Eastside Distilling Reports Second Quarter 2016 Financial Results
Q2 2016 Sales up 47% From Q2 2015 to $627,000 on 3,374 Cases Shipped, Driving Gross Profit up 61% to $236,000 in Q2 2016 From Q2 2015
/EINPresswire.com/ -- PORTLAND, OR -- (Marketwired) -- 08/15/16 -- Eastside Distilling, Inc. (OTCQB: ESDI), a producer of award-winning master-crafted spirits, reported financial results for the period ended June 30, 2016.
Second Quarter 2016 Highlights
- Sales up 47% from Q2 2015 to $627,000, with gross profit up 61% to $236,000
- Total shipments increased 72% to 3,374 cases from 1,930 cases in the year-ago quarter.
- National rollout advanced with new listing approval and initial distribution into California, the nation's top liquor consumption state where spirit sales exceed 25 million cases annually.
- Eastside's major distributor on the East Coast placed its fifth purchase order since it came online in late February, and launched Eastside's distribution into Massachusetts, Rhode Island, New Hampshire, Maine and Vermont.
- Eastside spirits are now approved for sale and distribution in 20 states, double the count at the end of Q2 2015.
- Appointed Jay Harkins, who bring more than two decades of experience in the spirits industry, to the new position of executive vice president of sales, where he will be responsible for implementing sales strategies for the Eastside's portfolio of spirits and overseeing the expansion of the company's ongoing national rollout campaign.
- Completed equity and debt financings totaling $2.9 million in net cash proceeds to support the company's continued national rollout, including inventory expansion, sales and marketing, general operations, and elimination of certain high-interest convertible debt.
Welcome to the Eastside
Second Quarter 2016 Financial Results
Sales in Q2 2016 increased 47% to approximately $627,000 from $428,000 in the year-ago period. Sales in the first six months of 2016 were up 47% from the comparable 2015 period to approximately $1.2 million. On a net sales basis (less excise taxes), sales were up 66% to $504,000 in Q2 2016 versus the year-ago quarter. Net sales in the first six months of 2016 were up 54% from the comparable 2015 period to $968,000. The increase in both periods was primarily due to expanded distribution into new states along with continued growth in the company's home Oregon market.
Gross profit increased $236,000 on gross margins of 46.2%, in the second quarter of 2016 compared to gross profit of $147,000 on gross margins of 48% in the same year-ago period. The change in gross margin is primarily attributed to the fluctuation in sales mix from quarter to quarter.
Net loss totaled $1.3 million or ($0.02) per diluted share in Q2 2016 versus a loss of $668,000 or ($0.02) per diluted share in the same year-ago quarter. The wider net loss is primarily due to increases in certain professional fees, and charges related to the amortization of a beneficial conversion feature on the convertible note payable, amortization of debt issuance costs and interest expense associated with notes outstanding.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, stock based compensation, and gain on spin-off) totaled a loss of $1.6 million in Q2 2016 compared to a loss of $1.4 million in Q2 2015 (see discussion about the presentation of adjusted EBITDA, a nonGAAP term, and reconciliation to the nearest GAAP metric, below).
The second quarter also included significant unusual expenses, both non-cash and cash expenses, primarily associated with various financing efforts and prior debt payoff. The Company estimates that if it were to exclude those additional unusual costs from of the adjusted EBITDA, it believes the cash burn during the second quarter would have been less than $650,000.
Cash at June 30, 2016, totaled $1.0 million compared to $141,000 at June 30, 2015, with the increase due primarily to funding activity. During the quarter, the company closed on a number of debt and equity financings that resulted in net cash proceeds of $2.9 million.
Further details about the company's results for the period ended June 30, 2016 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
"Our record sales for the second quarter were driven by strong growth in both our home Oregon market and across the new states we've entered as part of our national rollout campaign," said Eastside president and CEO, Steven Earles. "In fact, in the year ago quarter, our markets outside Oregon represented only about 5% of sales, whereas for this year's second quarter they expanded dramatically to 41%.
"We began our second quarter by announcing several new states where we have begun to sell our full lineup of spirits, making it now 20 states in total, with four states representing the highest liquor consumption states in the country. This compares to only five states in total just 18 months ago when we launch our national campaign.
"Entering so many new states in such a short period of time, including California, the largest spirit market in the country, has positioned Eastside for an exciting future, especially as we enter the busier part of the year where we typically generate close to 70% of our business in the second half. To take advantage of this positioning, we added significant strength to our sales team with several key additions, including 20-year industry veteran, Jay Harkins, as our new executive vice president of sales. We were also able to close on a significant financing with major new investors to facilitate our national rollout.
"With the combination of our extensive portfolio of award-winning premium spirits, our recent infusion of capital as well as the expansion of our sales team, we expect our revenue growth will continue on its current trajectory over the next several quarters. In sum, we have set the stage for significant growth and improved bottom line performance ahead."
Conference Call
The company will hold a conference call today, Monday, August 15, 2016, at 4:30 p.m. Eastern time to discuss these results. Eastside Distilling President and CEO Steven Earles and CFO Steven Shum will host the conference call, followed by a question and answer session.
Date: Monday, August 15, 2016
Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Toll-free dial-in number: (877) 317-6789
International dial-in number: (412) 317-6789
Conference ID: 10091150
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Lytham Partners at (602) 889-9700.
A webcast replay will be available in the Investor Relations section of the company's website here or directly here for 30 days.
