Eastside Reports Record First Quarter 2019 Financial Results and Announces Management Transition

Q1 2019 Gross Sales increase 161% as Redneck Riviera Whiskey case
volume, Craft Canning + Bottling volume and Pacific NW sales drive growth

Grover Wickersham announces transition to Executive Chairman,
stepping down from his dual role as Chairman and Chief Executive Officer

PORTLAND, Ore.–(BUSINESS WIRE)–lt;a href="https://twitter.com/search?q=%24EAST&src=ctag" target="_blank"gt;$EASTlt;/agt;–Eastside Distilling, Inc. (NASDAQ: EAST) reported first quarter 2019
financial results for the period ended March 31, 2019.

Financial Highlights:

  • Gross sales for Q1 2019 were $3,685,700, an increase of 161% compared
    to $1,413,182 in Q1 2018, led by the continued organic growth of
    Redneck Riviera Whiskey (“RRW”), sales from the Company’s co-packing
    and wine canning operations including the recent acquisition of Craft
    Canning + Bottling (CC+B), and organic growth in Oregon and the
    Pacific Northwest.
  • Branded product shipments increased 76% to 12,091 cases in Q1 2019
    compared to 6,877 in the year ago quarter.
  • Q1 2019 9L case shipments of Redneck Riviera Whiskey were
    approximately 6,300.
  • Total shipments, including the branded products and co-packed products
    (spirits, wine and beer) increased to 270,447 cases. This included
    12,091 for branded products, 18,411 for non-CC+B co-packing, and
    239,945 cases for CC+B co-packing during Q1 2019, compared to 8,305
    cases in Q1 2018 (6,877 for branded products and 1,428 for co-packing).
  • Net loss for Q1 2019 was $(2,943,439) compared to $(1,319,117) in Q1
  • Adjusted EBITDA (see attached table) during Q1 2019 was $(2,129,283),
    which compared to $(780,357) in Q1 2018 as the Company continued to
    invest in key areas, including the Redneck Riviera Whiskey via
    marketing and sales spending. EBITDA in the period was also impacted
    by approximately $500,000 in one-time, non-recurring items.

Recent Operational Highlights:

  • Acquired Craft Canning + Bottling in January 2019, a leading provider
    of mobile canning and bottling services in Oregon, Washington and
    Colorado. This is a transformative acquisition with a high growth
    co-packing business and materially increases efficiencies in
    production of the Company’s proprietary products.
  • Entered into the fast growing Ready-to-Drink (RTD) market with the
    introduction of the Portland Mule RTD Cocktail, Eastside’s first
    branded RTD.
  • Announced Eastside’s Sandstrom-branded entry into the rapidly growing
    CBD market with Outlandish non-alcoholic CBD Beverage, targeting
    Oregon in Q2 2019.
  • Redneck Riviera Whiskey expanded distribution and is now distributed
    in 46 states, though 9 different tier-one distributors.
  • Launched the first Redneck Riviera product line extension with the
    introduction of the “Granny Rich Reserve,” as well as the introduction
    of the 1.75 liter (half-gallon) Redneck Riviera Whiskey bottle.
  • Redneck Riviera Whiskey continued strong adoption amongst key
    retailers, including recent authorizations and launches at Kroger,
    Fred Meyer, QFC, Albertson, VONS, Pavilions, Safeway, Walmart,
    Winn-Dixie, Jewel-Osco, Binny’s, Meijers, WinCo, and others.
  • Leveraged strong distribution platform with the initial launch of
    Burnside Bourbon into California as the Company expands beyond its
    Northwest roots with the lineup.
  • Eastside’s subsidiary, Big Bottom Distilling, was named Whiskey
    Distillery of the Year at the 2019 Berlin International Spirits
    Competition and received the prestigious double gold medal for its
    Delta Rye Whiskey in both Berlin as well as the San Francisco World
    Spirits Competition.

Executive Management Transition

Effective May 10, 2019, Grover Wickersham announced his transition to
Executive Chairman, stepping down from his dual role as Chairman and
Chief Executive Officer. The Company’s Chief Financial Officer, Steve
Shum, has been given the additional title of Interim Chief Executive
Officer. The Company has commenced a search for a spirit’s industry
veteran. Wickersham’s transition follows the recent appointment of
25-year spirits industry veteran Robert Manfredonia as Eastside’s
President in December 2018. Steve Shum will also maintain his current
role as Chief Financial Officer and expects to work closely with Robert
Manfredonia with respect to managing daily operations, as well as
working closely with the board of directors and Grover Wickersham.

