10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2017
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _________________

Commission File No.: 001-38182

EASTSIDE DISTILLING, INC.

(Exact name of registrant as specified in its charter)

Nevada	20-3937596
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1001 SE Water Avenue, Suite 390

Portland, Oregon 97214

(Address of principal executive offices)

Issuer’s telephone number: (971) 888-4264

2150 SE Hanna Harvester Drive

Portland, Oregon 97222

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company)	Smaller reporting company [X]
Emerging growth company [X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of November 14, 2017, 4,824,990 shares of our common stock, $0.0001 par value, were outstanding.

EASTSIDE DISTILLING, INC.

FORM 10-Q

September 30, 2017

TABLE OF CONTENTS

		Page
PART I— FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	3
	Condensed Consolidated Statements of Operations for three and nine months ended September 30, 2017 and 2016	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4	Control and Procedures	35
PART II— OTHER INFORMATION
Item 1	Legal Proceedings	36
Item 1A	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37
SIGNATURES		38

2

PART I: FINANCIAL INFORMATION

ITEM 1 –FINANCIAL STATEMENTS (unaudited)

Eastside Distilling, Inc. and Subsidiaries

Consolidated Balance Sheets

September 30, 2017 and December 31, 2016

	September 30, 2017			December 31, 2016
	(unaudited)
Assets
Current assets:
Cash	$	4,190,085		$	1,088,066
Trade receivables		192,805			344,955
Inventories		2,416,946			780,037
Prepaid expenses and current assets		386,168			187,714
Total current assets		7,186,004			2,400,772
Property and equipment, net		468,382			99,216
Intangible assets, net		373,398			-
Goodwill		221,556			-
Other assets		238,375			48,000
Total Assets	$	8,487,715		$	2,547,988
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	523,882		$	457,034
Accrued liabilities		152,879			523,702
Deferred revenue		820			2,126
Current portion of notes payable		39,032			4,537
Total current liabilities		716,613			987,399
Notes payable - less current portion and debt discount		1,331,007			427,756
Total liabilities		2,047,620			1,415,155
Commitments and contingencies (Note 10)
Stockholders' equity:
Series A convertible preferred stock, $0.0001 par value; 3,000 shares authorized; 0 and 300 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively (liquidation values of $0 and $750,000, respectively)		-			245,838
Common stock, $0.0001 par value; 15,000,000 shares authorized; 4,824,990 and 2,542,504 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		482			254
Additional paid-in capital		22,844,814			13,699,785
Accumulated deficit		(16,419,011	)		(12,813,044	)
Total Eastside Distilling, Inc. Stockholders' Equity		6,426,285			1,132,833
Noncontrolling interests		13,810			-
Total Stockholders' Equity		6,440,095			1,132,833
Total Liabilities and Stockholders' Equity	$	8,487,715		$	2,547,988

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Eastside Distilling, Inc. and Subsidiaries

Consolidated Statements of Operations

For the three and nine months ended September 30, 2017 and 2016

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
Sales	$	895,182		$	796,222		$	2,608,373		$	2,045,568
Less excise taxes, customer programs and incentives		276,845			242,042			772,525			542,854
Net sales		618,337			554,180			1,835,848			1,502,714
Cost of sales		384,265			370,854			1,101,803			895,239
Gross profit		234,072			183,326			734,045			607,475
Operating expenses:
Advertising, promotional and selling expenses		563,754			319,391			1,499,751			951,293
General and administrative expenses		1,040,942			1,210,495			2,615,810			2,923,799
Loss on disposal of property and equipment		-			-			40,975			-
Total operating expenses		1,604,696			1,529,886			4,156,536			3,875,092
Loss from operations		(1,370,624	)		(1,346,560	)		(3,422,491	)		(3,267,617	)
Other income (expense), net
Interest expense		(41,436	)		(91,085	)		(184,998	)		(492,350	)
Other income (expense)		900			1,196			5,385			(662	)
Total other expense, net		(40,536	)		(89,889	)		(179,613	)		(493,012	)
Loss before income taxes		(1,411,160	)		(1,436,449	)		(3,602,104	)		(3,760,629	)
Provision for income taxes		-			-			-			-
Net loss		(1,411,160	)		(1,436,449	)		(3,602,104	)		(3,760,629	)
Dividends on convertible preferred stock		-			19,600			5,037			37,359
Income (loss) attributable to noncontrolling interests		301			-			(1,174	)		-
Net loss attributable to Eastside Distilling, Inc. common shareholders	$	(1,411,461	)	$	(1,456,049	)	$	(3,605,967	)	$	(3,797,988	)
Basic and diluted net loss per common share	$	(0.34	)	$	(0.92	)	$	(1.08	)	$	(3.43	)
Basic and diluted weighted average common shares outstanding		4,142,632			1,587,285			3,342,332			1,106,832

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Eastside Distilling, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the nine months ended September 30, 2017 and 2016

(unaudited)

	Nine Months Ended
	September 30, 2017			September 30, 2016
Cash Flows From Operating Activities:
Net loss	$	(3,602,104	)	$	(3,760,629	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		53,770			16,579
Loss on disposal of property and equipment		40,975			-
Amortization of debt issuance costs		68,305			116,750
Amortization of beneficial conversion feature		-			228,549
Issuance of common stock in exchange for services		413,936			218,970
Stock-based compensation		486,194			208,977
Changes in operating assets and liabilities:
Trade receivables		158,374			(240,798	)
Inventories		(1,403,499	)		(197,828	)
Prepaid expenses and other assets		(243,829	)		94,127
Accounts payable		61,669			(476,158	)
Accrued liabilities		(587,112	)		657,650
Deferred revenue		(1,306	)		2,467
Net cash used in operating activities		(4,554,627	)		(3,131,344	)
Cash Flows From Investing Activities:
Cash acquired in acquisition		4,541			-
Purchases of property and equipment		(381,837	)		(6,952	)
Net cash used in investing activities		(377,296	)		(6,952	)
Cash Flows From Financing Activities:
Stock issuance cost related to acquisitions		(19,980	)		-
Stock issuance cost related to common shares issued for preferred conversion		(15,000	)		-
Proceeds from common stock, net of issuance costs of $1,120,323, with detachable warrants		6,707,487			-
Proceeds from warrant exercise		159,250			-
Payments on conversion of note payable		(90,000	)		(500,923	)
Payments of principal on notes payable		(107,815	)		-
Proceeds from convertible notes payable, net of issuance costs		1,400,000			185,000
Proceeds from notes payable, warrants issued		-			1,250,000
Proceeds from preferred stock, net of issuance costs of $35,920, with warrants		-			463,080
Proceeds from common stock with detachable warrants		-			2,000,000
Net cash provided by financing activities		8,033,942			3,397,157
Net increase in cash		3,102,019			258,861
Cash - beginning of period		1,088,066			141,317
Cash - end of period	$	4,190,085		$	400,178
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	$	90,276		$	294,240
Supplemental Disclosure of Non-Cash Financing Activity
Issuance of common stock for the acquisition of MotherLode Craft Distillery, LLC	$	377,000		$	-
Issuance of common stock for the acquisition of Big Bottom Distilling, LLC	$	134,858		$	-
Note payable issued in exchange of accounts payable	$	60,000		$	-
Common stock issued in exchange of notes payable	$	505,637		$	-
Issuance of common stock in exchange for services recorded as other assets	$	145,000		$	-
Stock issued for payment of trade debt	$	-		$	19,213
Dividends paid in common stock	$	-		$	17,759
Stock issued in lieu of accrued compensation	$	-		$	423,000
Stock issued to retire notes and accrued interest	$	-		$	246,330

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

1. Description of Business

Eastside Distilling, Inc. (“Eastside” or the “Company”) is an Oregon-based producer and marketer of craft spirits, founded in 2008. Our products span several alcoholic beverage categories, including bourbon, American whiskey, vodka, and rum. Unlike many, if not most, distillers, we operate several retail tasting rooms in Oregon to market our brands directly to consumers. Our growth strategy is to build on our local base in the Pacific Northwest and expand selectively to other markets by using major spirits distributors, such as Southern Glazer Wines and Spirits, and regional distributors that focus on craft brands. As a small business in the large, international spirits marketplace populated with massive conglomerates, we are innovative in exploiting new trends with our products, for example, our Coffee Rum with cold brew coffee and low sugar and our gluten-free potato vodka. In December 2016 we retained Sandstrom Partners (an internationally known spirit branding firm that branded St Germain and Bulleit Bourbon) to guide our marketing strategy and branding. Sandstrom Partners subsequently became an investor in our Company. We seek to be both a leader in creating spirits that offer better value than comparable spirits, for example our value-priced Portland Potato Vodka, and an innovator in creating imaginative spirits that offer a unique taste experience, for example our cold-brewed Coffee Rum, Oregon oak aged whiskeys, Marionberry Whiskey and Peppermint Bark holiday liqueur. On May 1, 2017, we acquired 90% of the ownership of Big Bottom Distillery (“BBD”) for its excellent, award winning range of super premium gins and whiskeys, including The Ninety One Gin, Navy Strength Gin, Oregon Gin, Delta Rye and initial production of American Single Malt Whiskey. BBD’s super premium spirits will expand our tasting room offerings and give us a presence at the “high end” of the market. In addition, through MotherLode Craft Distillery (“MotherLode”), our wholly-owned subsidiary acquired in March 2017, we also provide contract bottling and packaging services for existing and emerging spirits producers, some of whom contract with us to blend or distill spirits. MotherLode has also launched a new canning line of Ready-to-Drink (RTD) products, primarily designed for the wine and pre-mixed alcoholic drink industry. As a publicly-traded craft spirit producer, we have access to the public capital markets to support our long-term growth initiatives, including strategic acquisitions.

We currently sell our products in 25 states (Oregon, California, Washington, Florida, New York, Illinois, Texas, Georgia, Pennsylvania, Alaska, Connecticut, Idaho, Indiana, Iowa, Kansas, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, North Carolina, Rhode Island, Virginia, West Virginia and Wyoming) as well as Washington D.C. and Ontario, Canada. The Company also generates revenue from tastings, tasting room tours, private parties, and merchandise sales from its facilities in Oregon. The Company is subject to the Oregon Liquor Control Commission (OLCC) and the Alcohol and Tobacco Tax and Trade Bureau (TTB).

2. Liquidity

Historically, the Company has funded its cash and liquidity needs through the issuance of convertible notes, extended credit terms and the sale of equity. The Company has incurred a net loss of $3,602,104 and has an accumulated deficit of $16,419,011 for the nine months ended September 30, 2017. The Company has been dependent on raising capital from debt and equity financings to fund its operating activities. For the nine months ended September 30, 2017, the Company raised $8,033,942 in proceeds from financing activities to meet cash flow used in operating activities.

At September 30, 2017, the Company had $4,190,085 of cash on hand with a positive working capital of $6,469,391. The Company’s ability to meet its ongoing operating cash needs is dependent on generating positive operating cash flow, primarily through increased sales, improved profit growth and controlling expenses. Management has taken actions to improve profitability, by managing expenses while increasing sales. Also, in March and May 2017, the Company acquired two businesses, a contract bottling and packaging services company and a small distillery business (both stock purchase transactions), that are expected to improve operating results. Management believes that cash on hand, including proceeds generated from the most recent equity financing, along with revenue that the Company expects to generate from operations, including as a result of its two recent acquisitions, will be sufficient to meet the Company’s cash needs for the foreseeable future.

6

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

3. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements for Eastside Distilling, Inc. and Subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with GAAP. In our opinion, the unaudited condensed consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly our financial position as of September 30, 2017, our operating results for the three and nine months ended September 30, 2017 and 2016 and our cash flows for the nine months ended September 30, 2017 and 2016. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Interim results are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2017. The condensed consolidated financial statements include the accounts of Eastside Distilling, Inc.’s wholly-owned subsidiary MotherLode (beginning as of March 8, 2017), and majority-owned subsidiary BBD (beginning as of May 1, 2017). All intercompany balances and transactions have been eliminated in consolidation.

Segment Reporting

The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity, producing, marketing and distributing hand-crafted spirits, and operates as one segment. The Company’s chief operating decision makers, its chief executive officer and chief financial officer, review the Company’s operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Net revenue includes product sales, less excise taxes and customer programs and incentives. The Company records revenue when all four of the following criteria are met: (i) there is persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured.

The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, which include sales to the Oregon Liquor Control Commission (OLCC), the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. The Company excludes sales tax collected and remitted to various states from sales and cost of sales. Sales from items sold through the Company’s retail location are recognized at the time of sale.

7

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

Revenue received from online merchants who sell discounted gift certificates for the Company’s merchandise and tastings is deferred until the customer has redeemed the discounted gift certificate or the gift certificate has expired, whichever occurs earlier.

Customer Programs and Incentives

Customer programs and incentives, which include customer promotional discount programs, customer incentives and other payments, are a common practice in the alcohol beverage industry. The Company makes these payments to customers and incurs these costs to promote sales of products and to maintain competitive pricing. Amounts paid in connection with customer programs and incentives are recorded as reductions to net sales or as advertising, promotional and selling expenses in accordance with Accounting Standards Codification (“ASC”) Topic 605-50, Revenue Recognition - Customer Payments and Incentives, based on the nature of the expenditure. Amounts paid to customers totaled $118,389 and $72,918 for the nine months ended September 30, 2017 and 2016, respectively.

Advertising, Promotional and Selling Expenses

The following expenses are included in advertising, promotions and selling expenses in the accompanying consolidated statements of operations: media advertising costs, special event costs, tasting room costs, sales and marketing expenses, salary and benefit expenses, travel and entertainment expenses for the sales, brand and sales support workforce and promotional activity expenses. Advertising, promotional and selling costs are expensed as incurred. Advertising, promotional and selling expense was $1,499,751 and $951,293 for the nine months ended September 30, 2017 and 2016, respectively.

Cost of Sales

Cost of sales consists of the costs of ingredients utilized in the production of spirits, manufacturing labor and overhead, warehousing rent, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by packaging and production costs.

Shipping and Fulfillment Costs

Freight costs incurred related to shipment of merchandise from the Company’s distribution facilities to customers are recorded in cost of sales.

Cash and Cash Equivalents

Cash equivalents are considered to be highly liquid investments with maturities of three months or less at the time of the purchase. The Company had no cash equivalents at September 30, 2017 and December 31, 2016.

Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. At September 30, 2017, four customers represented 82% of trade receivables, and at December 31, 2016, three customers represented 91% of trade receivables. Sales to two customers accounted for approximately 48% of consolidated net sales for the nine months ended September 30, 2017. Sales to three customers accounted for approximately 57% of net sales for the nine months ended September 30, 2016.

8

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

Fair Value Measurements

GAAP defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAAP permits an entity to choose to measure many financial instruments and certain other items at fair value and contains financial statement presentation and disclosure requirements for assets and liabilities for which the fair value option is elected. At September 30, 2017 and December 31, 2016, management has not elected to report any of the Company’s assets or liabilities at fair value under the “fair value option” provided by GAAP.

The hierarchy of fair value valuation techniques under GAAP provides for three levels: Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, generally would require significant management judgment. The three levels for categorizing assets and liabilities under GAAP’s fair value measurement requirements are as follows:

Level 1:	Fair value of the asset or liability is determined using unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:	Fair value of the asset or liability is determined using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:	Fair value of the asset or liability is determined using unobservable inputs that are significant to the fair value measurement and reflect management’s own assumptions regarding the applicable asset or liability.

None of the Company’s assets or liabilities were measured at fair value at September 30, 2017 and December 31, 2016. However, GAAP requires the disclosure of fair value information about financial instruments that are not measured at fair value. Financial instruments consist principally of trade receivables, accounts payable, accrued liabilities, note payable, and convertible note payable. The estimated fair value of trade receivables, accounts payable, and accrued liabilities approximates their carrying value due to the short period of time to their maturities. At September 30, 2017 and December 31, 2016, the Company’s note payable and convertible notes payable are at fixed rates and their carrying value approximates fair value.

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities acquired in a business acquisition are valued at fair value at the date of acquisition.

Inventories

Inventories primarily consist of bulk and bottled liquor and merchandise and are stated at the lower of cost or market. Cost is determined using an average costing methodology, which approximates cost under the first-in, first-out (FIFO) method. A portion of inventory is held by certain independent distributors on consignment until it is sold to a third party. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost basis of accounting for the related inventory. The Company has recorded no write-downs of inventory for the nine months ended September 30, 2017 and 2016.

9

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Amortization of leasehold improvements is computed using the straight-line method over the life of the lease or the useful lives of the assets, whichever is shorter. The cost and related accumulated depreciation and amortization of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current period income or expense. The costs of repairs and maintenance are expensed as incurred.

Intangible Assets / Goodwill

The Company accounts for long-lived assets, including property and equipment, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount of the asset, an impairment loss would be recognized to write down the asset to its estimated fair value. At September 30, 2017 and December 31, 2016, no impairment loss was recognized.

Income Taxes

The provision for income taxes is based on income and expenses as reported for financial statement purposes using the “asset and liability method” for accounting for deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. At September 30, 2017 and December 31, 2016, the Company established valuation allowances against its net deferred tax assets.

Income tax positions that meet the “more-likely-than-not” recognition threshold are measured at the largest amount of income tax benefit that is more than 50 percent likely to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with income tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized income tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized income tax benefits would be classified as additional income taxes in the accompanying condensed consolidated statements of operations. There were no unrecognized income tax benefits, nor any interest and penalties associated with unrecognized income tax benefits, accrued or expensed at and for the nine months ended September 30, 2017 and 2016.

The Company files federal income tax returns in the U.S. and various state income tax returns. The Company is no longer subject to examinations by the related tax authorities for the Company’s U.S. federal and state income tax returns for years prior to 2011.

Comprehensive Income

The Company does not have any reconciling other comprehensive income items for the nine months ended September 30, 2017 and 2016.

10

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

Excise Taxes

The Company is responsible for compliance with the TTB regulations, which includes making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual states also impose excise taxes on alcohol beverages in varying amounts. The Company calculates its excise tax expense based upon units produced and on its understanding of the applicable excise tax laws. Excise taxes totaled $654,136 and $469,936 for the nine months ended September 30, 2017 and 2016, respectively.

Stock-Based Compensation

The Company recognizes as compensation expense all stock-based awards issued to employees. The compensation cost is measured based on the grant-date fair value of the related stock-based awards and is recognized over the service period of stock-based awards, which is generally the same as the vesting period. The fair value of stock options is determined using the Black-Scholes valuation model, which estimates the fair value of each award on the date of grant based on a variety of assumptions including expected stock price volatility, expected terms of the awards, risk-free interest rate, and dividend rates, if applicable. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments at the end of each reporting period and as the underlying stock-based awards vest. Stock-based compensation was $900,130 and $427,947 for the nine months ended September 30, 2017 and 2016, respectively.

Accounts Receivable Factoring Program

During the three months ended June 30, 2017, we terminated our previous receivable factoring program. Under the prior program, we had the option to sell certain customer account receivables in advance of payment for 75% of the amount due. When the customer remitted payment, we would receive the remaining 25%. We were charged interest on the advanced 75% payment at a rate of 1.5% per month. Under the terms of the agreement with the factoring provider, any factored invoices had recourse should the customer fail to pay the invoice. Thus, we recorded factored amounts as a liability until the customer remitted payment and we received the remaining 25% of the non-factored amount. We did not factor any invoices during the nine months ended September 30, 2017. At September 30, 2017, we had no factored invoices outstanding, and we incurred fees associated with the factoring program of $63,238 during the nine months ended September 30, 2017. During the nine months ended September 30, 2016, we factored invoices totaling $560,172 and received total proceeds of $420,129. At September 30, 2016, we had $184,875 in open factored invoices, and we incurred fees associated with the factoring program of $21,500 during the nine months ended September 30, 2016.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standard Boards (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 was effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We have adopted ASU 2016-09 as of March 31, 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

- A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and

- A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

11

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are currently evaluating the impact ASU 2016-02 will have on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 will supersede virtually all existing revenue guidance. Under this update, an entity is required to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. As such, an entity will need to use more judgment and make more estimates than under the current guidance. ASU 2014-09 is to be applied retrospectively either to each prior reporting period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. The Company will elect to apply the impact (if any) of applying ASU 2014-09 to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 deferred the effective date of ASU 2014-09 for one year, making it effective for the year beginning December 31, 2017, with early adoption permitted as of January 1, 2017. The Company currently expects to adopt ASU 2014-09 in the first quarter of 2018. The Company does not expect adoption of ASU 2014-09 to have a material impact on its condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (“ASU 2014-15”). The new guidance explicitly requires that management assess an entity’s ability to continue as a going concern and may require additional detailed disclosures. ASU 2014-15 was effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. We adopted ASU 2014-15 as of December 31, 2016. The Company does not believe the adoption of ASU 2014-15 had any material impact on its condensed consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 is part of the FASB’s initiative to simplify accounting standards. The guidance requires an entity to recognize inventory within scope of the standard at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. ASU 2015-11 was effective prospectively for the year beginning January 1, 2017. We adopted ASU 2015-11 as of March 31, 2017. The Company does not believe the adoption of ASU 2015-11 had any material impact on its condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, simplifying the presentation of debt issuance costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 was effective for annual and interim periods beginning after December 15, 2015 and early application was permitted. We early adopted ASU 2015-03 as of December 31, 2015. The Company does not believe the adoption of ASU 2015-03 had any material impact on its condensed consolidated financial statements.

12

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

Reclassifications

Certain prior period amounts have been reclassified to conform to the September 30, 2017 presentation with no changes to net loss or total stockholders’ equity previously reported.

4. Business Acquisitions

During the nine months ended September 30, 2017, the Company completed the following acquisitions:

MotherLode Craft Distillery, LLC

On March 8, 2017, the Company completed the acquisition of MotherLode Craft Distillery, LLC (“MotherLode”), a small Portland, Oregon-based provider of bottling services and production support to craft distilleries. The Company’s condensed consolidated financial statements for the three and nine months ended September 30, 2017 include MotherLode’s results of operations from the acquisition date of March 8, 2017 through September 30, 2017. The Company’s condensed consolidated financial statements reflect the final purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. MotherLode had approximately $375,000 in revenues (unaudited) in 2016.

The following allocation of the purchase price is as follows:

Consideration given:
86,667 shares of common stock valued at $4.35 per share	$	377,000
Assets and liabilities acquired:
Cash		7,062
Inventory		103,488
Property and equipment		46,250
Intangible assets - customer list and license		376,431
Goodwill		28,182
Accounts payable		(5,180	)
Customer deposits		(179,233	)
	$	377,000

Intangible assets are recorded at estimated fair value, as determined by management based on available information. The fair value assigned to the customer list intangible asset was determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earning methods. The major assumptions used in arriving at the estimated identifiable intangible asset value included management’s estimates of future cash flows, discounted at an appropriate rate of return which is based on the weighted average cost of capital for both the Company and other market participants, projected customer attrition rates, as well as applicable royalty rates for comparable assets. The useful lives for intangible assets were determined based upon the remaining useful economic lives of the tangible assets that are expected to contribute directly or indirectly to future cash flows. The customer relationships estimated useful life is seven years. The fair values assigned to the license intangible asset were determined through the use of the cost approach. The license has an indefinite life and will not be amortized.

13

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

Big Bottom Distillery, LLC

On May 1, 2017, the Company acquired 90% of the ownership of Big Bottom Distillery, LLC (“BBD”), a Hillsboro, Oregon-based distiller of super premium spirits. The Company’s condensed consolidated financial statements for the three and nine months ended September 30, 2017 include BBD’s results of operations from the acquisition date of May 1, 2017 through September 30, 2017. The Company’s condensed consolidated financial statements reflect the final purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. BBD had approximately $201,000 in revenues (unaudited) in 2016.

The following allocation of the purchase price is as follows:

Consideration given:
28,096 shares of common stock valued at $4.80 per share for 90%	$	134,858
Noncontrolling interests		14,984
Total value of acquisition	$	149,842
Assets and liabilities acquired:
Cash (overdraft)	$	(2,521	)
Accounts receivable		6,224
Inventory		129,922
Property and equipment		22,717
Intangible assets - license		25,000
Goodwill		193,374
Accrued liabilities		(52,841	)
Notes payable		(172,033	)
Total	$	149,842

Intangible assets are recorded at estimated fair value, as determined by management based on available information. The fair value assigned to the license intangible asset was determined through the use of the cost approach. The license has an indefinite life and will not be amortized.

5. Inventories

Inventories consist of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017		December 31, 2016
Raw materials	$	2,077,989	$	439,739
Finished goods		338,957		340,298
Total inventories	$	2,416,946	$	780,037

6. Property and Equipment

Property and equipment consists of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
Furniture and fixtures	$	252,049		$	70,140
Leasehold improvements		18,266			8,607
Vehicles		49,483			38,831
Construction in progress		213,453			34,603
Total cost		533,251			152,181
Less accumulated depreciation		(64,869	)		(52,965	)
Property and equipment - net	$	468,382		$	99,216

Purchases of property and equipment totaled $381,837 and $6,952 for the nine months ended September 30, 2017 and 2016, respectively. Depreciation expense totaled $25,736 and $16,579 for the nine months ended September 30, 2017 and 2016, respectively.

14

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

7. Intangible Assets and Goodwill

There were no intangible assets or goodwill at December 31, 2016. At September 30, 2017, intangible assets and goodwill consist of the following:

	September 30, 2017			Life
Permits and licenses	$	50,000		-
Customer lists		351,431		7 years
Goodwill		221,556		-
Total intangible assets and goodwill		622,987
Less accumulated amortization		(28,033	)
Intangible assets and goodwill - net	$	594,954

Amortization expense totaled $28,033 and nil for the nine months ended September 30, 2017 and 2016, respectively.

8. Notes Payable

Notes payable consists of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
Notes payable bearing interest at 7.99%. The note is payable in monthly principal plus interest payments of $472 through December 2020. The note is secured by a vehicle.	$	-		$	16,642
Notes payable bearing interest at 8%. The notes have a 2-year maturity and are due at various dates between September 19, 2018 – October 19, 2018, and pay interest-only on a monthly basis.		460,000			547,500
Note payable bearing interest at 2.74%. The note is payable in monthly principal plus interest payments of $100 through December 2019.		2,608			-
Note payable bearing interest at 4.00%. The note is payable in quarterly principal plus interest payments of $9,614 through March 2019.		55,125			-
Convertible notes payable bearing interest at 4.00%. The notes principal plus accrued interest is due in full at various dates between April 3, 2020 – September 30, 2020. The notes have an automatic conversion feature upon the closing (or first in a series of closings) of the next equity financing in which the Company sells shares of its equity securities for an aggregate consideration of at least $4,000,000 at a purchase price of at least $7.50. The outstanding principal and unpaid accrued interest on the notes shall be automatically converted into equity securities at a price equal to 80% of the price paid per share by the investors in the next equity financing or $6.00, whichever is lower, provided, however, that in no event shall the conversion price be less than $6.00. The note has a voluntary conversion feature where the investor may convert, in whole or in part, at any time at the conversion price of $6.00.		915,850			-
Total notes payable		1,433,583			564,142
Less current portion		(39,032	)		(4,537	)
Less debt discount for detachable warrant		(63,544	)		(131,849	)
Long-term portion of notes payable	$	1,331,007		$	427,756

15

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

Maturities on notes payable as of September 30, 2017, are as follows:

Year ending December 31:

2017	$	9,280
2018		497,940
2019		10,513
2020		915,850
Thereafter		-
	$	1,433,583

9. Income Taxes

The provision for income taxes results in effective tax rates which are different than the federal income tax statutory rate. The nature of the differences for the nine months ended September 30, 2017 and 2016 were as follows:

	September 30, 2017			September 30, 2016
Expected federal income tax benefit	$	(1,204,479	)	$	(798,000	)
State income taxes after credits		(237,739	)		(155,000	)
Change in valuation allowance		1,442,218			953,000
Total provision for income taxes	$	-		$	-

The components of the net deferred tax assets and liabilities at September 30, 2017 and December 31, 2016 consisted of the following:

	September 30, 2017			December 31, 2016
Deferred tax assets:
Net operating loss carryforwards	$	4,824,563		$	3,557,909
Stock-based compensation		410,575			213,181
Total deferred tax assets		5,235,138			3,771,090
Deferred tax liabilities:
Depreciation and amortization		(92,647	)		(70,816	)
Total deferred tax liabilities		(92,647	)		(70,816	)
Valuation allowance		(5,142,491	)		(3,700,274	)
Net deferred tax assets	$	-		$	-

16

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

At September 30, 2017, the Company has a cumulative net operating loss carryforward (NOL) of approximately $12.2 million, to offset against future income for federal and state tax purposes. These federal and state NOLs can be carried forward for 20 and 15 years, respectively. The federal NOLs begin to expire in 2034, and the state NOLs begin to expire in 2029. The utilization of the NOL carryforwards may be subject to substantial annual limitation due to ownership change provisions of the Internal Revenue Code of 1986 and similar state provisions. In general, if the Company experiences a greater than 50 percentage aggregate change in ownership of certain significant stockholders over a three-year period (a “Section 382 ownership change”), utilization of its pre-change NOL carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code (and similar state laws). The annual limitation generally is determined by multiplying the value of the Company’s stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization and may be substantial.

In assessing the realizable of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. Due to the uncertainty of the realizability of the deferred tax assets, management has determined a full valuation allowance is appropriate.

10. Commitments and Contingencies

Operating Leases

The Company leases its warehouse, kiosks and tasting room space under operating lease agreements, which expire through October 2021. Monthly lease payments range from $1,802 to $6,400 over the terms of the leases. For operating leases which contain fixed escalations in rental payments, the Company records the total rent expense on a straight-line basis over the lease term. The difference between the expense computed on a straight-line basis and actual payments for rent represents deferred rent which is included within accrued liabilities on the accompanying consolidated balance sheets. Retail spaces under lease are subject to monthly percentage rent adjustments when gross sales exceed certain minimums.

At September 30, 2017, future minimum lease payments required under the operating leases are approximately as follows:

2017	$	82,000
2018		133,000
2019		114,000
2020		96,000
2021		64,000
Thereafter		-
Total	$	489,000

Total rent expense was $248,535 and $304,000 for the nine months ended September 30, 2017 and 2016, respectively.

On February 7, 2017, we entered into a Lease Termination Agreement with PJM BLDG. II LLC (the “Termination Agreement”), the landlord of our current headquarters and production facilities located at 1805 SE Martin Luther King Jr. Blvd., Portland, Oregon. The Termination Agreement provides that the original lease agreement dated July 17, 2014 terminated on June 30, 2017 rather than October 30, 2020.

17

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

Legal Matters

Except as described below, we are not currently subject to any material legal proceedings, however we could be subject to legal proceedings and claims from time to time in the ordinary course of our business. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and divert management resources.

On October 10, 2017, we received a letter from a law firm purporting to represent a Company stockholder named Jason Price. The letter stated that such representative was launching an “investigation” into certain grants of stock options and restricted stock units that exceeded applicable limits under the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) (collectively, the “Additional Grants”). The representative stated the belief that the Board had violated the terms of the 2016 Plan by approving the Additional Grants, and such approval constituted a breach of fiduciary duty and possible evidence of material weaknesses in internal controls. The Board rejects any such contentions. Although we acknowledge that the Additional Grants were made despite the stated limits in the 2016 Plan, we believe that the Additional Grants were in the best interests of our stockholders. We believe that our existing corporate governance mechanisms are sufficiently robust as to be able to review and take a proper response to Mr. Price’s letter. We are seeking stockholder approval of the Additional Grants and of certain amendments to the 2016 Plan to increase such limits at the upcoming annual stockholder meeting on December 8, 2017.

