Business Segment Information

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

Business Segment Information

4. Business Segment Information

The Company’s internal management financial reporting consists of Craft C+P, Eastside spirits and corporate. Craft C+P offers digital can printing and co-packing services in Portland, Oregon allowing it to offer end-to-end production capabilities. Craft C+P operates 13 mobile lines in Washington and Oregon. The spirits brands span several alcoholic beverage categories, including whiskey, vodka, rum, and tequila 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 two spirits customers that represents 27% of its revenue. Corporate consists of key executive and accounting personnel and corporate expenses such as public company and board costs, as well as interest on debt.

The measure of profitability reviewed is condensed statements of operations and gross margins. 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.

Eastside Distilling, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2023

(Unaudited)

Segment information was as follows for the six months ended June 30, 2023 and 2022:

(Dollars in thousands)	2023			2022
Craft C+P
Sales	$	3,405		$	2,505
Net sales		3,381			2,405
Cost of sales		3,545			2,809
Gross profit		(164	)		(404	)
Total operating expenses		1,314			1,947
Net loss		(1,462	)		(2,272	)
Gross margin		-5	%		-17	%
Interest expense	$	8		$	21
Depreciation and amortization		740			604
Significant noncash items:
(Gain) loss on disposal of property and equipment		(132	)		113
Stock compensation		-			102
Spirits
Sales	$	2,231		$	6,398
Net sales		2,133			6,192
Cost of sales		1,302			3,389
Gross profit		831			2,803
Total operating expenses		880			1,347
Net income (loss)		(17	)		1,456
Gross margin		39	%		45	%
Depreciation and amortization	$	77		$	82
Significant noncash items:
(Gain) loss on disposal of property and equipment		3			(12	)
Corporate
Total operating expenses	$	1,115		$	1,861
Net loss		(1,762	)		(3,008	)
Interest expense	$	647		$	1,147
Significant noncash items:
Stock compensation		166			418

Craft C+P’s sales increased due to new digital printing revenues offset by lower mobile revenues. Negative gross margin decreased compared to the prior year due to digital can printing volumes. The Company also incurred higher raw material costs in the quarter related to digital printing.

Spirits’ sales in 2022 included bulk inventory sales of $4.2 million. During the six months ended June 30, 2023, the Company undertook restructuring actions to reduce volumes in unprofitable market segments and incrementally restricting actions to lower production costs and improve profitability.