Since 2016, Wickersham has helped to transition Eastside Distilling to
one of the leading craft spirits companies in the United States. During
the last two years, Eastside has rebranded its product portfolio lead by
Sandstrom Partners, significantly expanded its production capacity
through the acquisition of Motherlode and Craft Canning + Bottling,
launched the highly successful Redneck Riviera Whiskey, and expanded
into the high growth Ready-to-Drink and CBD markets. Since 2016,
revenues have increased from $3.1 million for the year 2016 to $3.7
million in the just completed first quarter.

CBD Launch in Oregon

Eastside recently established its subsidiary, Outlandish Beverages, LLC,
targeting Oregon with a planned new product line for the cannabidiol
(CBD) beverage market in coming weeks of Q2. The full line of Outlandish
CBD beverages, the first of which is a non-alcoholic seltzer, will
initially only be available in the state of Oregon which legalized CBD
in 2014. The Company believes that Outlandish will be the first CBD
beverage produced in a 187 ml slim line can. The product concept is
designed for distribution to places having on premises alcohol
consumption or off premises sale of alcoholic beverages.

The Outlandish lineup of ready-to-drink (RTD) cans will initially
include three products: a seltzer-based, a ginger-based, and a
quinine-based tonic. Further line extensions are planned. Outlandish
beverages, formulated by Eastside’s award-winning master distiller, Mel
Heim, will include milligrams of CBD. Outlandish CBD beverages can be
used as a component in uniquely designed drinks limited only by
imagination or consumed entirely on their own. Outlandish LLC makes no
claims to health benefits of CBD. We encourage all our customers to do
research of their own.

Management Commentary

Grover Wickersham, Executive Chairman of Eastside Distilling, commented,
During the first quarter of 2019 we increased our revenues 161% versus
last year, boosted by our acquisition of Craft Canning + Bottling, which
is well on the way to being successfully integrated. I fully expect we
will see increased manufacturing efficiencies, a corresponding benefit
to COGs in Q2 and Q3 and continued co-packing sales momentum. We also
accelerated authorizations of Redneck Riviera Whiskey into some of the
country’s largest retailers, maintained 50% organic growth in Oregon of
our branded products, and expanded our operations into high growth
categories such as RTD cocktails and CBD beverages.”

Robert Manfredonia, President of Eastside Distilling, commented, “We
started off 2019 with a very strong start for our Redneck Riviera
Whiskey. The addition of new product extensions, including the 1.75
liter bottles and Granny Rich Reserve, and authorizations by a number of
tier one retailers, including Walmart, Albertson’s, Safeway, and Kroger,
helped us drive over 6,300 cases during the seasonally slow first
quarter. Looking forward, we are scheduled to release a Redneck Riviera
RTD mid-year, which should drive continued growth in the brand and are
set to receive a number of new authorizations later this month for the
annual June resets. Historically, the grocery sector takes a minimum of
three to four years for brand entry based upon development, however,
Redneck Riviera has entered the grocery sector in less than a year,
reflecting tremendous retail confidence in the brand as a whole.”

Steve Shum, Interim Chief Executive Officer and Chief Financial Officer
of Eastside Distilling, added, “Eastside Distilling is in a strong
position to build upon the significant investments and strategic
initiatives over the last three years. The integration of our newly
acquired Craft Canning + Bottling operations has exceeded our original
expectations, contributing more than $1.4 million of revenue in the
first quarter. The platform we have now created at Eastside allows for
us to quickly move product from concept to store shelves and into
customers hands in an expedited format. We look forward to leveraging
this platform and drive improved efficiencies in the quarters and years
to come.”

Q1 2019 Financial Results

For the quarter ended March 31, 2019, Eastside Distilling reported
record gross sales of $3,685,700, an increase of 161% compared to
$1,413,182 in Q1 2018. Wholesale sales ($1,467,189; +94%) benefited from
the rapid launch of the new Redneck Riviera Whiskey product as well as
continued strong sales traction within the Pacific Northwest. The
Company’s co-packing business ($1,993,591; +467%) experienced increased
activity from its canning capabilities and the recent acquisition of
CC+B, as well as bulk spirit sales during the period. Lastly, the
Company’s retail operations ($224,921; -26%) decreased due to continued
special event and retail store rationalizations.