11. Net Loss per Common Share

Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, without considering any dilutive items. Diluted net loss per common share is computed by dividing net loss by the sum of the weighted average number of common shares outstanding and the potential number of any dilutive common shares outstanding during the period. Potentially dilutive securities consist of the incremental common stock issuable upon exercise of stock options and convertible notes. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. There were no dilutive common shares at September 30, 2017 and 2016. The numerators and denominators used in computing basic and diluted net loss per common share in 2017 and 2016 are as follows:

	Three months ended September 30,
	2017			2016
Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator)	$	(1,411,461	)	$	(1,456,049	)
Weighted average shares (denominator)		4,142,632			1,587,285
Basic and diluted net loss per common share	$	(0.34	)	$	(0.92	)

	Nine months ended September 30,
	2017			2016
Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator)	$	(3,605,967	)	$	(3,797,988	)
Weighted average shares (denominator)		3,342,332			1,106,832
Basic and diluted net loss per common share	$	(1.08	)	$	(3.43	)

18

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

12. Stockholder’s Equity

																Total			Non-controlling
	Convertible Series A															Stockholders'			interest in
	Preferred Stock						Common Stock				Paid-in		Accumulated			Equity			consolidated			Total
	Shares			Amount			Shares		Amount		Capital		Deficit			(Deficit)			entities			Equity
Balance, December 31, 2016		300		$	245,838			2,542,504	$	254	$	13,699,785	$	(12,813,044	)	$	1,132,833		$	-		$	1,132,833
Issuance of common stock		-			-			15,001		1		58,499		-			58,500			-			58,500
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants		-			-			1,780,019		178		6,648,809		-			6,648,987			-			6,648,987
Issuance of common stock from warrant exercise for cash		-			-			40,834		4		159,246		-			159,250			-			159,250
Issuance of common stock for services by third parties		-			-			78,340		8		334,626		-			334,634			-			334,634
Issuance of common stock for services by employees		-			-			38,167		4		174,298		-			174,302			-			174,302
Stock option exercises		-			-			9,260		1		49,999		-			50,000			-			50,000
Stock-based compensation		-			-			-		-		486,194		-			486,194			-			486,194
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580		-			-			86,667		9		371,411		-			371,420			-			371,420
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400		-			-			28,096		3		120,455		-			120,458			14,984			135,442
Shares issued for payoff of long-term notes		-			-			105,770		10		505,627		-			505,637			-			505,637
Cumulative dividend on Series A preferred		-			5,037			-		-		-		(5,037	)		-			-			-
Common shares issued for preferred conversion		(300	)		(250,875	)		100,001		10		235,865		-			(15,000	)		-			(15,000	)
Adjustment of shares for reverse stock-split		-			-			331		-		-		-			-			-			-
Net loss attributable to noncontrolling interests		-			-			-		-		-		-			-			(1,174	)		(1,174	)
Net loss attributable to common shareholders		-			-			-		-		-		(3,600,930	)		(3,600,930	)		-			(3,600,930	)
Balance, September 30, 2017		-		$	-			4,824,990	$	482	$	22,844,814	$	(16,419,011	)	$	6,426,285		$	13,810		$	6,440,095

Reverse Stock Splits

All shares related and per share information in these financial statements has been adjusted to give effect to the 20-for-1 reverse stock split of the Company’s common stock effected on October 18, 2016, and the 3-for-1 reverse stock split of the Company’s common stock effected on June 15, 2017.

Issuance of Common Stock

From January 4, 2017 to January 22, 2017, the Company sold 15,001 shares of common stock to accredited investors at a price of $3.90 per share for aggregate cash proceeds of $58,500.

From March 31, 2017 to June 2, 2017, the Company issued 400,019 shares of its common stock for aggregate cash proceeds of $1,560,000, including 400,019 warrants for common stock.

From January 15, 2017 through February 16, 2017, the Company received warrant exercises and common stock subscriptions for 40,834 shares for aggregate cash proceeds of $159,250.

In March 2017, the Company issued 19,796 shares of common stock to four third-party consultants in exchange for services rendered. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.90 - $4.35 per share.

In March 2017, the Company issued 575 shares of common stock to employees for stock-based compensation of $2,517. The shares were valued using the $4.38 closing share price of our common stock on the date of grant.

On March 8, 2017, the Company completed the acquisition of MotherLode. We issued 86,667 shares of common stock to the owners of MotherLode as consideration for the acquisition. Based on the closing share price of our common stock of $4.35 on March 8, 2017, the value of the transaction was $377,000. Issuance costs incurred were $5,580.

In March 2017, the Company issued 22,436 shares of its common stock upon conversion of 8% convertible promissory notes with an aggregate principal amount converted of $87,500. No gain or loss recorded on the transactions.

19

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

In March 2017, the Company issued 83,334 shares of its common stock upon conversion of 250 shares of preferred stock.

In April 2017, the Company issued 16,667 shares of its common stock upon conversion of 50 shares of preferred stock.

In April 2017, the Company approved a restricted stock unit grant of 33,334 shares of common stock to the Company’s Chief Executive Officer, Grover Wickersham. The grant vested on April 5, 2017, of which 10,218 shares were not issued in order to satisfy Mr. Wickersham’s personal tax withholding responsibility. The shares were valued using the $4.80 closing share price of our common stock on the date of grant.

In April 2017, the Company issued 50,335 shares of common stock to three third-party consultants in exchange for services rendered. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $4.35 - $4.50 per share.

In April 2017, the independent directors, Messrs. Trent Davis and Michael Fleming, respectively, each exercised 4,630 stock options to purchase common stock at $5.40 per share.

In May 2017, the Company completed the acquisition of a majority stake in BBD. We issued 28,096 shares of common stock to the owners of BBD as consideration for 90% of the BBD LLC units. Based on the closing share price of our common stock of $4.80 on May 1, 2017, the value of the transaction was $134,858. Issuance costs incurred were $14,400.

In June 2017, the Company issued 2,716 shares of common stock to employees for stock-based compensation of $15,943, all of which were fully vested upon issuance. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $4.38 - $6.00 per share.

In August 2017, the Company completed an underwritten public offering of 1,200,000 units consisting of 1,200,000 shares of its common stock and warrants to purchase up to an aggregate of 1,200,000 shares of its common stock (each, a “Unit”) at a public offering price of $4.50 per Unit. The warrants have a per share exercise price of $5.40, are exercisable immediately, and will expire five years from the date of issuance. The gross proceeds to the Company from this offering were $5.4 million, before deducting underwriting discounts and commissions and other estimated offering expenses. On August 24, 2017, the underwriters exercised their option to purchase an additional 180,000 Units to cover over-allotments, that resulted in additional gross proceeds to the Company of $810,000, before deducting offering expenses.

In August 2017, the Company issued 5,209 shares of common stock to a third-party consultant in exchange for services rendered. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.40 - $3.50 per share.

In August 2017, the Company issued 83,334 shares of its common stock upon conversion of a 6% convertible promissory note with an aggregate principal amount converted of $500,000. No gain or loss recorded on the transactions.

In September 2017, the Company issued 14,760 shares of common stock to directors and employees for stock-based compensation of $56,221. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.78 - $4.38 per share.

Issuance of Convertible Preferred Stock

From April 4, 2016 to June 17, 2016, the Company sold 972 shares of its series A convertible preferred stock (“Series A Preferred”) for an aggregate purchase price of $972,000, of which (i) 499 shares of Series A Preferred were purchased for $499,000 in cash (ii) 423 shares of Series A Preferred were purchased by certain of our officers in consideration of $423,000 accrued and unpaid salary and (iii) 50 shares of Series A Preferred were purchased in consideration of cancellation of $50,000 of outstanding indebtedness net of issuance costs of $69,528.

20

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

Each share of Series A Preferred has a stated value of $1,000, which is convertible into shares of the Company’s common stock at a fixed conversion price equal to $4.50 per share. The Series A Preferred accrue dividends at a rate of 8% per annum, cumulative. Dividends are payable quarterly in arrears at the Company’s option either in cash or “in kind” in shares of common stock; provided, however that dividends may only be paid in cash following the fiscal year in which the Company has net income (as shown in its audited financial statements contained in its Annual Report on Form 10-K for such year) of at least $500,000, to the extent permitted under applicable law out of funds legally available therefore. For “in-kind” dividends, holders will receive that number of shares of common stock equal to (i) the amount of the dividend payment due such stockholder divided by (ii) 90% of the average of the per share market values during the twenty (20) trading days immediately preceding a dividend date.

In the event of any voluntary or involuntary liquidation, dissolution or winding up, or sale of the Company, each holder of Series A Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to: (i) $1,000 multiplied by (ii) the total number of shares of Series A Preferred issued under the Series A Certificate of Designation multiplied by (iii) 2.5.

For all matters submitted to a vote of the Company’s stockholders, the holders of the Series A Preferred as a class shall have an aggregate number of votes equal to the product of (x) the number of shares of Common Stock (rounded to the nearest whole number) into which the total shares of Series A Preferred Stock issued under the Series A Certificate of Designation on such date of determination are convertible multiplied by (y) 2.5 (the “Total Series A Votes”), with each holder of Series A Preferred entitled to vote its pro rata portion of the Total Series A Votes. Holders of Common Stock do not have cumulative voting rights. In addition, the holders of Series A Preferred shall vote separately a class to change any of the rights, preferences and privileges of the Series A Preferred.

As of September 30, 2017, the Company has zero shares of preferred stock outstanding.

Stock-Based Compensation

On September 8, 2016, the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”). The total number of shares available for the grant of either stock options or compensation stock under the 2016 Plan is 166,667 shares, subject to adjustment. On January 1, 2017, the number of shares available for grant under the 2016 Plan reset to 307,139 shares, equal to 8% of the number of outstanding shares of the Company’s capital stock, calculated on an as-converted basis, on December 31 of the preceding calendar year. On October 18, 2017, the Board of Directors (the “Board”) approved amendments to the 2016 Plan to (i) increase the number of shares of the common stock that may be issued under the 2016 Plan (the “Aggregate Limit”) by an additional 192,861 shares of common stock, for a total of 500,000 shares of common stock, (ii) increase the number of shares of common stock that may be granted to any participant pursuant to options to purchase common stock and stock appreciation rights under the 2016 Plan in any one year period (the “Individual Option Limit”) from 8,333 shares to 200,000 shares, (iii) increase the number of shares of common stock that may be granted to any participant pursuant to other awards (the “Individual Award Limit”) under the 2016 Plan in any one year period from 8,333 shares to 200,000 shares and (iv) increase the number of shares of common stock that may be paid to any one participant under the 2016 Plan for a performance period pursuant to performance compensation awards under the 2016 Plan (the “Individual Performance Award Limit”) from 8,333 shares to 200,000 shares, which amendments are contingent upon stockholder adoption and approval of these amendments at the next annual meeting of stockholders. The exercise price per share of each stock option shall not be less than 100 percent of the fair market value of the Company’s common stock on the date of grant. At September 30, 2017, there were 354,936 options and 89,185 restricted stock units (“RSUs”) issued under the 2016 Plan, with vesting schedules varying between immediate and five (5) years from the grant date.

21

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

On January 29, 2015, the Company adopted the 2015 Stock Incentive Plan (the “2015 Plan”). The total number of shares available for the grant of either stock options or compensation stock under the 2015 Plan is 50,000 shares, subject to adjustment. The exercise price per share of each stock option shall not be less than 20 percent of the fair market value of the Company’s common stock on the date of grant. At September 30, 2017, there were 14,584 options issued under the 2015 Plan outstanding, which options vest at the rate of at least 25 percent in the first year, starting 6-months after the grant date, and 75% in year two.

The Company also issues, from time to time, options which are not issued under or subject to a formal option plan. At September 30, 2017, there were 16,667 options outstanding that were not issued under the 2015 Plan or the 2016 Plan.

A summary of all stock option activity at and for the nine months ended September 30, 2017 is presented below:

	# of Options			Weighted- Average Exercise Price
Outstanding at December 31, 2016		173,750		$	9.24
Options granted		233,167			4.35
Options exercised		(9,260	)		5.40
Options canceled		(20,760	)		-
Outstanding at September 30, 2017		376,897		$	6.52
Exercisable at September 30, 2017		126,564		$	10.45

The aggregate intrinsic value of options outstanding at September 30, 2017 was $25,095.

At September 30, 2017, there were 250,334 unvested options with an aggregate grant date fair value of $745,883. The unvested options will vest in accordance with the vesting schedule in each respective option agreement, which varies between immediate and five (5) years from the grant date. The aggregate intrinsic value of unvested options at September 30, 2017 was $23,003. During the nine months ended September 30, 2017, 87,499 options became vested.

The Company uses the Black-Scholes valuation model to measure the grant-date fair value of stock options. The grant-date fair value of stock options issued to employees is recognized on a straight-line basis over the requisite service period. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments as the underlying stock-based awards vest. To determine the fair value of stock options using the Black-Scholes valuation model, the calculation takes into consideration the effect of the following:

● Exercise price of the option

● Fair value of the Company’s common stock on the date of grant

● Expected term of the option

● Expected volatility over the expected term of the option

● Risk-free interest rate for the expected term of the option

The calculation includes several assumptions that require management’s judgment. The expected term of the options is calculated using the simplified method described in GAAP. The simplified method defines the expected term as the average of the contractual term and the vesting period. Estimated volatility is derived from volatility calculated using historical closing prices of common shares of similar entities whose share prices are publicly available for the expected term of the options. The risk-free interest rate is based on the U.S. Treasury constant maturities in effect at the time of grant for the expected term of the options.

22

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

The following weighted-average assumptions were used in the Black-Scholes valuation model for options granted during the nine months ended September 30, 2017:

Risk-free interest rate	1.71	%
Expected term (in years)	6.6
Dividend yield	-
Expected volatility	75	%

The weighted-average grant-date fair value per share of stock options granted during the nine months ended September 30, 2017 was $2.97. The aggregate grant date fair value of the 233,167 options granted during the nine months ended September 30, 2017 was $692,835.

For the nine months ended September 30, 2017 and 2016, total stock option expense related to stock options was $373,278 and $154,707 respectively. At September 30, 2017, the total compensation cost related to stock options not yet recognized is approximately $772,636, which is expected to be recognized over a weighted-average period of approximately 2.99 years.

Warrants

During the nine months ended September 30, 2017, the Company issued an aggregate of 400,019 common stock warrants in connection with the purchase of 400,019 shares of common stock, 1,380,000 common stock warrants in connection with the August 2017 public offering, and 82,000 common stock warrants to four consultants. The Company has determined the warrants should be classified as equity on the condensed consolidated balance sheet as of September 30, 2017. The estimated fair value of the warrants at issuance was $1,944,553, based on a combination of closing market trading price on the date of issuance for the public offering warrants, and the Black-Scholes option-pricing model using the weighted-average assumptions below:

Volatility		75	%
Risk-free interest rate		1.47	%
Expected term (in years)		2.83
Expected dividend yield		-
Fair value of common stock	$	4.74

A total of 40,834 warrants were exercised during the nine months ended September 30, 2017 for cash proceeds of $159,250.

A summary of activity in warrants is as follows:

	Warrants			Weighted Average Remaining Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at December 31, 2016		846,765			2.77 years	$	6.48	$	0
Nine months ended September 30, 2017:
Granted		1,862,019			4.27 years	$	5.77	$	40,180
Exercised		(40,834	)		2.00 years	$	3.90		-
Forfeited and cancelled		(74,873	)		2.00 years	$	6.00		-
Outstanding at September 30, 2017		2,593,077			3.63 years	$	5.99	$	40,180

23

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

13. Related Party Transactions

The following is a description of transactions since January 1, 2015 as to which the amount involved exceeds the lesser of $120,000 or one percent (1%) of the average of our total assets at year-end for the last two completed fiscal years and in which any related person has or will have a direct or indirect material interest, other than equity, compensation, termination and other arrangements.

On April 4, 2016, Steven Earles, our former chief executive officer, purchased 185 units in an offering of units consisting of shares of our series A convertible preferred stock and warrants to purchase common stock (our “Series A Preferred Stock and Warrant Unit Offering”) in consideration of $185,000 in accrued and unpaid salary. Each unit consisted of one share of series A convertible preferred stock and one warrant to purchase 223 shares of common stock at an exercise price of $6.00 per share. Steven Shum, our chief financial officer, purchased 97 units in the Series A Preferred Stock and Warrant Unit Offering in consideration of $97,000 in accrued and unpaid salary. Martin Kunkel, our former chief marketing officer, director and secretary, purchased 58 Units in the Series A Preferred Stock and Warrant Unit Offering in consideration of $58,000 in accrued and unpaid salary. Carrie Earles, our chief branding officer and wife of Steven Earles, purchased 83 units in the Series A Preferred Stock and Warrant Unit Offering in consideration of $83,000 in accrued and unpaid salary. These issuances were unanimously approved by our Board, including all disinterested directors. Effective November 4, 2016, we entered into an agreement with Mr. Earles, the Company’s former chief executive officer, pursuant to which Mr. Earles agreed to convert 185 shares of the Company’s series A convertible preferred stock into 41,111 shares of the Company’s common stock and to cancel his warrant to purchase 41,107 shares of the Company’s common stock.

On June 9, 2016, pursuant to a subscription agreement executed by the Grover T. Wickersham Employees’ Profit Sharing Plan (“PSP”) for which Mr. Wickersham serves as trustee, the PSP purchased in a private placement an aggregate of 83,334 units, each unit consisting of one share of common stock and one common stock purchase warrant (collectively with the common stock, the “Common Stock Units”) at a purchase price of $3.00 per Common Stock Unit, for a total purchase price of $250,000.

On June 22, 2016, pursuant to a subscription agreement executed by Grover T. Wickersham, Mr. Wickersham directly purchased in a private placement an aggregate of 38,334 Common Stock Units at a purchase price of $3.00 per Common Stock Unit for a total purchase price of $115,000. On December 30, Mr. Wickersham assigned 24,680 of his warrants to a related and un-related party. He also voluntarily canceled 8,334 additional warrants.

On June 22, 2016, pursuant to a subscription agreement executed by an education trust established for the benefit of an unrelated minor for which Mr. Wickersham serves as trustee (“Education Trust”), the Education Trust purchased in a private placement 16,667 Common Stock Units at a purchase price of $3.00 per Common Stock Unit, for a total purchase price of $50,000.

On June 22, 2016, pursuant to a subscription agreement executed by the Lindsay Anne Wickersham 1999 Irrevocable Trust for which Mr. Wickersham serves as trustee (the “Irrevocable Trust”), the Irrevocable Trust purchased in a private placement 66,667 Common Stock Units at a purchase price of $3.00 per Common Stock Unit, for a total purchase price of $200,000.

24

Eastside Distilling, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2017

(unaudited)

On June 22, 2016, pursuant to a subscription agreement, Michael Fleming, a current director, directly purchased in a private placement an aggregate of 8,334 Common Stock Units at a purchase price of $3.00 per Common Stock Unit, each Common Stock Unit consisting of one share of common stock and a warrant to purchase one share of common stock at an exercise price of $6.00 per share, for a total purchase price of $25,000.

On June 30, 2016, the PSP purchased from us a promissory note bearing interest at the rate of 8% per annum (a “Promissory Note”) for aggregate consideration of $50,000, along with a warrant to acquire 8,334 shares of common stock at a price of $6.00 per share. On July 7, 2016, the PSP purchased an additional Promissory Note for aggregate consideration of $120,000, along with a warrant to acquire 20,000 shares of common stock at an exercise price of $6.00 per share. On December 30, 2016, the PSP exercised 43,590 warrants at a price of $3.90 per share.

On June 30, 2016, the Grover T. and Jill Z. Wickersham 2000 Charitable Remainder Trust (the “Wickersham Trust”) purchased an additional Promissory Note for aggregate consideration of $50,000, along with a warrant to acquire 8,334 shares of common stock at an exercise price of $6.00 per share. On November 21, 2016, the Wickersham Trust purchased an additional Promissory Note for aggregate consideration of $75,000, along with a warrant to acquire 12,500 shares of common stock at an exercise price of $6.00 per share. On December 31, 2016, the Wickersham Trust exercised its 20,834 warrants along with an additional 11,218 warrants assigned from Mr. Wickersham all at a price of $3.90 in exchange for eliminating the outstanding note principal.

During the nine months ended September 30, 2016, the Company’s chief executive officer paid expenses on behalf of the Company on his personal credit card. These related party advances do not bear interest and are payable on demand. At September 30, 2016, the balance due to the chief executive officer was approximately $8,000. The Company also has a note payable due its chief executive officer in the amount of $12,500 at September 30, 2016, that was repaid during fiscal year 2016.

On September 19, 2016, an entity for which Lawrence Hirson, a former director, serves as manager purchased $150,000 of promissory notes and received 3-year warrants to purchase 25,000 shares of our common stock at an exercise price of $6.00 per share.

On June 2, 2017, Mr. Wickersham purchased 15,189 units at $3.90 per unit, with each unit consisting of one share of common stock and one three-year common stock purchase warrant exercisable at $7.50 per share (subject to adjustment), for total proceeds of $59,237 in cash.

On August 10, 2017, Mr. Wickersham and his affiliates purchased 55,555 units at $4.50 per unit, with each unit consisting of one share of common stock and one Public Warrant, for total proceeds of approximately $250,000 in cash.

On August 23, 2017, our Board appointed Jack Peterson to the Board to fill an existing vacancy on the Board effective immediately. Mr. Peterson is also the President of Sandstrom Partners. In late 2016, with the goal of increasing its brand value and accelerating sales, the Company retained Sandstrom and tasked them with reviewing the Company’s current product portfolio, as well as its new ideas, and advising it with respect to marketing, creation of brand awareness and product positioning, locally and nationally. The Company is using Sandstrom’s full range of brand development services, including research, strategy, brand identity, package design, environments, advertising as well as digital design and development. The Company anticipates that its product packaging design will change in the second half of 2017 as a result of Sandstrom’s efforts. The Company has paid $80,000 in cash and issued 33,334 shares of stock valued at $145,000 (at the time of issuance) to Sandstrom Partners in 2017 to date for services rendered by Sandstrom under its agreement with the Company.

We believe that the foregoing transactions were in our best interests. Consistent with Section 78.140 of the Nevada Revised Statutes, it is our current policy that all transactions between us and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are approved by vote of the stockholders, or are fair to us as a corporation as of the time it is authorized, approved or ratified by the board. We will continue to conduct an appropriate review of all related party transactions and potential conflicts of interest on an ongoing basis. Our audit committee has the authority and responsibility to review, approve and oversee any transaction between the Company and any related person and any other potential conflict of interest situation on an ongoing basis, in accordance with Company policies and procedures in effect from time to time.

14. Subsequent Events

The Company’s corporate headquarters, including its wholly owned Motherlode subsidiary, has moved to 1001 SE Water Avenue, Suite 390, Portland, Oregon 97214, effective November 1, 2017. Located in Portland’s Eastbank Commerce Center on the east side of Portland, this office space is the new home to the Company’s executive offices, including finance, accounting, sales and general management, both for Eastside and its Motherlode bottling and canning subsidiary. The Company’s production facilities in Milwaukie and its Big Bottom Distilling operations in Hillsboro are not affected by this relocation, but the Company has fully terminated the occupancy of its former MLK location.

On October 26, 2017, the Securities and Exchange Commission (the “SEC”) declared effective a Post-Effective Amendment No. 1 to Form S-1 on Form S-3 (the “Post-Effective Amendment”) that the Company filed with the SEC on October 19, 2017 to register the resale of up to 2,462,436 shares of common stock held by certain selling stockholders, which includes shares of common stock issuable upon exercise of warrants to purchase common stock held by certain selling stockholders (the “Selling Stockholder Warrants”). The selling stockholders will receive all of the proceeds from the sale of shares of common stock registered under the Post-Effective Amendment and the Company will not receive any proceeds from these sales. However, we may receive proceeds from the cash exercise of the Selling Stockholder Warrants, which, if exercised for cash with respect to all 1,123,516 shares, would result in gross proceeds to us of approximately $7,993,736. We intend to use any net proceeds from any exercise of the Selling Stockholder Warrants for operating costs, working capital, and general corporate purposes. The amount and timing of our actual use of proceeds may vary significantly depending upon numerous factors, including the actual amount of proceeds we receive and the timing of when we receive such proceeds. There is no guarantee that the Selling Stockholder Warrants will be exercised in full or at all. 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes. This section of the Quarterly Report includes a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements which speak only as of the date made, and except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Factors that could cause differences include, but are not limited to, customer acceptance risks for current and new brands, reliance on external sources on financing, development risks for new products and brands, dependence on wholesale distributors, inventory carrying issues, fluctuations in market demand and customer preferences, as well as general conditions of the alcohol and beverage industry, and other factors discussed in Item 1A of Part I of our annual report on Form 10-K for the year ended December 31, 2016 entitled “Risk Factors,” similar discussions in subsequently filed Quarterly Reports on Form 10-Q, including this Form 10-Q, as applicable, and those contained from time to time in our other filings with the Securities and Exchange Commission.

Overview

We are an Oregon-based producer and marketer of craft spirits, founded in 2008. Our products span several alcoholic beverage categories, including bourbon, American whiskey, vodka, and rum. Unlike many, if not most, distillers, we operate several retail tasting rooms in Oregon to market our brands directly to consumers. Our growth strategy is to build on our local base in the Pacific Northwest and expand selectively to other markets by using major spirits distributors, such as Southern Glazer Wines and Spirits, and regional distributors that focus on craft brands. As a small business in the large, international spirits marketplace populated with massive conglomerates, we are innovative in exploiting new trends with our products, for example, our Coffee Rum with cold brew coffee and low sugar and our gluten-free potato vodka. In December 2016 we retained Sandstrom Partners (an internationally known spirit branding firm that branded St Germain and Bulleit Bourbon) to guide our marketing strategy and branding. Sandstrom Partners subsequently became an investor in our Company. We seek to be both a leader in creating spirits that offer better value than comparable spirits, for example our value-priced Portland Potato Vodka, and an innovator in creating imaginative spirits that offer a unique taste experience, for example our cold-brewed Coffee Rum, Oregon oak aged whiskeys, Marionberry Whiskey and Peppermint Bark holiday liqueur. On May 1, 2017, we acquired 90% of the ownership of Big Bottom Distillery (“BBD”) for its excellent, award winning range of super premium gins and whiskeys, including The Ninety One Gin, Navy Strength Gin, Oregon Gin, Delta Rye and initial production of American Single Malt Whiskey. BBD’s super premium spirits will expand our tasting room offerings and give us a presence at the “high end” of the market. In addition, through MotherLode Craft Distillery (“MotherLode”), our wholly-owned subsidiary acquired in March 2017, we also provide contract bottling and packaging services for existing and emerging spirits producers, some of whom contract with us to blend or distill spirits. As a publicly-traded craft spirit producer, we have access to the public capital markets to support our long-term growth initiatives, including strategic acquisitions.

Third quarter gross sales increased 12% over the prior year, and gross sales for the nine months ended September 30, 2017 increased 28% over the prior year primarily due to three factors: 1) increased wholesale sales traction within the Pacific Northwest, especially with our vodka product as we strategically invested in programs to promote the vodka product while waiting for our new Burnside Bourbon branding launch (which will occur in the upcoming fourth quarter); 2) the acquisitions of MotherLode and BBD, and the expansion of our private label business; and 3) the addition of two new retail locations.

The Oregon market continues to experience strong year-over-year growth. During the first nine months of this year, Oregon sales expanded 52% and represented approximately 73% of overall sales, compared to 2016 where Oregon represented approximately 61% of sales. We achieved this success in Oregon despite softer Burnside Bourbon sales due to that specific product’s planned transition. National distribution sales declined year-over-year, which also was a result of our planned transition to our new Burnside Bourbon packaging (and our concurrent phasing out of our prior brands). With our planned introduction of our new Burnside Bourbon branding in the fourth quarter, we anticipate new markets outside of Oregon to resume their prior growth trends thereby making strong sales progress and becoming a larger percentage of our overall sales going forward.

We have invested heavily in our infrastructure (facilities, people, and marketing programs) in order to support our planned expansion and believe we are well positioned to leverage those investments made and thus experience improved performance throughout the balance of 2017 and into 2018.

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2017 Compared to the Three Months Ended September 30, 2016

Our sales for the three months ended September 30, 2017 increased to $895,182, or approximately 12%, from $796,222 for the three months ended September 30, 2016. The following table compares our sales in the three months ended September 30, 2017 and 2016:

	Three Months Ended September 30,
	2017				2016
Wholesale	$	520,698	58	%	$	598,542	75	%
Private Label		65,426	7	%		-	-
Retail / Special Events		309,058	35	%		197,680	25	%
Total	$	895,182	100	%	$	796,222	100	%

The increase in sales in the three months ended September 30, 2017 is primarily attributable to three factors: 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 the addition of three retail locations.

Excise taxes, customer programs and incentives for the three months ended September 30, 2017 increased to $276,845, or approximately 14%, from $242,042 for the comparable 2016 period. The increase is attributable to the increase in liquor sales due to our increased distribution and sales traction during the period.

During the three months ended September 30, 2017, cost of sales increased to $384,265, or approximately 4%, from $370,854 for the three months ended September 30, 2016. The increase is attributable to the costs associated with our increased liquor sales in the period as well as certain one-time adjustments related to the recent acquisitions. We believe that the cost of sales we reported in both 2017 and 2016 are not typical of our expected future results because of the one-time costs and the product costs in both periods are based on smaller production lots, and do not reflect the economies of scale that we expect to achieve as we continue to scale our operations.

Gross profit is calculated by subtracting the cost of products sold from net sales. Cost of sales consists of the costs of ingredients utilized in the production of spirits, manufacturing labor and overhead, warehousing rent, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by packaging and production costs. Gross margin is gross profits stated as a percentage of net sales.

The following table compares our gross profit and gross margin in the three months ended September 30, 2017 and 2016:

	Three Months Ended September 30,
	2017			2016
Gross profit	$	234,072		$	183,326
Gross margin		38	%		33	%

Our gross margin of 38% of net sales in the three months ended September 30, 2017 increased from our gross margin of 33% for the three months ended September 30, 2016 primarily due to the combination of product mix and lower introductory pricing on a large East Coast order in the third quarter of 2016.

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Advertising, promotional and selling expenses for the three months ended September 30, 2017 increased to $563,754, or approximately 77%, from $319,391 for the three months ended September 30, 2016. This increase is primarily due to our efforts to expand our product sales both regionally in the Pacific Northwest as well as target national markets.

General and administrative expenses for the three months ended September 30, 2017 decreased to $1,040,942, or approximately 14%, from $1,210,495 for the three months ended September 30, 2016. This decrease is primarily due to decreased management headcount and tighter expense controls, offset by $99,649 higher stock-based compensation expense in 2017.

Total other expense, net was $40,536 for the three months ended September 30, 2017, compared to $89,889 for the three months ended September 30, 2016, a decrease of 55%. This decrease was primarily due to lower interest expense that started with the conversion of outstanding debt with beneficial conversion features and debt issuance costs into common stock in December 2016 and continued into 2017.

Net loss attributable to common shareholders during the three months ended September 30, 2017 was $1,411,461 as compared to a loss of $1,456,049 for the three months ended September 30, 2016. The reduction in our net loss was primarily attributable to our higher gross profit, decreased general and administrative expenses and interest expense during 2017, which amounts were offset by higher advertising, promotional and selling expenses.

Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016

Our sales for the nine months ended September 30, 2017 increased to $2,608,373, or approximately 28%, from $2,045,568 for the nine months ended September 30, 2016. The following table compares our sales in the nine months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,
	2017				2016
Wholesale	$	1,445,651	55	%	$	1,454,544	71	%
Private Label		257,109	10	%		-	-
Retail / Special Events		905,613	35	%		591,024	29	%
Total	$	2,608,373	100	%	$	2,045,568	100	%

The increase in sales in the nine months ended September 30, 2017 is primarily attributable to three factors: increased wholesale sales traction within the Pacific Northwest (which was offset by lower sales Nationally due to our Burnside product transition); the acquisitions of MotherLode and BBD, and the related expansion of our private label business; and the addition of three retail locations.

