | $ 2,400,000 | $ 5,900,000 | |||||||
Net income | $ 500,000 | ||||||||
Debt instrument term | 3 years | ||||||||
Stock issued during period, shares, acquisitions | 850,000 | ||||||||
Acquisition price per share | $ 6 | ||||||||
Additional common stock of shares acquired during acquisition | 350,000 | ||||||||
Deferred Consideration for Azuñia acquisition (Long Term) | $ 12,781,092 | ||||||||
Azunia Tequila [Member] | Maximum [Member] | |||||||||
Aggregate future revenue performance on acquisition | 1,500,000 | 15,500,000 | |||||||
Azunia Tequila [Member] | Minimum [Member] | |||||||||
Aggregate future revenue performance on acquisition | $ 9,450,000 | $ 2,700,000 |
Business Acquisitions - Schedul
Business Acquisitions - Schedule of Business Acquisition Assets and Liabilities (Details) - Craft Canning and Big Bottom Distillery, LLC [Member] | Jan. 11, 2019USD ($) |
338,212 shares of common stock valued at $6.15 per share | $ 2,080,004 |
Cash | 2,003,200 |
Notes payable | 761,678 |
Total value of acquisition | 4,844,882 |
Cash | 553,283 |
Trade receivables, net | 625,717 |
Inventories, net | 154,824 |
Prepaid expenses and current assets | 250 |
Property and equipment, net | 1,839,486 |
Right-of-use assets | 232,884 |
Intangible assets - customer list | 2,895,318 |
Other assets | 26,600 |
Accounts payable | (231,613) |
Accrued liabilities | (74,389) |
Deferred revenue | (52,000) |
Lease liabilities | (256,375) |
Notes payable | (869,103) |
Total | $ 4,844,882 |
Business Acquisitions - Sched_2
Business Acquisitions - Schedule of Business Acquisition Assets and Liabilities (Details) (Parenthetical) - Craft Canning and Big Bottom Distillery, LLC [Member] - $ / shares | Jan. 11, 2019 | Jan. 10, 2019 |
Stock issued during period, shares, acquisitions | 338,212 | |
Common stock valued per share | $ 6.15 |
Business Acquisitions - Sched_3
Business Acquisitions - Schedule of Allocation of Purchase Price (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 12, 2019 |
Deferred consideration payable | $ 15,451,500 | ||
Azunia Tequila [Member] | |||
Deferred consideration payable | $ 12,781,092 | ||
Total value of acquisition | 12,781,092 | ||
Inventories, net | 836,026 | ||
Intangible assets - brand | 11,945,066 | ||
Total assets acquired | $ 12,781,092 |
Business Acquisitions - Sched_4
Business Acquisitions - Schedule of Pro Forma Financial Information (Details) | 9 Months Ended |
Sep. 30, 2019USD ($)$ / shares | |
Business Combinations [Abstract] | |
Pro forma sales | $ 14,536,214 |
Pro forma net loss | $ (9,766,420) |
Pro forma basic and diluted net loss per share | $ / shares | $ (0.82) |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 8,677,000 | $ 9,336,000 |
Finished goods | 1,648,000 | 2,995,000 |
Total inventories | $ 10,325,191 | $ 12,331,133 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Purchases of property and equipment | $ 413,967 | $ 2,330,972 |
Depreciation expense | 1,400,000 | 600,000 |
Gain on disposal of fixed assets | $ 10,000 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Total cost | $ 6,841,000 | $ 6,906,000 |
Less accumulated depreciation | (3,474,000) | (2,219,000) |
Property and equipment, net | 3,366,831 | 4,687,469 |
Furniture and Fixtures [Member] | ||
Total cost | 4,369,000 | 4,464,000 |
Leasehold Improvements [Member] | ||
Total cost | 1,640,000 | 1,654,000 |
Vehicles [Member] | ||
Total cost | 779,000 | 690,000 |
Construction in Progress [Member] | ||
Total cost | $ 53,000 | $ 98,000 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Amortization of intangible assets | $ 400,000 | $ 500,000 |
Amotization period | 7 years | |
MotherLode LLC [Member] | ||
Net value of customer write down | $ 176,971 |
