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Eastside Distilling Reports 2014 Financial Results

2015-04-01 19:54 ET - News Release

PORTLAND, OR -- (Marketwired) -- 04/01/15

Eastside Distilling, Inc. (OTCQB: ESDI), a producer of award-winning master-crafted spirits, reported financial results for the fourth quarter and full year ended December 31, 2014.

Fourth Quarter and Full Year 2014 Financial Highlights

  • Revenue in Q4 2014 totaled $696,000, up 127% from Q4 2013, with the full year 2014 revenues up 63% to $1.4 million.
  • Gross profit in Q4 2014 was $239,000, up 40% from Q4 2013, with the full year 2014 gross profit up 28% to $560,000.
  • Net loss in Q4 2014 was $3.7 million versus net income of $76,000 in Q4 2013, with the full year 2014 net loss at $4.0 million versus net income of $86,000 in 2013. Loss includes a $3.2 million non-cash charge for goodwill impairment related to the February 2015 legacy asset spin-off.
  • Adjusted EBITDA totaled a loss of $528,000 in Q4 2014 versus a gain of $78,000 in Q4 2013, with a full year 2014 loss of $789,000 versus a gain of $91,000 in 2013.

2014 Product Highlights

  • Released Below Deck Spiced Rum, which won the MicroLiquor Spirit Awards "Triple Gold" for taste and bronze for package design, and First Place in Beverage Tasting Institute's Best of the Northwest competition.
  • Released Burnside "Oregon Oaked" Bourbon, which won a Silver Medal at the prestigious San Francisco World Spirits Competition.
  • Cherry Bomb Whiskey and Oregon Marionberry Whiskey both won the MicroLiquor Spirit Awards Gold Medal for taste and the Silver Medal for package design.

2014 Operational Highlights

  • Completed merger with Eastside Distilling, LLC in October 2014 and divested legacy assets in February 2015.
  • Upon completion of the merger, appointed Steven Earles as CEO. Earles has been instrumental in leading important company initiatives, including the first deployment of a new corporate retail store concept, and laying the groundwork for bringing the company's regional success to the national stage.
  • Hosted the Grand Opening of Oregon's first-ever retail mall location for tasting and purchase of master-crafted spirits.
  • Signed leading national distributor, Young's Market Company, as the company's broker in Oregon.
  • Expanded distribution to five states in 2014 (GA, MD, MN, PA, ID), up from two (OR, WA) in 2013, with further expansion within the existing states. In Oregon alone, more than 300 bars and restaurants now serve the company's spirits.
  • Case shipments increased 60% to 6,400 in 2014, representing the full annual capacity of the company's distillery on Portland's Distillery Row.
  • 2,800 cases were shipped during the 2014 Holiday Season (November to December), driving a 250% increase in distribution and sales over the 2013 Holiday Season.
  • 2014 Holiday Season generated more than $550,000 in gross revenues or 39% of the year's total revenues.
  • Signed lease for new 41,000 sq. ft. distillery designed to increase annual production capacity from 6,400 to 1 million cases. The new facility is expected to become fully operational in the second quarter of 2015, and the company expects it will be the largest craft distillery in the Pacific Northwest.
  • Completed a $2.2 million private placement of common stock to accredited investors to fund the new distillery build-out and launch of our national marketing campaign.

Fourth Quarter and Full Year 2014 Financial Results
Revenues in the fourth quarter of 2014 increased 127% to $696,000 compared to $306,000 for the comparable 2013 period. For the 2014 full year, revenues totaled $1.4 million, an increase of 63% from $880,000 in 2013. The increase in revenue in both periods is primarily attributable to strong customer traffic at its new retail locations in the Greater Portland area, such the Clackamas Town Center Mall, as well as increased distribution and sales across the Pacific Northwest.

Gross margins in the fourth quarter 2014 declined to 34.4% from 55.7% in the comparable 2013 period, and for the full year 2014 declined to 39% from 49.7%. The decreased gross margins in both periods is primarily attributable to increased costs of liquor sales in the periods associated with the opening of certain retail store locations, as well as increased distribution and sales activity within the Pacific Northwest.

