SOURCE: Eastside Distilling Inc.

Eastside Distilling Inc.

August 17, 2015 09:15 ET

Eastside Distilling Reports Fiscal Second Quarter 2015 Financial Results

Q2 Sales Up 66% to $427,000 With 1,930 Cases Shipped

PORTLAND, OR--(Marketwired - Aug 17, 2015) - Eastside Distilling, Inc. (OTCQB: ESDI), a producer of award-winning master-crafted spirits, reported financial results for the second quarter ended June 30, 2015.

Second Quarter 2015 Financial Highlights vs. Year-Ago Quarter

  • Revenue up 66% to $427,000
  • Gross profit totaled $146,000 versus $175,000 in Q2 2014
  • Net loss totaled $688,000 versus net income of $9,700 in Q2 2014
  • Adjusted EBITDA totaled a loss of $633,000

Second Quarter 2015 Operational Highlights

  • Case shipments increased 88% to 1,930 from 1,028 in the same year-ago quarter.
  • Expanded distribution in GA, MD, MN, PA, and especially OR and WA.
  • Continued national rollout campaign receiving state listing approval for spirits sales in Virginia, followed by initial order of Burnside Bourbon.
  • Named official sponsor of spirits for the 2015 Portland Rose Festival.
  • Teamed up with Reed's Inc., makers of nationally recognized nonalcoholic ginger beer to serve award winning beverages at the 2015 Portland Rose Festival and Molalla Buckeroo Rodeo.
  • Showcased the company's award-winning spirits at the 16th Annual B. Riley & Co. Conference, which was attended by more 2,000 members of the financial community.

Second Quarter 2015 Financial Results
Revenues in the second quarter of 2015 increased 66% to $427,000 compared to $257,000 in the same year-ago period. The increase in revenue is primarily attributable to increased penetration in existing markets across the Pacific Northwest as well as increased distribution to additional states that came online in the second quarter.

Gross margins in the second quarter of 2015 declined to 34.3% of revenue from 68.2% in the year-ago period. The decreased gross margins is primarily attributable to a change in the sales-channel mix along with higher allocated facility costs, due to our new larger facility. As volumes continue to increase, the company anticipates better fixed facility cost coverage and hence improved gross margins.

Net loss in the second quarter of 2015 totaled approximately $688,000 or ($0.02) per diluted share, compared to net income of $9,700 or $0.00 per diluted share in the year-ago quarter. The wider net loss is primarily due to a $665,000 increase in SG&A, including advertising, office personnel, marketing, legal and accounting expenses all associated with the company's planned increase in infrastructure to support its national expansion plans.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and change in fair value of derivative liabilities) for the second quarter of 2015 totaled a loss of $633,000 versus a gain of $11,000 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 June 30, 2015, decreased to $145,000 compared to $1.0 million at December 31, 2014, with the decrease resulting from cash used in operations.

Further details about the company's results in fiscal second 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
"During the second quarter, we continued to experience strong growth in case sales, but more importantly further positioned the company for a more aggressive rollout across multiple states," said the company's CEO, Steven Earles.

"The increase in SG&A in the second quarter of 2015 reflects our investments in our national expansion plan as well as a multi-faceted marketing campaign to bring our regional success and award-winning spirits to these new markets. 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. As the sales volumes continue to increase, we expect to leverage the efficiencies associated with our operating model that ultimately will improve bottom-line results.

"We maintained momentum on the national rollout front adding Virginia to our listing approved states. We continue to target the top liquor consumption states including New York and Texas as we look to expand our national footprint in the second half of this year. We are also shipping spirits to all of our approved states and are currently finalizing a large purchase order with a major distributor soon to be announced.

"A key part of the roll out of our national campaign is internal development and preparation. Our new 41,000 sq. ft. distillery now provides ample room for growth. In addition, we continue to advance our product innovation and have expanded our broad product portfolio with the recent introduction of our American Whiskey, labeled Barrel Hitch, which is already experiencing strong results.

"We are also in full swing with planning and preparation for our seasonally strong third and fourth quarters. I would like to thank all of our employees for their dedication and hard work in the second quarter to insure we take full advantage of the opportunities available to us as we move into the second half of the year and the holiday season in particular.