Excise taxes, customer programs and incentives for the nine months ended September 30, 2017 increased to $772,525, or approximately 42%, from $542,854 for the comparable 2016 period. The increase is attributable to the increase in liquor sales due to our increased distribution and sales traction during the period.

During the nine months ended September 30, 2017, cost of sales increased to $1,101,803, or approximately 23%, from $895,239 for the nine months ended September 30, 2016. The increase is primarily attributable to the costs associated with our increased liquor sales in the period as well as certain one-time adjustments related to the recent acquisitions. We believe the cost of sales we reported in both 2017 and 2016 are not typical of our expected future results because the product costs in both periods are based on smaller production lots, and do not reflect the economies of scale that we expect to achieve as we continue to scale our operations.

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Gross profit is calculated by subtracting the cost of products sold from net sales. Cost of sales consists of the costs of ingredients utilized in the production of spirits, manufacturing labor and overhead, warehousing rent, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by packaging and production costs. Gross margin is gross profits stated as a percentage of net sales.

The following table compares our gross profit and gross margin in the nine months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,
	2017			2016
Gross profit	$	734,045		$	607,475
Gross margin		40	%		40	%

Advertising, promotional and selling expenses for the nine months ended September 30, 2017 increased to $1,499,751, or approximately 58%, from $951,293 for the nine months ended September 30, 2016. This increase is primarily due to our efforts to expand our product sales both regionally in the Pacific Northwest as well as target national markets.

General and administrative expenses for the nine months ended September 30, 2017 decreased to $2,615,810, or approximately 11%, from $2,923,799 for the nine months ended September 30, 2016. This decrease is primarily due to decreased management headcount and tighter expense controls, offset by $472,183 higher stock-based compensation expense in 2017.

In the nine months ended September 30, 2107, we had a $40,975 loss on disposal of property and equipment, primarily related to the write-off of construction-in-process on our MLK facility due to the early lease termination agreement we were able to execute in February 2017, and the write-off of leasehold improvements on our MotherLode facility as it is being renovated to accommodate new and expanded production capabilities.

Total other expense, net was $179,613 for the nine months ended September 30, 2017, compared to $493,012 for the nine months ended September 30, 2016, a decrease of 64%. This decrease was primarily due to lower interest expense that started with the conversion of outstanding debt with beneficial conversion features and debt issuance costs into common stock in December 2016 and continued into 2017.

Net loss attributable to common shareholders during the nine months ended September 30, 2017 was $3,605,967 as compared to a loss of $3,797,988 for the nine months ended September 30, 2016. The reduction in our net loss was primarily attributable to our higher gross profit, decreased general and administrative expenses and interest expense during 2017, which amounts were offset by higher advertising, promotional and selling expenses.

Liquidity and Capital Resources

Nine Months Ended September 30, 2017

The Company’s primary capital requirements are for the financing of inventories, and cash used in operating activities. Funds for the Company’s cash and liquidity needs have historically not been generated from operations but rather from short-term credit in the form of extended payment terms from suppliers as well as from convertible debt and equity financings.

29

For the nine months ended September 30, 2017 and 2016, the Company incurred a net loss of approximately $3.6 and $3.8 million, respectively, and has an accumulated deficit of approximately $16.4 million as of September 30, 2017. The Company has been dependent on raising capital from debt and equity financings to meet its needs for cash flow used in operating activities. For the nine months ended September 30, 2017, the Company raised approximately $8.0 million from financing activities to meet cash flows used in operating activities.

At September 30, 2017, the Company had approximately $4.2 million of cash on hand with a positive working capital of $6.5 million. The Company’s ability to meet its ongoing operating cash needs is dependent on generating positive operating cash flow, primarily through increased sales, improved profit growth and controlling expenses. Management has taken actions to improve profitability, reduce headcount, reduce rent and increase sales. Management believes that cash on hand and proceeds generated from the most recent equity financing, along with revenue that the Company expects to generate from operations, including as a result of its two recent acquisitions, will be sufficient to meet the Company’s cash needs for the foreseeable future.

The Company’s cash flows for the nine months ended September 30, 2017 and 2016 are as follows:

	Nine Months Ended September 30,
	2017			2016
Net cash flows provided by (used in):
Operating activities	$	(4,554,627	)	$	(3,131,344	)
Investing activities	$	(377,296	)	$	(6,952	)
Financing activities	$	8,033,942		$	3,397,157

Operating Activities

During the nine months ended September 30, 2017, our net loss plus non-cash adjustments used was approximately $2.5 million compared to using $3.0 million in 2016. The decrease in cash usage can be primarily attributed to the smaller net loss incurred in 2017 as compared to 2016, and non-cash adjustments in the aggregate were approximately $0.3 million higher in 2017. In addition, there was an increase of $1.4 million in inventory, a $0.2 million increase in prepaid expenses and other assets, and a $0.5 million net reduction in accounts payable and accrued liabilities in 2017. In 2016, there was a $0.2 million increase in inventory, a $0.2 million increase in trade receivables, a $0.1 million decrease in prepaid expenses and $0.2 million net increase in accounts payable and accrued liabilities.

Investing Activities

Cash used in investing activities consists primarily of purchases of property and equipment. Capital expenditures of $0.4 million and $6,952 were incurred in the nine months ended September 30, 2017 and 2016, respectively.

Financing Activities

During the nine months ended September 30, 2017, the Company’s operating losses and working capital needs were primarily funded by $6.7 million in proceeds from the sale of common stock, warrant exercises of $0.2 million, and $1.4 million in proceeds from the issuance of convertible notes. Net cash flows provided by financing activities during the nine months ended September 30, 2016 primarily consisted of $2.0 million in proceeds from the sale of common stock, $1.25 million in proceeds from our long-term note and warrant financing, and $0.5 million in proceeds from issuing preferred stock.

Recent Developments

Resale Registration Statement

On October 26, 2017, the Securities and Exchange Commission (the “SEC”) declared effective a Post-Effective Amendment No. 1 to Form S-1 on Form S-3 (the “Post-Effective Amendment”) that the Company filed with the SEC on October 19, 2017 to register the resale of up to 2,462,436 shares of common stock held by certain selling stockholders, which includes shares of common stock issuable upon exercise of warrants to purchase common stock held by certain selling stockholders (the “Selling Stockholder Warrants”). The selling stockholders will receive all of the proceeds from the sale of shares of common stock registered under the Post-Effective Amendment and the Company will not receive any proceeds from these sales. However, we may receive proceeds from the cash exercise of the Selling Stockholder Warrants, which, if exercised for cash with respect to all 1,123,516 shares, would result in gross proceeds to us of approximately $7,993,736. We intend to use any net proceeds from any exercise of the Selling Stockholder Warrants for operating costs, working capital, and general corporate purposes. The amount and timing of our actual use of proceeds may vary significantly depending upon numerous factors, including the actual amount of proceeds we receive and the timing of when we receive such proceeds. There is no guarantee that the Selling Stockholder Warrants will be exercised in full or at all.

Prior Common Stock Issuances

In September 2017, the Company issued 14,760 shares of common stock to directors and employees for stock-based compensation of $56,221. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.78 - $4.38 per share.

In August 2017, the Company completed an underwritten public offering of 1,200,000 units consisting of 1,200,000 shares of its common stock and warrants to purchase up to an aggregate of 1,200,000 shares of its common stock (each, a “Unit”) at a public offering price of $4.50 per Unit. The warrants have a per share exercise price of $5.40, are exercisable immediately, and will expire five years from the date of issuance. The gross proceeds to the Company from this offering were $5.4 million, before deducting underwriting discounts and commissions and other estimated offering expenses. On August 24, 2017, the underwriters exercised their option to purchase an additional 180,000 Units to cover over-allotments, that resulted in additional gross proceeds to the Company of $0.8 million, before deducting offering expenses.

30

In August 2017, the Company issued 5,209 shares of common stock to a third-party consultant in exchange for services rendered. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.40 - $3.50 per share.

In August 2017, the Company issued 83,334 shares of its common stock upon conversion of a 6% convertible promissory note with an aggregate principal amount converted of $500,000.

On several dates between March 31, 2017 and June 4, 2017, we issued an aggregate of 400,000 units at $3.90 per unit, with each unit consisting of one share of common stock and one three-year common stock purchase warrant exercisable at $7.50 per share (subject to adjustment), for total proceeds of $1.6 million in cash. The financing closed in several phases: (1) on March 31, 2017, on which date we issued 192,308 shares of our common stock for $0.8 million in cash proceeds and also issued warrants to purchase 192,308 shares of common stock, (2) on several dates between April 3, 2017 and May 4, 2017, during which period we issued 85,602 shares of our common stock for $0.3 million in cash proceeds and also issued warrants to purchase 85,602 shares of common stock, and (3) on several dates between May 5, 2017 and June 4, 2017, during which period we issued 122,109 shares of our common stock for $0.5 million in cash proceeds and also issued warrants to purchase 122,109 shares of common stock.

On several dates between April 21, 2017 and June 30, 2017, we issued an aggregate of $1.4 million convertible promissory notes to accredited investors. The notes have a maturity date of three years from the date of issuance, and bear interest at the rate of five percent (5%) and six percent (6%) per annum. The notes have an automatic conversion feature upon the closing (or first in a series of closings) of the next equity financing in which we sell shares of our equity securities for an aggregate consideration of at least $4.0 million at a purchase price of at least $7.50. The outstanding principal and unpaid accrued interest on the notes shall be automatically converted into equity securities at a price equal to 80% of the price paid per share by the investors in the next equity financing or $6.00, whichever is lower, provided, however, that in no event shall the conversion price be less than $6.00. The notes have a voluntary conversion feature where the investor may convert, in whole or in part, at any time at the conversion rate of $6.00.

31

In May 2017, the Company completed the acquisition of a majority stake in BBD. We issued 28,096 shares of common stock to the owners of BBD as consideration for 90% of the BBD LLC units. Based on the closing share price of our common stock of $4.80 on May 1, 2017, the value of the transaction was $134,858. with issuance costs of $14,400.

In March 2017, we issued 19,796 shares of common stock to four third-party consultants in exchange for services rendered. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.90 - $4.35 per share.

In March 2017, we issued 575 shares of common stock to employees for stock-based compensation of $2,517. The shares were valued using the $4.38 closing share price of our common stock on the date of grant.

On March 8, 2017, we completed the acquisition of MotherLode. We issued 86,667 shares of common stock to the owners of MotherLode as consideration for the acquisition. Based on the closing share price of our common stock of $4.35 on March 8, 2017, the value of the transaction was $377,000.

In March 2017, we issued 22,436 shares of common stock upon conversion of 8% convertible promissory notes with an aggregate principal amount converted of $87,500.

In March 2017, we issued 83,334 shares of common stock upon conversion of 250 shares of preferred stock.

From January 15, 2017 through February 16, 2017, we received warrant exercises and common stock subscriptions for 40,834 shares for aggregate cash proceeds of $159,250.

From January 4, 2017 to January 22, 2017, we sold 15,000 shares of common stock to accredited investors at a price of $3.90 per share for aggregate cash proceeds of $58,500.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon its condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. The more judgmental estimates are summarized below. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from the Company’s estimates if past experience or other assumptions do not turn out to be substantially accurate.

Revenue Recognition

Net sales includes product sales, less excise taxes, customer programs and incentives. we record revenue when all four of the following criteria are met: (i) there is persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured.

32

We recognize sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, which include sales to the Oregon Liquor Control Commission (OLCC), the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. We exclude sales tax collected and remitted to various states from sales and cost of sales. Sales from items sold through the Company’s retail location are recognized at the time of sale.

Sales received from online merchants who sell discounted gift certificates for our merchandise and tastings is deferred until the customer has redeemed the discounted gift certificate or the gift certificate has expired, whichever occurs earlier.

Customer Programs and Incentives

Customer programs and incentives, which include customer promotional discount programs, customer incentives and other payments, are a common practice in the alcohol beverage industry. The Company makes these payments to customers and incurs these costs to promote sales of products and to maintain competitive pricing. Amounts paid in connection with customer programs and incentives are recorded as reductions to net revenue or as advertising, promotional and selling expenses in accordance with ASC Topic 605-50, Revenue Recognition- Customer Payments and Incentives, based on the nature of the expenditure. Amounts paid to customers totaled $118,389 and $72,918 for the nine months ended September 30, 2017 and 2016, respectively.

Shipping and Fulfillment Costs

Freight costs incurred related to shipment of merchandise from our distribution facilities to customers are recorded in cost of sales.

Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. At September 30, 2017, four customers represented 82% of trade receivables, and at December 31, 2016, three customers represented 91% of trade receivables. Sales to two customers accounted for approximately 48% of consolidated net sales for the nine months ended September 30, 2017. Sales to three customers accounted for approximately 57% of net sales for the nine months ended September 30, 2016

Inventories

Inventories primarily consist of bulk and bottled liquor and merchandise and are stated at the lower of cost or market. Cost is determined using an average costing methodology, which approximates cost under the first-in, first-out (FIFO) method. A portion of inventory is held by the OLCC on consignment until it is sold to a third party. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost basis of accounting for the related inventory. We have recorded no write-downs of inventory for the nine months ended September 30, 2017 and 2016.

Advertising

Advertising costs are expensed as incurred. Advertising expense was $1,499,751 and $951,293 for the nine months ended September 30, 2017 and 2016, respectively.

33

Excise Taxes

The Company is responsible for compliance with Alcohol and Tobacco Tax and Trade Bureau (TTB) regulations, which includes making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual states also impose excise taxes on alcohol beverages in varying amounts. The Company calculates its excise tax expense based upon units produced and on its understanding of the applicable excise tax laws. Excise taxes totaled $654,136 and $469,936 for the nine months ended September 30, 2017 and 2016, respectively.

Stock-Based Compensation

The Company recognizes as compensation expense all stock-based awards issued to employees in accordance with the fair value recognition provisions of Accounting Standards Codification Topic 718, Compensation - Stock Compensation. The compensation cost is measured based on the grant-date fair value of the related stock-based awards and is recognized over the service period of stock-based awards, which is generally the same as the vesting period. The fair value of stock options is determined using the Black-Scholes valuation model, which estimates the fair value of each award on the date of grant based on a variety of assumptions including expected stock price volatility, expected terms of the awards, risk-free interest rate, and dividend rates, if applicable. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments as the underlying stock-based awards vest. Stock-based compensation was $900,130 and $427,947 for the nine months ended September 30, 2017 and 2016, respectively.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standard Boards (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 was effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We have adopted ASU 2016-09 as of March 31, 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

● A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and

● A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are currently evaluating the impact ASU 2016-02 will have on the Company’s condensed consolidated financial statements.

34

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 will supersede virtually all existing revenue guidance. Under this update, an entity is required to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. As such, an entity will need to use more judgment and make more estimates than under the current guidance. ASU 2014-09 is to be applied retrospectively either to each prior reporting period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. The Company will elect to apply the impact (if any) of applying ASU 2014-09 to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU 2015-14 deferred the effective date of ASU 2014-09 for one year, making it effective for the year beginning December 31, 2017, with early adoption permitted as of January 1, 2017. The Company currently expects to adopt ASU 2014-09 in the first quarter of 2018. The Company does not expect adoption of ASU 2014-09 to have a material impact on its condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (“ASU 2014-15”). The new guidance explicitly requires that management assess an entity’s ability to continue as a going concern and may require additional detailed disclosures. ASU 2014-15 was effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. We adopted ASU 2014-15 as of December 31, 2016. The Company does not believe the adoption of ASU 2014-15 had any material impact on its condensed consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 is part of the FASB’s initiative to simplify accounting standards. The guidance requires an entity to recognize inventory within scope of the standard at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. ASU 2015-11 was effective prospectively for the year beginning January 1, 2017. We have adopted ASU 2015-11 as of March 31, 2017. The Company does not believe the adoption of ASU 2015-11 had any material impact on its condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, simplifying the presentation of debt issuance costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 was effective for annual and interim periods beginning after December 15, 2015 and early application was permitted. We early adopted ASU 2015-03 as of December 31, 2015. The Company does not believe the adoption of ASU 2015-03 had any material impact on its condensed consolidated financial statements.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

ITEM 4 – CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) that are designed to provide reasonable assurances that the information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by our management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended September 30, 2017, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

35

PART II: OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

On October 10, 2017, we received a letter from a law firm purporting to represent a Company stockholder named Jason Price. The letter stated that such representative was launching an “investigation” into certain grants of stock options and restricted stock units that exceeded applicable limits under the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) (collectively, the “Additional Grants”). The representative stated the belief that the Board had violated the terms of the 2016 Plan by approving the Additional Grants, and such approval constituted a breach of fiduciary duty and possible evidence of material weaknesses in internal controls. The Board rejects any such contentions. Although we acknowledge that the Additional Grants were made despite the stated limits in the 2016 Plan, we believe that the Additional Grants were in the best interests of our stockholders. We believe that our existing corporate governance mechanisms are sufficiently robust as to be able to review and take a proper response to Mr. Price’s letter. We are seeking stockholder approval of the Additional Grants and of certain amendments to the 2016 Plan to increase such limits at the upcoming annual stockholder meeting on December 8, 2017.

ITEM 1A – RISK FACTORS

Not applicable.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following list sets forth information regarding all securities sold or granted by us during the period covered by this report that were not registered under the Securities Act, and the consideration, if any, received by us for such securities, which proceeds has been or will be used by us for general working capital purposes. The securities were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) or Rule 506(b) of Regulation D promulgated under the Securities Act, which exempt transactions by an issuer not involving any public offering. The purchasers were “accredited investors” as such term is defined in Regulation D. The securities are non-transferable in the absence of an effective registration statement under the Act or an available exemption therefrom, and all certificates are imprinted with a restrictive legend to that effect.

In August 2017, the Company issued 5,209 shares of common stock to a third-party consultant in exchange for services rendered. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.40 - $3.50 per share.

In August 2017, the Company issued 83,334 shares of its common stock to an existing noteholder upon conversion of a 6% convertible promissory note with an aggregate principal amount converted of $500,000.

In September 2017, the Company issued 14,760 shares of common stock to directors and employees for stock-based compensation of $56,221. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.78 - $4.38 per share.

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ITEM 3 – DEFAULT UPON SENIOR SECURITIES

None

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

Not applicable.

ITEM 6 – EXHIBITS

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation of the Company, as presently in effect, filed as Exhibit 3.1 to the Registration Statement on Form S-1 filed on November 14, 2011 (File No. 333-177918) and incorporated by reference herein.
3.2	Certificate of Designation – Series A Preferred Stock, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated March 9, 2016 and filed on March 11, 2016 and incorporated by reference herein.
3.3	Amendment to Certificate of Designation After Issuance of Class or Series, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated June 1, 2016 and filed on June 9, 2016 and incorporated by reference herein.
3.4	Certificate of Change, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated October 6, 2016 and filed on October 11, 2016 and incorporated by reference herein.
3.5	Certificate of Change, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated June 14, 2017 and filed on June 15, 2017 and incorporated by reference herein.
3.6	Amended and Restated Bylaws of the Company, as presently in effect, filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated October 13, 2016 and filed on October 19, 2016 and incorporated by reference herein.
10.1	Office Lease 1001 SE Water Avenue dated as of September 29, 2017 between the Company and Eastbank Commerce Center, LLC.
31.1	Certification of Grover Wickersham pursuant to Rule 13a-14(a).
31.2	Certification of Steven Shum pursuant to Rule 13a-14(a).
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Schema Linkbase Document
101.CAL	XBRL Taxonomy Calculation Linkbase Document
101.DEF	XBRL Taxonomy Definition Linkbase Document
101.LAB	XBRL Taxonomy Labels Linkbase Document
101.PRE	XBRL Taxonomy Presentation Linkbase Document

37

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EASTSIDE DISTILLING, INC.
By:	/s/ Grover Wickersham
	Grover Wickersham
	Chief Executive Officer, Director
	(Principal Executive Officer)
	Date: November 14, 2017
By:	/s/ Steve Shum
	Steve Shum
	Chief Financial Officer
	(Principal Financial and Accounting Officer)
	Date: November 14, 2017

38

EX-10.1

OFFICE LEASE

1001 SE WATER AVENUE

BETWEEN

Eastside Distilling Inc,

a Nevada corporation

Tenant

AND

Eastbank Commerce Center, LLC,

an Oregon limited liability company

Landlord

TABLE OF CONTENTS

1.	PREMISES; DELIVERY		1
	1.1	Lease of Premises.	1
	1.2	Delivery of Possession and Commencement.	1
	1.3	Early Access.	1
	1.4	Option to Extend Term.	2
	1.5	Right of First Offer.	3
2.	RENT PAYMENT		3
	2.1	Base Rent.	3
	2.2	Abated Rent and Other Inducement Provisions.	4
3.	SECURITY DEPOSIT		4
4.	USE		4
	4.1	Use.	4
	4.2	Equipment.	5
	4.3	Signs and Other Installations.	5
	4.4	Parking.	5
5.	UTILITIES, SERVICES, SECURITY		6
	5.1	Utilities and Services.	6
	5.2	Data and Information Sharing for Environmental Management and Extra Usage.	6
	5.3	Security Measures for the Premises.	6
	5.4	Fiber Optic.	7
6.	MAINTENANCE, REPAIR, ALTERATIONS		7
	6.1	Maintenance and Repair.	7
	6.2	Alterations.	8
7.	INDEMNITY, INSURANCE		9
	7.1	Indemnity.	9
	7.2	Insurance.	9
8.	DAMAGE, WAIVER OF SUBROGATION		10
	8.1	Fire or Casualty.	10
	8.2	Waiver of Subrogation.	10
9.	EMINENT DOMAIN		10
10.	ASSIGNMENT AND SUBLETTING		11
11.	DEFAULT, REMEDIES		11
	11.1	Default.	11
	11.2	Remedies for Default.	12
	11.3	Landlord’s Right To Cure Default.	12
12.	SURRENDER, HOLDOVER		12
13.	RULES AND REGULATIONS		13
14.	ACCESS		13
	14.1	Access.	13
	14.2	Furniture and Bulky Articles.	13

i 

15.	Notices.		13
16.	SUBORDINATION AND ATTORNMENT, TRANSFER OF BUILDING, ESTOPPELS		14
	16.1	Subordination and Attornment.	14
	16.2	Transfer of Building.	14
	16.3	Estoppels.	14
17.	ATTORNEY FEES		14
18.	QUIET ENJOYMENT		14
19.	LIMITATION ON LIABILITY		15
20.	ADDITIONAL RENT		15
	20.1	Additional Rent: Operating Expense Adjustment.	15
	20.2	Disputes.	16
21.	HAZARDOUS MATERIALS		16
22.	MISCELLANEOUS		17
	22.1	Complete Agreement; No Implied Covenants.	17
	22.2	Governing Law.	17
	22.3	Partial Invalidity.	17
	22.4	Space Leased AS IS.	17
	22.5	Captions; Construction	17
	22.6	Nonwaiver.	17
	22.7	Consent.	17
	22.8	Force Majeure.	17
	22.9	Commissions.	18
	22.10	Successors.	18
	22.11	Financial Reports.	18
	22.12	Waiver of Jury Trial.	18
	22.13	Executive Order 13224.	18
	22.14	Relocation.	18
	22.15	Confidentiality.	18
	22.16	Building Name and Signage.	19
	22.17	Mold.	19
	22.18	Survival of Obligations.	19
	22.19	Amendments.	19
	22.20	Execution; Counterpart; Signature Transmitted.	19
	22.21	Intentionally Deleted.	19
	22.22	Exhibit.	19

ii 

OFFICE LEASE

Basic Lease Terms.
A.	EFFECTIVE DATE OF LEASE:	September 29, 2017
B.	TENANT:	Eastside Distilling Inc,
		a Nevada corporation
	Addresses For Notices:	Eastside Distilling Inc.
		Att’n General Manager
		1001 SE Water Ave., Suite 390
		Portland, OR 97214
		Facsimile: _____________________
		Email: _____________________
C.	LANDLORD:	Eastbank Commerce Center, LLC,
		an Oregon limited liability company
		Addresses For Notices:
		c/o Beam Development
		75 SE Yamhill, Suite 201
		Portland, OR 97214
		Attn: Jonathan Malsin
		Email: jonathan@beamdevelopment.com
		With copy to:
		Brix Law LLP
		75 SE Yamhill, Suite 202
		Portland, OR 97214
		Attn: Brad Miller
		Email:  bmiller@brixlaw.com
		Address for payment of Rent:
		c/o Beam Development
		75 SE Yamhill, Suite 201
		Portland, OR 97214
D.	PREMISES:	Approximately 3,050 rentable square feet with an address of 1001 SE Water Avenue, Suite 390, Portland, Oregon 97214, as shown on the attached Exhibit “A.”
E.	BUILDING:	The building located at 1001 SE Water Avenue, Portland, OR 97214 commonly known as the Eastbank Commerce Center.
F.	BUILDING AREA:	Approximately 55,274 rentable square feet
G.	TENANT’S PROPORTIONATE SHARE: 5.52%.	The percentage is obtained by dividing the rentable square feet of the Premises by the total number of rentable square feet of the Building. Landlord may modify Tenant’s Proportionate Share if the Building size is increased or decreased, as the case may be.
H.	TENANT’S PERMITTED USE OF PREMISES:	General office use, and for no other purpose.

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I.	TERM OF LEASE:	Anticipated Commencement Date: October 15, 2017. Expiration Date: Last day of the month that is twenty-six (26) months after the Commencement Date (defined below) of the Lease.
J.	INITIAL MONTHLY BASE RENT:	$5,718.75.

K.	BASE RENT:	Period (Months)	Monthly Base Rent
		1-2	Abated
		3-12	$5,718.75
		13-24	$5,890.31
		25-26	$6,067.02

L.	PREPAID RENT:	$5,718.75, applicable to month three (3) after the Commencement Date.
M.	SECURITY DEPOSIT:	$6,067.02.
N.	PARKING:	During the Term of the Lease, Tenant shall be permitted to use four (4) reserved parking spaces. All parking arrangements with Tenant shall be addressed by separate agreement and shall be subject to the provisions of Section 4.4.
L.	BROKER(S):	Landlord was not represented by a real estate broker with respect to this Lease. Tim Budelman of Norris & Stevens, Inc. representing Tenant.

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OFFICE LEASE

For valuable consideration, Landlord and Tenant covenant and agree as follows:

1.	PREMISES; DELIVERY
1.1	Lease of Premises.

Landlord leases to Tenant the Premises described in the Basic Lease Terms and shown as Suite 390 on Exhibit ”A” (the “Premises”) subject to the terms and conditions of this Lease.

1.2 Delivery of Possession and Commencement.

Should Landlord be unable to deliver possession of the Premises on the Anticipated Commencement Date stated in the Basic Lease Terms, Landlord shall have no liability to Tenant for delay in delivering possession. The term of the Lease shall commence on the date the Premises are delivered to Tenant in the condition required under this Lease, which shall be deemed to have occurred when Landlord’s Work (defined below) has been substantially completed (the “Commencement Date”). The Premises shall be delivered to Tenant in “as is” condition and without any representation or warranty subject only to the improvements to be performed by Landlord in accordance with Exhibit ”B” (“Landlord’s Work”). The terms “substantial completion,” “substantially complete,” and words of similar import (whether or not spelled with initial capitals) as used herein shall mean the date of substantial completion of Landlord’s Work such that Tenant may commence the installation of any of Tenant’s equipment and occupy the Premises for the conduct of its business (subject to the completion of any additional construction to be performed by Tenant). Landlord’s Work shall be deemed substantially complete notwithstanding the fact that minor details of construction, mechanical adjustments or decorations which do not materially interfere with Tenant’s use and enjoyment of the Premises remain to be performed (items normally referred to as “punch list” items). The existence of any “punch list” items shall not postpone the Commencement Date. Tenant’s occupancy of the Premises shall constitute conclusive acceptance of the amount of square footage stated herein, and of the condition of the Premises. The Expiration Date of this Lease shall be the date stated in the Basic Lease Terms. Upon ascertaining the date of the Commencement Date, Landlord shall deliver to Tenant a written confirmation in the form attached hereto as Exhibit “E” (“Lease Confirmation”) of the Commencement Date. The Lease Confirmation shall be binding upon Tenant unless Tenant objects to the notice in writing delivered to Landlord within five (5) days of Tenant’s receipt of said Lease Confirmation.

The rentable areas of the Premises and the Building specified in Section 1.1 are approximate. Tenant is satisfied with Landlord’s measurement of the rentable areas of the Premises and of the Building.

1.3 Early Access.

Tenant shall have the right to occupy the Premises approximately seven (7) days after the mutual execution of this Lease. Such early access to the Premises by Tenant shall be solely for the purpose of installing Tenant’s cabling, furniture, fixtures, and equipment in the Premises and shall be subject to the following conditions: (i) prior to Tenant’s entry into the Premises, Tenant provides Landlord with proof that Tenant has the insurance that Tenant is required to maintain under this Lease, (ii) prior to Tenant’s entry into the Premises, Tenant provides Landlord with such evidence as reasonably required that Tenant has received all required governmental approvals to enter the Premises, (iii) prior to Tenant’s entry into the Premises, Tenant provides Landlord with contractor’s licenses, insurance and bonds for all contractors entering the Premises in connection with any work to be performed on by Tenant in the Premises, and (iv) Landlord shall have the right to terminate or suspend Tenant’s early access at any time that Landlord determines that such early access interferes with the performance of the Landlord’s Work.

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1.4 Option to Extend Term.

Landlord hereby grants Tenant the right to extend the Term of the Lease for one (1) additional period of three (3) years (such extended period is hereinafter referred to as the “Extended Term”) on the same terms and conditions contained in the Lease, except that (i) Base Rent for an Extended Term shall be as set forth hereinbelow, (ii) no additional options to extend shall apply following the expiration of applicable Extended Term (other than as expressly set forth above), and (iii) Landlord shall have no obligation to make any improvements to the Premises or contribute any amounts therefor. Written notice of Tenant’s exercise of its option to extend (“Option to Extend”) the Term of this Lease for the Extended Term must be given to Landlord no less than six (6) months prior to the date the Term of the Lease would otherwise expire. If Tenant is in default under this Lease, Tenant shall have no Option to Extend the Term of this Lease until such default is cured within the cure period set forth in this Lease for such default, if any; provided, that the period of time within which said Option to Extend may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise said Option to Extend because of a default. In the event Tenant validly exercises its Option to Extend the Term of this Lease as herein provided, Base Rent shall be adjusted as of the commencement date of the Extended Term as follows (but in no event shall it be less than the Base Rent for the month immediately prior to the commencement of the Extended Term):

(a)       Not later than six (6) months prior to the commencement of an Extended Term, Landlord shall provide Tenant with Landlord’s determination of the fair market Base Rent for such Extended Term, including periodic increases as dictated by the current market (“Landlord’s Determination of Base Rent for Extended Term”). Tenant shall provide notice to Landlord within ten (10) days after receipt of such notice from Landlord as to whether Tenant accepts Landlord’s Determination of Base Rent for Extended Term. In the event Tenant does not agree to Landlord’s Determination of Base Rent for Extended Term, Landlord and Tenant shall attempt to agree upon Base Rent for the Premises for the Extended Term, such rent to be the fair market Base Rent installment of rent for the Premises for the Extended Term, as defined in Subsection (c) below. If the parties are unable to agree upon the Base Rent for the Extended Term by the date three (3) months prior to the commencement of the Extended Term, then within ten (10) days thereafter each party, at its own cost and by giving notice to the other party, shall appoint a real estate appraiser with at least five (5) years full-time commercial real estate appraisal experience in the area in which the Premises are located to appraise and set Base Rent for the Extended Term. If a party does not appoint an appraiser within ten (10) days after the other party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set Base Rent for the Extended Term. If each party shall have so appointed an appraiser, the two (2) appraisers shall meet promptly and attempt to set the Base Rent for the Extended Term. If the two (2) appraisers are unable to agree within thirty (30) days after the second appraiser has been appointed, they shall attempt to select a third appraiser meeting the qualifications herein stated within ten (10) days after the last day the two (2) appraisers are given to set Base Rent. If the two (2) appraisers are unable to agree on the third appraiser within such ten (10) day period, either of the parties to this Lease, by giving five (5) days’ notice to the other party, may apply to the Arbitration Service of Portland for the selection of a third appraiser meeting the qualifications stated in this Section. Each of the parties shall bear one-half (1/2) of the cost of appointing the third appraiser and of paying the third appraiser’s fee. The third appraiser, however selected, shall be a person who has not previously acted in any capacity for either party.