Net loss in the fourth quarter of 2014 totaled $3.7 million or ($0.10) per diluted share, compared to net income of $76,000 or $0.00 per diluted share in the year-ago quarter. For the full year of 2014, net loss totaled $4.0 million or ($0.12) per diluted share, compared to net income of $86,000 or $0.00 per diluted share in 2013. The net loss in both periods was primarily due to a goodwill impairment of $3.2 million, along with increased selling, general and administrative expenses of $1.3 million relating to personnel, marketing, legal and accounting expenses (including additional legal and accounting expenses associated with the October 2014 merger with Eastside Distilling LLC).

The goodwill impairment charge resulted from the February 2015 divestiture of the company's legacy online marketing and media solutions business that it operated prior to the merger with Eastside Distilling. The non-cash charge provides an expected benefit of a tax loss carry forward that could reduce the company's tax liability in future profitable periods.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and the change in fair value of derivative liabilities) for the fourth quarter of 2014 totaled a loss of $528,000 versus a gain of $78,000 in the year-ago period. For the full year, adjusted EBITDA was a loss of $789,000 compared to a gain of $91,000 in 2013 (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 December 31, 2014, increased to $1.0 million compared to $29,700 at December 31, 2013, with the increase resulting from greater cash flow from operations and the completion of the fourth quarter $2.2 million private placement.

Further details about the company's results in 2014 are available in its Annual Report Form 10-K, accessible in the investor relations section of the company's website at www.eastsidedistilling.com.

Management Commentary
"2014 was a strong year of innovation, growth and expansion for Eastside Distilling," said the company's CEO, Steven Earles. "We released another award-winning spirit, hit record numbers in terms of case shipments and revenue, signed a Top 5 national distributor, entered five new states, opened our first corporate owned mall-based retail concept store (and the first for Oregon), and secured the ideal space for our new distillery.

"We also received six coveted industry awards in 2014 for both taste and packaging design, and ended the year with a 250% increase in holiday season sales and a fully-subscribed $2.2 million offering.

"This momentum has continued into the new year, with the launch of the new distillery build-out, traffic increasing at our new Clackamas Mall store, and the signing of Blackheath Beverage Group. The Blackheath team brings a proven track record of helping independent brands like Eastside to establish a nationwide presence. We also joined forces with Comcast SportsNet, the home of the Portland Trail Blazers, for a new regional broadcast marketing campaign.

"We are looking forward to the grand opening of our new distillery in the first half of 2015, along with the planned expansion of distribution to California, Florida, New York, Texas and Illinois. We are also planning a number of major new product launches, and the further development of our corporate owned retail and tasting concept store.

"We believe our broad spirits portfolio and the three revenue streams of wholesale distribution, distillery tasting room, and retail stores distinguishes Eastside from our competition. While the first quarter is typically our slowest of the year, we're on track for another consecutive year of record first quarter-over-quarter growth, and see a strong ramp-up in sales as we proceed through the year. In fact, given both our momentum and strong industry tailwinds, we expect to ship more than 50,000 cases in 2015."

2015 Outlook
Based on the strength of the company's planned national rollout and the new distillery becoming fully operational, management expects Eastside to ship more than 50,000 cases in 2015, driving positive cash flow and revenue of $7 million.

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

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 Fourth Quarter & 2014 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 March 31, 2015 in its Annual Report on Form 10-K for the period ended December 31, 2014, 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           Year Ended
                                 December 31,             December 31,
                               2014         2013        2014         2013
                           -----------  ----------- -----------  -----------
Net (loss) income          $(3,790,083) $    76,696 $(4,057,171) $    86,986

  Interest expense                 666          388       3,974        1,552
  Provision for income
   taxes                         1,500            -       1,500            -
  Depreciation and
   amortization                  2,818          997       5,889        2,790
  Goodwill impairment        3,246,149            -   3,246,149            -
  Stock-based compensation      10,000            -      10,000            -
                           -----------  ----------- -----------  -----------
Adjusted EBITDA            $  (528,950) $    78,081 $  (789,659) $    91,328
                           ===========  =========== ===========  ===========




