SOURCE: Eastside Distilling Inc.

Eastside Distilling Inc.

May 20, 2015 14:44 ET

Eastside Distilling Reports Fiscal First Quarter 2015 Financial Results

Q1 Sales up 133% to $425,000, With 1,754 Cases Shipped, Driving Gross Profit up 105% to $107,000

PORTLAND, OR--(Marketwired - May 20, 2015) - Eastside Distilling, Inc. (OTCQB: ESDI), a producer of award-winning master-crafted spirits, reported financial results for the first quarter ended March 31, 2015.

First Quarter 2015 Financial Highlights vs. Year-Ago Quarter

  • Revenue up 133% to $425,000
  • Gross profit up 105% to $107,000
  • Net loss totaled $831,000 versus a loss of $25,000 in Q1 2014
  • Adjusted EBITDA totaled a loss of $787,000 in Q1 2015 compared to a loss of $23,000 in Q1 2014

First Quarter 2015 Operational Highlights

  • Case shipments increased 147% to 1,754 from 709 in the same year-ago quarter.
  • Began build-out of new 41,000 sq. ft. distillery designed to increase annual production capacity from 6,400 to 1 million cases, and making it the largest craft distillery in the Pacific Northwest. The facility is expected to become operational in the second quarter of 2015.
  • Commenced national product rollout with Blackheath Beverage Group, which has a proven record of helping independent brands like Eastside establish a nationwide presence.
  • Expanded distribution in GA, MD, MN, PA, ID, and especially OR and WA, with other states in the development stage.
  • Partnered with Comcast SportsNet Northwest, the home of the Trail Blazers, for new broadcast marketing campaign.
  • Signed Alpha Media for new radio broadcast marketing campaign in Pacific Northwest.
  • Engaged Liolios Group to assist in financial communications and lead new strategic investor relations campaign.
  • Showcased the company's award-winning spirits at the 27th Annual ROTH Conference, which was attended by more 6,000 members of the financial community.
  • Extended employment agreement of the company's master distiller Melissa Heim, to 2020. As the nation's first female master distiller west of the Mississippi, Mel will oversee the company's new marketing initiative, 'Whiskey & Women' that highlights the company's award-winning whiskey portfolio that has become increasingly popular with the female demographic.

First Quarter 2015 Financial Results
Revenues in the first quarter of 2015 increased 133% to $425,000 compared to $182,000 in the same year-ago period. The increase in revenue is primarily attributable to strong customer traffic at the company's retail locations in the Greater Portland area, including the new location at the Clackamas Town Center Mall, as well as increased distribution and sales across the Pacific Northwest.

Gross margins in the first quarter 2015 declined to 25.2% from 28.6% in the year-ago period. The decreased gross margins is primarily attributable to the increased costs of liquor sales associated with the opening of certain retail store locations, as well as increased distribution and sales activity in the Pacific Northwest.

Net loss in the first quarter of 2015 totaled $831,000 or ($0.02) per diluted share, compared to net loss of $25,000 or $0.00 per diluted share in the year-ago quarter. The wider net loss is primarily due to a $987,000 increase in SG&A, and particularly personnel, marketing, legal and accounting expenses.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and change in fair value of derivative liabilities) for the first quarter of 2015 totaled a loss of $787,000 versus a loss of $23,000 in the year-ago period (see discussion about the company's presentation of adjusted EBITDA, a non-GAAP term, and its reconciliation to the nearest GAAP metric, below).

Cash at March 31, 2015, increased to $368,000 compared to $43,100 at March 31, 2014, with the increase resulting from greater cash flow from operations and the completion a $2.2 million private placement in the previous quarter.

Further details about the company's results in fiscal first quarter 2015 are available in its quarterly report on Form 10-Q, which is available for download from the investor relations section of the company's website at www.eastsidedistilling.com.

Management Commentary
"While the first quarter is typically our slowest quarter of the year, we once again generated triple digit sales growth over the same year-ago period as we continued to build upon the momentum of our record holiday season and the introduction of our mall-based tasting room concept," said the company's CEO, Steven Earles.