(b)       The fair market Base Rent shall be fixed by the appraisers in accordance with the following procedures. Each party-appointed appraiser shall state, in writing, such appraiser’s determination of the fair market Base Rent supported by the reasons therefor and shall make counterpart copies for the other party-appointed appraiser and any neutral appraiser. The party-appointed appraisers shall arrange for a simultaneous exchange of their proposed fair market Base Rent determinations. The role of any neutral appraiser shall be to select whichever of the two (2) proposed determinations of fair market Base Rent most closely approximates the neutral appraiser’s own determination of fair market Base Rent. The neutral appraiser shall have no right to propose a middle ground or any modification of either of the two (2) proposed determinations of fair market Base Rent. The determination of fair market Base Rent the neutral appraiser chooses as that most closely approximating the neutral appraiser’s determination of the fair market Base Rent shall constitute the decision of the appraisers and shall be final and binding upon the parties. The appraisers shall have no power to modify the provisions of this Lease.

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(c)       For purposes of the appraisal, the term “fair market Base Rent” shall mean the price that a ready and willing tenant would pay, as of the Extended Term commencement date, as a base rent to a ready and willing landlord of premises comparable to the Premises, in terms of size, quality and comparable term, in their then-improved state, in the Portland, Oregon market, if such premises were exposed for lease on the open market for a reasonable period of time; including any rent increases over the Extended Term. In no event shall there be deducted from such fair market rental the value of any concessions, including without limitation, tenant improvements, commission and/or “down time.”

(d)       Any neutral appraiser’s decision shall be made not later than thirty (30) days after the submission by the appraisers of their proposals with respect to the fair market Base Rent. The parties have included these time limits in order to expedite the proceeding, but they are not jurisdictional, and the neutral appraiser may for good cause allow reasonable extensions or delays, which shall not affect the validity of the award. Absent fraud, collusion or willful misconduct by the neutral appraiser, the award shall be final, and judgment may be entered in any court having jurisdiction thereof. The Option to Extend the Lease hereby granted is personal to the entity executing this Lease as tenant and is not transferable; in the event of any assignment or subletting under this Lease, the Option to Extend the Lease shall automatically terminate and shall thereafter be null and void.

1.5 Right of First Offer.

If at any time during the initial Term of the Lease space in Suites 360 or 370 of the Building as shown on Exhibit “D” (collectively and individually, the “First Offer Space”) is available for lease or is about to become available for lease (provided such space shall not be deemed available for lease until it has already been leased to a third party after the date of this Lease or if it is subject to any existing options of existing tenants of the Building) and so long as Tenant is not in default of this Lease, Landlord shall notify Tenant of the availability of such space and the terms upon which Landlord is willing to lease such space to Tenant (the base rent per sq. ft., and the general terms shall be consistent with the then prevailing-market for premises comparable to the Premises, in terms of size, quality and comparable term, in their then-improved state, in the Portland, Oregon market, provided the base rent shall be no lower than that for the initial Premises for the month in which the expansion of the Premises to include the First Offer Space shall occur (the “Expansion Space Commencement Date”). If Tenant timely accepts Landlord’s offer, if, as of the Expansion Space Commencement Date, the Term of the Lease is set to expire less than twenty-four (24) months later, the Term of the Lease with respect to the initial Premises and the First Offer Space shall be extended such that the Term of the Lease expires twenty-four (24) months following the Expansion Space Commencement Date. Tenant shall have five (5) business days to accept Landlord’s offer. If Tenant fails to accept Landlord’s offer within such five (5) business day period, Landlord shall be free to lease such space any time during the term of this Lease free and clear of any rights of Tenant; provided however, once such space has been leased to a third party and thereafter becomes available for lease, the provisions of this Right of First Offer shall then again apply. The right of first offer contained herein shall not apply to any renewal or extension of the term of the Lease and shall be personal to the entity executing this Lease as tenant.

2. RENT PAYMENT

2.1 Base Rent.

Tenant shall pay to Landlord the Base Rent for the Premises and any additional rent provided herein, without deduction or offset. At the same time as execution of the Lease, Tenant shall pay any prepaid rent stated in the Basic Lease Terms. Rent is payable in advance on the first day of each month commencing on the Commencement Date of this Lease. Tenant shall have a five (5) day grace period from the first day of the month within which to pay the Base Rent and any additional rent. Rent for any partial month during the Lease term shall be prorated to reflect the number of days during the month that Tenant occupies the Premises. Additional rent means amounts determined under Section 20 of this Lease and any other sums payable by Tenant to Landlord under this Lease. Rent not paid when due shall bear interest at the rate of nine percent (9%) per annum, until paid. Landlord may at its option impose a late charge of the greater of $.05 for each $1 of rent or $50 for rent payments made more than ten (10) days late in lieu of interest for the first month of delinquency. Tenant acknowledges that late payment by Tenant to Landlord of any rent or other sums due under this Lease will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to ascertain, and that such late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of any such late payment and is not a penalty. Neither imposition nor collection nor failure to impose or collect such late charge shall be considered a waiver of any other remedies available for default. In addition to such late charge, an additional charge of $75 shall be recoverable by Landlord for any returned checks.

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2.2 Abated Rent and Other Inducement Provisions.

As reflected above, Tenant shall have no obligation to pay monthly Base Rent for the first two (2) full months after the Commencement Date (the “Free Rent Period”) resulting in an abatement of monthly Base Rent in the aggregate amount of $11,437.50. In the event of a default by Tenant under the terms of this Lease which results in early termination pursuant to the provisions hereof during such Free Rent Period, Tenant shall not be entitled to any such rent abatement after the date of termination nor shall Tenant be entitled to assert any right to rent abatement after such termination against any sums due Landlord. The rent abatement granted under this Section and any other cash and allowance which is granted to Tenant (collectively, “Inducement Provisions”) is solely for the benefit of the entity executing this Lease as tenant and is not transferable to any assignee or subtenant. In the event of a default by Tenant under the terms of this Lease which results in early termination pursuant to the provisions hereof, then as a part of the recovery to which Landlord shall be entitled shall be included a portion of such rent which was abated under the provisions of this Section and the cash and any allowance other all other Inducement Provisions, which portion shall be determined by multiplying the total amount of rent, cash and allowance which was abated or granted under this Lease by a fraction, the numerator of which is the number of months remaining in the term of this Lease at the time of such default and the denominator of which is the number of months during the term of this Lease that Tenant is obligated to pay monthly Base Rent. For the avoidance of doubt, during the Free Rent Period Tenant shall be obligated to pay Tenant’s Proportionate Share of operating expenses and real property taxes.

3. SECURITY DEPOSIT

Upon execution of the Lease, Tenant shall pay to Landlord the amount stated in the Basic Lease Terms as a Security Deposit. Landlord may apply the Security Deposit to pay the cost of performing any obligation which Tenant fails to perform within the time required by this Lease, but such application by Landlord shall not waive Landlord’s other remedies nor be the exclusive remedy for Tenant’s default. If the Security Deposit is applied by Landlord, Tenant shall on demand pay the sum necessary to replenish the Security Deposit to its original amount. In no event will Tenant have the right to apply any part of the Security Deposit to any rent or other sums due under this Lease. If Tenant is not in default at the expiration or termination of this Lease, Landlord shall return the entire Security Deposit to Tenant, within thirty (30) days, except for the portion designated in the Basic Lease Terms, if any, which Landlord shall retain as a non-refundable cleaning fee. If Tenant is in default at the expiration or termination of this Lease, Landlord may retain such portion of the Security Deposit as needed to cure the default and shall promptly return the balance, if any, to Tenant. Landlord’s obligations with respect to the Security Deposit are those of a debtor and not of a trustee, and Landlord can commingle the Security Deposit with Landlord’s general funds. Landlord shall not be required to pay Tenant interest on the Security Deposit. Landlord shall be entitled to immediately endorse and cash Tenant's Security Deposit; however, such endorsement and cashing shall not constitute Landlord's acceptance of this Lease. In the event Landlord does not accept this Lease, Landlord shall return said Security Deposit. If Landlord sells its interest in the Premises during the term hereof and deposits with or credits to the purchaser the unapplied portion of the Security Deposit, thereupon Landlord shall be discharged from any further liability or responsibility with respect to the Security Deposit.

4. USE

4.1 Use.

Tenant shall use the Premises for Tenant’s Permitted Use stated in the Basic Lease Terms and for no other purpose. In connection with Tenant’s use of the Premises (including, without limitation, any alteration of the Premises), Tenant shall at its expense promptly comply with all applicable laws, ordinances, rules, and regulations (“Laws”) and shall not annoy, obstruct, or interfere with the rights of other tenants. Tenant shall not allow any objectionable fumes, noise, light, vibration, radiation, or electromagnetic waves to be emitted from the Premises. If any such sound or vibration is detectable outside of the Premises, Tenant shall provide such insulation as is required to muffle such sound or vibration and render it undetectable at Tenant’s cost. Tenant shall not conduct any activities that will increase Landlord’s insurance rates. Tenant shall pay before delinquency all taxes, assessments, license fees and public charges levied, assessed or imposed upon its business operations and all trade fixtures, leasehold improvements, merchandise and other personal property in or about the Premises. Tenant shall not use the Premises for any uses that will cause any increase in insurance rates in the Building. Notwithstanding anything to the contrary in this Lease, in no event shall any portion of the Premises be used for any marijuana-related business, cannabusiness, or any other business related to controlled substances as defined in the Federal Controlled Substances Act (including, but not limited to, the cultivation, manufacture, processing, accounting, financial transactions, other ancillary services, storage or sale of cannabis or cannabis-related products).

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4.2 Equipment.

Tenant shall install in the Premises only such equipment as is customary for Tenant’s Permitted Use and shall not overload the floors or electrical circuits of the Premises or Building or alter the plumbing or wiring of the Premises or Building. Landlord must approve in advance the location of and manner of installing any wiring or electrical, heat generating, climate sensitive, or communication equipment or exceptionally heavy articles. All telecommunications equipment, conduit, cables and wiring, additional dedicated circuits, and any additional air conditioning required because of heat generating equipment or special lighting installed by Tenant shall be installed and operated at Tenant’s expense and, at Landlord’s written request shall be removed by Tenant at Tenant’s sole cost. Tenant shall have no right to install any equipment on or through the roof of the Building, or use or install or store any equipment or other items outside of the interior boundary of the Premises.

4.3 Signs and Other Installations.

No signs, awnings, or other apparatus shall be painted on or attached to the Building or anything placed on any glass or woodwork of the Premises or positioned so as to be visible from outside the Premises, including any window covering (e.g., shades, blinds, curtains, drapes, screens, or tinting materials) without Landlord’s written consent. All signs installed by Tenant shall comply with Landlord’s standards for signs and all applicable codes and all signs and sign hardware shall be removed upon termination of this Lease with the sign location restored to its former state. Any material violating this provision may be removed and disposed by Landlord without compensation to Tenant, and Tenant shall reimburse Landlord for the cost of the same upon request. Subject to Landlord’s final approval as to the specific design, location, and size of such signage, Tenant may install, at Tenant’s sole cost and expense, Tenant-branded signage on the door and window of the entry to the Premises. Landlord shall, at Landlord’s sole cost and expense, place Tenant’s name on the directory of the Building. Notwithstanding the above, and subject to Landlord’s reasonable approval of the design, location, and size of such signage, Landlord consents to Tenant placing a neon sign in its third floor window for “Portland Potato” or “Portland Potato Vodka,” as permitted by the city sign code and all other governmental regulations, provided such signage shall not be placed within three (3) feet of the window line.

4.4 Parking.

All parking spaces shall be assigned to tenants and other parties pursuant to a separate written agreement with Landlord. This Lease does not cover any parking spaces or rights to use any parking spaces except as indicated in Section N of the Basic Lease Terms. Except to the extent of the negligence or willful misconduct of Landlord or Landlord’s agents, employees or contractors, Landlord shall not be responsible for money, jewelry, automobiles or personal property lost in or stolen from the parking areas regardless of whether such loss or theft occurs when the parking areas are locked or otherwise secured. Without limiting the terms of the preceding sentence, Landlord shall not be liable for any loss, injury or damage to persons using the parking areas or automobiles or other property therein, it being agreed that, to the fullest extent permitted by law, the use of the parking spaces shall be at the sole risk of Tenant and its employees. If Tenant and Landlord enter into a parking agreement covering parking spaces in the Building, then any default by Tenant under such agreement beyond any applicable cure period shall, at Landlord’s option, constitute an event of default under this Lease. A copy of the separate parking agreement is attached hereto as Exhibit “F.”

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5. UTILITIES, SERVICES, SECURITY

5.1 Utilities and Services.

Landlord will furnish water and electricity to the Building at all times and will furnish heat and air conditioning, at building standard levels, during the normal Building hours as established by Landlord. Tenant shall pay for all charges for electricity, natural gas and water furnished to the Premises. If Tenant does not pay any of these charges directly, Tenant shall pay Landlord for such charges and the amount payable by Tenant will be based upon consumption as sub-metered to the Premises by Landlord, or if not sub-metered, upon an equitable allocation made by Landlord, which allocation will be binding absent manifest error. Tenant shall be responsible for paying, as additional rent, the monthly charges allocable to the Premises for the HVAC maintenance contracts entered into by Landlord from time to time. Any additional rent provided for in this Lease shall become due with the next monthly installment of Base Rent unless otherwise provided. Janitorial service for the Building’s common areas will be provided in accordance with the regular schedule of the Building, which schedule may change from time to time. Tenant shall provide Tenant’s own janitorial service for the Premises unless Landlord and Tenant otherwise agree in writing that Landlord will provide such service to Tenant as part of operating expenses for the Building. Tenant shall be responsible for, and promptly pay when due, any and all charges for utility services used in the Premises and for all other services required for Tenants use of the Premises (including without limitation, all data and telephone services). Tenant shall comply with all government laws or regulations regarding the use or reduction of use of utilities on the Premises. Interruption of services or utilities shall not be deemed an eviction or disturbance of Tenant’s use and possession of the Premises, render Landlord liable to Tenant for damages, or relieve Tenant from performance of Tenant’s obligations under this Lease. Landlord shall take all reasonable steps to correct any interruptions in service caused by defects in utility systems within Landlord’s reasonable control. Tenant shall provide its own surge protection for power furnished to the Premises. Tenant shall cooperate with Landlord and the utility service providers at all times as reasonably necessary, and shall allow Landlord and utility service providers, reasonable access to the pipes, lines, feeders, risers, wiring, and any other machinery within the Premises. Tenant shall not contract or engage any other utility provider without prior written approval of Landlord.

5.2 Data and Information Sharing for Environmental Management and Extra Usage.

Tenant shall be required to furnish to Landlord energy and water consumption data for all energy and water types used on the Premises for which utility accounts or consumption meters are owned by Tenant. Landlord and Tenant agree to provide all reasonable and accurate information that may be required to pursue green building certification of the Premises. If Tenant does not pay for utilities directly and Tenant uses excessive amounts of utilities because of operation outside of ordinary business hours of Monday through Friday from 7:00 am to 6:00 pm and Saturday 8:00 am to Noon (“Ordinary Building Hours”), high demands from office machinery and equipment, nonstandard lighting, or any other cause, Landlord may impose a reasonable charge for supplying such extra utilities, which charge shall be payable monthly by Tenant in conjunction with rent payments. Landlord reserves the right to install separate meters for any such utility and to charge Tenant for the cost of such installation.

5.3 Security Measures for the Premises.

Landlord may (but shall have no obligation) adopt security measures regarding the Premises, and Tenant shall cooperate with all such security measures. Landlord may, in Landlord’s sole and absolute discretion, modify the type or amount of security measures provided at any time without notice.

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Tenant may not install alarm boxes, foil protection tape, or other security equipment on the Premises without Landlord’s prior written consent. Tenant may, at Tenant’s sole cost and expense, install a supplemental security system within the Premises (such as a card-key system) with Landlord’s written consent not to be unreasonably withheld; provided that such consent may be conditioned on, among other things, that: (i) the plans and specifications for any such system shall be subject to Landlord's reasonable approval, (ii) any such system must be compatible with any existing systems of the Building, (iii) Tenant's obligation to indemnify, defend and hold Landlord harmless shall also apply to Tenant's use and operation of any such system, (iv) the installation of such system shall otherwise be subject to the terms and conditions of Section 6 below (and Exhibit “B”, if installed as a part of the Tenant improvements), and (v) notwithstanding anything to the contrary in this Lease, Tenant shall remove such system upon the expiration or earlier termination of this Lease and repair all damage caused by such removal. Tenant shall at all times provide Landlord with a contact person who can disarm the security/surveillance system and who is familiar with the functions of such system in the event of a malfunction, and Tenant shall provide Landlord with the alarm codes or other necessary information required to disarm such system in the event Landlord must enter the Premises in an emergency and Landlord shall not have any liability for accidentally setting off Tenant’s security system. The determination of the extent to which such supplemental security equipment, systems and procedures are reasonably required shall be made in the sole judgment, and shall be the responsibility of, the Tenant.

5.4 Fiber Optic.

Tenant shall have the right to select an alternative telecom provider for its data and telecom connectivity in the Building; provided that (i) such telecom provider enters into a license agreement with the Landlord which license agreement shall be subject to Landlord’s prior written approval, (ii) Tenant assumes all costs and expenses related to the license agreement, including, without limitation, the costs of installation of fiber and electrical feeds, including chases and conduits in the risers in the Building (collectively, the “Cabling”), and (iii) the telecom provider’s use will not interfere with or adversely impact the Building or the use or occupancy of office space leased by any tenant of the Building. Together with Tenant's request for a new telecom provider, Tenant shall submit to Landlord evidence acceptable to Landlord in its sole discretion that the installation of the Cabling by the telecom provider is in compliance with all applicable laws and will not impede the operation of the Building or its systems in any material respect and if so as to the latter, that Tenant will be responsible to correct and remediate such impediment at it sole cost and expense as a condition precedent to such approval by Landlord. Without limiting the generality of the foregoing, Tenant shall not commence or allow the telecom provider to commence any installation or operation of the Cabling until the proposed location of and specifications for the Cabling have been approved in writing by Landlord. Landlord shall have no obligation to design, install, construct, use, operate, maintain, repair, replace or remove the Cabling or to have any other responsibility or liability in connection therewith or the operations thereof. The use of the Cabling and all areas outside the Premises shall be subject to all terms and conditions of the Lease as if within the Premises, including, without limitation, insurance and indemnification obligations in this Lease. Landlord shall not be liable for any loss or damage suffered by Tenant or others because of any interruption in or failure of utilities, including electrical power, to the Cabling. Tenant acknowledges and agrees that it shall accept the areas in which Tenant installs its Cabling and piping in their “As Is” condition. Landlord makes no representation respecting the condition of these areas or their suitability for operation and installation of the Cabling.

6. MAINTENANCE, REPAIR, ALTERATIONS

6.1 Maintenance and Repair.

6.1.1 Landlord’s obligation with respect to maintenance and repair of the Building shall be limited to: (A) the structural portions of the Building, (B) the exterior walls of the Building, including glass and glazing (provided that the cleaning of the interior faces of exterior glazing within the Premises shall be Tenant’s responsibility), (C) the roof, (D) the mechanical, electrical, plumbing and life safety systems leading to the Premises, and (E) the common areas. Landlord shall have the right but not the obligation to undertake work of repair that Tenant is required to perform hereunder and that Tenant fails or refuses to perform in a timely and efficient manner. All costs incurred by Landlord in performing any such repair for the account of Tenant shall be repaid by Tenant to Landlord upon demand, together with a reasonable administrative fee.

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6.1.2 Tenant shall maintain and repair the Premises in good condition, including, without limitation, maintaining and repairing all walls, floors, and ceilings, all interior doors, partitions, and windows, and all Premises systems, fixtures, and equipment that are not the maintenance responsibility of Landlord, as well as damage to the Building caused by Tenant, its agents, employees, contractors, or invitees.

6.1.3 Landlord shall have no liability for failure to perform required maintenance and repair unless written notice is given by Tenant and Landlord fails to commence efforts to remedy the problem within a reasonable time and diligently pursue such remedy to completion. Landlord shall have the right to erect scaffolding and other apparatus necessary for the purpose of making repairs or alterations to the Building, and Landlord shall have no liability for interference with Tenant’s use because of such work. Work may be done during normal business hours. Tenant shall have no claim against Landlord for any interruption of services or interference with Tenant’s occupancy caused by Landlord’s maintenance and repair or any claim of constructive or other eviction of Tenant.

6.1.4 Landlord’s cost of repair and maintenance shall be considered “operating expenses” for the purposes of Section 20, except that repair of damage caused by negligent or intentional acts or breach of this Lease by Tenant, its contractors, agents or invitees shall be at Tenant’s expense.

Landlord represents and warrants that the plumbing, mechanical, electrical, safety, HVAC, and other systems serving the Premises shall be in good working order on the Commencement Date.

6.2 Alterations.

6.2.1 Tenant shall not make any alterations to the Premises that affect the structure of the Building or any Building system (electrical, plumbing, mechanical or life safety), or install any wall or floor covering without Landlord’s prior written consent which may be withheld in Landlord’s sole discretion. With respect to any other alteration requested by Tenant, Landlord’s consent shall not be unreasonably withheld. Should Landlord consent in writing to Tenant’s alteration of the Premises, Tenant shall contract with a contractor approved by Landlord for the construction of such alterations (which contractor shall comply with the insurance provisions set forth in this Lease), shall secure all appropriate governmental approvals and permits, and shall complete such alterations with due diligence in compliance with the plans and specifications approved by Landlord and in a good and workmanlike manner. All such construction shall be performed in a manner which will not interfere with the quiet enjoyment of other tenants of the Building. Any such alterations, wiring, cables, or conduit installed by Tenant shall at once become part of the Premises and belong to Landlord except for removable machinery and unattached movable trade fixtures. Landlord may at its option require that Tenant remove any alterations, wiring, cables or conduit installed by or for Tenant and restore the Premises to the original condition upon termination of this Lease. If Tenant seeks Landlord’s consent to perform an alteration, then at the time Landlord provides its approval of same, Landlord shall notify Tenant as to whether Landlord will require Tenant to remove such alteration upon the expiration or earlier termination of this Lease. If Tenant makes an alteration without asking Landlord whether Landlord will require such alteration to be removed at the expiration or sooner termination of this Lease, Landlord may at its option, require that Tenant remove such alterations and repair any damage in connection therewith. Landlord shall have the right to post notices of nonresponsibility in connection with work being performed by Tenant in the Premises. Work by Tenant shall comply with all laws then applicable to the Premises. Tenant shall not allow any liens to attach to the Building or Tenant’s interest in the Premises as a result of its activities or any alterations. Landlord may perform alterations to or change the configuration of the Building and common areas. At the conclusion of any alteration, (A) Tenant shall provide Landlord with as-built drawings of such alterations, and (B) certify that the “record-set” of as-built drawings are true and correct, which certification shall survive the expiration or termination of this Lease.

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6.2.2 Throughout the term of the Lease and notwithstanding the provisions of Section 18 below, Landlord shall have a continuing right (but shall not be obligated) to make alterations and/or improvements to the common areas and any other portions of the Building for any purposes that Landlord deems necessary, in its reasonable business judgment, including, without limitation, alterations or improvements that will affect the operation, design, use or aesthetic of the Building. Landlord is authorized to prioritize sustainability requirements over minimizing upfront costs of property improvements. Landlord shall make reasonable efforts to complete all such alterations and improvements so as to minimize, to the extent feasible, disturbance to Tenant. Without limiting the generality of the foregoing, Landlord reserves the right to grant such easements, rights and dedications as Landlord deems necessary or desirable and to cause the recordation of parcel maps and covenants, conditions and restrictions affecting the Premises and Building, as long as such easements, rights, dedications, maps and covenants, conditions and restrictions do not materially and adversely interfere with the use of the Premises by Tenant. At Landlord’s request, Tenant shall join in the execution of any of the aforementioned documents.

7. INDEMNITY, INSURANCE

7.1 Indemnity.

Tenant shall indemnify, defend, and hold harmless Landlord and its managing agents and employees from any claim, liability, damage, or loss occurring in, on, or about the Premises, or any cost or expense in connection therewith (including attorney fees), arising out of (a) any damage to any person or property occurring in, on, or about the Premises, (b) use by Tenant or its agents, invitees or contractors of the Premises and/or the Building, and/or (c) Tenant’s breach or violation of any term of this Lease. This indemnity obligation shall survive the expiration or sooner termination of this Lease. Notwithstanding the forgoing, Tenant shall have no obligation to indemnify, defend or hold harmless Landlord for any claim, damage or loss caused in whole or in part by the intentional or grossly negligent acts of Landlord, its employees or agents or by other tenants in the building.

7.2 Insurance.

Tenant shall carry liability insurance, on an occurrence basis, with limits of not less than Two Million Dollars ($2,000,000) combined single limit bodily injury and property damage which insurance shall have an endorsement naming Landlord and Landlord’s managing agent and lender, if any, and any other entity reasonably required by Landlord, as an additional insured, cover the liability insured under Section 7 of this Lease and be in form and with companies reasonably acceptable to Landlord. Such insurance shall provide that it is primary insurance and not “excess over” or contributory with any other valid, existing and applicable insurance in force for or on behalf of Landlord. The policy shall not eliminate cross-liability and shall contain a severability of interest clause. Tenant, at its cost, shall maintain on all of its personal property, tenant improvements (whether constructed by Landlord or Tenant), in, on, or about the Premises, a policy of “Broad Form” insurance, to the extent of at least full replacement value without any deduction for depreciation. Tenant, at its cost, shall maintain such other insurance as Landlord may reasonably require from time to time. Not more frequently than once each year, if, in the opinion of Landlord’s lender or of the insurance consultant, the amount of public liability and property damage insurance coverage at that time is not adequate, Tenant shall increase the insurance coverage as required by either Landlord’s lender or Landlord’s insurance consultant. Prior to occupancy, Tenant shall furnish a certificate evidencing such insurance which shall state that the coverage shall not be canceled or materially changed without thirty (30) days’ advance notice to Landlord and Landlord’s managing agent, if any. Tenant shall furnish to Landlord a renewal certificate at least thirty (30) days prior to expiration of any policy.

Tenant shall also maintain workers’ compensation insurance in accordance with the laws of the state in which the Premises are located with employer’s liability insurance in an amount not less than $1,000,000 and business income and extra expense insurance with limits not less than one hundred percent (100%) of all income and charges payable by Tenant under this Lease for a period of twelve (12) months.

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Should Tenant engage the services of any contractor to perform work in the Premises, Tenant shall ensure that such contractor carries commercial general liability, business automobile liability, umbrella/excess liability (following form), worker’s compensation and employers’ liability coverages in substantially the same amounts as are required of Tenant under this Lease. Contractor shall include Landlord, its trustees, officers, directors, members, agents and employees, Landlord’s mortgagees and Landlord’s representatives as additional insureds on the liability policies required hereunder. All policies required to be carried by any contractor shall be issued by and binding upon an insurance company licensed or authorized to do business in the state in which the Building is located with a rating of at least “A-: X” or better as set forth in the most current issue of Best’s Insurance Reports, unless otherwise approved by Landlord. Certificates of insurance, acceptable to Landlord, evidencing the existence and amount of each insurance policy required hereunder shall be delivered to Landlord prior to the commencement of any work in the Premises. Further, each policy will contain provisions giving Landlord and each of the other additional insureds with at least thirty (30) days’ prior written notice of any cancelation, non-renewal or material change in coverage. The above requirements shall apply equally to any subcontractor engaged by contractor.

8. DAMAGE, WAIVER OF SUBROGATION

8.1 Fire or Casualty.

“Major Damage” means damage by fire or other casualty to the Building or the Premises which causes the Premises or any substantial portion of the Building to be unusable, or which will cost more than twenty-five percent (25%) of the pre-damage value of the Building to repair, or which is not covered by insurance. In case of Major Damage, Landlord may elect to terminate this Lease by notice in writing to Tenant within thirty (30) days after such date. If this Lease is not terminated following Major Damage, or if damage occurs which is not Major Damage, Landlord shall promptly restore the Premises to the condition existing just prior to the damage. Tenant shall promptly restore all damage to tenant improvements or alterations installed or paid for by Tenant or pay the cost of such restoration to Landlord if Landlord elects to do the restoration of such improvements. Unless the casualty was caused by Tenant, rent shall be reduced from the date of damage until the date restoration work being performed by Landlord is substantially complete, with the reduction to be in proportion to the area of the Premises not usable by Tenant. Notwithstanding the foregoing, in the event of Major Damage, Landlord, within thirty (30) days of the date of such damage, shall use commercially reasonable efforts to cause a general contractor selected by Landlord to provide Landlord with a written estimate of the amount of time required, using standard working methods, to substantially complete the repair and restoration of the Premises and any common areas necessary to provide access to the Premises (“Completion Estimate”). Landlord shall promptly forward a copy of the Completion Estimate to Tenant. If the Completion Estimate indicates that the Premises or any common areas necessary to provide access to the Premises cannot be made tenantable within two hundred seventy (270) days from the date the repair is started (when such repairs are made without the payment of overtime or other premiums), then either party shall have the right to terminate this Lease upon written notice to the other within ten (10) business days after Landlord’s delivery of the Completion Estimate; provided, however, if the Lease is not terminated under this Section and Landlord reasonably believes at any time during the performance of the repairs that the repairs will not be completed within thirty (30) days of the estimated completion date set forth the Completion Estimate, Landlord shall notify Tenant, and either party may terminate this Lease within ten (10) days of the date of Landlord’s notice.

8.2 Waiver of Subrogation.

Tenant shall be responsible for insuring its personal property and trade fixtures located on the Premises and any alterations or tenant improvements it has made to the Premises. Neither Landlord, its managing agent nor Tenant shall be liable to the other for any loss or damage caused by any of the risks that are covered by property insurance or could be covered by a customary broad form of property insurance policy, or for any business interruption, and there shall be no subrogated claim by one party’s insurance carrier against the other party arising out of any such loss. Subject to the other provisions of this Lease, if damage is caused by a risk that is not covered by property insurance or could be covered by a customary broad form of property insurance policy and such damages is caused by the other party or its agents, employees, contractors or invitees, nothing contained herein shall be deemed to preclude a party from making a claim against the other with respect to such damages.

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9. EMINENT DOMAIN

If a condemning authority takes title by eminent domain or by agreement in lieu thereof a portion sufficient to render the Premises unsuitable for Tenant’s use, then either party may elect to terminate this Lease effective on the date that possession is taken by the condemning authority. If this Lease is not terminated, then rent shall be reduced for the remainder of the term in an amount proportionate to the reduction in area of the Premises caused by the taking. All condemnation proceeds (except those specifically allocated to Tenant’s furniture, fixtures, and equipment, if any) shall belong to Landlord, and Tenant shall have no claim against Landlord for theses condemnation proceeds because of the taking. Nothing herein is intended to prevent Tenant from separately seeking and retaining condemnation proceeds from the condemning authority that are available for tenants, including but not limited to relocation costs.