Gross profit margins (as a percent of Net Sales) were 34% during Q1 2019
compared to 49% during Q1 2018. Gross profit margin change was primarily
due to a change in product and business mix, higher raw material costs
on certain products in the period, and higher facilities costs. The
Company expects gross profit margins to improve in the future as we
generate higher volumes and improve the production efficiencies in our
larger facilities.

Advertising, promotional and selling expenses for Q1 2019 increased to
$1,333,275, or approximately 107.4%, from $642,977 Q1 2018. This
increase is primarily due to our efforts to target national markets,
particularly with the newer Redneck Riviera product, as well as to
accelerate sales of Burnside Bourbon and other proprietary products in
the Pacific Northwest. General and administrative expenses for the
quarter ended March 31, 2019 increased to $2,677,755, or approximately
121%, from $1,212,512 in Q1 2018. This increase was directly impacted by
increased headcount (and the associated compensation and benefits),
higher depreciation and amortization related to production, and
significant one-time costs that occurred in the period, part of which
was related to the acquisition of CC+B. Other expense, net was $107,410
for Q1 2019, compared to $56,438 during Q1 2018, an increase of 90.3%,
due to the higher notes payable balance in 2019.

Adjusted EBITDA during Q1 2019 was $(2,129,283), which compared to
$(780,357) in Q1 2018. The Q1 2019 EBITDA was impacted by the one-time
costs in the period.

Net loss attributable to common shareholders was $2,943,439 as compared
to a loss of $1,318,524 during Q1 2018.

The company ended the quarter with $4.2 million in cash with a positive
working capital of $15.2 million. As a result of strong sales activity
right at quarter end, the company also ended with nearly $2 million in
accounts receivables, substantially all of which is expected to be
collected within 30 to 45 days. In addition, the company ended with
inventories of $11.6 million (at cost) consisting primarily of barrels
of light whiskey, bourbon whiskey and rye whiskey stored in third party
warehouses. The Company had approximately $6.5 million in long-term debt.

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 earnings before interest, taxes,
depreciation and amortization, stock based compensation and the newly
implemented lease accounting. The table below provides a reconciliation
of this non-GAAP financial measure with the most directly comparable
GAAP financial measure.

Conference Call

The Company will hold a conference call today to discuss these results.

Date and Time: 11:30am ET (8:30am PT) on Monday, May 13, 2019

Call-in Information: Interested parties can access the conference
call by dialing (844) 889-4332 or (412) 717-9595.

Live Webcast Information: Interested parties can access the
conference call via a live Internet webcast, which is available in the
Investor Relations section of the Company’s website at https://www.eastsidedistilling.com/investors/.

Replay: A teleconference replay of the call will be available for
three days at (877) 344-7529 or (412) 317-0088, confirmation #10131481.
A webcast replay will be available in the Investor Relations section of
the Company’s website at https://www.eastsidedistilling.com/investors/
for 90 days.

About Eastside Distilling

Eastside Distilling, Inc. (NASDAQ: EAST) has been producing
high-quality, award-winning craft spirits in Portland, Oregon since
2008. The Company is distinguished by its highly decorated product
lineup that includes Redneck Riviera Whiskey, Burnside Bourbon, West End
American Whiskey, Goose Hollow Reserve, Below Deck Rums, Portland Potato
Vodka, Hue-Hue Coffee Rum and a distinctive line of fruit infused
spirits. Eastside Distilling is majority owner of Big Bottom Distilling
(makers of The Ninety One Gin, Navy Strength Gin and Delta Rye whiskey)
and the Redneck Riviera Whiskey Co. All Eastside, Big Bottom and Redneck
Riviera spirits are crafted from natural ingredients for quality and
taste. Eastside’s Craft Bottling + Canning subsidiary is one of the
Northwest’s leading independent spirit bottlers and ready-to-drink
canners. The Company also owns Outlandish LLC, an Oregon LLC for making
and selling products that do not contain alcohol but include ingredients
such as CBD. For more information visit: www.eastsidedistilling.com
or follow the Company on Twitter
and Facebook.

