Eastside Distilling, Inc. (NASDAQ:EAST), a Nevada-based beverage company with a market capitalization of $4.19 million, has entered into a material definitive agreement resulting in the sale of equity securities, according to a recent 8-K filing with the U.S. Securities and Exchange Commission.
The transaction involved two accredited investors, with the proceeds intended for working capital and general corporate purposes. With a current ratio of 0.29 and total debt of $12.83 million, the company's financial health score is rated as WEAK by InvestingPro, which offers comprehensive analysis through its Pro Research Reports covering over 1,400 US stocks.
Accompanying the sale, Eastside Distilling agreed to a registration rights agreement, committing to file a registration statement for the underlying common shares within 30 trading days post-offering and to secure its effectiveness within a subsequent 60-day period (or 120 days if under full review).
The warrants are exercisable at $0.65 per share after certain conditions are met, including shareholder approval for an increase in authorized common stock and for the issuance of securities as mandated by The Nasdaq Stock Market LLC regulations. The stock currently trades at $0.76, having shown significant volatility with a 36.32% return over the past week despite a year-to-date decline of nearly 37%.
In conjunction with the securities sale, Eastside Distilling amended its articles of incorporation, designating 6,000,000 shares of Series G Preferred Stock and filing a Certificate of Correction to establish a floor price for the conversion rate, safeguarded at 20% of the Minimum Price as defined by Nasdaq rules.
The preferred stock shares have a stated value of $0.51 each, with no conversion or voting rights prior to shareholder approval. In the event of liquidation, Series G shareholders will have a subordinate claim on net assets, following Series B, C, D, and E shareholders. Upon shareholder approval, Series G shares will be convertible into common stock at a rate determined by dividing the stated value by the conversion price, initially set at $0.51 per share and subject to adjustments.
Corrections were also filed for the Series F and F-1 Preferred Stock to rectify a scrivener's error in the beneficial ownership limitation on conversion, ensuring it does not apply to shareholders who are executive officers or directors of Eastside due to Section 16 of the Securities Exchange Act of 1934.
In other recent news, Eastside Distilling has made significant strides in its financial activities. The company recently announced a registered direct offering, aiming to raise $350,000 in gross proceeds, which reflects its efforts to bolster its financial position. The offering includes the sale of units comprising common stock shares and associated warrants.
In its third quarter financial results for 2024, Eastside reported a gross profit increase in its spirits division, with sales amounting to $783,000. The company's vodka sales were robust, while the tequila brand Azuñia encountered distribution-related challenges. Additionally, Eastside secured $440,000 through a direct equity placement.
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