Intangible Assets and Goodwil_3
Intangible Assets and Goodwill - Schedule of Intangible Assets and Goodwill (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Total intangible assets and goodwill | $ 14,894,000 | $ 15,245,000 |
Less accumulated amortization | (724,000) | (542,000) |
Intangible assets and goodwill - net | 14,170,000 | 14,703,000 |
Permits and Licenses [Member] | ||
Total intangible assets and goodwill | 25,000 | 25,000 |
Azunia Brand [Member] | ||
Total intangible assets and goodwill | 11,945,000 | 11,945,000 |
Customer Lists [Member] | ||
Total intangible assets and goodwill | 2,896,000 | 3,247,000 |
Goodwill [Member] | ||
Total intangible assets and goodwill | $ 28,000 | $ 28,000 |
Other Assets (Details Narrative
Other Assets (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Capitalized costs of rebranding product line | $ 900,000 | |
Capitalized costs amortization period | 7 years | |
Amortization expense | $ 80,000 | $ 50,000 |
Other Assets - Schedule of Othe
Other Assets - Schedule of Other Assets (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Total other assets | $ 1,009,000 | $ 1,302,000 |
Less accumulated amortization | (219,000) | (136,000) |
Other assets - net | 787,008 | 1,165,581 |
Product Branding [Member] | ||
Total other assets | 949,000 | 809,000 |
Notes Receivable [Member] | ||
Total other assets | 450,000 | |
Deposits [Member] | ||
Total other assets | $ 60,000 | $ 43,000 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Lease obligations expire, description | These lease obligations expire at various dates through 2025 | |
Right-of-use assets | $ 1,361,188 | $ 577,856 |
Lease liabilities | 1,424,757 | |
Aggregate lease expense | 500,000 | |
Lease expense | 400,000 | |
Short-term lease cost | 100,000 | |
ASU 2016-02 [Member] | ||
Right-of-use assets | 1,400,000 | |
Lease liabilities | $ 1,400,000 |
Leases - Schedule of Maturities
Leases - Schedule of Maturities of Operating Lease Liabilities (Details) | Sep. 30, 2020USD ($) |
Leases [Abstract] | |
2020 | $ 158,821 |
2021 | 580,380 |
2022 | 353,509 |
2023 | 266,045 |
Thereafter | 250,798 |
Total lease payments | 1,609,553 |
Less imputed interest (based on 6.6% weighted- average discount rate | (184,796) |
Present value of lease liability | $ 1,424,757 |
Weighted-Average Remaining Term in Years | 3 years 3 months 19 days |
Leases - Schedule of Maturiti_2
Leases - Schedule of Maturities of Operating Lease Liabilities (Details) (Parenthetical) | Sep. 30, 2020 |
Leases [Abstract] | |
Weighted average discount rate | 6.60% |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Debt Disclosure [Abstract] | ||
Interest on notes | $ 200,000 | $ 10,000 |
Notes Payable - Schedule of Not
Notes Payable - Schedule of Notes Payable (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Total notes payable | $ 5,358,106 | $ 5,413,426 |
Less current portion | (4,010,887) | (1,819,172) |
Long-term portion of notes payable | 1,347,219 | 3,594,254 |
Note Payable 1 [Member] | ||
Total notes payable | 2,300,000 | 2,300,000 |
Note Payable 2 [Member] | ||
Total notes payable | 1,049,317 | |
Note Payable 3 [Member] | ||
Total notes payable | 395,437 | |
Note Payable 4 [Member] | ||
Total notes payable | 125,000 | 254,075 |
Note Payable 5 [Member] | ||
Total notes payable | 367,138 | 649,774 |
Note Payable 6 [Member] | ||
Total notes payable | 141,362 | 176,571 |
Note Payable 7 [Member] | ||
Total notes payable | 189,045 | 265,509 |
Note Payable 8 [Member] | ||
Total notes payable | 141,000 | 50,000 |
Note Payable 9 [Member] | ||
Total notes payable | 155,728 | 183,202 |
Note Payable 10 [Member] | ||
Total notes payable | 239,979 | 281,802 |
Note Payable 11 [Member] | ||