"In all, we expect 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. The second half of 2015 looks even brighter with the company now approved in 11 states and several pending, it's much larger production facility on-line, and various marketing initiatives in place to ensure the success with our national expansion. As a result, we believe the company is well positioned to continue its high rate of growth."

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, Barrel Hitch American Whiskey, 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 Second 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 August 14, 2015 in its Annual Report on Form 10-Q for the period ended June 30, 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.

       
       
    Six Months Ended
June 30,
 
    2015     2014  
Net (loss) income   $ (1,519,078 )   $ (15,511 )
  Add:                
    Interest expense     5,684       858  
    Provision for income taxes     -       -  
    Depreciation and amortization     9,009       2,064  
    Stock-based compensation     83,375       -  
Adjusted EBITDA   $ (1,421,010 )   $ (12,589 )
                 
   
Eastside Distilling, Inc. and Subsidiary  
Condensed Consolidated Balance Sheets  
June 30, 2015 and December 31, 2014  
             
    June 30,
2015
(unaudited)
    December 31,
2014
(1)
 
Assets                
Current assets:                
  Cash   $ 145,950     $ 1,082,290  
  Trade receivables     66,997       138,041  
  Inventories     849,970       377,020  
  Prepaid expenses     234,788       174,147  
Total current assets     1,297,705       1,771,498  
Property and equipment - net     85,517       81,206  
Other assets     107,500       193,750  
Total Assets   $ 1,490,722     $ 2,046,454  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
  Accounts payable   $ 914,245     $ 206,630  
  Accrued liabilities     184,540       72,610  
  Deferred revenue     5,473       8,275  
  Current portion of note payable     3,891       3,560  
  Convertible note payable     150,000       150,000  
Total current liabilities     1,258,149       441,075  
Note payable - less current portion     20,543       23,271  
Total liabilities     1,278,692       464,346  
                 
Commitments and contingencies (Note 10)                
                 
Stockholders' equity:                
  Preferred stock, $0.0001 par value; 100,000,000 shares authorized; no shares issued and outstanding at June 30, 2015 and December 31, 2014    

--
     

--
 
  Common stock, $0.0001 par value; 900,000,000 shares authorized; 45,550,000 and 45,512,500 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively    

4,555
     

4,551
 
  Additional paid-in capital     5,687,238       5,538,242  
  Accumulated deficit     (5,479,763 )     (3,960,685 )
Total stockholders' equity     212,030       1,582,108  
Total Liabilities and Stockholders' Equity   $ 1,490,722     $ 2,046,454  
(1) Derived from the Company's December 31, 2014 audited financial statements                
   
   
Eastside Distilling, Inc. and Subsidiary  
Condensed Consolidated Statements of Operations  
For the three and six months ended June 30, 2015 and 2014  
(unaudited)  
                         
    Three Months Ended     Six Months Ended  
    June 30, 2015     June 30, 2014     June 30, 2015     June 30, 2014  
Sales   $ 427,591     $ 257,622     $ 852,501     $ 439,972  
Less excise taxes     123,177       49,782       223,017       85,019  
  Net sales     304,414       207,840       629,484       354,953  
Cost of sales     157,651       32,164       350,832       127,101  
  Gross profit     146,763       175,676       278,652       227,852  
Selling, general, and administrative expenses     832,039       165,444       1,843,883       242,505  
Income (loss) from operations     (685,276 )     10,232       (1,565,231 )     (14,653 )
Other income (expense) - net     (2,784 )     (464 )     46,153       (858 )
Income (loss) before income taxes     (688,060 )     9,768       (1,519,078 )     (15,511 )
Provision for income taxes     --       --       --       --  
Net income (loss)   $ (688,060 )   $ 9,768     $ (1,519,078 )   $ (15,511 )
                                 
                                 
Basic and diluted net income (loss) per common share   $ (0.02 )   $ 0.00     $ (0.03 )   $ (0.00 )
                                 
Basic and diluted weighted average common shares outstanding     45,547,115       32,000,000       45,529,903       32,000,000  
                                 

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