"Our increase in SG&A in the first quarter of 2015 reflected our investment in regional expansion as well as a multi-faceted campaign to bring our regional success and award-winning spirits to the national stage. We believe this investment could not be timelier, with sales of distilled spirits climbing 14% over the last five years to a record 210 million cases sold in 2014.

"Within this growing market, we see a new opportunity emerging for craft spirits, similar to the beginning stages of the craft beer category 15 years ago. Craft beer has since realized explosive growth, with local favorites like Sam Adams, Sierra Nevada and New Belgium becoming national brands. Small and independent brewers now command more than 11% of the total beer market in 2014 -- the first year of double-digit market share. We see the same market share opportunity for craft spirits and for a small, regional producer to develop a local following, and then take its regional success nationwide.

"A key part of the roll out of our national campaign is internal development and preparation. Along these lines, we secured the long-term commitment of the genius behind our award-winning spirits, our master distiller, Melissa Heim. We also began the build-out of our new 41,000 sq. ft. distillery and flagship tasting room that will provide ample room for growth. In addition to overseeing the build-out, Mel has been advancing product innovation and the expansion of our already broad product portfolio, including preparation for the release of an American Whiskey and Gin.

"Another key part of our national rollout strategy is to demonstrate successful programs on a regional level and then apply the proven model to other metro regions across the United States. During the quarter, this included the formation of partnerships for a new digital and radio broadcast marketing campaign in the Pacific Northwest with Comcast SportsNet Northwest and Alpha Media.

"We also realized it is important to have expert guidance in this endeavor, so in early February we retained Blackheath Beverage Group, a leading sales and marketing firm for independent spirits brands. They have since been instrumental in developing and implementing a comprehensive national sales and distribution strategy, and we are already fielding multiple purchase order requests from new states along the East Coast."

"As a newly public company, in the first quarter we also realized several milestones in terms of our investor outreach, including our first major institutional investor conference where we were selected to showcase our award-winning spirits to more than 6,000 attendees. We also engaged one of the top investor relations firms in the U.S. to facilitate investor outreach and help us navigate the capital markets. Earlier this month we shared our story at the B. Riley & Co. Investor Conference held Los Angeles, where our master crafted spirits were served at both evening entertainment events."

"We also recently strengthened our management team with the addition of Patrick Roth as our new national sales manager. Pat brings more than 15 years of experience with one of the top spirits distribution companies in the U.S., which made him the perfect candidate to lead our national marketing campaign. We expect to leverage his extensive experience in launching new brands, growing distribution channels and building out a national sales force.

"In all, we expect all of these internal and external efforts to keep us on course towards achieving the high goals we've set for 2015, with the ultimate goal of building long-term shareholder value." 

2015 Outlook
Management has revised its outlook for 2015 to provide a range of performance, and now expects to ship between 35,000 to 55,000 cases in 2015, as compared the previous guidance of more than 50,000. Likewise, the company expects revenue to range between $5 million and $7.7 million, versus the previous guidance of $7 million. The company continues to expect generating positive cash flow in 2015. Management updated it guidance in light of various factors related to the company's planned national rollout, its new distillery becoming operational and potential new distribution channels in Canada and Asia.

About Eastside Distilling
Eastside Distilling, Inc. (OTCQB: ESDI) has been producing high-quality, master crafted spirits since 2008 and is located in Southeast Portland's Distillery Row. Makers of award winning spirits, the company is unique in the marketplace and is distinguished by its highly decorated product lineup that includes Burnside Bourbon, Below Deck Rums, Portland Potato Vodka and a distinctive line of infused whiskeys. All Eastside spirits are master crafted from natural ingredients for unparalleled quality and taste. The company is publicly traded under the symbol OTCQB: ESDI. For more information visit: www.eastsidedistilling.com or follow the company on: Twitter & Facebook.

Forward-Looking Statements 
Certain matters discussed in this press release may be forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; acceptance of the Company's products in the market; the Company's success in obtaining new customers; the Company's success in product development; the Company's ability to execute its business model and strategic plans; the Company's success in integrating acquired entities and assets, and all the risks and related information described from time to time in the Company's filings with the Securities and Exchange Commission ("SEC"), including the financial statements and related information contained in the Company's Annual Report on Form 10-K and interim Quarterly Reports on Form 10-Q. Examples of forward-looking statements in this release may include statements related to our strategic focus, product verticals, anticipated revenue and profitability. The Company assumes no obligation to update the cautionary information in this release.