Total notes payable | 254,100 | 295,463 |
Note Payable 12 [Member] | ||
Total notes payable | 946,640 | |
Note Payable 13 [Member] | ||
Total notes payable | $ 10,390 |
Notes Payable - Schedule of N_2
Notes Payable - Schedule of Notes Payable (Details) (Parenthetical) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Note Payable 1 [Member] | ||
Debt instrument interest rate | 5.00% | 5.00% |
Debt instrument maturity date description | Due May 1, 2021 | Due May 1, 2021 |
Note Payable 2 [Member] | ||
Debt instrument interest rate | 1.00% | 1.00% |
Debt instrument maturity date description | Due May 1, 2022 | Due May 1, 2022 |
Note Payable 3 [Member] | ||
Debt instrument interest rate | 1.00% | 1.00% |
Debt instrument maturity date description | Due May 1, 2022 | Due May 1, 2022 |
Note Payable 4 [Member] | ||
Debt instrument interest rate | 9.00% | 9.00% |
Debt instrument maturity date description | Due December 31, 2020 | Due December 31, 2020 |
Equity offering | $ 1,000,000 | $ 1,000,000 |
Share purchase price | $ 4.25 | $ 4.25 |
Note Payable 5 [Member] | ||
Debt instrument interest rate | 5.00% | 5.00% |
Note Payable 6 [Member] | ||
Debt instrument interest rate | 5.20% | 5.20% |
Debt instrument maturity date description | The note has a 46-month term with maturity in May 2023 | The note has a 46-month term with maturity in May 2023 |
Debt maturity term | 46 months | 46 months |
Note Payable 7 [Member] | ||
Debt instrument interest rate | 4.45% | 4.45% |
Debt instrument maturity date description | The note has a 34-month term with maturity in May 2022 | The note has a 34-month term with maturity in May 2022 |
Debt instrument, covenants | The note is secured by the assets of Craft Canning and includes debt covenants requiring a Current Ratio of 1.75 to 1.00 and a Debt Service Coverage Ratio of 1.25 to 1.00. | The note is secured by the assets of Craft Canning and includes debt covenants requiring a Current Ratio of 1.75 to 1.00 and a Debt Service Coverage Ratio of 1.25 to 1.00. |
Debt service coverage | Debt Service Coverage Ratio of 1.25 to 1.00 | Debt Service Coverage Ratio of 1.25 to 1.00 |
Note Payable 8 [Member] | ||
Debt instrument interest rate | 5.50% | 5.50% |
Debt instrument maturity date description | The note has a 15-month term with principal and accrued interest due in lump sum in October 2020. | The note has a 15-month term with principal and accrued interest due in lump sum in October 2020. |
Debt maturity term | 15 months | 15 months |
Revolving line of credit borrowing limit | $ 250,000 | $ 250,000 |
Note Payable 9 [Member] | ||
Debt instrument interest rate | 4.14% | 4.14% |
Debt instrument maturity date description | The note has a 60-month term with maturity in July 2024. | The note has a 60-month term with maturity in July 2024. |
Debt maturity term | 60 months | 60 months |
Note Payable 10 [Member] | ||
Debt instrument interest rate | 3.91% | 3.91% |
Debt instrument maturity date description | The note has a 60-month term with maturity in August 2024. | The note has a 60-month term with maturity in August 2024. |
Debt maturity term | 60 months | 60 months |
Note Payable 11 [Member] | ||
Debt instrument interest rate | 3.96% | 3.96% |
Debt instrument maturity date description | The note has a 60-month term with maturity in November 2024. | The note has a 60-month term with maturity in November 2024. |
Debt maturity term | 60 months | 60 months |
Note Payable 12 [Member] | ||
Debt instrument maturity date description | The Note matures on April 15, 2020 | The Note matures on April 15, 2020 |
Revolving line of credit borrowing limit | $ 2,000,000 | $ 2,000,000 |
Note Payable 13 [Member] | ||
