Business Segment Information

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Business Segment Information

5. Business Segment Information

The Company’s internal management financial reporting consists of Eastside spirits and Craft C+B. The spirits brands span several alcoholic beverage categories, including whiskey, vodka, gin, rum, tequila and Ready-to-Drink (“RTD”) and are sold on a wholesale basis to distributors in open states, and brokers in control states. The Company’s principal area of operation is in the U.S. and has one spirits customer that represents 25% of its revenue. Craft C+B primarily services the craft beer and craft cider business. Craft C+B operates 16 mobile lines in Seattle, Washington; Spokane, Washington; Portland, Oregon; and Denver, Colorado.

The measure of profitability reviewed is a condensed statement of operations and gross margin. These business segments reflect how operations are managed, operating performance is evaluated and the structure of internal financial reporting. Total asset information by segment is not provided to, or reviewed by, the chief operating decision maker (“CODM”) as it is not used to make strategic decisions, allocate resources or assess performance. The accounting policies of the segments are the same as those described for the Company in the Summary of Significant Accounting Policies in Note 3. Spirits allocates 50% of certain general and administrative expenses to Craft C+B, which is included in the segments’ financial data below.

Eastside Distilling, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2022

(Unaudited)

Segment information was as follows for the three months ended March 31, 2022 and 2021:

(Dollars in thousands)	2022			2021
Spirits
Sales	$	2,704		$	1,334
Net sales		2,664			1,239
Cost of sales		1,682			1,054
Gross profit		982			185
Total operating expenses		1,269			1,695
Net income (loss)		(682	)		4,113
Gross margin		37	%		15	%
Interest revenue	$	-		$	-
Interest expense		395			113
Depreciation and amortization		43			77
Income tax expense		-			-
Significant noncash items:
Loss on disposal of property and equipment		-			61
Forgiveness of debt - PPP		-			(1,052	)
Remeasurement of deferred consideration		-			(750	)
Gain on disposal of offsite inventory		-			(1,047	)
Stock compensation		184			117
Craft C+B
Sales	$	1,076		$	1,909
Net sales		1,076			1,909
Cost of sales		1,111			1,551
Gross profit (loss)		(35	)		358
Total operating expenses		1,308			1,147
Net loss		(1,354	)		(405	)
Gross margin		-3	%		19	%
Interest revenue	$	-		$	-
Interest expense		11			13
Depreciation and amortization		220			223
Income tax expense		-			-
Significant noncash items:
Forgiveness of debt - PPP		-			(396	)
Stock compensation		191			118

Craft C+B’s gross margin decreased primarily due to lower sales of services, a change in product and service mix, and higher raw material costs. In addition, Craft C+B launched its digital can printing business subsequent to first quarter ending, however it continued to incur costs with no associated revenue during the three months ended March 31, 2022.

Eastside Distilling, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2022

(Unaudited)