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Eastside Reports First Quarter 2018 Financial Results

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Gross Sales Increase 70% on the Back of Strong Redneck Riviera
Launch, Resumption of Growth in Sandstrom-Rebranded Burnside Spirits and
Wine Canning Revenue

Eastside Distilling, Inc. (NASDAQ:EAST), a producer of craft spirits,
reported first quarter 2018 financial results.

Q1 2018 Financial Highlights:

  • Gross sales for the quarter ended March 31, 2018 were of $1,413,182,
    an increase of 70% compared to $829,669 in the first quarter of 2017,
    led by the launch of Redneck Riviera Whiskey, sales from our private
    label and wine canning operations, as well as resumption of growth
    within the Pacific Northwest of our rebranded Burnside lineup.
  • Total shipments increased to 8,305 cases during Q1 2018 from 5,937
    cases in Q1 2017, an increase of 40%. Branded product shipments
    increased 80% over last year.
  • Initial shipments of Redneck Riviera Whiskey, which first hit store
    shelves in February 2018, exceeded expectations, with 2,800 9L cases
    shipped.
  • Gross margins improved to 49% during Q1 2018 compared to 37% during
    fiscal 2017.

Key Operational Highlights from Q1 2018:

  • Redneck Riviera Whiskey, a collaboration with country music superstar
    John Rich, launched in January 2018, with first product hitting the
    shelf in February 2018.
  • Eastside began to benefit from the December 2017 tax legislation,
    which went into effect January 1 of 2018.
  • Strengthened the management team with the addition of Tom Wood as VP
    of Production, Robert Manfredonia as VP of National Accounts, and Kim
    Davis as Controller.
  • Introduced Hue-Hue Coffee Rum, the next Sandstrom rebranded product in
    our lineup.
  • Launched our new "slim line" canning capability during the quarter,
    with initial shipments to customers in the canned wine segment during
    the first quarter.

Redneck Riviera Whiskey Launch Highlights Since January 2018:

  • Signed distribution agreements with the Southeast's largest spirit
    distributors, Republic National Distributing Company ("RNDC"), to
    distribute Redneck Riviera Whiskey throughout the Gulf Coast, upper
    Midwest and began distribution in California with Southern Glazer Wine
    and Spirits.
  • Redneck Riviera Whiskey is currently distributed in 15 states,
    including Texas, Louisiana, Alabama, Georgia, Mississippi, Florida,
    California, North Carolina, North and South Dakota, Oregon, Tennessee,
    Oklahoma, Nebraska and Kentucky.
  • Strong promotional support has been provided for Redneck Riviera
    Whiskey since its launch, with John Rich making appearances on
    national TV shows, including Today
    Show with Megyn Kelly
    ; local TV shows, including NBC,
    ABC
    and Fox
    affiliates; in-store
    appearances
    to support retailers; performances at numerous events,
    including the ROTH
    Capital Partners 2018 Conference
    ; participation in the Nasdaq
    Closing Bell ceremony
    ; as well as distributor and customer events.
  • Significant retailer adoption, including authorization by Walmart
    in Florida, Louisiana and California; the largest liquor retailer in
    Texas, Spec's;
    as well as one of the largest independent supermarkets in the Gulf
    Coast, Rouses.

Management Commentary

Grover Wickersham, Chairman and CEO of Eastside Distilling, commented,
"Our first quarter 2018 results are the early returns on the investments
EAST made in 2017 to position us as a leader in the emerging craft
spirits industry. The sales growth of 70% was achieved with two months
of Redneck Riviera shipments and two weeks of wine canning operations
during the quarter. The Sandstrom rebranding of our Burnside Bourbon,
which re-launched at the end of last year, has resulted in a resumption
of growth in that key product line. March sales of the Burnside line in
the Pacific Northwest surpassed the peak level reached in 2017. We
believe that momentum in our key brands, our pipeline of innovative new
products and our canning operations, as well as other of our strategic
initiatives, will produce continued strong growth throughout the
remainder of 2018 and well into 2019."

Financial Results

For the quarter ended March 31, 2018, Eastside Distilling reported
record gross sales of $1,413,182, an increase of 70% compared to
$829,669 in the first quarter of 2017. The increase in sales is
primarily attributable to: the newly launched Redneck Riviera Whiskey
product, increased wholesale sales traction within the Pacific Northwest
(which was offset by lower sales nationally due to our Burnside product
transition), our acquisitions of MotherLode and BBD and related
expansion of our private label business and canning abilities, and the
addition of new retail locations.

Total shipments increased to 8,305 cases during Q1 2018 (6,877 for
branded products and 1,428 for private label which now includes wine
canning) from 5,937 cases in Q1 2017, an increase of 40% overall and 80%
in branded products.

Gross profit margins (as a percent of Net Sales) were 49% during Q1 2018
compared to 47% during Q1 2017 and approximately 37% overall in fiscal
2017. The improvement in gross profit margins is primarily due to the
combination of our new products which have higher margins than prior
legacy products as well as the new, lower federal excise tax. While our
goal is to ultimately improve our overall gross margin further, we
expect it to fluctuate around the current level in the short term due to
the impact of product sales mix and the related customer programs and
incentive programs that are subject to fluctuation and are especially
large in the early phases of new product launches such as Redneck
Riviera and rebranded Burnside. Under our contract with Mark Rich, half
of reimbursable marketing expense, as defined in the contract, is
returned to us upon sale of the Redneck Riviera Whiskey brand, should a
sale occur.