Debt instrument maturity date description | The notes have 60-month terms with maturity dates between February 2019 - June 2020. | The notes have 60-month terms with maturity dates between February 2019 - June 2020. |
Note Payable 13 [Member] | Minimum [Member] | ||
Debt instrument interest rate | 2.99% | 2.99% |
Note Payable 13 [Member] | Maximum [Member] | ||
Debt instrument interest rate | 3.14% | 3.14% |
Notes Payable - Schedule of Mat
Notes Payable - Schedule of Maturities on Notes Payable (Details) | Sep. 30, 2020USD ($) |
Debt Disclosure [Abstract] | |
2020 | $ 503,689 |
2021 | 4,079,584 |
2022 | 701,242 |
Thereafter | 323,591 |
Total | $ 5,608,106 |
Secured Credit Facility (Detail
Secured Credit Facility (Details Narrative) - USD ($) | Jan. 16, 2020 | Jan. 15, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | May 13, 2020 |
Interest paid | $ 200,000 | $ 10,000 | |||
TQLA Note [Member] | |||||
Interest paid | 27,015 | ||||
Loan Agreement [Member] | |||||
Loan advance to borrowers | $ 8,000,000 | ||||
Borrowing base percentage, description | Under the Loan Agreement, the Lender has committed to make up to two loan advances to the Borrowers in an aggregate principal amount not to exceed the lesser of (i) $8,000,000 and (ii) a borrowing base equal to 85% of the appraised value of the Borrowers' eligible inventory of whisky in barrels or totes less an amount equal to all service fees or rental payments owed by the Borrowers during the 90 day period immediately succeeding the date of determination to any warehouses or bailees holding eligible inventory (the "Loan"). | ||||
Maturity date | Jan. 14, 2021 | ||||
Interest rate | 2.49% | ||||
Interest paid | 300,000 | ||||
Increase in interest rate | 2.00% | ||||
Warrants to purchase common stock | 100,000 | ||||
Warrant exercise price | $ 3.9425 | ||||
Warrant expiration, description | Jan. 15, 2025 | ||||
Loan Agreement [Member] | Live Oak Banking Company [Member] | |||||
Interest rate | 2.00% | ||||
Credit and Security Agreement [Member] | |||||
Interest paid | $ 17,117 | ||||
Termination of line of credit | $ 3,000,000 |
Net Loss Per Common Share - Sch
Net Loss Per Common Share - Schedule of Basic and Diluted Net Loss Per Common Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Earnings Per Share [Abstract] | ||||
Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator) | $ (1,767,021) | $ (3,544,299) | $ (7,461,985) | $ (9,436,225) |
Weighted average shares (denominator) | 10,103,936 | 9,255,347 | 9,947,208 | 9,155,397 |
Basic and diluted net loss per common share | $ (0.17) | $ (0.38) | $ (0.75) | $ (1.03) |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | Sep. 08, 2020 | Aug. 21, 2020 | Jul. 24, 2020 | Jul. 17, 2020 | May 28, 2020 | May 22, 2020 | Apr. 06, 2020 | Jan. 02, 2020 | Jan. 31, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Jan. 02, 2019 | Jan. 29, 2015 |
Stock issued during period, value, issued for services | $ 234,056 | ||||||||||||
Stock issued shares for stock based compensation, value | $ 223,816 | ||||||||||||
Option granted | |||||||||||||
Vesting period of option | 5 years | ||||||||||||
Aggregate intrinsic value of options outstanding | $ 0 | ||||||||||||
Number of unvested options | 113,833 | ||||||||||||
Compensation cost related to stock options not yet recognized | $ 278,660 | ||||||||||||
Aggregate intrinsic value of unvested options | $ 0 | ||||||||||||
Number of options vested | 69,431 | ||||||||||||
Stock compensation expenses | $ 223,816 | 596,852 | |||||||||||
Aggregate grant date fair value unvested options | $ 935,755 | ||||||||||||
Period of compensation cost related to stock options not yet recognized | 2 years 1 month 9 days | ||||||||||||
Warrants issued | 100,000 | ||||||||||||