10. ASSIGNMENT AND SUBLETTING

Tenant shall not assign or encumber its interest under this Lease or sublet all or any portion of the Premises without first obtaining Landlord’s consent in writing. This provision shall apply to all transfers by operation of law, and to all mergers and changes in control of Tenant, all of which shall be deemed assignments for the purposes of this Section. Tenant’s request for Landlord’s consent to an assignment or sublease shall be accompanied by a copy of the proposed agreements between Tenant and the proposed assignee or subtenant. Tenant shall provide Landlord with (1) any additional information or documents reasonably requested by Landlord, within ten (10) days after receiving Tenant’s notice, and (2) an opportunity to meet and interview the proposed assignee or subtenant, if requested. No assignment shall relieve Tenant of its obligation to pay rent or perform other obligations required by this Lease, and no consent to one assignment or subletting shall be a consent to any further assignment or subletting. If Tenant proposes a subletting for which Landlord’s consent is required, Landlord shall have the option of terminating this Lease and dealing directly with the proposed subtenant . Notwithstanding the foregoing, Landlord may at its sole discretion withhold consent to the subletting of the Premises to an existing occupant of the Building, to any prospective tenant with which the Landlord or Landlord’s agents have negotiated within the previous six (6) months, where the prospective tenant is a government entity or a labor union, or where any sublease will require any changes to any building systems. Tenant shall not advertise at a rate which is less than the Building’s listed rate. If Landlord does not terminate this Lease, Landlord shall not unreasonably withhold its consent to any assignment or subletting provided the proposed Tenant is compatible with Landlord’s normal standards for the Building. If an assignment or subletting is permitted, fifty percent (50%) of any net profit, or net value of any other consideration received by Tenant as a result of such transaction shall be paid to Landlord promptly following its receipt by Tenant. Tenant shall pay any costs incurred by Landlord in connection with a request for assignment or subletting, including reasonable attorney fees, not to exceed $750.

11. DEFAULT, REMEDIES

11.1 Default.

Any of the following shall constitute an “Event of Default” by Tenant under this Lease (time of performance being of the essence of this Lease):

11.1.1 Tenant’s failure to pay rent or any other charge under this Lease when due or within any grace period provided in this Lease.

11.1.2 Tenant’s failure to comply with any other term or condition within twenty (20) days following written notice from Landlord specifying the noncompliance. If such noncompliance cannot be cured within the twenty (20)-day period, this provision shall be satisfied if Tenant commences correction within such period and thereafter proceeds in good faith and with reasonable diligence to complete correction as soon as possible but not later than ninety (90) days after the date of Landlord’s notice.

11.1.3 Failure of Tenant to execute the documents described in Section 16.1 or 16.3 within the time required under such Sections; failure of Tenant to provide or maintain the insurance required of Tenant pursuant hereto; or failure of Tenant to comply with any Laws as required pursuant hereto within twenty-four (24) hours after written demand by Landlord, if non-compliance possess a substantial risk of damage to the Premises or Building or bodily injury.

11.1.4 Tenant’s insolvency, business failure, or assignment for the benefit of its creditors. Tenant’s commencement of proceedings under any provision of any bankruptcy or insolvency law or failure to obtain dismissal of any petition filed against it under such laws within the time required to answer; or the appointment of a receiver for all or any portion of Tenant’s properties or financial records.

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11.1.5 Assignment or subletting by Tenant in violation of Section 10.

11.2 Remedies for Default.

Upon occurrence of an Event of Default as described in Section 11.1, Landlord shall have the right to the following remedies, which are intended to be cumulative and in addition to any other remedies provided under applicable law or under this Lease:

11.2.1 Landlord may at its option terminate this Lease, without prejudice to its right to damages for Tenant’s breach. With or without termination, Landlord may retake possession of the Premises (using self-help or otherwise) and may use or relet the Premises without accepting a surrender or waiving the right to damages. Following such retaking of possession, efforts by Landlord to relet the Premises shall be sufficient if Landlord follows its usual procedures for finding tenants for the space at rates not less than the current rates for other comparable space in the Building. If Landlord has other comparable vacant space in the Building, prospective tenants may be placed in such other space without prejudice to Landlord’s claim to damages or loss of rentals from Tenant.

11.2.2 Landlord may recover all damages caused by Tenant’s default which shall include an amount equal to rentals lost because of the default, amortized Lease commissions paid for this Lease, and the amortized cost of any tenant improvements installed by or paid for by Landlord. Landlord may sue periodically to recover damages as they occur throughout the Lease term, and no action for accrued damages shall bar a later action for damages subsequently accruing. Landlord may elect in any one action to recover accrued damages plus damages attributable to the remaining term of the Lease. Such damages shall be measured by the difference between the rent under this Lease and the reasonable rental value of the Premises for the remainder of the term, discounted to the time of judgment at the prevailing interest rate on judgments.

11.3 Landlord’s Right To Cure Default.

Landlord may, but shall not be obligated to, make any payment or perform any obligation which Tenant has failed to perform under this Lease. All of Landlord’s expenditures shall be reimbursed by Tenant upon demand with interest from the date of expenditure at the rate of nine percent (9%) per annum. Landlord’s right to correct Tenant’s failure to perform is for the sole protection of Landlord and the existence of this right shall not release Tenant from the obligation to perform all of the covenants herein required to be performed by Tenant, or deprive Landlord of any other right which Landlord may have by reason of default of this Lease by Tenant, whether or not Landlord exercises its right under this Section.

12. SURRENDER, HOLDOVER

On expiration or early termination of this Lease, Tenant shall deliver all keys to Landlord and surrender the Premises vacuumed, swept, and free of debris and in the same condition as at the commencement of the term subject only to reasonable wear from ordinary use. Tenant shall remove all of its furnishings and trade fixtures that remain its property and any alterations, cables, or conduits if required by Section 6.2, and shall repair all damage resulting from such removal. Failure to remove shall be an abandonment of the property, and, following ten (10) days’ written notice, Landlord may remove or dispose of it in any manner without liability, and recover the cost of removal and other damages from Tenant. If Tenant fails to vacate the Premises when required, including failure to remove all its personal property, Landlord may elect either: (i) to treat Tenant as a tenant from month to month, subject to the provisions of this Lease except that rent shall be one-and-one-quarter times the total rent being charged when the Lease term expired, and any option or other rights regarding extension of the term or expansion of the Premises shall no longer apply; and/or (ii) to eject Tenant from the Premises (using self-help or otherwise) and recover all damages (including, without limitation, consequential damages) caused by wrongful holdover.

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13. RULES AND REGULATIONS

Tenant shall abide by and adhere to the operating rules and regulations set forth in the attached Exhibit “C” and any other rules and regulations as Landlord may from time to time reasonably institute. Any default or breach of such rules and regulations shall be deemed a default under this Lease and Landlord shall be entitled to exercise all rights and remedies available to Landlord as set forth in this Lease. Landlord shall not be liable to Tenant for the failure of any other tenant or any of its assignees, subtenants or their respective agents, employees, representatives, invitees or licensees to conform to such rules and regulations. Landlord shall use commercially reasonable efforts to enforce all rules and regulations fairly.

14. ACCESS

14.1 Access.

Tenant’s officers and employees or those having business with Tenant may be required to identify themselves or show passes in order to gain access to the Building. Landlord shall have no liability for permitting or refusing to permit access by anyone. IN ALL EVENTS, LANDLORD SHALL NOT BE LIABLE TO TENANT, AND TENANT HEREBY WAIVES ANY CLAIM AGAINST LANDLORD, FOR (I) ANY UNAUTHORIZED OR CRIMINAL ENTRY OF THIRD PARTIES INTO THE PRESMISES OR THE BUILDING, (II) ANY DAMAGE TO PERSONS, OR (III) ANY LOSS OF PROPERTY IN OR ABOUT THE PREMISES OR THE BUILDING, BY OR FROM ANY UNATHORIZED OR CRIMINAL ACTS OF THIRD PARTIES, REGARDLESS OF ANY ACTION, INACTION, FAILUIRE, BREAKDOWN, MALFUNCTION AND/OR INSUFFICIENCY OF THE ACCESS CONTROL PROVIDED BY LANDLORD, IF ANY. Landlord may regulate access to any Building elevators and may (but shall have no obligation) adopt security measures regarding the Building as Landlord, in its sole and absolute discretion, deems appropriate. In addition, Landlord may, in Landlord’s sole and absolute discretion, modify the type or amount of security measures provided at any time without notice. Landlord shall have the right to enter upon the Premises at any time by passkey or otherwise to determine Tenant’s compliance with this Lease, to perform necessary services, maintenance and repairs or alterations to the Building or the Premises, to post notices of non-responsibility, or to show the Premises to any prospective tenant or purchasers. Except in case of emergency, such entry shall be at such times and in such manner as to minimize interference with the reasonable business use of the Premises by Tenant. Tenant acknowledges that it has neither received nor relied upon any representation or warranty made by or on behalf of Landlord with respect to the safety or security of the Premises or the Building or any part thereof or the extent or effectiveness of any security measures or procedures now or hereafter provided by Landlord, and further acknowledges that Tenant has made its own independent determination with respect to all such matters.

14.2 Furniture and Bulky Articles.

Tenant shall move furniture and bulky articles in and out of the Building or make independent use of any elevators only at times approved by Landlord following at least 24 hours’ written notice to Landlord.

15. Notices.

All notices between the parties relating to this Lease must be in writing and sent to the parties at the address set forth in the Basic Lease Terms. Any such notices must be sent either by (a) overnight delivery using a nationally-recognized courier (e.g., Fed Ex, Airborne Express or UPS) and delivery charges prepaid, in which case notice shall be deemed given one (1) business day after deposit with such courier, (b) facsimile, email, PDF file or other generally-recognized electronic means, in which case notice shall be deemed given upon transmission provided a copy of such electronic transmission is sent within one (1) day after electronic transmission by overnight delivery using a nationally-recognized courier and delivery charges prepaid, or (c) personal delivery or mailed by U.S. certified mail and postage or equivalent charges prepaid, in which case notice shall be effective upon receipt provided that if any party refuses delivery, such notices shall be deemed given when mailed or, if made by personal delivery, upon delivery. Any notice sent by facsimile, email, PDF file or other electronic transmission after 5:00 p.m. local time where the Premises are located shall be deemed given the next business day. A party’s address may be changed by written notice to the other party; provided, however, that no notice of a change of address shall be effective until actual receipt of such notice. Notice to Tenant may always be delivered to the Premises. Rent shall be payable to Landlord at the address set forth in the Basic Lease Terms for rent payments, but shall be considered paid only when received by Landlord.

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16. SUBORDINATION AND ATTORNMENT, TRANSFER OF BUILDING, ESTOPPELS

16.1 Subordination and Attornment.

This Lease shall be subject to and subordinate to any mortgages, deeds of trust, ground lease, master lease, and land sale contracts (hereafter collectively referred to as “encumbrances”) and to any covenants, conditions and restrictions (“CC&Rs”), in each such case applicable to encumbrances and CC&Rs now existing against the Building. At Landlord’s option this Lease shall be subject and subordinate to any future encumbrance, ground lease, master lease or CC&Rs hereafter placed against the Building (including the underlying land) or any modifications of existing encumbrances, and Tenant shall execute such documents as may reasonably be requested by Landlord or the holder of the encumbrance to evidence this subordination within ten (10) days of request therefor. If any encumbrance is foreclosed, then if the purchaser at foreclosure sale gives to Tenant a written agreement to recognize Tenant’s Lease, Tenant shall attorn to such purchaser and this Lease shall continue.

16.2 Transfer of Building.

If the Building is sold or otherwise transferred by Landlord or any successor, Tenant shall attorn to the purchaser or transferee and recognize it as the landlord under this Lease, and, provided the purchaser or transferee assumes all obligations under this Lease thereafter accruing, the transferor shall have no further liability hereunder for obligations accruing after the date of transfer.

16.3 Estoppels.

Either party will within ten (10) days after notice from the other execute, acknowledge, and deliver to the other party a certificate certifying whether or not this Lease has been modified and is in full force and effect; whether there are any modifications or alleged breaches by the other party; the dates to which rent has been paid in advance, and the amount of any Security Deposit or prepaid rent; and any other facts that may reasonably be requested. If requested by the holder of any encumbrance, or any underlying lessor, Tenant will agree to give such holder or lessor notice of and an opportunity to cure any default by Landlord under this Lease.

17. ATTORNEY FEES

In any litigation arising out of this Lease, including any bankruptcy proceeding, the prevailing party shall be entitled to recover attorney fees at trial and on any appeal or petition for review. If Landlord incurs attorney fees because of a default by Tenant, Tenant shall pay all such fees whether or not litigation is filed. If Landlord employs a collection agency to recover delinquent charges, Tenant agrees to pay all collection agency and other fees charged to Landlord in addition to rent, late charges, interest, and other sums payable under this Lease.

18. QUIET ENJOYMENT

Landlord warrants that as long as Tenant complies with all terms of this Lease, it shall be entitled to possession of the Premises free from any eviction or disturbance by Landlord or parties claiming through Landlord. This covenant of quiet enjoyment shall in no event entitle Tenant to any claims against Landlord arising out of any construction noise that may from time to time occur during the term of this Lease, including, without limitation, construction noise for the performance of tenant improvements.

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19. LIMITATION ON LIABILITY

Notwithstanding any provision in this Lease to the contrary, neither Landlord nor its managing agent or employees shall have any liability to Tenant for loss or damages to Tenant’s property from any cause (unless the result of Landlord’s gross negligence or willful misconduct), nor arising out of the acts of other tenants of the Building or third parties, nor any liability for consequential damages, nor liability for any reason which exceeds the value of Landlord’s interest in the Building.

20. ADDITIONAL RENT

20.1 Additional Rent: Operating Expenses and Real Estate Taxes.

Tenant shall pay as additional rent Tenant’s Proportionate Share of operating expenses and real property taxes for the Building. Effective January 1 of each year Landlord shall estimate the operating expenses and real property taxes. Monthly rent for that year shall be increased by one-twelfth of Tenant’s Proportionate Share of operating expenses and real property taxes, provided that Landlord may revise its estimate during any year with reasonable cause and the additional estimate shall be payable as equal additions to rent for the remainder of the calendar year. Following the end of each calendar year, Landlord shall compute Tenant’s actual Proportionate Share of operating expenses and real property taxes and bill Tenant for any deficiency or credit Tenant with any excess collected. Tenant shall pay any such deficiency within thirty (30) days after Landlord’s billing, whether or not this Lease shall have expired or terminated at the time of such billing.

20.1.1 As used herein “real property taxes” as used herein shall mean all taxes and assessments of any public authority against the Building and the land on which it is located, the cost of contesting any tax and any form of fee or charge imposed on Landlord as a direct consequence of owning or leasing the Premises, including but not limited to, rent taxes, gross receipt taxes, leasing taxes, or any fee or charge wholly or partially in lieu of or in substitution for ad valorem real property taxes or assessments, whether now existing or hereafter enacted. If a separate assessment or identifiable tax increase arises because of improvements to the Premises, then Tenant shall pay one hundred percent (100%) of such increase.

As used herein, “operating expenses” shall mean all costs of operating, maintaining, managing, replacing and repairing the Building as determined by standard real estate accounting practice, including, but not limited to: all water and sewer charges not separately metered and paid by tenants; the cost of natural gas and electricity provided to the Building not separately metered and paid by tenants; janitorial and cleaning supplies and services for the common areas of the Building; administration costs, management fees not to exceeds five percent of gross revenues for the Building; superintendent fees; security services, if any; insurance premiums; licenses, permits for the operation and maintenance of the Building and all of its component elements and mechanical systems; ordinary and emergency repairs and maintenance, and the annual amortized capital improvement cost (amortized over the useful life of the improvement for any capital improvements to the Building. Without limiting the generality of the foregoing, if Landlord makes an expenditure for a capital improvement to the Building (or any portion thereof) by installing energy-, water-, or labor-saving devices to reduce operating expenses or to comply with any law, rule, regulation or other legal requirement or Green Agency Rating pertaining to the Building, and if, under generally accepted accounting principles, such expenditure is not a current expense, then the cost thereof shall be amortized over a period equal to the useful life of such improvement, determined in accordance with generally accepted accounting principles, and the amortized costs allocated to each calendar year during the term, together with an imputed interest amount calculated on the unamortized portion thereof using an interest rate of eight percent (8%) per annum, shall be treated as an operating expense (a “Permitted Capital Expenditure”). In the event the average occupancy level of the Building for any calendar year was or is not one hundred percent (100%) of full occupancy, then the estimated and actual operating expenses for such year shall be proportionately adjusted by Landlord to reflect those costs which have occurred had the Building been one hundred percent (100%) occupied during such year. Operating Expenses do not include the cost of tenant improvements. Operating expenses, excluding real estate taxes and insurance premiums, shall not increase by more than five percent (5%) annually. In no event shall Tenant be required to pay Controllable Expenses in excess of the Controllable Expense Cap. As used herein “Controllable Expenses” are those Operating Expenses for which Landlord has exclusive control over the amount of increase over such Operating Expenses, and in no event shall Controllable Expenses include insurance premiums and deductibles, utility charges, Real Property Taxes, or Non-Recurring Costs (as defined below). As used herein, the Controllable Expense Cap shall be an amount equal to the amount of the Controllable Expenses for the Building during the calendar year 2017, which cap amount shall be annually increased by five percent (5%) on each January 1^st thereafter. “Non-Recurring Costs” shall mean Operating Expenses that are not customarily incurred and budgeted monthly for by owners of comparable projects in the Portland, Oregon area, or are materially in excess of such customary and budgeted monthly costs, such as costs incurred due to unusual weather (i.e. snow and ice removal, wind damage, excessive ground water), labor trouble, shortages in supplies, utility shortages or black-outs and costs that may arise in connection with a force majeure event or costs that do not occur annually.

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20.2 Disputes.

If Tenant disputes any computation of operating expenses in Section 20, it shall give notice to Landlord not later than sixty (60) days after the notice from Landlord describing the computation in question. If Tenant fails to give such a notice, the computation by Landlord shall be binding and conclusive between the parties for the period in question. If Tenant gives a timely notice, the dispute shall be resolved by an independent CPA selected by Landlord and approved by Tenant in Tenant’s reasonable discretion, whose decision shall be conclusive between the parties. Each party shall pay one-half of the fee of such CPA for making such determination except that if the adjustment in favor of Tenant does not exceed five percent (5%) of the escalation amounts for the year in question, Tenant shall pay (i) the entire cost of any such third-party determination; and if the decision of the CPA in favor of the Tenant exceeds seven percent (7%) of the amount for the year in question, Landlord shall pay the entire cost of the CPA. If the adjustment in favor of Tenant is between five percent (5%) and seven percent (7%), each party shall pay one-half of the fee of the CPA. The CPA shall not be paid on a contingency-fee basis. Landlord shall promptly credit any sums found owing to Tenant, and if the Lease has expired or been terminated, Landlord shall promptly refund such sums to Tenant. Nothing herein shall reduce Tenant’s obligations to make all payments as required by this Lease. In no event shall Landlord have any liability to Tenant based on its calculation of additional rent or rent adjustments except and only the obligation to cause any correction to be made pursuant to this Section 20.2. Tenant shall maintain as strictly confidential the existence and resolution of any dispute regarding rent charges hereunder.

21. HAZARDOUS MATERIALS

Neither Tenant nor Tenant’s agents or employees shall cause or permit any Hazardous Material, as hereinafter defined, to be brought upon, stored, used, generated, released into the environment, or disposed of on, in, under, or about the Premises, except reasonable quantities of cleaning supplies and office supplies necessary to or required as part of Tenant’s business that are generated, used, kept, stored, or disposed of in a manner that complies with all laws regulating any such Hazardous Materials and with good business practices. Tenant covenants to remove from the Premises (or the Building, if applicable), upon the expiration or sooner termination of this Lease and at Tenant’s sole cost and expense, any and all Hazardous Materials brought upon, stored, used, generated, or released into the environment by Tenant, Tenant’s principals, agents, employees, contractors, or invitees during the term of this Lease. To the fullest extent permitted by law, Tenant hereby agrees to indemnify, defend, protect, and hold harmless Landlord, Landlord’s managing agent and their respective agents and employees, and their respective successors and assigns, from any and all claims, judgments, damages, penalties, fines, costs, liabilities, and losses that arise during or after the term directly or indirectly from the use, storage, disposal, release, or presence of Hazardous Materials on, in, or about the Premises which occurs during the term of this Lease and caused by Tenant, Tenant’s principals, agents, employees, contractors, or invitees. Tenant shall promptly notify Landlord of any release of Hazardous Materials in, on, or about the Premises that Tenant or Tenant’s agents or employees become aware of during the term of this Lease, whether caused by Tenant, Tenant’s agents or employees, or any other persons or entities. As used herein, the term “Hazardous Materials” shall mean any hazardous or toxic substance, material, or waste which is or becomes regulated by any local or state governmental authority or the United States Government. The term “Hazardous Materials” shall include, without limitation, any material or substance that is (i) defined as a “hazardous waste,” “extremely hazardous waste,” “restricted hazardous waste,” “hazardous substance,” “hazardous material,” or “waste” under any federal, state, or local law, (ii) petroleum, and (iii) asbestos. The provisions of this Section 21, including, without limitation, the indemnification provisions set forth herein, shall survive any termination of this Lease. Landlord represents and warrants to Tenant that to the best of Landlord’s knowledge that there are no Hazardous Materials in, on, under, or about the Premises in violation of applicable laws.

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22. MISCELLANEOUS

22.1 Complete Agreement; No Implied Covenants.

This Lease constitutes the entire agreement of the parties and supersedes all prior written and oral agreements and representations and there are no implied covenants or other agreements between the parties except as expressly set forth in this Lease. Neither Landlord nor Tenant is relying on any representations other than those expressly set forth herein.

22.2 Governing Law.

This Lease shall be construed under the laws of the State of Oregon.

22.3 Partial Invalidity.

If any provision of this Lease or the application thereof to any person or circumstance shall to any extent be held invalid, then the remainder of this Lease or the application of such provision to persons or circumstances other than those as to which it is held invalid shall not be affected thereby, and each provision of this Lease shall be valid and enforced to the fullest extent permitted by law.

22.4 Space Leased AS IS.

Except for the Landlord’s work described in Exhibit “B,” and subject to the Landlord’s warranties and representation and its general duties of maintenance and repair, the Premises are leased AS IS in the condition now existing with no alterations or other work to be performed by Landlord.

22.5 Captions; Construction

The titles to the Sections of this Lease are descriptive only and are not intended to change or influence the meaning of any Section or to be part of this Lease. All references to “days” in this Lease shall be construed to mean calendar days unless otherwise expressly provided and all references to “business days” shall be construed to mean days on which charter banks are open for business where the Premises are located.

22.6 Nonwaiver.

Failure by either party to promptly enforce any regulation, remedy, or right of any kind under this Lease shall not constitute a waiver of the same and such right or remedy may be asserted at any time after the party becomes entitled to the benefit thereof notwithstanding delay in enforcement.

22.7 Consent.

Except where otherwise provided in this Lease, either party may withhold its consent for any reason or for no reason whenever that party’s consent is required under this Lease.

22.8 Force Majeure.

If performance by Landlord of any portion of this Lease is made impossible by any prevention, delay, or stoppage caused by governmental approvals, war, acts of terrorism, strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes for those items, governmental actions, civil commotions, fire or other casualty, or other causes beyond the reasonable control of Landlord, performance by Landlord for a period equal to the period of that prevention, delay, or stoppage is excused.

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22.9 Commissions.

Each party represents that it has not had dealings with any real estate broker, finder, or other person with respect to this Lease in any manner, except for the broker(s) identified in the Basic Lease Terms. Tenant hereby agrees to indemnify, defend and hold Landlord harmless for, from and against all claims for any brokerage commissions, finder’s fees or similar payments by any person other than Tenant’s broker identified herein arising from Tenant’s acts and all costs, expenses and liabilities incurred in connection with such claims, including reasonable attorneys’ fees and costs. Landlord hereby agrees to indemnify, defend and hold Tenant harmless for, from and against all claims for any brokerage commissions, finder’s fees or similar payments by any person arising from Landlord’s acts and all costs, expenses and liabilities incurred in connection with such claims, including reasonable attorneys’ fees and costs. Landlord shall pay a leasing commission in accordance with a separate agreement between Landlord and Landlord’s broker and Tenant’s broker.

22.10 Successors.

Subject to Section 10, this Lease shall bind and inure to the benefit of the parties, their respective heirs, successors, and permitted assigns.

22.11 Financial Reports.

Within ten (10) days after Landlord’s request, Tenant will furnish Tenant’s most recent financial statements to Landlord prepared in accordance with generally accepted accounting principles, certified by Tenant or an independent auditor to be true and correct. Tenant will discuss its financial statements with Landlord and will give Landlord access to Tenant’s books and records in order to enable Landlord to verify the financial statements. Landlord will not disclose any aspect of Tenant’s financial statements except (1) to Landlord’s lenders or prospective purchasers of the Building who have executed a sales contract with Landlord, (2) in litigation between Landlord and Tenant, or (3) if required by court order. Notwithstanding the foregoing, so long as Tenant’s financial statements are publicly available online, Tenant shall not be required to provide financial statements directly to Landlord.

22.12 Waiver of Jury Trial. 

To the maximum extent permitted by law, Landlord and Tenant each waive right to trial by jury in any litigation arising out of or with respect to this Lease.

22.13 Executive Order 13224.

Tenant hereby certifies all persons or entities holding any legal or beneficial interest whatsoever in Tenant are not included in, owned by, controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to, or otherwise associated with any of the persons or entities referred to or described in Executive Order 13224 - Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism, as amended.

22.14 Intentionally Deleted.

22.15 Confidentiality.

Landlord and Tenant shall keep the content and all copies of this Lease, all related documents and amendments, and all proposals, materials, information (including but not limited to rental terms, rent abatement, construction allowance, and any other concessions or terms of the business deal), and matters relating hereto strictly confidential and shall not disclose, divulge, disseminate or distribute any of the same, or permit the same to occur, except to the extent reasonably required for proper business purposes by Landlord’s or Tenant’s employees, attorneys, agents, insurers, auditors, lenders and permitted successors and assigns (and Landlord shall obligate any such parties to whom disclosure is permitted to honor the confidentiality provisions hereof) and except as may be required by law, securities regulations, or court proceedings. This confidentiality provision shall be binding upon the parties hereto and their respective successor and assigns and shall survive the expiration of this Lease. Tenant and its representatives shall be prohibited from issuing any press release(s) or communicating with the media regarding the proposed or agreed to transaction, in which Tenant has not received prior written authorization from Landlord.

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22.16 Building Name and Signage.

Landlord shall have the right at any time to install, affix and maintain any and all signs on the interior and exterior of the Building as Landlord may, in its sole discretion, desire. Tenant shall not use the name of the Building or use pictures or illustrations of the Building in advertising or other publicity or for any purpose other than as the address of the business to be conducted by Tenant in the Premises, without the prior written consent of Landlord. Additionally, Landlord shall have the exclusive right at all times during the Lease term to change, modify, add to or otherwise alter the name, number or designation of the Building, and Landlord shall not be liable for claims or damages of any kind which may be attributed thereto or result therefrom.

22.17 Mold.

Landlord represents and warrants that to the best of its knowledge the Premises is free from mold. Tenant shall not allow or permit any conduct or omission at the Premises that will promote or allow the production or growth of mold, spores, fungus, or any other similar organism, and shall indemnify and hold Landlord harmless from any claim, demand, cost, and expense (including attorney fees) arising from or caused by Tenant’s failure to strictly comply with its obligations under this provision. Similarly, Landlord will maintain and repair the Building as provided in Section 6.1.1 of the Lease and in a manner that strives to prevent the production or growth of mold, spores, fungus, or any other similar organism.

22.18 Survival of Obligations.

The provisions of this Lease with respect to any indemnity obligation or any obligation of either party to pay any sum in order to perform any act required by this Lease after the expiration or other termination of this Lease shall survive the expiration or other termination of this Lease.

22.19 Amendments.

Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and executed by both parties.

22.20 Execution; Counterpart; Signature Transmitted.

This Lease may be executed simultaneously in one or more counterparts, each of which will be considered an original, but all of which together will constitute one and the same instrument. Signatures transmitted by facsimile, PDF file or other form of electronic transmission and received by the other party shall be sufficient evidence of the execution hereof by the applicable signatory and such signatures shall be treated as originals. At the request of a party, the other party will confirm an electronically transmitted signature page by delivering an original signature page to the requesting party.

22.21 Intentionally Deleted.

22.22 Exhibit.

Exhibits “A” (Floor Plan Showing Premises), “B” (Landlord’s Work), “C” (Rules and Regulations), “D” (First Offer Space), and “E” (Lease Confirmation), “F” (Parking Use Agreement) are attached hereto and incorporated as a part of this Lease. Exhibit F, Parking Agreement is attached hereto.

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IN WITNESS WHEREOF, the duly authorized representatives of the parties have executed this Lease as of the Effective Date.

LANDLORD:	Eastbank Commerce Center, LLC,
	an Oregon limited liability company
	By:	/s/ Jonathan Malsin
	Its:	Authorized Agent

TENANT:	Eastside Distilling Inc,
	a Nevada corporation
	By:	/s/ Grover T. Wickersham
	Its:	CEO

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EXHIBIT “A”
Floor Plan Showing Premises

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EXHIBIT “B”
Landlord’s Work

Except as expressly provided below, Tenant is leasing the Premises in its “as is” condition and Landlord shall have no obligation to make any improvements to the Premises or provide Tenant with any improvement allowance. Landlord shall, at Landlord’s sole cost and expense and using such Building standard materials and finishes as Landlord determines appropriate in its reasonable discretion, and as “Landlord’s Work” perform the following:

(1)	Construct a demising wall between the columns on the east end of the Premises by the kitchenette, as shown on Exhibit A; and
(2)	Patch and paint the walls of the Premises in Building-standard white.

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EXHIBIT “C”
Rules & Regulations

Tenant covenants and agrees to comply with the following rules and regulations as they may be modified or amended during the term:

1. Signs. Unless otherwise permitted in the Lease, no sign, advertisement, display, notice or other lettering shall be exhibited, inscribed, painted or affixed on any part of the outside of the Premises or inside, if visible from the outside, or outside the building of which they form a part, and in no event shall Tenant place any signs, displays or other advertising material on the glass of the leaseline of the Premises. All signs, displays, advertisements, and notices of Tenant shall be professional and maintained by Tenant in good and attractive condition at Tenant’s expense and risk. Tenant shall not use handbills for advertising at the Project. Any permanent signs must be approved by Landlord.

2. Directory. The bulletin board or directory of the Building will be provided exclusively for the display of the name and location of tenants, and Landlord reserves the right to exclude any other names therefrom.

3. Access. The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by any of the tenants or used by them for any purpose other than for ingress to and egress from their respective Premises. The halls, passages, entrances, exits, elevators, stairways, balconies and roof are not for the use of the general public and Landlord shall in all cases retain the right to control thereof and prevent access thereto by all persons whose presence in the judgment of Landlord shall be prejudicial to the safety, character, reputation and interests of the Building or its tenants; provided, however, that nothing herein contained shall be construed to prevent access by persons with whom the Tenant normally deals in the ordinary course of Tenant’s business unless such persons are engaged in illegal activities. No Tenant and no employees or invitees of any Tenant shall go upon the roof of the Building.

4. Locks. Tenant shall not alter any lock or install any new additional locks or any bolts on any door of the Premises without the written consent of Landlord.

5. Restrooms. The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from a violation of this rule shall be borne by the Tenant who, or whose employees, sublessees, assignees, agents, licensees, or invitees, shall have caused it.