Advertising, promotional and selling expenses during Q1 2018 improved as
a percent of sales to 45.5% of sales compared to 46.5% during Q1 2017.
General and administrative expenses increased slightly as a percent of
sales primarily due to increased headcount to support the Redneck
Riviera and wine canning launches, as well as higher stock-based
compensation.

Adjusted EBITDA during Q1 2018 was $(780,357), which compared to
$(564,494) in Q1 2017 and $(930,472) in Q4 2017.

Net loss attributable to common shareholders was $(1,318,524), or
$(0.27) per basic and diluted share for Q1 2018, compared $(906,855), or
$(0.35) per basic and diluted share in the year ago period.

The company ended the quarter with $1.6 million in cash and inventories
of $5.3 million. The inventory balance was an increase of $1.3 million
compared to the year end as the company purchased bulk spirits to meet
the anticipated demand of its newly launched Redneck Riviera Whiskey.
Subsequent to the end of the year, the Company also raised approximately
$1.7 million through the issuance of notes and early redemption of
previously issued public warrants.

Conference Call

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

Date and Time: 11:30 am ET (8:30 am PT) on Monday, May 14, 2018

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/.

To Ask a Question: The conference call will be moderated by
Lytham Partners, an investor relations firm. There will be three options
to ask a question during the call:

  1. Questions can be asked live during the call-in portion of the
    conference call.
  2. The live webcast will feature an option to submit questions in writing
    during the event.
  3. If you are unable to attend the event, you can submit a question in
    advance to EAST@lythampartners.com.

Replay: A teleconference replay of the call will be available for
three days at (877) 344-7529 or (412) 317-0088, confirmation #10120228.
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 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 and Big Bottom spirits are crafted from natural
ingredients for quality and taste. Eastside's MotherLode Bottling
subsidiary is one of the Northwest's leading independent spirit bottlers
and ready-to-drink canners. 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; 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, 2017 filed with the Securities and Exchange
Commission on April 2, 2018. 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, when the Company typically generates close to
70% of its annual business. 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.

Q1 2018 Financial Summary Tables

The following financial information should be read in conjunction with
the audited financial statements and accompanying notes filed by the
Company with the Securities and Exchange Commission on May 14, 2018 on
Form 10-Q for the period ended March 31, 2018, 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, 2018 and 2017
 
2018 2017
Sales $ 1,413,182 $ 829,669
Less excise taxes, customer programs and incentives   192,849     217,188  
Net sales 1,220,333 612,481
Cost of sales   627,523     322,913  
Gross profit   592,810     289,568  
Operating expenses:
Advertising, promotional and selling expenses 642,977 386,132
General and administrative expenses 1,212,512 726,396
Loss on disposal of property and equipment   -     35,534  
Total operating expenses   1,855,489     1,148,062  
Loss from operations   (1,262,679 )   (858,494 )
Other income (expense), net
Interest expense (56,638 ) (47,809 )
Other income (expense)   200     4,485  
Total other expense, net   (56,438 )   (43,324 )
Loss before income taxes (1,319,117 ) (901,818 )
Provision for income taxes   -     -  
Net loss   (1,319,117 )   (901,818 )
 
Dividends on convertible preferred stock - (5,037 )
Income (loss) attributable to noncontrolling interests   593     -  
 
Net loss attributable to Eastside Distilling, Inc. common
shareholders
$ (1,318,524 ) $ (906,855 )
 
Basic and diluted net loss per common share $ (0.27 ) $ (0.35 )
 
Basic and diluted weighted average common shares outstanding   4,920,534     2,614,324  
 
 
                         
Eastside Distilling, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 2018 and December 31, 2017
 
March 31, 2018 December 31, 2017
Assets
Current assets:
Cash $ 1,554,119 $ 2,586,315
Trade receivables 405,601 315,321
Inventories 5,305,953 4,051,282
Prepaid expenses and current assets   624,299     649,749  
Total current assets 7,889,972 7,602,667
Property and equipment, net 1,027,087 728,506
Intangible assets, net 323,294 325,668
Goodwill 28,182 28,182

Other assets, net

  383,620     343,942  
Total Assets $ 9,652,155   $ 9,028,965  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 909,098 $ 1,267,189
Accrued liabilities 202,247 156,163
Deferred revenue 18,704 1,579
Current portion of notes payable   297,259     38,731  
Total current liabilities 1,427,308 1,463,662
Notes payable - less current portion and debt discount   3,388,237     2,416,755  
Total liabilities   4,815,545     3,880,417  
 
Commitments and contingencies (Note 10)
 
Stockholders' equity:

Common stock, $0.0001 par value; 15,000,000 shares authorized;
5,044,770 and 4,889,745 shares issued and outstanding at March 31,
2018 and December 31, 2017, respectively

504 489
Additional paid-in capital 24,230,006 23,223,435
Accumulated deficit   (19,410,078 )   (18,090,961 )
Total Eastside Distilling, Inc. Stockholders' Equity 4,820,432 5,132,963
Noncontrolling interests   16,178     15,585  
Total Stockholders' Equity 4,836,610 5,148,548
Total Liabilities and Stockholders' Equity $ 9,652,155   $ 9,028,965  
 
 
                   
Three Months Ended

March 31,

2018           2017
 
Net Loss $ (1,319,117 ) $ (901,818 )
Add:
Interest Expense 56,638 47,809
Loss on disposal of property and equipment - 35,534
Provision for Income taxes - -
Stock-based compensation 276,068 158,658
Stock issued for services 125,030 86,317
Depreciation and amortization   81,024     9,006  
 
Adjusted EBITDA $ (780,357 ) $ (564,494 )
 

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