Fair value of warrants | $ 97,800 | ||||||||||||
Secured credit facility | 6,337,064 | ||||||||||||
Amortization expense | $ 80,000 | $ 50,000 | |||||||||||
Warrant [Member] | |||||||||||||
Vesting period of option | 3 years | ||||||||||||
Secured credit facility | $ 73,350 | ||||||||||||
Amortization expense | $ 18,791 | ||||||||||||
2016 Equity Incentive Plan [Member] | |||||||||||||
Number of shares available for grant | 2,887,005 | ||||||||||||
Shares outstanding percentage | 8.00% | ||||||||||||
Option granted | 640,825 | ||||||||||||
Number of RSU's issued | 1,061,174 | ||||||||||||
Vesting period of option | 5 years | ||||||||||||
2015 Equity Incentive Plan [Member] | |||||||||||||
Number of shares available for grant | 50,000 | ||||||||||||
Number of options issued | 5,417 | ||||||||||||
Description of vesting percentage | Options vest at the rate of at least 25 percent in the first year, starting 6-months after the grant date, and 75% in year two. | ||||||||||||
Directors Employees and Consultants [Member] | |||||||||||||
Issuance of common stock for services, shares | 90,798 | ||||||||||||
Stock issued during period, value, issued for services | $ 290,547 | ||||||||||||
Stock issued during period for services, price per share | $ 3.20 | ||||||||||||
Directors Employees and Consultants [Member] | 2016 Equity Incentive Plan [Member] | |||||||||||||
Issuance of common stock for services, shares | 19,294 | 19,955 | 19,955 | 73,010 | 216,363 | ||||||||
Stock issued during period, value, issued for services | $ 42,188 | $ 43,125 | $ 38,125 | $ 87,000 | $ 238,800 | ||||||||
Stock issued during period for services, price per share | $ 1.35 | $ 1.38 | $ 1.22 | $ 1.08 | $ 1.10 | ||||||||
Consultant [Member] | |||||||||||||
Stock issued shares for stock based compensation | 45,553 | ||||||||||||
Stock issued shares for stock based compensation, value | $ 72,885 | ||||||||||||
Share price per share | $ 1.60 | ||||||||||||
Employee [Member] | |||||||||||||
Share retired | 10,704 | ||||||||||||
Employee [Member] | Minimum [Member] | |||||||||||||
Share price per share | $ 3.20 | ||||||||||||
Employee [Member] | Maximum [Member] | |||||||||||||
Share price per share | $ 7.94 |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Shareholder's Equity (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Balance | $ 7,333,318 | |||
Issuance of common stock for services by third parties | 234,056 | |||
Issuance of common stock for services by employees | 468,162 | |||
Amortization of non-deal warrant grants | 18,791 | |||
Issuance of warrants for secured credit facility | 97,800 | |||
Stock-based compensation | 223,816 | |||
Net loss attributable to common shareholders | $ (1,756,444) | $ (3,453,090) | (7,253,370) | $ (9,099,113) |
Balance | 913,958 | 913,958 | ||
Common Stock [Member] | ||||
Balance | $ 967 | |||
Balance, shares | 9,675,028 | |||
Issuance of common stock for services by third parties | $ 17 | |||
Issuance of common stock for services by third parties, shares | 170,944 | |||
Issuance of common stock for services by employees | $ 30 | |||
Issuance of common stock for services by employees, shares | 303,280 | |||
Amortization of non-deal warrant grants | ||||
Issuance of warrants for secured credit facility | ||||
Stock-based compensation | ||||
Net loss attributable to common shareholders | ||||
Balance | $ 1,014 | $ 1,014 | ||
Balance, shares | 10,149,252 | 10,149,252 | ||
Paid-In Capital [Member] | ||||
Balance | $ 51,566,438 | |||
Issuance of common stock for services by third parties | 234,039 | |||
Issuance of common stock for services by employees | 468,132 | |||
Amortization of non-deal warrant grants | 18,791 | |||