6. No Defacing Premises. Tenant shall not overload the floor of the Premises, shall not mark on or drive nails, screw or drill into the partitions, woodwork or plaster (except as may be incidental to the hanging of wall decorations), and shall not in any way deface the Premises or any part thereof.

7. Safes and Heavy Equipment. No furniture, freight or equipment of any kind shall be brought into the Building and/or Common Area Facilities without the consent of Landlord and all moving of the same into or out of the Building and/or Common Area Facilities shall be done at such time and in such manner as Landlord shall designate. Landlord shall have the right to prescribe the times and manner of moving all furniture, freight and heavy equipment in and out of the Building and/or Common Area Facilities, including, but not limited to, requirements for the protection of floor coverings, walls and other surfaces during such moves. Landlord will not be responsible for loss of or damage to any such safe or property from any cause and all damage done to the Building and/or Common Area Facilities by moving or maintaining any such safe or other property shall be repaired at the expense of Tenant. There shall not be used in any Premises, or in the public halls of the Building, either by any tenant or others, any hand trucks except those equipped with rubber tires and side guards. Elevators must be padded while moving freight via the elevators. All such heavy equipment shall be subject to the requirements of Rule 26 below.

8. Janitorial Services. Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or indifference in the preservation of good order and cleanliness. Janitorial service for Common Area Facilities shall include ordinary dusting and cleaning by the janitor assigned to such work and shall not include cleaning of carpets or rugs, except normal vacuuming, or moving of furniture and other special services. The work of cleaning personnel shall not be hindered by Tenant after 5.30 p.m. Tenant is responsible for cleaning his or her own Premises. Tenant shall be responsible for transporting waste and rubbish from the Premises to the Building trash room.

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9. Nuisance. Tenant shall not use, keep or permit to be used or kept any noxious gas or substance in the Premises, or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations, or interfere in any way with other tenants or those having business in the Building. No animals (other than those aiding the disabled such as “seeing eye” dogs) or birds shall be brought in or kept in or about the Premises or the Building and/or Common Area Facilities. No Tenant shall make or permit to be made any disturbing noises or disturb or interfere with occupants of the Building, or with those having business with such occupants by the use of any musical instrument, radio, phonograph, unusual noise, or in any other way. No Tenant shall throw anything out of doors or down the passageways.

10. Permitted Use. No Tenant shall occupy or permit any portion of its Premises to be occupied for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as a medical office, or as a barber shop or manicure shop except with prior written consent of Landlord. No Tenant shall advertise for laborers giving an address at the Premises. The Premises shall not be used for lodging or sleeping or for illegal purposes.

11. Hazardous Materials. Other than ordinary office supplies and materials used and stored in accordance with applicable laws, ordinances, governmental rules and regulations, Tenant shall not use or keep in the Premises or the Building and/or Common Area Facilities any kerosene, gasoline or inflammable or combustible fluid or material or any Hazardous Materials as defined in Section 1.2.4 of the Lease (including but not limited to asbestos or lead based paints) or use any method of heating or air conditioning other than that supplied by Landlord.

12. Telephones. Landlord will direct electricians as to where and how telephone and telegraph wires are to be introduced. No boring or cutting for or stringing of wires will be allowed without the consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord.

13. Keys. A reasonable number of keys (including electronic FOBs and cards) to the locks on the entry doors to the Building and to the Premises shall be furnished by Landlord to Tenant at Tenant’s cost, and Tenant shall not make any duplicate keys. All keys to the Building, Premises, rooms and toilet rooms shall be obtained from Landlord’s office, and Tenant shall not from any other source duplicate or obtain keys or have keys made. The Tenant, upon termination of the tenancy, shall deliver to Landlord the keys to the Building, Premises, rooms and toilet rooms which shall have been furnished and shall pay Landlord the cost of replacing any lost key or of changing the lock or locks opened by such lost key if Landlord deems it necessary to make such change. If Landlord determines that unusual burdens are created by Tenant’s access requirements or practices, Tenant shall (a) bear the cost of such unusual burdens, as determined by Landlord, and (b) if requested by Landlord, make adjustments so that such burdens are reduced to normal levels.

14. Floor Covering. No Tenant shall lay linoleum, tile, carpet or other similar floor coverings so that the same shall be affixed to the floor or the Premises in any manner except as approved by Landlord. The expense of repairing any damage resulting from a violation of this rule or removal of any floor covering shall be borne by the Tenant by whom, or by whose contractors, agents, sublessees, licensees, employees or invitees, the floor covering shall have been laid.

15. Premises Closure. Tenant shall see that the doors of the Premises are closed and securely locked before leaving the Building and that all water faucets, water apparatus and electricity are entirely shut off before Tenant or Tenant’s employees leave the Building. Tenant shall be responsible for any damage to the Building and/or Common Area Facilities or other tenants caused by a failure to comply with this rule.

16. Disorderly Conduct. Landlord reserves the right to exclude or expel from the Building and/or Common Area Facilities any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building.

17. Tenant Requests. Any requests of Tenant will be considered only upon application at the office of Landlord. Employees of Landlord shall not be requested to perform any work or do anything outside of their regular duties unless under special instructions from Landlord.

18. Vending Machines. No vending machine shall be installed, maintained or operated upon the Premises without the written consent of Landlord, which consent shall not be unreasonably withheld.

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19. Bicycles. Bicycles and other vehicles are not permitted inside the Building or its elevators, except in areas designated by Landlord.

20. Building Name and Address. Landlord shall have the right, exercisable upon thirty (30) days prior written notice to Tenant, to change the name and/or the street address of the Building of which the Premises is a part.

21. Fire Regulations. Tenant agrees that it shall comply with all fire regulations that may be issued from time to time by Landlord and Tenant also shall provide Landlord with the names of a designated responsible employee to represent Tenant in all matters pertaining to fire regulations.

22. Tenant Advertising. Without the written consent of Landlord, Tenant shall not use the name of the Building and/or Common Area Facilities in connection with or in promotion or advertising the business of Tenant except as Tenant’s address.

23. Emergency Information. Tenant must provide Landlord with names and telephone numbers to contact in case of emergency. Tenant must fill out a tenant emergency information sheet and return it to Landlord’s office within three (3) days of occupancy.

24. Installation of Burglar and Informational Services. If Tenant requires telegraphic, telephonic, burglar alarm or similar services, it shall first obtain, and comply with, Landlord’s instructions in their installation.

25. Deliveries. The Building freight elevator(s) shall be available for use by all tenants in the Building, subject to such reasonable scheduling as Landlord, in its discretion, shall deem appropriate. No equipment, materials, furniture, packages, supplies, merchandise or other property will be received in the Building or carried in the elevators except between such hours and in such elevators as may be designated by Landlord. Tenant’s initial move in and subsequent deliveries of bulky items, such as furniture, safes and similar items shall, unless otherwise agreed in writing by Landlord, be made during the hours of 6:00 p.m. to 6:00 a.m. or on Saturday or Sunday. Deliveries shall be limited as set forth in the Lease. No deliveries shall be made which impede or interfere with other tenants or the operation of the Building.

26. Floor Loads. Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. Landlord shall have the right to prescribe the weight, size and position of all equipment, materials, furniture or other property brought into the Building and/or Common Area Facilities. Heavy objects shall, if considered necessary by Landlord, stand on such platforms as determined by Landlord to be necessary to properly distribute the weight, which platforms shall be provided at Tenant’s expense. Business machines and mechanical equipment belonging to Tenant, which cause noise or vibration that may be transmitted to the structure of the Building and/or Common Area Facilities or to any space therein to such a degree as to be objectionable to Landlord or to any tenants in the Building, shall be placed and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration. The persons employed to move such equipment in or out of the Building and/or Common Area Facilities must be acceptable to Landlord. Landlord will not be responsible for loss of, or damage to, any such equipment or other property from any cause, and all damage done to the Building and/or Common Areas by maintaining or moving such equipment or other property shall be repaired at the expense of Tenant

27. Energy Conservation. Tenant shall not waste electricity, water or air conditioning and agrees to cooperate fully with Landlord to assure the most effective operation of the Building’s heating and air-conditioning and to comply with any governmental energy-saving rules, laws or regulations of which Tenant has actual notice, and shall refrain from attempting to adjust controls. Tenant shall keep corridor doors closed.

28. No Antennas. Tenant shall not install any radio or television antenna, loudspeaker or other devices on the roof or exterior walls of the Building and/or Common Area Facilities without obtaining Landlord’s prior approval as set forth in the Lease. Tenant shall not interfere with radio or television broadcasting or reception from or in the Building or elsewhere.

29. No Soliciting. Canvassing, soliciting and distribution of handbills or any other written material, and peddling in the Building and/or Common Area Facilities are prohibited, and Tenant shall cooperate to prevent such activities.

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30. Prohibited Uses. The Premises shall not be used for any improper, immoral or objectionable purpose. No cooking shall be done or permitted on the Premises without Landlord’s consent, except that use by Tenant of Underwriters Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar beverages or use of microwave ovens, dishwashers and refrigerators for employee use shall be permitted, provided that such equipment and use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations.

31. Enforcement of Rules. Landlord may waive any one or more of these Rules and Regulations for the benefit of Tenant or any other tenant but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of Tenant, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the tenants of the Building.

32. Lease. These Rules and Regulations are in addition to, and are made a part of, the terms, covenants, agreements and conditions of Tenant’s Lease of its Premises in the Building. In the event the Rules and Regulations conflict with any term of the Lease, the terms of the Lease shall control.

33. Additional Rules. Landlord reserves the right to make such other Rules and Regulations or amendments hereto as, in its reasonable judgment, may from Time to time be needed for safety and security, for care and cleanliness of the Building and/or Common Area Facilities and for the preservation of good order therein. Tenant agrees to abide by all such Rules and Regulations hereinabove stated and any additional rules and regulations which are adopted.

34. Observance of Rules. Tenant shall be responsible for the observance of all of the foregoing rules by Tenant’s employees, agents, licensees, sublessees, assigns, and invitees.

35. Loading Dock and Service Corridor. The loading dock and service corridor are not for the use of the general public and Landlord shall in all cases retain the right to control thereof and prevent access thereto by all persons whose presence in the judgment of Landlord shall be prejudicial to the safety, character, reputation and interests of the Building or its tenants, or invitees; provided that Tenant or its building-approved contractors shall be able to use the loading dock in its normal course of loading and unloading activities, for articles to be delivered to or received from the Tenant’s Premises. Children under the age of 18 are specifically prohibited from being in the loading dock and service corridor area at any time, unless prior written permission is received from Landlord.

36. Smoking. As more fully set forth in the Lease, Landlord has designated the entire Building as a smoke free zone, including 20 feet from any Building entry or opening. The Tenant shall not permit smoking in the Premises.

37. Animals. Except as allowed herein, no animals, except those assisting handicapped persons, shall be brought into the Buildings or kept in or about the Premises. Dogs are permitted in the Common Area Facilities and the Premises only if on a leash, currently licensed and fully inoculated as required by law. In no event shall any dog be left unattended to in the Common Areas or in the Premises. No dog may engage in any threatening behavior, either to persons or other dogs. All damage caused by any dog will be the responsibility of the Tenant. No dog will be allowed to deposit any waste in or around the Building. Landlord reserves the right to exclude any dog from the Building.

38. Window Coverings. Landlord shall have the right to designate and approve standard window coverings for the Premises and to establish rules to assure that the Building presents a uniform exterior appearance. Tenant shall ensure, to the extent reasonably practicable, that window coverings are closed on windows in the Premises while they are exposed to the direct rays of the sun.

39. Outside Contractors. All contractors, contractor’s representatives and installation technicians performing work in the Building shall be subject to Landlord’s prior approval and shall be required to comply with Landlord’s standard rules, regulations, policies and procedures, which may be revised from time to time.

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EXHIBIT “D”
First Offer Space

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EXHIBIT “E”

Lease Confirmation

This Lease Confirmation is made ________________, 201_, by Eastside Distilling Inc (“Tenant”) and Eastbank Commerce Center, LLC (“Landlord”), who agree as follows:

1. Landlord and Tenant entered into a lease dated _______, 2017, in which Landlord leased to Tenant and Tenant leased from Landlord the Premises described in Section 1.1 of said Lease (“Premises”). All capitalized terms herein are as defined in the Lease.

2. Pursuant to the Lease, Landlord and Tenant agreed to and do hereby confirm the following matters as of the commencement of the Term:

a. ___________, 2017 is the Commencement Date of the Term of the Lease;

b. ___________, 20____ is the Expiration Date of the Term of the Lease;

c. The initial monthly Base Rent under the Lease, subject to adjustments as provided in the Lease, is __________.

3. Tenant confirms that:

a. It has accepted possession of the Premises as provided in the Lease;

b. The improvements required to be furnished by Landlord under the Lease have been furnished (subject to any corrective work or punch-list items of which Tenant has notified Landlord in accordance with the Lease);

c. Landlord has fulfilled all its duties of an inducement nature;

d. The Lease is in full force and effect and has not been modified, altered, or amended, except as follows:

_________________________________________________________

_______________________________________________; and

e. There are no setoffs or credits against rent, and no Security Deposit or prepaid rent has been paid except as provided by the Lease.

4. The provisions of this Lease Confirmation shall inure to the benefit, or bind, as the case may require, the parties and their respective successors and assigns, subject to the restrictions on assignment and subleasing contained in the Lease.

Initials

Landlord: _________________

Tenant: ___________________

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EXHIBIT “F”

Parking Use Agreement

PARKING USE AGREEMENT

PARTIES:	Eastbank Commerce Center, LLC	(“Landlord”)
	75 SE Yamhill St., Suite 201
	Portland, Oregon 97214
	Eastside Distilling Inc, a Nevada corporation	(“Tenant”)
	1001 SE Water Avenue, Suite 390
	Portland, OR 97214

WHEREAS, Landlord and Tenant are parties to that certain Eastside Distilling Lease dated September 29, 2017 (the "Lease"), with respect to certain office space containing approximately 3,050 rentable square feet in the building owned by Landlord located at 1001 SW Water Avenue (the "Building").

WHEREAS, pursuant to the Lease, Landlord has agreed to rent to Tenant the Parking Space(s) 29, 33, 55, and 56 in the lot located in the courtyard of the Building or the Taylor Street Lot located at the west end of SE Taylor Street of the Building subject to the terms and conditions of this Parking Use Agreement (this “Agreement”).

WHEREAS, this Agreement herein constitutes the entirety of the parking arrangement by and between the parties herein.

In satisfaction of the Lease provision pertaining to Tenant’s right to use parking located at the Building, Landlord and Tenant desire to enter into this Agreement, specifically as follows:

AGREEMENT

1. Description of Parking Spaces. Landlord grants Tenant the right to use Four (4) parking space, consisting of Four (4) single parking stalls (“Dedicated Parking Spaces”). If at any time Tenant chooses to use less than the Four (4) Dedicated Parking Spaces, Tenant shall provide Landlord not less than thirty (30) days prior written notice of such decision, and, after such thirty (30) day period, Tenant shall have no further right to use the parking spaces that Tenant relinquished in its notice to Landlord.

2. Term. The term of this Agreement shall be for a period commencing on the Commencement Date with respect to Suite 390 of the Premises (as defined in the Lease) and terminating on the earlier to occur of the expiration or earlier termination of the Lease.

3. Rent. Landlord shall provide the use of the Dedicated Parking Spaces at no cost to Tenant during the Term of the Lease. If Tenant provides any of the Dedicated Parking Spaces to a subtenant or any other third party, any cash net profit, or the net value of any other consideration received by Tenant as a result of such transaction shall be paid to Landlord promptly following its receipt by Tenant.

4. Authorized Use. The Dedicated Parking Spaces may be used for vehicle parking only and otherwise in compliance with the terms and provisions of the Lease. Tenant shall not allow derelict or disabled vehicles on the Dedicated Parking Spaces and Tenant shall promptly remove any such vehicles at Tenant’s sole risk and cost. Tenant shall not utilize the Dedicated Parking Spaces for storage, repair, or maintenance of any kind. All other uses are expressly prohibited.

5. As Is. Tenant has inspected the Dedicated Parking Spaces and accepts them in AS IS, WHERE IS condition.

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6. Relocation. Landlord reserves the right at any time during the Term to relocate Tenant’s Dedicated Parking Spaces; provided such Relocated Dedicated Parking Spaces are within a five hundred (500) foot radius of and of comparable quality to Dedicated Parking Spaces.

7. Towing. Towing is the sole responsibility of the tenant. Tenant shall designate one individual who is authorized to impound and notify Landlord of their decision. Sergeant’s Towing will only allow a vehicle to be towed from Tenant’s parking spot(s) if reported by the authorized individual.

8. Exemption from Liability, Hold Harmless and Indemnity. Tenant agrees that Landlord, its affiliates, managing agent, officers, directors, employees, agents and invitees shall have no liability for, and Tenant shall, to the extent it is legally therefor, indemnify, defend, and hold harmless Landlord, its affiliates, managing agent, officers, directors, employees, agents and invitees from and against, any and all liabilities, penalties, fines, forfeitures, demands, claims, costs, and expenses incidental thereto, including cost of defense, settlement, and reasonable attorneys’ fees, which any or all of them may hereafter suffer, incur, be responsible for, or pay out as a result of bodily injuries (including death) to any person, or damage (including loss of use) to any property, arising out of or connected with this Agreement, Tenant’s (and its employees, contractors, or invitees) use of the Dedicated Parking Spaces or from the conduct of any activity which may be permitted or suffered by Tenant (and its employees, contractors, or invitees) in or about the Dedicated Parking Spaces or upon the property leased by Landlord pursuant to the Lease. These indemnity obligations shall survive the expiration or sooner termination of this Agreement.

9. Default. The failure of Tenant to comply with any term of condition of this Agreement within ten (10) days after written notice from Landlord (provided, however, the third time in any twelve (12) month period that Tenant fails to timely pay rent for the Dedicated Parking Spaces as required in Section 3 of this Agreement shall be an automatic default of this Agreement and no additional notice from Landlord shall be required), specifying the nature of the breach, shall be a default under this Agreement. Upon such a default, Landlord, at its option and in addition to any other rights and remedies it may have, may terminate this Agreement on ten (10) days written notice to Tenant. If this Agreement is terminated, Landlord may re-enter, take possession of the Dedicated Parking Spaces, and remove Tenant by legal action or by self-help, with the use of reasonable force and without liability for damages. Landlord may recover from Tenant all reasonable expenses arising from Tenant’s default, including all unpaid rent, the cost of re-entry, clean-up, refurbishing, removal of Tenant’s property, or any other reasonable expense.

10. Attorney’s Fees. In the event any suit, action, or proceeding is brought by either party to establish, obtain, or enforce any right under this Agreement or for recovery of any amounts hereunder, or for breach of any covenant, term, or condition hereof, or for any matter in any way arising from the execution of this Agreement, the prevailing party in such action, suit, or proceeding, including any appeal there from, shall be entitled to recover reasonable attorneys’ fees in addition to its costs and disbursements.

11. Notices. All notices required or permitted by law or by this Agreement shall be given by certified U.S. mail, postage prepaid, hand delivery or electronically and addressed as set forth above or to such other place either party at any time may designate by written notice to the other party.

12. Waiver. Waiver by either party of the strict performance of any provision of this Agreement shall not act as a waiver of or prejudice the party’s right to require strict performance of the same provision in the future.

13. Governing Law. This Agreement shall be governed by the laws of the State of Oregon, without regard to the conflict of laws principles thereof, and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, representatives, successors, and assignees.

14. Severability. If any clause or provision of this Agreement shall be determined to be illegal, unenforceable, invalid or void, under present or future laws, then the remainder of this Agreement shall be unaffected and all other provisions of this Agreement shall remain in full force and effect.

15. Entire Agreement. This Agreement, and all attachments hereto, constitutes the entire understanding and agreement between the parties relative to the subject matter hereof and supersedes all other prior understandings and agreements, oral or written, with respect to the subject matter hereof. This Agreement may be amended only by the further written agreement of the parties hereto.

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of September 29, 2017.

LANDLORD:		TENANT:
Eastbank Commerce Center, LLC		Eastside Distilling Inc.
By:	Jonathan Malsin
Its:	Authorized Agent
By:	/s/ Jonathan Malsin	By:	/s/ Grover T. Wickersham
Title:	Authorized Agent	Title:	CEO

 3

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Grover Wickersham, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Eastside Distilling, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2017

/s/ Grover Wickersham

Grover Wickersham

Chief Executive Officer and Director

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Steven Shum, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Eastside Distilling, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2017

/s/ Steven Shum

Steven Shum

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350

I, Grover Wickersham, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Eastside Distilling, Inc. on Form 10-Q for the period ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Eastside Distilling, Inc.

Date: November 14, 2017

By:	/s/ Grover Wickersham
Name:	Grover Wickersham
Title:	Chief Executive Officer and Director

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350

I, Steven Shum, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Eastside Distilling, Inc. on Form 10-Q for the period ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Eastside Distilling, Inc.

Date: November 14, 2017

By:	/s/ Steven Shum
Name:	Steven Shum
Title:	Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 14, 2017
Document And Entity Information
Entity Registrant Name	Eastside Distilling, Inc.
Entity Central Index Key	0001534708
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		4,824,990
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017

XML

Consolidated Balance Sheets - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash	$ 4,190,085	$ 1,088,066
Trade receivables	192,805	344,955
Inventories	2,416,946	780,037
Prepaid expenses and current assets	386,168	187,714
Total current assets	7,186,004	2,400,772
Property and equipment, net	468,382	99,216
Intangible assets, net	373,398
Goodwill	221,556
Other assets	238,375	48,000
Total Assets	8,487,715	2,547,988
Current liabilities:
Accounts payable	523,882	457,034
Accrued liabilities	152,879	523,702
Deferred revenue	820	2,126
Current portion of notes payable	39,032	4,537
Total current liabilities	716,613	987,399
Notes payable - less current portion and debt discount	1,331,007	427,756
Total liabilities	2,047,620	1,415,155
Commitments and contingencies (Note 10)
Stockholders' equity:
Series A convertible preferred stock, $0.0001 par value; 3,000 shares authorized; 0 and 300 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively (liquidation values of $0 and $750,000, respectively)		245,838
Common stock, $0.0001 par value; 15,000,000 shares authorized; 4,824,990 and 2,542,504 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	482	254
Additional paid-in capital	22,844,814	13,699,785
Accumulated deficit	(16,419,011)	(12,813,044)
Total Eastside Distilling, Inc. Stockholders' Equity	6,426,285	1,132,833
Noncontrolling interests	13,810
Total Stockholders' Equity	6,440,095	1,132,833
Total Liabilities and Stockholders' Equity	$ 8,487,715	$ 2,547,988

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	3,000	3,000
Preferred stock, shares issued	0	300
Preferred stock, shares outstanding	0	300
Preferred stock, liquidation value	$ 0	$ 750,000
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	15,000,000	15,000,000
Common stock, shares issued	4,824,990	2,542,504
Common stock, shares outstanding	4,824,990	2,542,504

XML

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Sales	$ 895,182	$ 796,222	$ 2,608,373	$ 2,045,568
Less excise taxes, customer programs and incentives	276,845	242,042	772,525	542,854
Net sales	618,337	554,180	1,835,848	1,502,714
Cost of sales	384,265	370,854	1,101,803	895,239
Gross profit	234,072	183,326	734,045	607,475
Operating expenses:
Advertising, promotional and selling expenses	563,754	319,391	1,499,751	951,293
General and administrative expenses	1,040,942	1,210,495	2,615,810	2,923,799
Loss on disposal of property and equipment			40,975
Total operating expenses	1,604,696	1,529,886	4,156,536	3,875,092
Loss from operations	(1,370,624)	(1,346,560)	(3,422,491)	(3,267,617)
Other income (expense), net
Interest expense	(41,436)	(91,085)	(184,998)	(492,350)
Other income (expense)	900	1,196	5,385	(662)
Total other expense, net	(40,536)	(89,889)	(179,613)	(493,012)
Loss before income taxes	(1,411,160)	(1,436,449)	(3,602,104)	(3,760,629)
Provision for income taxes
Net loss	(1,411,160)	(1,436,449)	(3,602,104)	(3,760,629)
Dividends on convertible preferred stock		19,600	5,037	37,359
Income (loss) attributable to noncontrolling interests	301		(1,174)
Net loss attributable to Eastside Distilling, Inc. common shareholders	$ (1,411,461)	$ (1,456,049)	$ (3,605,967)	$ (3,797,988)
Basic and diluted net loss per common share	$ (0.34)	$ (0.92)	$ (1.08)	$ (3.43)
Basic and diluted weighted average common shares outstanding	4,142,632	1,587,285	3,342,332	1,106,832

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash Flows From Operating Activities:
Net loss	$ (3,602,104)	$ (3,760,629)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	53,770	16,579
Loss on disposal of property and equipment	40,975
Amortization of debt issuance costs	68,305	116,750
Amortization of beneficial conversion feature		228,549
Issuance of common stock in exchange for services	413,936	218,970
Stock-based compensation	486,194	208,977
Changes in operating assets and liabilities:
Trade receivables	158,374	(240,798)
Inventories	(1,403,499)	(197,828)
Prepaid expenses and other assets	(243,829)	94,127
Accounts payable	61,669	(476,158)
Accrued liabilities	(587,112)	657,650
Deferred revenue	(1,306)	2,467
Net cash used in operating activities	(4,554,627)	(3,131,344)
Cash Flows From Investing Activities:
Cash acquired in acquisition	4,541
Purchases of property and equipment	(381,837)	(6,952)
Net cash used in investing activities	(377,296)	(6,952)
Cash Flows From Financing Activities:
Stock issuance cost related to acquisitions	(19,980)
Stock issuance cost related to common shares issued for preferred conversion	(15,000)
Proceeds from common stock, net of issuance costs of $1,120,323, with detachable warrants	6,707,487
Proceeds from warrant exercise	159,250
Payments on conversion of note payable	(90,000)	(500,923)
Payments of principal on notes payable	(107,815)
Proceeds from convertible notes payable, net of issuance costs	1,400,000	185,000
Proceeds from notes payable, warrants issued		1,250,000
Proceeds from preferred stock, net of issuance costs of $35,920, with warrants		463,080
Proceeds from common stock with detachable warrants		2,000,000
Net cash provided by financing activities	8,033,942	3,397,157
Net increase in cash	3,102,019	258,861
Cash - beginning of period	1,088,066	141,317
Cash - end of period	4,190,085	400,178
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	90,276	294,240
Supplemental Disclosure of Non-Cash Financing Activity
Issuance of common stock for the acquisition of MotherLode Craft Distillery, LLC	377,000
Issuance of common stock for the acquisition of Big Bottom Distilling, LLC	134,858
Note payable issued in exchange of accounts payable	60,000
Common stock issued in exchange of notes payable	505,637
Issuance of common stock in exchange for services recorded as other assets	145,000
Stock issued for payment of trade debt		19,213
Dividends paid in common stock		17,759
Stock issued in lieu of accrued compensation		423,000
Stock issued to retire notes and accrued interest		$ 246,330

XML

Consolidated Statements of Cash Flows (Unaudited) (Parenthetical)	9 Months Ended
	Sep. 30, 2017 USD ($)
Net of issuance costs	$ 1,120,323
Common Stock [Member]
Net of issuance costs	1,120,323
Preferred Stock [Member]
Net of issuance costs	$ 35,920

XML

Description of Business

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Description of Business

1. Description of Business

Eastside Distilling, Inc. (“Eastside” or the “Company”) is an Oregon-based producer and marketer of craft spirits, founded in 2008. Our products span several alcoholic beverage categories, including bourbon, American whiskey, vodka, and rum. Unlike many, if not most, distillers, we operate several retail tasting rooms in Oregon to market our brands directly to consumers. Our growth strategy is to build on our local base in the Pacific Northwest and expand selectively to other markets by using major spirits distributors, such as Southern Glazer Wines and Spirits, and regional distributors that focus on craft brands. As a small business in the large, international spirits marketplace populated with massive conglomerates, we are innovative in exploiting new trends with our products, for example, our Coffee Rum with cold brew coffee and low sugar and our gluten-free potato vodka. In December 2016 we retained Sandstrom Partners (an internationally known spirit branding firm that branded St Germain and Bulleit Bourbon) to guide our marketing strategy and branding. Sandstrom Partners subsequently became an investor in our Company. We seek to be both a leader in creating spirits that offer better value than comparable spirits, for example our value-priced Portland Potato Vodka, and an innovator in creating imaginative spirits that offer a unique taste experience, for example our cold-brewed Coffee Rum, Oregon oak aged whiskeys, Marionberry Whiskey and Peppermint Bark holiday liqueur. On May 1, 2017, we acquired 90% of the ownership of Big Bottom Distillery (“BBD”) for its excellent, award winning range of super premium gins and whiskeys, including The Ninety One Gin, Navy Strength Gin, Oregon Gin, Delta Rye and initial production of American Single Malt Whiskey. BBD’s super premium spirits will expand our tasting room offerings and give us a presence at the “high end” of the market. In addition, through MotherLode Craft Distillery (“MotherLode”), our wholly-owned subsidiary acquired in March 2017, we also provide contract bottling and packaging services for existing and emerging spirits producers, some of whom contract with us to blend or distill spirits. MotherLode has also launched a new canning line of Ready-to-Drink (RTD) products, primarily designed for the wine and pre-mixed alcoholic drink industry. As a publicly-traded craft spirit producer, we have access to the public capital markets to support our long-term growth initiatives, including strategic acquisitions.

We currently sell our products in 25 states (Oregon, California, Washington, Florida, New York, Illinois, Texas, Georgia, Pennsylvania, Alaska, Connecticut, Idaho, Indiana, Iowa, Kansas, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, North Carolina, Rhode Island, Virginia, West Virginia and Wyoming) as well as Washington D.C. and Ontario, Canada. The Company also generates revenue from tastings, tasting room tours, private parties, and merchandise sales from its facilities in Oregon. The Company is subject to the Oregon Liquor Control Commission (OLCC) and the Alcohol and Tobacco Tax and Trade Bureau (TTB).

XML

Liquidity

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Liquidity

2. Liquidity

Historically, the Company has funded its cash and liquidity needs through the issuance of convertible notes, extended credit terms and the sale of equity. The Company has incurred a net loss of $3,602,104 and has an accumulated deficit of $16,419,011 for the nine months ended September 30, 2017. The Company has been dependent on raising capital from debt and equity financings to fund its operating activities. For the nine months ended September 30, 2017, the Company raised $8,033,942 in proceeds from financing activities to meet cash flow used in operating activities.

At September 30, 2017, the Company had $4,190,085 of cash on hand with a positive working capital of $6,469,391. The Company’s ability to meet its ongoing operating cash needs is dependent on generating positive operating cash flow, primarily through increased sales, improved profit growth and controlling expenses. Management has taken actions to improve profitability, by managing expenses while increasing sales. Also, in March and May 2017, the Company acquired two businesses, a contract bottling and packaging services company and a small distillery business (both stock purchase transactions), that are expected to improve operating results. Management believes that cash on hand, including proceeds generated from the most recent equity financing, along with revenue that the Company expects to generate from operations, including as a result of its two recent acquisitions, will be sufficient to meet the Company’s cash needs for the foreseeable future.

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

3. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements for Eastside Distilling, Inc. and Subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with GAAP. In our opinion, the unaudited condensed consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly our financial position as of September 30, 2017, our operating results for the three and nine months ended September 30, 2017 and 2016 and our cash flows for the nine months ended September 30, 2017 and 2016. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Interim results are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2017. The condensed consolidated financial statements include the accounts of Eastside Distilling, Inc.’s wholly-owned subsidiary MotherLode (beginning as of March 8, 2017), and majority-owned subsidiary BBD (beginning as of May 1, 2017). All intercompany balances and transactions have been eliminated in consolidation.