Important Cautions Regarding 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 release of new products and entering into
RTD and CBD markets, growth prospects, receipt of future authorizations
or anticipated revenues, our expected success in integrating acquired
entities and assets, including expected co-packing sales momentum and
production efficiencies associated with the acquisition of CC+B, and our
strategic focus, product verticals, and expected financial performance
and profitability. The Company assumes no obligation to update the
cautionary information in this release.

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 or before May 15,
2019 on Form 10-Q for the period ended March 31, 2019, and which can be
viewed at www.sec.gov
and in the investor relations section of the Company’s website at www.eastsidedistilling.com.

Eastside Distilling, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended March 31, 2019 and 2018
Three Months Ended

March 31,

March 31,

Sales $ 3,685,700 $ 1,413,182
Less excise taxes, customer programs and incentives   189,401     192,849  
Net sales 3,496,299 1,220,333
Cost of sales   2,321,298     627,523  
Gross profit   1,175,001     592,810  
Operating expenses:
Advertising, promotional and selling expenses 1,333,275 642,977
General and administrative expenses 2,677,755 1,212,512
Loss on disposal of property and equipment        
Total operating expenses   4,011,030     1,855,489  
Loss from operations   (2,836,029 )   (1,262,679 )
Other income (expense), net
Interest expense (107,410 ) (56,638 )
Other income (expense)       200  
Total other expense, net   (107,410 )   (56,438 )
Loss before income taxes (2,943,439 ) (1,319,117 )
Provision for income taxes        
Net loss   (2,943,439 )   (1,319,117 )
Dividends on convertible preferred stock
Income (loss) attributable to noncontrolling interests       593  
Net loss attributable to Eastside Distilling, Inc. common
$ (2,943,439 ) $ (1,318,524 )
Basic and diluted net loss per common share $ (0.32 ) $ (0.27 )
Basic and diluted weighted average common shares outstanding   9,099,382     4,920,534  
Eastside Distilling, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 2019 and December 31,2018



March 31,

December 31,

Current assets:
Cash $ 4,180,799 $ 10,642,877
Trade receivables 1,867,871 1,064,078
Inventories 11,565,655 11,017,459
Prepaid expenses and current assets   1,460,879     765,146  

Total current assets

19,075,204 23,489,560
Property and equipment, net 4,804,585 1,758,130
Right of use asset 1,180,632
Intangible assets, net 3,065,039 285,676
Goodwill 28,182 28,182
Other assets   985,685     796,260  
Total Assets $ 29,139,327   $ 26,357,808  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 2,062,039 $ 1,984,690
Accrued liabilities 507,470 386,166
Deferred revenue 97,345 1,728
Current portion of notes payable 580,647
Current portion of lease liability   662,700    
Total current liabilities 3,910,201 2,372,584
Lease Liability – less current portion 712,743
Secured trade credit facility, net of debt issuance costs 2,940,971 2,934,106
Notes payable – less current portion and debt discount   3,615,306     2,300,000  
Total liabilities   11,179,221     7,606,690  
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.0001 par value; 15,000,000 shares authorized;
9,110,635 and 8,764,085 shares issued and outstanding at
March 31, 2019 and December 31, 2018, respectively 911 876
Additional paid-in capital 48,228,617 45,888,872
Stock payable
Accumulated deficit   (30,269,422 )   (27,138,630 )
Total Eastside Distilling, Inc. Stockholders’ Equity 17,960,106 18,751,118
Noncontrolling interests        
Total Stockholders’ Equity 17,960,106 18,751,118
Total Liabilities and Stockholders’ Equity $ 29,139,327   $ 26,357,808  
        Three Months Ended
March 31
2019     2018
Net Loss $ (2,943,439 ) $


Interest Expense 107,410 56,638
Lease Expense 124,270
Stock-based compensation 191,856 276,068
Stock issued for services 53,920


Depreciation and amortization   336,700    


Adjusted EBITDA $ (2,129,283 ) $




Company Contact:
Eastside Distilling
Steve Shum, CFO

Investor Relations Contact:
Lytham Partners, LLC
(602) 889-9700

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