Issuance of warrants for secured credit facility | 97,800 | |||
Stock-based compensation | 223,816 | |||
Net loss attributable to common shareholders | ||||
Balance | $ 52,609,016 | 52,609,016 | ||
Accumulated Deficit [Member] | ||||
Balance | (44,234,087) | |||
Issuance of common stock for services by third parties | ||||
Issuance of common stock for services by employees | ||||
Amortization of non-deal warrant grants | ||||
Issuance of warrants for secured credit facility | ||||
Stock-based compensation | ||||
Net loss attributable to common shareholders | (7,461,985) | |||
Balance | $ (51,696,072) | $ (51,696,072) |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Stock Option Activity (Details) | 9 Months Ended |
Sep. 30, 2020$ / sharesshares | |
Equity [Abstract] | |
Number of Options Outstanding, Beginning Balance | shares | 784,101 |
Number of Options Outstanding, Granted | shares | |
Number of Options Outstanding, Exercised | shares | |
Number of Options Outstanding, Canceled | shares | (218,001) |
Number of Options Outstanding, Ending Balance | shares | 566,100 |
Number of Options Exercisable, Ending Balance | shares | 454,767 |
Weighted- Average Exercise Price Options Outstanding, Beginning Balance | $ / shares | $ 5.65 |
Weighted- Average Exercise Price Options Outstanding, Granted | $ / shares | |
Weighted- Average Exercise Price Options Outstanding, Exercised | $ / shares | |
Weighted- Average Exercise Price Options Outstanding, Canceled | $ / shares | 6.76 |
Weighted- Average Exercise Price Options Outstanding, Ending Balance | $ / shares | 5.22 |
Weighted- Average Exercise Price Options Exercisable, Ending Balance | $ / shares | $ 5.05 |
Stockholders' Equity - Schedu_2
Stockholders' Equity - Schedule of Weighted-average Assumptions for Warrants (Details) - Warrant [Member] | 9 Months Ended |
Sep. 30, 2020$ / shares | |
Volatility | 40.00% |
Risk-free interest rate | 1.54% |
Expected term (in years) | 5 years |
Expected dividend yield | 0.00% |
Fair value of common stock | $ 3.20 |
Stockholders' Equity - Summar_2
Stockholders' Equity - Summary of Warrant Activity (Details) | 9 Months Ended |
Sep. 30, 2020USD ($)$ / sharesshares | |
Equity [Abstract] | |
Warrants Outstanding, Beginning Balance | shares | 736,559 |
Warrants Outstanding, Granted | shares | 100,000 |
Warrants Outstanding, Exercised | shares | |
Warrants Outstanding, Forfeited and cancelled | shares | (556,281) |
Warrants Outstanding, Ending Balance | shares | 280,278 |
Warrants Outstanding Weighted Average Remaining Life, Beginning Balance | 1 year 2 months 5 days |
Warrants Outstanding Weighted Average Remaining Life, Granted | 4 years 9 months 14 days |
Warrants Outstanding Weighted Average Remaining Life, Forfeited and cancelled | 6 months 10 days |
Warrants Outstanding Weighted Average Remaining Life, Ending Balance | 2 years 10 months 3 days |
Warrants Outstanding Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 6.95 |
Warrants Outstanding Weighted Average Exercise Price, Granted | $ / shares | 3.94 |
Warrants Outstanding Weighted Average Exercise Price, Exercised | $ / shares | |
Warrants Outstanding Weighted Average Exercise Price, Forfeited and cancelled | $ / shares | 7.51 |
Warrants Outstanding Weighted Average Exercise Price, Ending Balance | $ / shares | $ 4.76 |
Warrants Outstanding Aggregate Intrinsic Value, Beginning Balance | $ | |
Warrants Outstanding Aggregate Intrinsic Value, Granted | $ | |
Warrants Outstanding Aggregate Intrinsic Value, Ending Balance | $ |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Nov. 29, 2019 | Oct. 24, 2019 | Sep. 16, 2019 | Jun. 11, 2019 | Aug. 31, 2020 | Jan. 31, 2020 | Sep. 30, 2020 | Dec. 31, 2019 |