Segment Reporting

The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity, producing, marketing and distributing hand-crafted spirits, and operates as one segment. The Company’s chief operating decision makers, its chief executive officer and chief financial officer, review the Company’s operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Net revenue includes product sales, less excise taxes and customer programs and incentives. The Company records revenue when all four of the following criteria are met: (i) there is persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured.

The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, which include sales to the Oregon Liquor Control Commission (OLCC), the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. The Company excludes sales tax collected and remitted to various states from sales and cost of sales. Sales from items sold through the Company’s retail location are recognized at the time of sale.

Revenue received from online merchants who sell discounted gift certificates for the Company’s merchandise and tastings is deferred until the customer has redeemed the discounted gift certificate or the gift certificate has expired, whichever occurs earlier.

Customer Programs and Incentives

Customer programs and incentives, which include customer promotional discount programs, customer incentives and other payments, are a common practice in the alcohol beverage industry. The Company makes these payments to customers and incurs these costs to promote sales of products and to maintain competitive pricing. Amounts paid in connection with customer programs and incentives are recorded as reductions to net sales or as advertising, promotional and selling expenses in accordance with Accounting Standards Codification (“ASC”) Topic 605-50, Revenue Recognition - Customer Payments and Incentives, based on the nature of the expenditure. Amounts paid to customers totaled $118,389 and $72,918 for the nine months ended September 30, 2017 and 2016, respectively.

Advertising, Promotional and Selling Expenses

The following expenses are included in advertising, promotions and selling expenses in the accompanying consolidated statements of operations: media advertising costs, special event costs, tasting room costs, sales and marketing expenses, salary and benefit expenses, travel and entertainment expenses for the sales, brand and sales support workforce and promotional activity expenses. Advertising, promotional and selling costs are expensed as incurred. Advertising, promotional and selling expense was $1,499,751 and $951,293 for the nine months ended September 30, 2017 and 2016, respectively.

Cost of Sales

Cost of sales consists of the costs of ingredients utilized in the production of spirits, manufacturing labor and overhead, warehousing rent, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by packaging and production costs.

Shipping and Fulfillment Costs

Freight costs incurred related to shipment of merchandise from the Company’s distribution facilities to customers are recorded in cost of sales.

Cash and Cash Equivalents

Cash equivalents are considered to be highly liquid investments with maturities of three months or less at the time of the purchase. The Company had no cash equivalents at September 30, 2017 and December 31, 2016.

Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. At September 30, 2017, four customers represented 82% of trade receivables, and at December 31, 2016, three customers represented 91% of trade receivables. Sales to two customers accounted for approximately 48% of consolidated net sales for the nine months ended September 30, 2017. Sales to three customers accounted for approximately 57% of net sales for the nine months ended September 30, 2016.

Fair Value Measurements

GAAP defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAAP permits an entity to choose to measure many financial instruments and certain other items at fair value and contains financial statement presentation and disclosure requirements for assets and liabilities for which the fair value option is elected. At September 30, 2017 and December 31, 2016, management has not elected to report any of the Company’s assets or liabilities at fair value under the “fair value option” provided by GAAP.

The hierarchy of fair value valuation techniques under GAAP provides for three levels: Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, generally would require significant management judgment. The three levels for categorizing assets and liabilities under GAAP’s fair value measurement requirements are as follows:

Level 1:	Fair value of the asset or liability is determined using unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:	Fair value of the asset or liability is determined using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:	Fair value of the asset or liability is determined using unobservable inputs that are significant to the fair value measurement and reflect management’s own assumptions regarding the applicable asset or liability.

None of the Company’s assets or liabilities were measured at fair value at September 30, 2017 and December 31, 2016. However, GAAP requires the disclosure of fair value information about financial instruments that are not measured at fair value. Financial instruments consist principally of trade receivables, accounts payable, accrued liabilities, note payable, and convertible note payable. The estimated fair value of trade receivables, accounts payable, and accrued liabilities approximates their carrying value due to the short period of time to their maturities. At September 30, 2017 and December 31, 2016, the Company’s note payable and convertible notes payable are at fixed rates and their carrying value approximates fair value.

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities acquired in a business acquisition are valued at fair value at the date of acquisition.

Inventories

Inventories primarily consist of bulk and bottled liquor and merchandise and are stated at the lower of cost or market. Cost is determined using an average costing methodology, which approximates cost under the first-in, first-out (FIFO) method. A portion of inventory is held by certain independent distributors on consignment until it is sold to a third party. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost basis of accounting for the related inventory. The Company has recorded no write-downs of inventory for the nine months ended September 30, 2017 and 2016.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Amortization of leasehold improvements is computed using the straight-line method over the life of the lease or the useful lives of the assets, whichever is shorter. The cost and related accumulated depreciation and amortization of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current period income or expense. The costs of repairs and maintenance are expensed as incurred.

Intangible Assets / Goodwill

The Company accounts for long-lived assets, including property and equipment, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount of the asset, an impairment loss would be recognized to write down the asset to its estimated fair value. At September 30, 2017 and December 31, 2016, no impairment loss was recognized.

Income Taxes

The provision for income taxes is based on income and expenses as reported for financial statement purposes using the “asset and liability method” for accounting for deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. At September 30, 2017 and December 31, 2016, the Company established valuation allowances against its net deferred tax assets.

Income tax positions that meet the “more-likely-than-not” recognition threshold are measured at the largest amount of income tax benefit that is more than 50 percent likely to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with income tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized income tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized income tax benefits would be classified as additional income taxes in the accompanying condensed consolidated statements of operations. There were no unrecognized income tax benefits, nor any interest and penalties associated with unrecognized income tax benefits, accrued or expensed at and for the nine months ended September 30, 2017 and 2016.

The Company files federal income tax returns in the U.S. and various state income tax returns. The Company is no longer subject to examinations by the related tax authorities for the Company’s U.S. federal and state income tax returns for years prior to 2011.

Comprehensive Income

The Company does not have any reconciling other comprehensive income items for the nine months ended September 30, 2017 and 2016.

Excise Taxes

The Company is responsible for compliance with the TTB regulations, which includes making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual states also impose excise taxes on alcohol beverages in varying amounts. The Company calculates its excise tax expense based upon units produced and on its understanding of the applicable excise tax laws. Excise taxes totaled $654,136 and $469,936 for the nine months ended September 30, 2017 and 2016, respectively.

Stock-Based Compensation

The Company recognizes as compensation expense all stock-based awards issued to employees. The compensation cost is measured based on the grant-date fair value of the related stock-based awards and is recognized over the service period of stock-based awards, which is generally the same as the vesting period. The fair value of stock options is determined using the Black-Scholes valuation model, which estimates the fair value of each award on the date of grant based on a variety of assumptions including expected stock price volatility, expected terms of the awards, risk-free interest rate, and dividend rates, if applicable. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments at the end of each reporting period and as the underlying stock-based awards vest. Stock-based compensation was $900,130 and $427,947 for the nine months ended September 30, 2017 and 2016, respectively.

Accounts Receivable Factoring Program

During the three months ended June 30, 2017, we terminated our previous receivable factoring program. Under the prior program, we had the option to sell certain customer account receivables in advance of payment for 75% of the amount due. When the customer remitted payment, we would receive the remaining 25%. We were charged interest on the advanced 75% payment at a rate of 1.5% per month. Under the terms of the agreement with the factoring provider, any factored invoices had recourse should the customer fail to pay the invoice. Thus, we recorded factored amounts as a liability until the customer remitted payment and we received the remaining 25% of the non-factored amount. We did not factor any invoices during the nine months ended September 30, 2017. At September 30, 2017, we had no factored invoices outstanding, and we incurred fees associated with the factoring program of $63,238 during the nine months ended September 30, 2017. During the nine months ended September 30, 2016, we factored invoices totaling $560,172 and received total proceeds of $420,129. At September 30, 2016, we had $184,875 in open factored invoices, and we incurred fees associated with the factoring program of $21,500 during the nine months ended September 30, 2016.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standard Boards (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 was effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We have adopted ASU 2016-09 as of March 31, 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

- A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and

- A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are currently evaluating the impact ASU 2016-02 will have on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 will supersede virtually all existing revenue guidance. Under this update, an entity is required to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. As such, an entity will need to use more judgment and make more estimates than under the current guidance. ASU 2014-09 is to be applied retrospectively either to each prior reporting period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. The Company will elect to apply the impact (if any) of applying ASU 2014-09 to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 deferred the effective date of ASU 2014-09 for one year, making it effective for the year beginning December 31, 2017, with early adoption permitted as of January 1, 2017. The Company currently expects to adopt ASU 2014-09 in the first quarter of 2018. The Company does not expect adoption of ASU 2014-09 to have a material impact on its condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (“ASU 2014-15”). The new guidance explicitly requires that management assess an entity’s ability to continue as a going concern and may require additional detailed disclosures. ASU 2014-15 was effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. We adopted ASU 2014-15 as of December 31, 2016. The Company does not believe the adoption of ASU 2014-15 had any material impact on its condensed consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 is part of the FASB’s initiative to simplify accounting standards. The guidance requires an entity to recognize inventory within scope of the standard at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. ASU 2015-11 was effective prospectively for the year beginning January 1, 2017. We adopted ASU 2015-11 as of March 31, 2017. The Company does not believe the adoption of ASU 2015-11 had any material impact on its condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, simplifying the presentation of debt issuance costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 was effective for annual and interim periods beginning after December 15, 2015 and early application was permitted. We early adopted ASU 2015-03 as of December 31, 2015. The Company does not believe the adoption of ASU 2015-03 had any material impact on its condensed consolidated financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to the September 30, 2017 presentation with no changes to net loss or total stockholders’ equity previously reported.

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Business Acquisitions

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Business Acquisitions

4. Business Acquisitions

During the nine months ended September 30, 2017, the Company completed the following acquisitions:

MotherLode Craft Distillery, LLC

On March 8, 2017, the Company completed the acquisition of MotherLode Craft Distillery, LLC (“MotherLode”), a small Portland, Oregon-based provider of bottling services and production support to craft distilleries. The Company’s condensed consolidated financial statements for the three and nine months ended September 30, 2017 include MotherLode’s results of operations from the acquisition date of March 8, 2017 through September 30, 2017. The Company’s condensed consolidated financial statements reflect the final purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. MotherLode had approximately $375,000 in revenues (unaudited) in 2016.

The following allocation of the purchase price is as follows:

Consideration given:
86,667 shares of common stock valued at $4.35 per share	$	377,000
Assets and liabilities acquired:
Cash		7,062
Inventory		103,488
Property and equipment		46,250
Intangible assets - customer list and license		376,431
Goodwill		28,182
Accounts payable		(5,180	)
Customer deposits		(179,233	)
	$	377,000

Intangible assets are recorded at estimated fair value, as determined by management based on available information. The fair value assigned to the customer list intangible asset was determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earning methods. The major assumptions used in arriving at the estimated identifiable intangible asset value included management’s estimates of future cash flows, discounted at an appropriate rate of return which is based on the weighted average cost of capital for both the Company and other market participants, projected customer attrition rates, as well as applicable royalty rates for comparable assets. The useful lives for intangible assets were determined based upon the remaining useful economic lives of the tangible assets that are expected to contribute directly or indirectly to future cash flows. The customer relationships estimated useful life is seven years. The fair values assigned to the license intangible asset were determined through the use of the cost approach. The license has an indefinite life and will not be amortized.

Big Bottom Distillery, LLC

On May 1, 2017, the Company acquired 90% of the ownership of Big Bottom Distillery, LLC (“BBD”), a Hillsboro, Oregon-based distiller of super premium spirits. The Company’s condensed consolidated financial statements for the three and nine months ended September 30, 2017 include BBD’s results of operations from the acquisition date of May 1, 2017 through September 30, 2017. The Company’s condensed consolidated financial statements reflect the final purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. BBD had approximately $201,000 in revenues (unaudited) in 2016.

The following allocation of the purchase price is as follows:

Consideration given:
28,096 shares of common stock valued at $4.80 per share for 90%	$	134,858
Noncontrolling interests		14,984
Total value of acquisition	$	149,842
Assets and liabilities acquired:
Cash (overdraft)	$	(2,521	)
Accounts receivable		6,224
Inventory		129,922
Property and equipment		22,717
Intangible assets - license		25,000
Goodwill		193,374
Accrued liabilities		(52,841	)
Notes payable		(172,033	)
Total	$	149,842

Intangible assets are recorded at estimated fair value, as determined by management based on available information. The fair value assigned to the license intangible asset was determined through the use of the cost approach. The license has an indefinite life and will not be amortized.

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Inventories

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Inventories

5. Inventories

Inventories consist of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017		December 31, 2016
Raw materials	$	2,077,989	$	439,739
Finished goods		338,957		340,298
Total inventories	$	2,416,946	$	780,037

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Property and Equipment

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Property and Equipment

6. Property and Equipment

Property and equipment consists of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
Furniture and fixtures	$	252,049		$	70,140
Leasehold improvements		18,266			8,607
Vehicles		49,483			38,831
Construction in progress		213,453			34,603
Total cost		533,251			152,181
Less accumulated depreciation		(64,869	)		(52,965	)
Property and equipment - net	$	468,382		$	99,216

Purchases of property and equipment totaled $381,837 and $6,952 for the nine months ended September 30, 2017 and 2016, respectively. Depreciation expense totaled $25,736 and $16,579 for the nine months ended September 30, 2017 and 2016, respectively.

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Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

7. Intangible Assets and Goodwill

There were no intangible assets or goodwill at December 31, 2016. At September 30, 2017, intangible assets and goodwill consist of the following:

	September 30, 2017			Life
Permits and licenses	$	50,000		-
Customer lists		351,431		7 years
Goodwill		221,556		-
Total intangible assets and goodwill		622,987
Less accumulated amortization		(28,033	)
Intangible assets and goodwill - net	$	594,954

Amortization expense totaled $28,033 and nil for the nine months ended September 30, 2017 and 2016, respectively.

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Notes Payable

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Notes Payable

8. Notes Payable

Notes payable consists of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
Notes payable bearing interest at 7.99%. The note is payable in monthly principal plus interest payments of $472 through December 2020. The note is secured by a vehicle.	$	-		$	16,642
Notes payable bearing interest at 8%. The notes have a 2-year maturity and are due at various dates between September 19, 2018 – October 19, 2018, and pay interest-only on a monthly basis.		460,000			547,500
Note payable bearing interest at 2.74%. The note is payable in monthly principal plus interest payments of $100 through December 2019.		2,608			-
Note payable bearing interest at 4.00%. The note is payable in quarterly principal plus interest payments of $9,614 through March 2019.		55,125			-
Convertible notes payable bearing interest at 4.00%. The notes principal plus accrued interest is due in full at various dates between April 3, 2020 – September 30, 2020. The notes have an automatic conversion feature upon the closing (or first in a series of closings) of the next equity financing in which the Company sells shares of its equity securities for an aggregate consideration of at least $4,000,000 at a purchase price of at least $7.50. The outstanding principal and unpaid accrued interest on the notes shall be automatically converted into equity securities at a price equal to 80% of the price paid per share by the investors in the next equity financing or $6.00, whichever is lower, provided, however, that in no event shall the conversion price be less than $6.00. The note has a voluntary conversion feature where the investor may convert, in whole or in part, at any time at the conversion price of $6.00.		915,850			-
Total notes payable		1,433,583			564,142
Less current portion		(39,032	)		(4,537	)
Less debt discount for detachable warrant		(63,544	)		(131,849	)
Long-term portion of notes payable	$	1,331,007		$	427,756

Maturities on notes payable as of September 30, 2017, are as follows:

Year ending December 31:

2017	$	9,280
2018		497,940
2019		10,513
2020		915,850
Thereafter		-
	$	1,433,583

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Income Taxes

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

The provision for income taxes results in effective tax rates which are different than the federal income tax statutory rate. The nature of the differences for the nine months ended September 30, 2017 and 2016 were as follows:

	September 30, 2017			September 30, 2016
Expected federal income tax benefit	$	(1,204,479	)	$	(798,000	)
State income taxes after credits		(237,739	)		(155,000	)
Change in valuation allowance		1,442,218			953,000
Total provision for income taxes	$	-		$	-

The components of the net deferred tax assets and liabilities at September 30, 2017 and December 31, 2016 consisted of the following:

	September 30, 2017			December 31, 2016
Deferred tax assets:
Net operating loss carryforwards	$	4,824,563		$	3,557,909
Stock-based compensation		410,575			213,181
Total deferred tax assets		5,235,138			3,771,090
Deferred tax liabilities:
Depreciation and amortization		(92,647	)		(70,816	)
Total deferred tax liabilities		(92,647	)		(70,816	)
Valuation allowance		(5,142,491	)		(3,700,274	)
Net deferred tax assets	$	-		$	-

At September 30, 2017, the Company has a cumulative net operating loss carryforward (NOL) of approximately $12.2 million, to offset against future income for federal and state tax purposes. These federal and state NOLs can be carried forward for 20 and 15 years, respectively. The federal NOLs begin to expire in 2034, and the state NOLs begin to expire in 2029. The utilization of the NOL carryforwards may be subject to substantial annual limitation due to ownership change provisions of the Internal Revenue Code of 1986 and similar state provisions. In general, if the Company experiences a greater than 50 percentage aggregate change in ownership of certain significant stockholders over a three-year period (a “Section 382 ownership change”), utilization of its pre-change NOL carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code (and similar state laws). The annual limitation generally is determined by multiplying the value of the Company’s stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization and may be substantial.

In assessing the realizable of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. Due to the uncertainty of the realizability of the deferred tax assets, management has determined a full valuation allowance is appropriate.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

Operating Leases

The Company leases its warehouse, kiosks and tasting room space under operating lease agreements, which expire through October 2021. Monthly lease payments range from $1,802 to $6,400 over the terms of the leases. For operating leases which contain fixed escalations in rental payments, the Company records the total rent expense on a straight-line basis over the lease term. The difference between the expense computed on a straight-line basis and actual payments for rent represents deferred rent which is included within accrued liabilities on the accompanying consolidated balance sheets. Retail spaces under lease are subject to monthly percentage rent adjustments when gross sales exceed certain minimums.

At September 30, 2017, future minimum lease payments required under the operating leases are approximately as follows:

2017	$	82,000
2018		133,000
2019		114,000
2020		96,000
2021		64,000
Thereafter		-
Total	$	489,000

Total rent expense was $248,535 and $304,000 for the nine months ended September 30, 2017 and 2016, respectively.

On February 7, 2017, we entered into a Lease Termination Agreement with PJM BLDG. II LLC (the “Termination Agreement”), the landlord of our current headquarters and production facilities located at 1805 SE Martin Luther King Jr. Blvd., Portland, Oregon. The Termination Agreement provides that the original lease agreement dated July 17, 2014 terminated on June 30, 2017 rather than October 30, 2020.

Legal Matters

Except as described below, we are not currently subject to any material legal proceedings, however we could be subject to legal proceedings and claims from time to time in the ordinary course of our business. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and divert management resources.

On October 10, 2017, we received a letter from a law firm purporting to represent a Company stockholder named Jason Price. The letter stated that such representative was launching an “investigation” into certain grants of stock options and restricted stock units that exceeded applicable limits under the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) (collectively, the “Additional Grants”). The representative stated the belief that the Board had violated the terms of the 2016 Plan by approving the Additional Grants, and such approval constituted a breach of fiduciary duty and possible evidence of material weaknesses in internal controls. The Board rejects any such contentions. Although we acknowledge that the Additional Grants were made despite the stated limits in the 2016 Plan, we believe that the Additional Grants were in the best interests of our stockholders. We believe that our existing corporate governance mechanisms are sufficiently robust as to be able to review and take a proper response to Mr. Price’s letter. We are seeking stockholder approval of the Additional Grants and of certain amendments to the 2016 Plan to increase such limits at the upcoming annual stockholder meeting on December 8, 2017.

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Net Loss Per Common Share

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Net Loss Per Common Share

11. Net Loss per Common Share

Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, without considering any dilutive items. Diluted net loss per common share is computed by dividing net loss by the sum of the weighted average number of common shares outstanding and the potential number of any dilutive common shares outstanding during the period. Potentially dilutive securities consist of the incremental common stock issuable upon exercise of stock options and convertible notes. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. There were no dilutive common shares at September 30, 2017 and 2016. The numerators and denominators used in computing basic and diluted net loss per common share in 2017 and 2016 are as follows:

	Three months ended September 30,
	2017			2016
Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator)	$	(1,411,461	)	$	(1,456,049	)
Weighted average shares (denominator)		4,142,632			1,587,285
Basic and diluted net loss per common share	$	(0.34	)	$	(0.92	)

	Nine months ended September 30,
	2017			2016
Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator)	$	(3,605,967	)	$	(3,797,988	)
Weighted average shares (denominator)		3,342,332			1,106,832
Basic and diluted net loss per common share	$	(1.08	)	$	(3.43	)

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Stockholder's Equity

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Stockholder's Equity

12. Stockholder’s Equity

																Total			Non-controlling
	Convertible Series A															Stockholders'			interest in
	Preferred Stock						Common Stock				Paid-in		Accumulated			Equity			consolidated			Total
	Shares			Amount			Shares		Amount		Capital		Deficit			(Deficit)			entities			Equity
Balance, December 31, 2016		300		$	245,838			2,542,504	$	254	$	13,699,785	$	(12,813,044	)	$	1,132,833		$	-		$	1,132,833
Issuance of common stock		-			-			15,001		1		58,499		-			58,500			-			58,500
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants		-			-			1,780,019		178		6,648,809		-			6,648,987			-			6,648,987
Issuance of common stock from warrant exercise for cash		-			-			40,834		4		159,246		-			159,250			-			159,250
Issuance of common stock for services by third parties		-			-			78,340		8		334,626		-			334,634			-			334,634
Issuance of common stock for services by employees		-			-			38,167		4		174,298		-			174,302			-			174,302
Stock option exercises		-			-			9,260		1		49,999		-			50,000			-			50,000
Stock-based compensation		-			-			-		-		486,194		-			486,194			-			486,194
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580		-			-			86,667		9		371,411		-			371,420			-			371,420
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400		-			-			28,096		3		120,455		-			120,458			14,984			135,442
Shares issued for payoff of long-term notes		-			-			105,770		10		505,627		-			505,637			-			505,637
Cumulative dividend on Series A preferred		-			5,037			-		-		-		(5,037	)		-			-			-
Common shares issued for preferred conversion		(300	)		(250,875	)		100,001		10		235,865		-			(15,000	)		-			(15,000	)
Adjustment of shares for reverse stock-split		-			-			331		-		-		-			-			-			-
Net loss attributable to noncontrolling interests		-			-			-		-		-		-			-			(1,174	)		(1,174	)
Net loss attributable to common shareholders		-			-			-		-		-		(3,600,930	)		(3,600,930	)		-			(3,600,930	)
Balance, September 30, 2017		-		$	-			4,824,990	$	482	$	22,844,814	$	(16,419,011	)	$	6,426,285		$	13,810		$	6,440,095

Reverse Stock Splits

All shares related and per share information in these financial statements has been adjusted to give effect to the 20-for-1 reverse stock split of the Company’s common stock effected on October 18, 2016, and the 3-for-1 reverse stock split of the Company’s common stock effected on June 15, 2017.

Issuance of Common Stock

From January 4, 2017 to January 22, 2017, the Company sold 15,001 shares of common stock to accredited investors at a price of $3.90 per share for aggregate cash proceeds of $58,500.

From March 31, 2017 to June 2, 2017, the Company issued 400,019 shares of its common stock for aggregate cash proceeds of $1,560,000, including 400,019 warrants for common stock.

From January 15, 2017 through February 16, 2017, the Company received warrant exercises and common stock subscriptions for 40,834 shares for aggregate cash proceeds of $159,250.

In March 2017, the Company issued 19,796 shares of common stock to four third-party consultants in exchange for services rendered. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.90 - $4.35 per share.

In March 2017, the Company issued 575 shares of common stock to employees for stock-based compensation of $2,517. The shares were valued using the $4.38 closing share price of our common stock on the date of grant.

On March 8, 2017, the Company completed the acquisition of MotherLode. We issued 86,667 shares of common stock to the owners of MotherLode as consideration for the acquisition. Based on the closing share price of our common stock of $4.35 on March 8, 2017, the value of the transaction was $377,000. Issuance costs incurred were $5,580.

In March 2017, the Company issued 22,436 shares of its common stock upon conversion of 8% convertible promissory notes with an aggregate principal amount converted of $87,500. No gain or loss recorded on the transactions.

In March 2017, the Company issued 83,334 shares of its common stock upon conversion of 250 shares of preferred stock.

In April 2017, the Company issued 16,667 shares of its common stock upon conversion of 50 shares of preferred stock.

In April 2017, the Company approved a restricted stock unit grant of 33,334 shares of common stock to the Company’s Chief Executive Officer, Grover Wickersham. The grant vested on April 5, 2017, of which 10,218 shares were not issued in order to satisfy Mr. Wickersham’s personal tax withholding responsibility. The shares were valued using the $4.80 closing share price of our common stock on the date of grant.

In April 2017, the Company issued 50,335 shares of common stock to three third-party consultants in exchange for services rendered. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $4.35 - $4.50 per share.

In April 2017, the independent directors, Messrs. Trent Davis and Michael Fleming, respectively, each exercised 4,630 stock options to purchase common stock at $5.40 per share.

In May 2017, the Company completed the acquisition of a majority stake in BBD. We issued 28,096 shares of common stock to the owners of BBD as consideration for 90% of the BBD LLC units. Based on the closing share price of our common stock of $4.80 on May 1, 2017, the value of the transaction was $134,858. Issuance costs incurred were $14,400.

In June 2017, the Company issued 2,716 shares of common stock to employees for stock-based compensation of $15,943, all of which were fully vested upon issuance. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $4.38 - $6.00 per share.

In August 2017, the Company completed an underwritten public offering of 1,200,000 units consisting of 1,200,000 shares of its common stock and warrants to purchase up to an aggregate of 1,200,000 shares of its common stock (each, a “Unit”) at a public offering price of $4.50 per Unit. The warrants have a per share exercise price of $5.40, are exercisable immediately, and will expire five years from the date of issuance. The gross proceeds to the Company from this offering were $5.4 million, before deducting underwriting discounts and commissions and other estimated offering expenses. On August 24, 2017, the underwriters exercised their option to purchase an additional 180,000 Units to cover over-allotments, that resulted in additional gross proceeds to the Company of $810,000, before deducting offering expenses.

In August 2017, the Company issued 5,209 shares of common stock to a third-party consultant in exchange for services rendered. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.40 - $3.50 per share.

In August 2017, the Company issued 83,334 shares of its common stock upon conversion of a 6% convertible promissory note with an aggregate principal amount converted of $500,000. No gain or loss recorded on the transactions.

In September 2017, the Company issued 14,760 shares of common stock to directors and employees for stock-based compensation of $56,221. The shares were valued using the closing share price of our common stock on the date of grant, with the range of $3.78 - $4.38 per share.

Issuance of Convertible Preferred Stock

From April 4, 2016 to June 17, 2016, the Company sold 972 shares of its series A convertible preferred stock (“Series A Preferred”) for an aggregate purchase price of $972,000, of which (i) 499 shares of Series A Preferred were purchased for $499,000 in cash (ii) 423 shares of Series A Preferred were purchased by certain of our officers in consideration of $423,000 accrued and unpaid salary and (iii) 50 shares of Series A Preferred were purchased in consideration of cancellation of $50,000 of outstanding indebtedness net of issuance costs of $69,528.

Each share of Series A Preferred has a stated value of $1,000, which is convertible into shares of the Company’s common stock at a fixed conversion price equal to $4.50 per share. The Series A Preferred accrue dividends at a rate of 8% per annum, cumulative. Dividends are payable quarterly in arrears at the Company’s option either in cash or “in kind” in shares of common stock; provided, however that dividends may only be paid in cash following the fiscal year in which the Company has net income (as shown in its audited financial statements contained in its Annual Report on Form 10-K for such year) of at least $500,000, to the extent permitted under applicable law out of funds legally available therefore. For “in-kind” dividends, holders will receive that number of shares of common stock equal to (i) the amount of the dividend payment due such stockholder divided by (ii) 90% of the average of the per share market values during the twenty (20) trading days immediately preceding a dividend date.

In the event of any voluntary or involuntary liquidation, dissolution or winding up, or sale of the Company, each holder of Series A Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to: (i) $1,000 multiplied by (ii) the total number of shares of Series A Preferred issued under the Series A Certificate of Designation multiplied by (iii) 2.5.

For all matters submitted to a vote of the Company’s stockholders, the holders of the Series A Preferred as a class shall have an aggregate number of votes equal to the product of (x) the number of shares of Common Stock (rounded to the nearest whole number) into which the total shares of Series A Preferred Stock issued under the Series A Certificate of Designation on such date of determination are convertible multiplied by (y) 2.5 (the “Total Series A Votes”), with each holder of Series A Preferred entitled to vote its pro rata portion of the Total Series A Votes. Holders of Common Stock do not have cumulative voting rights. In addition, the holders of Series A Preferred shall vote separately a class to change any of the rights, preferences and privileges of the Series A Preferred.

As of September 30, 2017, the Company has zero shares of preferred stock outstanding.

Stock-Based Compensation

On September 8, 2016, the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”). The total number of shares available for the grant of either stock options or compensation stock under the 2016 Plan is 166,667 shares, subject to adjustment. On January 1, 2017, the number of shares available for grant under the 2016 Plan reset to 307,139 shares, equal to 8% of the number of outstanding shares of the Company’s capital stock, calculated on an as-converted basis, on December 31 of the preceding calendar year. On October 18, 2017, the Board of Directors (the “Board”) approved amendments to the 2016 Plan to (i) increase the number of shares of the common stock that may be issued under the 2016 Plan (the “Aggregate Limit”) by an additional 192,861 shares of common stock, for a total of 500,000 shares of common stock, (ii) increase the number of shares of common stock that may be granted to any participant pursuant to options to purchase common stock and stock appreciation rights under the 2016 Plan in any one year period (the “Individual Option Limit”) from 8,333 shares to 200,000 shares, (iii) increase the number of shares of common stock that may be granted to any participant pursuant to other awards (the “Individual Award Limit”) under the 2016 Plan in any one year period from 8,333 shares to 200,000 shares and (iv) increase the number of shares of common stock that may be paid to any one participant under the 2016 Plan for a performance period pursuant to performance compensation awards under the 2016 Plan (the “Individual Performance Award Limit”) from 8,333 shares to 200,000 shares, which amendments are contingent upon stockholder adoption and approval of these amendments at the next annual meeting of stockholders. The exercise price per share of each stock option shall not be less than 100 percent of the fair market value of the Company’s common stock on the date of grant. At September 30, 2017, there were 354,936 options and 89,185 restricted stock units (“RSUs”) issued under the 2016 Plan, with vesting schedules varying between immediate and five (5) years from the grant date.

On January 29, 2015, the Company adopted the 2015 Stock Incentive Plan (the “2015 Plan”). The total number of shares available for the grant of either stock options or compensation stock under the 2015 Plan is 50,000 shares, subject to adjustment. The exercise price per share of each stock option shall not be less than 20 percent of the fair market value of the Company’s common stock on the date of grant. At September 30, 2017, there were 14,584 options issued under the 2015 Plan outstanding, which options vest at the rate of at least 25 percent in the first year, starting 6-months after the grant date, and 75% in year two.

The Company also issues, from time to time, options which are not issued under or subject to a formal option plan. At September 30, 2017, there were 16,667 options outstanding that were not issued under the 2015 Plan or the 2016 Plan.