Fiscal First Quarter 2015 Financial Summary Tables

The following financial information should be read in conjunction with the unaudited financial statements and accompanying notes filed by the company with the Securities and Exchange Commission on May 20, 2015 in its Annual Report on Form 10-Q for the period ended March 31, 2015, and which can be viewed at www.sec.gov and in the investor relations section of the company's website at www.eastsidedistilling.com.

Use of Non-GAAP Measures
Eastside Distilling's management evaluates and makes operating decisions using various financial metrics. In addition to the company's GAAP results, management also considers the non-GAAP measure of adjusted EBITDA. Management believes this non-GAAP measure provides useful information about the company's operating results.

The company defines adjusted EBITDA as net income (loss), plus interest expense, provision for income taxes, depreciation and amortization, loss from discontinued operations (goodwill impairment), and stock-based compensation. The table below provides a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure.

       
    Three Months Ended
March 31,
 
    2015     2014  
Net (loss) income   $ (831,018 )   $ (25,279 )
  Add:                
    Interest expense     2,900       395  
    Provision for income taxes     -       -  
    Depreciation and amortization     4,379       988  
    Stock-based compensation     36,469       -  
Adjusted EBITDA   $ (787,270 )   $ (23,896 )
                 
                 
   
Eastside Distilling, Inc. and Subsidiary  
Condensed Consolidated Balance Sheets  
March 31, 2015 and December 31, 2014  
             
    March 31,
2015
    December 31,
2014
 
Assets                
Current assets:                
  Cash   $ 368,136     $ 1,082,290  
  Trade receivables     59,106       138,041  
  Inventories     841,843       377,020  
  Prepaid expenses     189,024       174,147  
Total current assets     1,458,109       1,771,498  
Property and equipment - net     76,827       81,206  
Other assets     150,625       193,750  
Total Assets   $ 1,685,561     $ 2,046,454  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
  Accounts payable   $ 640,368     $ 206,630  
  Accrued liabilities     99,997       72,610  
  Deferred revenue     2,076       8,275  
  Current portion of note payable     3,715       3,560  
  Convertible note payable     150,000       150,000  
Total current liabilities     896,156       441,075  
Note payable - less current portion     22,315       23,271  
Total liabilities     918,471       464,346  
                 
Stockholders' equity:                
  Preferred stock, $0.0001 par value; 100,000,000 shares authorized;no shares issued and outstanding at March 31, 2015 andDecember 31, 2014    

-
     

-
 
  Common stock, $0.0001 par value; 900,000,000 shares authorized;45,512,500 shares issued and outstanding at March 31, 2015and December 31, 2014    

4,551
     

4,551
 
  Additional paid-in capital     5,554,242       5,538,242  
  Accumulated deficit     (4,791,703 )     (3,960,685 )
Total stockholders' equity     767,090       1,582,108  
Total Liabilities and Stockholders' Equity   $ 1,685,561     $ 2,046,454  
                 
                 
   
Eastside Distilling, Inc. and Subsidiary  
Condensed Consolidated Statements of Operations  
For the three months ended March 31, 2015 and 2014  
   
             
    Three Months Ended  
    March 31, 2015     March 31, 2014  
Sales   $ 424,910     $ 182,350  
Less excise taxes     99,840       35,237  
  Net sales     325,070       147,113  
Cost of sales     217,862       94,937  
  Gross profit     107,208       52,176  
Selling, general, and administrative expenses     987,163       77,061  
Loss from operations     (879,955 )     (24,885 )
Other income (expense) - net     48,937       (394 )
Loss before income taxes     (831,018 )     (25,279 )
Provision for income taxes     -       -  
Net loss   $ (831,018 )   $ (25,279 )
                 
                 
Basic and diluted net loss per common share   $ (0.02 )   $ (0.00 )
                 
Basic and diluted weighted average common shares outstanding     45,512,500       32,000,000  
                 
                 

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