A telephone replay of the call will be available until August 18, 2016:
Toll-free replay number: (877) 344-7529
International replay number: (412) 317-0088
Replay ID: 10091150
About Eastside Distilling
Eastside Distilling, Inc. (OTCQB: ESDI) is located in Southeast Portland's Distillery Row, and has been producing high-quality, master crafted spirits since 2008. Makers of award winning spirits, the company is unique in the marketplace and distinguished by its highly decorated product line-up that includes Barrel Hitch American Whiskies, 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
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; the Company's ability to continue as a going concern; acceptance of the Company's products in the market; the Company's success in obtaining new customers; the Company's ability to obtain additional capital, 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, including the financial statements and related information contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on April 13, 2016 Examples of forward-looking statements in this release may include statements related to our strategic focus, product verticals, anticipated revenue and profitability. Further, such forward looking statements in this press release include but are not limited to: that the Company's growth will continue on its current trajectory; the stage is set for significant growth and improved bottom line performance ahead and beyond; that the second half is traditionally our busiest of the year where the Company typically generates close to 70% of our business in the second half. The Company assumes no obligation to update the cautionary information in this release.
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 gain on spin-off. The table below provides a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure.
Three Months Ended Six Months Ended
June 30 June 30
2016 2015 2016 2015
----------- ----------- ----------- -----------
Net Loss $(1,309,500) $ (688,060) $(2,324,179) $(1,519,078)
Add:
Interest Expense 34,743 3,837 57,724 6,737
Gain on Spin-off - - - (52,890)
Provision for Income
taxes - - - -
Stock-based
compensation 51,569 52,375 157,408 83,375
Stock issued for
services - 65,625 89,100 65,625
Depreciation and
amortization 191,529 4,630 356,347 9,009
----------- ----------- ----------- -----------
Adjusted EBITDA $(1,031,659) $ (561,593) $(1,663,600) $(1,407,222)
=========== =========== =========== ===========
Second Quarter 2016 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 15, 2016 in its Quarterly Report on Form 10-Q for the period ended June 30, 2016, 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 Subsidiary
Condensed Consolidated Statements of Operations
For the three and six months ended June 30, 2016 and 2015
(unaudited)
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
2016 2015 2016 2015
----------- ----------- ----------- -----------
Sales $ 627,464 $ 427,591 $ 1,249,346 $ 852,501
Less excise taxes 123,153 123,177 281,561 223,017
----------- ----------- ----------- -----------
Net sales 504,311 304,414 967,785 629,484
Cost of sales 268,216 157,651 524,385 350,832
----------- ----------- ----------- -----------
Gross profit 236,095 146,763 443,400 278,652
Selling, general, and
administrative expenses 1,313,629 832,039 2,364,555 1,843,883
----------- ----------- ----------- -----------
Loss from operations (1,077,534) (685,276) (1,921,155) (1,565,231)
Other (expense) income -
net (231,966) (2,784) (403,024) 46,153
----------- ----------- ----------- -----------
Loss before income taxes (1,309,500) (688,060) (2,324,179) (1,519,078)
Provision for income
taxes - - - -
----------- ----------- ----------- -----------
Net loss $(1,309,500) $ (688,060) $(2,324,179) $(1,519,078)
----------- ----------- ----------- -----------
Dividends on convertible
preferred stock (17,759) - (17,759) -
Net loss available to
common shareholders $(1,327,259) $ (688,060) $(2,341,938) $(1,519,078)
----------- ----------- ----------- -----------
Basic and diluted net
loss per common share $ (0.02) $ (0.02) $ (0.05) $ (0.03)
----------- ----------- ----------- -----------
Basic and diluted
weighted average common
shares outstanding 57,101,502 45,547,115 51,837,894 45,529,903
----------- ----------- ----------- -----------
Eastside Distilling, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
June 30, 2016 and December 31, 2015
June 30, 2016 December 31,
(unaudited) 2015
------------- -------------
Assets
Current assets:
Cash $ 1,013,596 $ 141,317
Trade receivables 266,214 142,206
Inventories 778,526 683,824
Prepaid expenses 66,631 163,506
------------- -------------
Total current assets 2,124,967 1,130,853
Property and equipment - net 107,910 112,005
Other assets 48,000 49,000
------------- -------------
Total Assets $ 2,280,877 $ 1,291,858
------------- -------------
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 1,144,651 $ 1,300,532
Accrued liabilities 576,613 563,814
Deferred revenue 3,194 727
Current portion of notes payable 4,313 4,098
Related party note payable 12,500 12,500
Convertible notes payable - net of debt
discounts 105,000 455,958
------------- -------------
Total current liabilities 1,846,271 2,337,629
Notes payable - less current portion and debt
discount 149,258 17,842
------------- -------------
Total liabilities 1,995,529 2,355,471
------------- -------------
Commitments and contingencies (Note 9)
Stockholders' equity (deficit):
Series A convertible preferred stock,
$0.0001 par value; 100,000,000 shares
authorized; 972 and 0 shares issued and
outstanding at June 30, 2016 and December
31, 2015, respectively (liquidation value
of $2,430,000 at June 30, 2016) 756,835 -
Common stock, $0.0001 par value; 900,000,000
shares authorized; 93,859,490 and
46,195,000 shares issued and outstanding at
June 30, 2016 and December 31, 2015,
respectively 9,386 4,620
Additional paid-in capital 9,422,816 6,493,518
Accumulated deficit (9,903,689) (7,561,751)
------------- -------------
Total stockholders' equity (deficit) 285,348 (1,063,613)
------------- -------------
Total Liabilities and Stockholders' Equity
(Deficit) $ 2,280,877 $ 1,291,858
------------- -------------
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Company Contact:
Eastside Distilling
inquiries@eastsidedistilling.com
Investor Relations Contact:
Robert Blum, Joe Diaz or Joe Dorame
Lytham Partners, LLC
Tel (602) 889-9700
esdi@lythampartners.com
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