                  Eastside Distilling, Inc. and Subsidiary
            (Prior to November 1, 2014, Eastside Distilling, LLC)
                         Consolidated Balance Sheets
                         December 31, 2014 and 2013

                                                        2014         2013
                                                    -----------  -----------
Assets
Current assets:
  Cash                                              $ 1,082,290  $    29,784
  Trade receivables                                     138,041       63,177
  Inventories                                           377,020       59,051
  Prepaid expenses                                      174,147            -
                                                    -----------  -----------
Total current assets                                  1,771,498      152,012
Property and equipment - net                             81,206       22,395
Other long-term assets                                  193,750            -
                                                    -----------  -----------
Total Assets                                        $ 2,046,454  $   174,407
                                                    ===========  ===========

Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                                  $   206,630  $    13,506
  Accrued liabilities                                    72,610       10,086
  Deferred revenue                                        8,275       15,356
  Current portion of notes payable                        3,560        2,301
  Convertible note payable                              150,000            -
                                                    -----------  -----------
Total current liabilities                               441,075       41,249
Notes payable - less current portion                     23,271       30,000
                                                    -----------  -----------
Total liabilities                                       464,346       71,249
                                                    -----------  -----------

Commitments and contingencies (note 9)

Stockholders' equity:
  Preferred stock, $0.0001 par value; 100,000,000
   shares authorized; no shares issued and
   outstanding at December 31, 2014 and 2013                  -            -
  Common stock, $0.0001 par value; 900,000,000
   shares authorized; 45,512,500 and 32,000,000
   shares issued and outstanding at December 31,
   2014 and 2013, respectively                            4,551        3,200
  Additional paid-in capital                          5,538,242        1,954
  (Accumulated deficit) retained earnings            (3,960,685)      98,004
                                                    -----------  -----------
Total stockholders' equity                            1,582,108      103,158
                                                    -----------  -----------
Total Liabilities and Stockholders' Equity          $ 2,046,454  $   174,407
                                                    ===========  ===========




                  Eastside Distilling, Inc. and Subsidiary
            (Prior to November 1, 2014, Eastside Distilling, LLC)
                    Consolidated Statements of Operations

                              Three Months Ended           Year Ended
                                 December 31,             December 31,
                               2014         2013        2014         2013
                           -----------  ----------- -----------  -----------
Sales                      $   696,777  $   306,050 $ 1,435,416  $   880,454
Less excise taxes              252,036       52,776     379,972      138,897
                           -----------  ----------- -----------  -----------
Net sales                      444,741      253,274   1,055,444      741,557
Cost of sales                  204,853       82,791     494,889      303,220
                           -----------  ----------- -----------  -----------
Gross profit                   239,888      170,483     560,555      438,337
Selling, general, and
 administrative expenses       781,894       91,182   1,366,341      347,582
Goodwill impairment          3,246,149            -   3,246,149            -
                           -----------  ----------- -----------  -----------
(Loss) income from
 operations                 (3,788,155)      79,301  (4,051,935)      90,755
Other expenses - net               428        2,605       3,736        3,769
                           -----------  ----------- -----------  -----------
(Loss) income before income
 taxes                      (3,788,583)      76,696  (4,055,671)      86,986
Provision for income taxes       1,500            -       1,500            -
                           -----------  ----------- -----------  -----------
Net (loss) income          $(3,790,083) $    76,696 $(4,057,171) $    86,986
                           -----------  ----------- -----------  -----------


Basic and diluted net (loss) income
 per common share:
                           $     (0.10) $      0.00 $     (0.12) $      0.00
                           -----------  ----------- -----------  -----------

Basic and diluted weighted average
 shares outstanding:
                            37,451,223   32,000,000  33,374,007   32,000,000

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Company Contact:
Eastside Distilling, Inc.
Julie Bohn
Executive Assistant to the CEO
Tel 971-888-4264
inquiries@eastsidedistilling.com

Investor Relations:
Liolios Group, Inc.
Chris Tyson
Tel 949-574-3860
ESDI@liolios.com

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