Related Party Transaction [Line Items] | ||||||||
Assets from related party transaction | $ 120,000 | |||||||
Percentage of average of assets net | 1.00% | |||||||
Due to related party | $ 311,118 | |||||||
Loan borrowed | $ 5,358,106 | $ 5,413,426 | ||||||
TQLA, LLC [Member] | Azunia Tequila [Member] | Intersect Beverage, LLC [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Proceeds from related party | $ 250,000 | |||||||
Secured Line of Credit Promissory Note [Member] | TQLA, LLC [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Loan borrowed | $ 946,640 | |||||||
Secured Line of Credit Promissory Note [Member] | TQLA, LLC [Member] | Revolving Credit Facility [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Principal amount | $ 2,000,000 | |||||||
Debt instrument maturity date | Apr. 15, 2020 | |||||||
Mr. Lingley [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Due to related party | $ 1,843,200 | |||||||
Shares issued to related party | 338,212 | |||||||
Number of warrants exercised | 146,262 | |||||||
Warrant exercise price | $ 7.80 | |||||||
Employee benefits and share-based compensation | $ 75,000 | |||||||
Number of warrants cancelled | 146,262 | |||||||
Mr. Lingley [Member] | Promissory Notes [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Principal amount | $ 731,211 | |||||||
Debt interest rate, percentage | 5.00% | |||||||
Debt instrument maturity date | Jan. 11, 2022 | |||||||
Stephanie Kilkenny [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Shares issued to related party | 850,000 | |||||||
Related party transaction, description | On October 24, 2019, our Board appointed Stephanie Kilkenny to the Board to fill an existing vacancy on the Board effective immediately. Mrs. Kilkenny was the former managing director of Azuñia Tequila, and together with her spouse, owns and controls TQLA, LLC ("TQLA"), the majority owner of Intersect Beverage, LLC. In connection with the acquisition of Azuñia Tequila from Intersect Beverage, LLC, TQLA is entitled to receive up to 93.88% of the aggregate consideration payable under the asset purchase agreement. Subject to compliance with applicable Nasdaq rules, the aggregate initial consideration will be payable approximately 18 months following the closing and will consist of 850,000 shares of Company common stock at a stipulated value of $6.00 per share, 350,000 shares of Company common stock based on the Company's stock price twelve months after the close of the transaction, and additional shares based on the Azuñia business achieving certain revenue targets and the Company's stock price 18 months after the close of the transaction. The Company has also agreed to issue additional stock consideration (subject to compliance with applicable Nasdaq rules) of up to $1.5 million upon the Azuñia business achieving revenue of at least $9.45 million in the period commencing on the 13th month following the closing and ending on the 24th month following the closing. | |||||||
Shares issued price, per share | $ 6 | |||||||
Stephanie Kilkenny's Spouse [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Shares issued to related party | 55,555 | |||||||
Number of warrants exercised | 0.5 | |||||||
Warrant exercise price | $ 5.50 | |||||||
Shares issued price, per share | $ 4.50 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($) | Nov. 12, 2020 | Oct. 29, 2020 |
Intersect Beverage, LLC [Member] | TQLA, LLC [Member] | ||
Proceed from divestiture of business | $ 500,000 | |
RSG [Member] | Raw Materials and Finished Goods [Member] | ||
Proceed from divestiture of business | $ 8,100,000 | |
RSG [Member] | Termination Fee [Member] | ||
Proceed from divestiture of business | $ 3,000,000 |