A summary of all stock option activity at and for the nine months ended September 30, 2017 is presented below:

	# of Options			Weighted- Average Exercise Price
Outstanding at December 31, 2016		173,750		$	9.24
Options granted		233,167			4.35
Options exercised		(9,260	)		5.40
Options canceled		(20,760	)		-
Outstanding at September 30, 2017		376,897		$	6.52
Exercisable at September 30, 2017		126,564		$	10.45

The aggregate intrinsic value of options outstanding at September 30, 2017 was $25,095.

At September 30, 2017, there were 250,334 unvested options with an aggregate grant date fair value of $745,883. The unvested options will vest in accordance with the vesting schedule in each respective option agreement, which varies between immediate and five (5) years from the grant date. The aggregate intrinsic value of unvested options at September 30, 2017 was $23,003. During the nine months ended September 30, 2017, 87,499 options became vested.

The Company uses the Black-Scholes valuation model to measure the grant-date fair value of stock options. The grant-date fair value of stock options issued to employees is recognized on a straight-line basis over the requisite service period. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments as the underlying stock-based awards vest. To determine the fair value of stock options using the Black-Scholes valuation model, the calculation takes into consideration the effect of the following:

● Exercise price of the option

● Fair value of the Company’s common stock on the date of grant

● Expected term of the option

● Expected volatility over the expected term of the option

● Risk-free interest rate for the expected term of the option

The calculation includes several assumptions that require management’s judgment. The expected term of the options is calculated using the simplified method described in GAAP. The simplified method defines the expected term as the average of the contractual term and the vesting period. Estimated volatility is derived from volatility calculated using historical closing prices of common shares of similar entities whose share prices are publicly available for the expected term of the options. The risk-free interest rate is based on the U.S. Treasury constant maturities in effect at the time of grant for the expected term of the options.

The following weighted-average assumptions were used in the Black-Scholes valuation model for options granted during the nine months ended September 30, 2017:

Risk-free interest rate	1.71	%
Expected term (in years)	6.6
Dividend yield	-
Expected volatility	75	%

The weighted-average grant-date fair value per share of stock options granted during the nine months ended September 30, 2017 was $2.97. The aggregate grant date fair value of the 233,167 options granted during the nine months ended September 30, 2017 was $692,835.

For the nine months ended September 30, 2017 and 2016, total stock option expense related to stock options was $373,278 and $154,707 respectively. At September 30, 2017, the total compensation cost related to stock options not yet recognized is approximately $772,636, which is expected to be recognized over a weighted-average period of approximately 2.99 years.

Warrants

During the nine months ended September 30, 2017, the Company issued an aggregate of 400,019 common stock warrants in connection with the purchase of 400,019 shares of common stock, 1,380,000 common stock warrants in connection with the August 2017 public offering, and 82,000 common stock warrants to four consultants. The Company has determined the warrants should be classified as equity on the condensed consolidated balance sheet as of September 30, 2017. The estimated fair value of the warrants at issuance was $1,944,553, based on a combination of closing market trading price on the date of issuance for the public offering warrants, and the Black-Scholes option-pricing model using the weighted-average assumptions below:

Volatility		75	%
Risk-free interest rate		1.47	%
Expected term (in years)		2.83
Expected dividend yield		-
Fair value of common stock	$	4.74

A total of 40,834 warrants were exercised during the nine months ended September 30, 2017 for cash proceeds of $159,250.

A summary of activity in warrants is as follows:

	Warrants			Weighted Average Remaining Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at December 31, 2016		846,765			2.77 years	$	6.48	$	0
Nine months ended September 30, 2017:
Granted		1,862,019			4.27 years	$	5.77	$	40,180
Exercised		(40,834	)		2.00 years	$	3.90		-
Forfeited and cancelled		(74,873	)		2.00 years	$	6.00		-
Outstanding at September 30, 2017		2,593,077			3.63 years	$	5.99	$	40,180

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Related Party Transactions

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions

13. Related Party Transactions

The following is a description of transactions since January 1, 2015 as to which the amount involved exceeds the lesser of $120,000 or one percent (1%) of the average of our total assets at year-end for the last two completed fiscal years and in which any related person has or will have a direct or indirect material interest, other than equity, compensation, termination and other arrangements.

On April 4, 2016, Steven Earles, our former chief executive officer, purchased 185 units in an offering of units consisting of shares of our series A convertible preferred stock and warrants to purchase common stock (our “Series A Preferred Stock and Warrant Unit Offering”) in consideration of $185,000 in accrued and unpaid salary. Each unit consisted of one share of series A convertible preferred stock and one warrant to purchase 223 shares of common stock at an exercise price of $6.00 per share. Steven Shum, our chief financial officer, purchased 97 units in the Series A Preferred Stock and Warrant Unit Offering in consideration of $97,000 in accrued and unpaid salary. Martin Kunkel, our former chief marketing officer, director and secretary, purchased 58 Units in the Series A Preferred Stock and Warrant Unit Offering in consideration of $58,000 in accrued and unpaid salary. Carrie Earles, our chief branding officer and wife of Steven Earles, purchased 83 units in the Series A Preferred Stock and Warrant Unit Offering in consideration of $83,000 in accrued and unpaid salary. These issuances were unanimously approved by our Board, including all disinterested directors. Effective November 4, 2016, we entered into an agreement with Mr. Earles, the Company’s former chief executive officer, pursuant to which Mr. Earles agreed to convert 185 shares of the Company’s series A convertible preferred stock into 41,111 shares of the Company’s common stock and to cancel his warrant to purchase 41,107 shares of the Company’s common stock.

On June 9, 2016, pursuant to a subscription agreement executed by the Grover T. Wickersham Employees’ Profit Sharing Plan (“PSP”) for which Mr. Wickersham serves as trustee, the PSP purchased in a private placement an aggregate of 83,334 units, each unit consisting of one share of common stock and one common stock purchase warrant (collectively with the common stock, the “Common Stock Units”) at a purchase price of $3.00 per Common Stock Unit, for a total purchase price of $250,000.

On June 22, 2016, pursuant to a subscription agreement executed by Grover T. Wickersham, Mr. Wickersham directly purchased in a private placement an aggregate of 38,334 Common Stock Units at a purchase price of $3.00 per Common Stock Unit for a total purchase price of $115,000. On December 30, Mr. Wickersham assigned 24,680 of his warrants to a related and un-related party. He also voluntarily canceled 8,334 additional warrants.

On June 22, 2016, pursuant to a subscription agreement executed by an education trust established for the benefit of an unrelated minor for which Mr. Wickersham serves as trustee (“Education Trust”), the Education Trust purchased in a private placement 16,667 Common Stock Units at a purchase price of $3.00 per Common Stock Unit, for a total purchase price of $50,000.

On June 22, 2016, pursuant to a subscription agreement executed by the Lindsay Anne Wickersham 1999 Irrevocable Trust for which Mr. Wickersham serves as trustee (the “Irrevocable Trust”), the Irrevocable Trust purchased in a private placement 66,667 Common Stock Units at a purchase price of $3.00 per Common Stock Unit, for a total purchase price of $200,000.

On June 22, 2016, pursuant to a subscription agreement, Michael Fleming, a current director, directly purchased in a private placement an aggregate of 8,334 Common Stock Units at a purchase price of $3.00 per Common Stock Unit, each Common Stock Unit consisting of one share of common stock and a warrant to purchase one share of common stock at an exercise price of $6.00 per share, for a total purchase price of $25,000.

On June 30, 2016, the PSP purchased from us a promissory note bearing interest at the rate of 8% per annum (a “Promissory Note”) for aggregate consideration of $50,000, along with a warrant to acquire 8,334 shares of common stock at a price of $6.00 per share. On July 7, 2016, the PSP purchased an additional Promissory Note for aggregate consideration of $120,000, along with a warrant to acquire 20,000 shares of common stock at an exercise price of $6.00 per share. On December 30, 2016, the PSP exercised 43,590 warrants at a price of $3.90 per share.

On June 30, 2016, the Grover T. and Jill Z. Wickersham 2000 Charitable Remainder Trust (the “Wickersham Trust”) purchased an additional Promissory Note for aggregate consideration of $50,000, along with a warrant to acquire 8,334 shares of common stock at an exercise price of $6.00 per share. On November 21, 2016, the Wickersham Trust purchased an additional Promissory Note for aggregate consideration of $75,000, along with a warrant to acquire 12,500 shares of common stock at an exercise price of $6.00 per share. On December 31, 2016, the Wickersham Trust exercised its 20,834 warrants along with an additional 11,218 warrants assigned from Mr. Wickersham all at a price of $3.90 in exchange for eliminating the outstanding note principal.

During the nine months ended September 30, 2016, the Company’s chief executive officer paid expenses on behalf of the Company on his personal credit card. These related party advances do not bear interest and are payable on demand. At September 30, 2016, the balance due to the chief executive officer was approximately $8,000. The Company also has a note payable due its chief executive officer in the amount of $12,500 at September 30, 2016, that was repaid during fiscal year 2016.

On September 19, 2016, an entity for which Lawrence Hirson, a former director, serves as manager purchased $150,000 of promissory notes and received 3-year warrants to purchase 25,000 shares of our common stock at an exercise price of $6.00 per share.

On June 2, 2017, Mr. Wickersham purchased 15,189 units at $3.90 per unit, with each unit consisting of one share of common stock and one three-year common stock purchase warrant exercisable at $7.50 per share (subject to adjustment), for total proceeds of $59,237 in cash.

On August 10, 2017, Mr. Wickersham and his affiliates purchased 55,555 units at $4.50 per unit, with each unit consisting of one share of common stock and one Public Warrant, for total proceeds of approximately $250,000 in cash.

On August 23, 2017, our Board appointed Jack Peterson to the Board to fill an existing vacancy on the Board effective immediately. Mr. Peterson is also the President of Sandstrom Partners. In late 2016, with the goal of increasing its brand value and accelerating sales, the Company retained Sandstrom and tasked them with reviewing the Company’s current product portfolio, as well as its new ideas, and advising it with respect to marketing, creation of brand awareness and product positioning, locally and nationally. The Company is using Sandstrom’s full range of brand development services, including research, strategy, brand identity, package design, environments, advertising as well as digital design and development. The Company anticipates that its product packaging design will change in the second half of 2017 as a result of Sandstrom’s efforts. The Company has paid $80,000 in cash and issued 33,334 shares of stock valued at $145,000 (at the time of issuance) to Sandstrom Partners in 2017 to date for services rendered by Sandstrom under its agreement with the Company.

We believe that the foregoing transactions were in our best interests. Consistent with Section 78.140 of the Nevada Revised Statutes, it is our current policy that all transactions between us and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are approved by vote of the stockholders, or are fair to us as a corporation as of the time it is authorized, approved or ratified by the board. We will continue to conduct an appropriate review of all related party transactions and potential conflicts of interest on an ongoing basis. Our audit committee has the authority and responsibility to review, approve and oversee any transaction between the Company and any related person and any other potential conflict of interest situation on an ongoing basis, in accordance with Company policies and procedures in effect from time to time.

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

14. Subsequent Events

The Company’s corporate headquarters, including its wholly owned Motherlode subsidiary, has moved to 1001 SE Water Avenue, Suite 390, Portland, Oregon 97214, effective November 1, 2017. Located in Portland’s Eastbank Commerce Center on the east side of Portland, this office space is the new home to the Company’s executive offices, including finance, accounting, sales and general management, both for Eastside and its Motherlode bottling and canning subsidiary. The Company’s production facilities in Milwaukie and its Big Bottom Distilling operations in Hillsboro are not affected by this relocation, but the Company has fully terminated the occupancy of its former MLK location.

On October 26, 2017, the Securities and Exchange Commission (the “SEC”) declared effective a Post-Effective Amendment No. 1 to Form S-1 on Form S-3 (the “Post-Effective Amendment”) that the Company filed with the SEC on October 19, 2017 to register the resale of up to 2,462,436 shares of common stock held by certain selling stockholders, which includes shares of common stock issuable upon exercise of warrants to purchase common stock held by certain selling stockholders (the “Selling Stockholder Warrants”). The selling stockholders will receive all of the proceeds from the sale of shares of common stock registered under the Post-Effective Amendment and the Company will not receive any proceeds from these sales. However, we may receive proceeds from the cash exercise of the Selling Stockholder Warrants, which, if exercised for cash with respect to all 1,123,516 shares, would result in gross proceeds to us of approximately $7,993,736. We intend to use any net proceeds from any exercise of the Selling Stockholder Warrants for operating costs, working capital, and general corporate purposes. The amount and timing of our actual use of proceeds may vary significantly depending upon numerous factors, including the actual amount of proceeds we receive and the timing of when we receive such proceeds. There is no guarantee that the Selling Stockholder Warrants will be exercised in full or at all.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements for Eastside Distilling, Inc. and Subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with GAAP. In our opinion, the unaudited condensed consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly our financial position as of September 30, 2017, our operating results for the three and nine months ended September 30, 2017 and 2016 and our cash flows for the nine months ended September 30, 2017 and 2016. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Interim results are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2017. The condensed consolidated financial statements include the accounts of Eastside Distilling, Inc.’s wholly-owned subsidiary MotherLode (beginning as of March 8, 2017), and majority-owned subsidiary BBD (beginning as of May 1, 2017). All intercompany balances and transactions have been eliminated in consolidation.

Segment Reporting

Segment Reporting

The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company has one business activity, producing, marketing and distributing hand-crafted spirits, and operates as one segment. The Company’s chief operating decision makers, its chief executive officer and chief financial officer, review the Company’s operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance.

Use of Estimates

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Revenue Recognition

Net revenue includes product sales, less excise taxes and customer programs and incentives. The Company records revenue when all four of the following criteria are met: (i) there is persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured.

The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, which include sales to the Oregon Liquor Control Commission (OLCC), the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. The Company excludes sales tax collected and remitted to various states from sales and cost of sales. Sales from items sold through the Company’s retail location are recognized at the time of sale.

Revenue received from online merchants who sell discounted gift certificates for the Company’s merchandise and tastings is deferred until the customer has redeemed the discounted gift certificate or the gift certificate has expired, whichever occurs earlier.

Customer Programs and Incentives

Customer Programs and Incentives

Customer programs and incentives, which include customer promotional discount programs, customer incentives and other payments, are a common practice in the alcohol beverage industry. The Company makes these payments to customers and incurs these costs to promote sales of products and to maintain competitive pricing. Amounts paid in connection with customer programs and incentives are recorded as reductions to net sales or as advertising, promotional and selling expenses in accordance with Accounting Standards Codification (“ASC”) Topic 605-50, Revenue Recognition - Customer Payments and Incentives, based on the nature of the expenditure. Amounts paid to customers totaled $118,389 and $72,918 for the nine months ended September 30, 2017 and 2016, respectively.

Advertising, Promotional and Selling Expenses

Advertising, Promotional and Selling Expenses

The following expenses are included in advertising, promotions and selling expenses in the accompanying consolidated statements of operations: media advertising costs, special event costs, tasting room costs, sales and marketing expenses, salary and benefit expenses, travel and entertainment expenses for the sales, brand and sales support workforce and promotional activity expenses. Advertising, promotional and selling costs are expensed as incurred. Advertising, promotional and selling expense was $1,499,751 and $951,293 for the nine months ended September 30, 2017 and 2016, respectively.

Cost of Sales

Cost of Sales

Cost of sales consists of the costs of ingredients utilized in the production of spirits, manufacturing labor and overhead, warehousing rent, packaging, and in-bound freight charges. Ingredients account for the largest portion of the cost of sales, followed by packaging and production costs.

Shipping and Fulfillment Costs

Shipping and Fulfillment Costs

Freight costs incurred related to shipment of merchandise from the Company’s distribution facilities to customers are recorded in cost of sales.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash equivalents are considered to be highly liquid investments with maturities of three months or less at the time of the purchase. The Company had no cash equivalents at September 30, 2017 and December 31, 2016.

Concentrations

Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. At September 30, 2017, four customers represented 82% of trade receivables, and at December 31, 2016, three customers represented 91% of trade receivables. Sales to two customers accounted for approximately 48% of consolidated net sales for the nine months ended September 30, 2017. Sales to three customers accounted for approximately 57% of net sales for the nine months ended September 30, 2016.

Fair Value Measurements

Fair Value Measurements

GAAP defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAAP permits an entity to choose to measure many financial instruments and certain other items at fair value and contains financial statement presentation and disclosure requirements for assets and liabilities for which the fair value option is elected. At September 30, 2017 and December 31, 2016, management has not elected to report any of the Company’s assets or liabilities at fair value under the “fair value option” provided by GAAP.

The hierarchy of fair value valuation techniques under GAAP provides for three levels: Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, generally would require significant management judgment. The three levels for categorizing assets and liabilities under GAAP’s fair value measurement requirements are as follows:

Level 1:	Fair value of the asset or liability is determined using unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:	Fair value of the asset or liability is determined using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:	Fair value of the asset or liability is determined using unobservable inputs that are significant to the fair value measurement and reflect management’s own assumptions regarding the applicable asset or liability.

None of the Company’s assets or liabilities were measured at fair value at September 30, 2017 and December 31, 2016. However, GAAP requires the disclosure of fair value information about financial instruments that are not measured at fair value. Financial instruments consist principally of trade receivables, accounts payable, accrued liabilities, note payable, and convertible note payable. The estimated fair value of trade receivables, accounts payable, and accrued liabilities approximates their carrying value due to the short period of time to their maturities. At September 30, 2017 and December 31, 2016, the Company’s note payable and convertible notes payable are at fixed rates and their carrying value approximates fair value.

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities acquired in a business acquisition are valued at fair value at the date of acquisition.

Inventories

Inventories

Inventories primarily consist of bulk and bottled liquor and merchandise and are stated at the lower of cost or market. Cost is determined using an average costing methodology, which approximates cost under the first-in, first-out (FIFO) method. A portion of inventory is held by certain independent distributors on consignment until it is sold to a third party. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based primarily on the Company’s estimated forecast of product demand and production requirements. Such write-downs establish a new cost basis of accounting for the related inventory. The Company has recorded no write-downs of inventory for the nine months ended September 30, 2017 and 2016.

Property and Equipment

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Amortization of leasehold improvements is computed using the straight-line method over the life of the lease or the useful lives of the assets, whichever is shorter. The cost and related accumulated depreciation and amortization of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current period income or expense. The costs of repairs and maintenance are expensed as incurred.

Intangible Assets / Goodwill

Intangible Assets / Goodwill

The Company accounts for long-lived assets, including property and equipment, at amortized cost. Management reviews long-lived assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount of the asset, an impairment loss would be recognized to write down the asset to its estimated fair value. At September 30, 2017 and December 31, 2016, no impairment loss was recognized.

Income Taxes

Income Taxes

The provision for income taxes is based on income and expenses as reported for financial statement purposes using the “asset and liability method” for accounting for deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. At September 30, 2017 and December 31, 2016, the Company established valuation allowances against its net deferred tax assets.

Income tax positions that meet the “more-likely-than-not” recognition threshold are measured at the largest amount of income tax benefit that is more than 50 percent likely to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with income tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized income tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized income tax benefits would be classified as additional income taxes in the accompanying condensed consolidated statements of operations. There were no unrecognized income tax benefits, nor any interest and penalties associated with unrecognized income tax benefits, accrued or expensed at and for the nine months ended September 30, 2017 and 2016.

The Company files federal income tax returns in the U.S. and various state income tax returns. The Company is no longer subject to examinations by the related tax authorities for the Company’s U.S. federal and state income tax returns for years prior to 2011.

Comprehensive Income

Comprehensive Income

The Company does not have any reconciling other comprehensive income items for the nine months ended September 30, 2017 and 2016.

Excise Taxes

Excise Taxes

The Company is responsible for compliance with the TTB regulations, which includes making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual states also impose excise taxes on alcohol beverages in varying amounts. The Company calculates its excise tax expense based upon units produced and on its understanding of the applicable excise tax laws. Excise taxes totaled $654,136 and $469,936 for the nine months ended September 30, 2017 and 2016, respectively.

Stock-Based Compensation

Stock-Based Compensation

The Company recognizes as compensation expense all stock-based awards issued to employees. The compensation cost is measured based on the grant-date fair value of the related stock-based awards and is recognized over the service period of stock-based awards, which is generally the same as the vesting period. The fair value of stock options is determined using the Black-Scholes valuation model, which estimates the fair value of each award on the date of grant based on a variety of assumptions including expected stock price volatility, expected terms of the awards, risk-free interest rate, and dividend rates, if applicable. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments at the end of each reporting period and as the underlying stock-based awards vest. Stock-based compensation was $900,130 and $427,947 for the nine months ended September 30, 2017 and 2016, respectively.

Accounts Receivable Factoring Program

Accounts Receivable Factoring Program

During the three months ended June 30, 2017, we terminated our previous receivable factoring program. Under the prior program, we had the option to sell certain customer account receivables in advance of payment for 75% of the amount due. When the customer remitted payment, we would receive the remaining 25%. We were charged interest on the advanced 75% payment at a rate of 1.5% per month. Under the terms of the agreement with the factoring provider, any factored invoices had recourse should the customer fail to pay the invoice. Thus, we recorded factored amounts as a liability until the customer remitted payment and we received the remaining 25% of the non-factored amount. We did not factor any invoices during the nine months ended September 30, 2017. At September 30, 2017, we had no factored invoices outstanding, and we incurred fees associated with the factoring program of $63,238 during the nine months ended September 30, 2017. During the nine months ended September 30, 2016, we factored invoices totaling $560,172 and received total proceeds of $420,129. At September 30, 2016, we had $184,875 in open factored invoices, and we incurred fees associated with the factoring program of $21,500 during the nine months ended September 30, 2016.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standard Boards (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 was effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We have adopted ASU 2016-09 as of March 31, 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

- A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and

- A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are currently evaluating the impact ASU 2016-02 will have on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 will supersede virtually all existing revenue guidance. Under this update, an entity is required to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. As such, an entity will need to use more judgment and make more estimates than under the current guidance. ASU 2014-09 is to be applied retrospectively either to each prior reporting period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. The Company will elect to apply the impact (if any) of applying ASU 2014-09 to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 deferred the effective date of ASU 2014-09 for one year, making it effective for the year beginning December 31, 2017, with early adoption permitted as of January 1, 2017. The Company currently expects to adopt ASU 2014-09 in the first quarter of 2018. The Company does not expect adoption of ASU 2014-09 to have a material impact on its condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (“ASU 2014-15”). The new guidance explicitly requires that management assess an entity’s ability to continue as a going concern and may require additional detailed disclosures. ASU 2014-15 was effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. We adopted ASU 2014-15 as of December 31, 2016. The Company does not believe the adoption of ASU 2014-15 had any material impact on its condensed consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 is part of the FASB’s initiative to simplify accounting standards. The guidance requires an entity to recognize inventory within scope of the standard at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. ASU 2015-11 was effective prospectively for the year beginning January 1, 2017. We adopted ASU 2015-11 as of March 31, 2017. The Company does not believe the adoption of ASU 2015-11 had any material impact on its condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, simplifying the presentation of debt issuance costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 was effective for annual and interim periods beginning after December 15, 2015 and early application was permitted. We early adopted ASU 2015-03 as of December 31, 2015. The Company does not believe the adoption of ASU 2015-03 had any material impact on its condensed consolidated financial statements.

Reclassifications

Reclassifications

Certain prior period amounts have been reclassified to conform to the September 30, 2017 presentation with no changes to net loss or total stockholders’ equity previously reported.

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Business Acquisition (Tables)

9 Months Ended

Sep. 30, 2017

MotherLode Craft Distillery, LLC [Member]

Schedule of Business Acquisition Assets and Labilities

The following allocation of the purchase price is as follows:

Consideration given:
86,667 shares of common stock valued at $4.35 per share	$	377,000
Assets and liabilities acquired:
Cash		7,062
Inventory		103,488
Property and equipment		46,250
Intangible assets - customer list and license		376,431
Goodwill		28,182
Accounts payable		(5,180	)
Customer deposits		(179,233	)
	$	377,000

Big Bottom Distilling, LLC [Member]

Schedule of Business Acquisition Assets and Labilities

The following allocation of the purchase price is as follows:

Consideration given:
28,096 shares of common stock valued at $4.80 per share for 90%	$	134,858
Noncontrolling interests		14,984
Total value of acquisition	$	149,842
Assets and liabilities acquired:
Cash (overdraft)	$	(2,521	)
Accounts receivable		6,224
Inventory		129,922
Property and equipment		22,717
Intangible assets - license		25,000
Goodwill		193,374
Accrued liabilities		(52,841	)
Notes payable		(172,033	)
Total	$	149,842

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Inventories (Tables)

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consist of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017		December 31, 2016
Raw materials	$	2,077,989	$	439,739
Finished goods		338,957		340,298
Total inventories	$	2,416,946	$	780,037

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Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment Net

Property and equipment consists of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
Furniture and fixtures	$	252,049		$	70,140
Leasehold improvements		18,266			8,607
Vehicles		49,483			38,831
Construction in progress		213,453			34,603
Total cost		533,251			152,181
Less accumulated depreciation		(64,869	)		(52,965	)
Property and equipment - net	$	468,382		$	99,216

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Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

At September 30, 2017, intangible assets and goodwill consist of the following:

	September 30, 2017			Life
Permits and licenses	$	50,000		-
Customer lists		351,431		7 years
Goodwill		221,556		-
Total intangible assets and goodwill		622,987
Less accumulated amortization		(28,033	)
Intangible assets and goodwill - net	$	594,954

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of Notes Payable

Notes payable consists of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
Notes payable bearing interest at 7.99%. The note is payable in monthly principal plus interest payments of $472 through December 2020. The note is secured by a vehicle.	$	-		$	16,642
Notes payable bearing interest at 8%. The notes have a 2-year maturity and are due at various dates between September 19, 2018 – October 19, 2018, and pay interest-only on a monthly basis.		460,000			547,500
Note payable bearing interest at 2.74%. The note is payable in monthly principal plus interest payments of $100 through December 2019.		2,608			-
Note payable bearing interest at 4.00%. The note is payable in quarterly principal plus interest payments of $9,614 through March 2019.		55,125			-
Convertible notes payable bearing interest at 4.00%. The notes principal plus accrued interest is due in full at various dates between April 3, 2020 – September 30, 2020. The notes have an automatic conversion feature upon the closing (or first in a series of closings) of the next equity financing in which the Company sells shares of its equity securities for an aggregate consideration of at least $4,000,000 at a purchase price of at least $7.50. The outstanding principal and unpaid accrued interest on the notes shall be automatically converted into equity securities at a price equal to 80% of the price paid per share by the investors in the next equity financing or $6.00, whichever is lower, provided, however, that in no event shall the conversion price be less than $6.00. The note has a voluntary conversion feature where the investor may convert, in whole or in part, at any time at the conversion price of $6.00.		915,850			-
Total notes payable		1,433,583			564,142
Less current portion		(39,032	)		(4,537	)
Less debt discount for detachable warrant		(63,544	)		(131,849	)
Long-term portion of notes payable	$	1,331,007		$	427,756

Schedule of Maturities on Notes Payable

Maturities on notes payable as of September 30, 2017, are as follows:

Year ending December 31:

2017	$	9,280
2018		497,940
2019		10,513
2020		915,850
Thereafter		-
	$	1,433,583

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

Schedule of Effective Tax Rates Reconciliation

The nature of the differences for the nine months ended September 30, 2017 and 2016 were as follows:

	September 30, 2017			September 30, 2016
Expected federal income tax benefit	$	(1,204,479	)	$	(798,000	)
State income taxes after credits		(237,739	)		(155,000	)
Change in valuation allowance		1,442,218			953,000
Total provision for income taxes	$	-		$	-

Schedule of Deferred Tax Assets and Liabilities

The components of the net deferred tax assets and liabilities at September 30, 2017 and December 31, 2016 consisted of the following:

	September 30, 2017			December 31, 2016
Deferred tax assets:
Net operating loss carryforwards	$	4,824,563		$	3,557,909
Stock-based compensation		410,575			213,181
Total deferred tax assets		5,235,138			3,771,090
Deferred tax liabilities:
Depreciation and amortization		(92,647	)		(70,816	)
Total deferred tax liabilities		(92,647	)		(70,816	)
Valuation allowance		(5,142,491	)		(3,700,274	)
Net deferred tax assets	$	-		$	-

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Lease Payments Under Operating Leases

At September 30, 2017, future minimum lease payments required under the operating leases are approximately as follows:

2017	$	82,000
2018		133,000
2019		114,000
2020		96,000
2021		64,000
Thereafter		-
Total	$	489,000

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Net Loss Per Common Share (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Net Loss Per Common Share

The numerators and denominators used in computing basic and diluted net loss per common share in 2017 and 2016 are as follows:

	Three months ended September 30,
	2017			2016
Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator)	$	(1,411,461	)	$	(1,456,049	)
Weighted average shares (denominator)		4,142,632			1,587,285
Basic and diluted net loss per common share	$	(0.34	)	$	(0.92	)

	Nine months ended September 30,
	2017			2016
Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator)	$	(3,605,967	)	$	(3,797,988	)
Weighted average shares (denominator)		3,342,332			1,106,832
Basic and diluted net loss per common share	$	(1.08	)	$	(3.43	)

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Stockholder's Deficit (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of Balance of Stockholder's Equity

																Total			Non-controlling
	Convertible Series A															Stockholders'			interest in
	Preferred Stock						Common Stock				Paid-in		Accumulated			Equity			consolidated			Total
	Shares			Amount			Shares		Amount		Capital		Deficit			(Deficit)			entities			Equity
Balance, December 31, 2016		300		$	245,838			2,542,504	$	254	$	13,699,785	$	(12,813,044	)	$	1,132,833		$	-		$	1,132,833
Issuance of common stock		-			-			15,001		1		58,499		-			58,500			-			58,500
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants		-			-			1,780,019		178		6,648,809		-			6,648,987			-			6,648,987
Issuance of common stock from warrant exercise for cash		-			-			40,834		4		159,246		-			159,250			-			159,250
Issuance of common stock for services by third parties		-			-			78,340		8		334,626		-			334,634			-			334,634
Issuance of common stock for services by employees		-			-			38,167		4		174,298		-			174,302			-			174,302
Stock option exercises		-			-			9,260		1		49,999		-			50,000			-			50,000
Stock-based compensation		-			-			-		-		486,194		-			486,194			-			486,194
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580		-			-			86,667		9		371,411		-			371,420			-			371,420
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400		-			-			28,096		3		120,455		-			120,458			14,984			135,442
Shares issued for payoff of long-term notes		-			-			105,770		10		505,627		-			505,637			-			505,637
Cumulative dividend on Series A preferred		-			5,037			-		-		-		(5,037	)		-			-			-
Common shares issued for preferred conversion		(300	)		(250,875	)		100,001		10		235,865		-			(15,000	)		-			(15,000	)
Adjustment of shares for reverse stock-split		-			-			331		-		-		-			-			-			-
Net loss attributable to noncontrolling interests		-			-			-		-		-		-			-			(1,174	)		(1,174	)
Net loss attributable to common shareholders		-			-			-		-		-		(3,600,930	)		(3,600,930	)		-			(3,600,930	)
Balance, September 30, 2017		-		$	-			4,824,990	$	482	$	22,844,814	$	(16,419,011	)	$	6,426,285		$	13,810		$	6,440,095

Summary of Stock Option Activity

A summary of all stock option activity at and for the nine months ended September 30, 2017 is presented below:

	# of Options			Weighted- Average Exercise Price
Outstanding at December 31, 2016		173,750		$	9.24
Options granted		233,167			4.35
Options exercised		(9,260	)		5.40
Options canceled		(20,760	)		-
Outstanding at September 30, 2017		376,897		$	6.52
Exercisable at September 30, 2017		126,564		$	10.45

Schedule of Weighted-average Assumptions used in Black-Scholes Valuation Method

The following weighted-average assumptions were used in the Black-Scholes valuation model for options granted during the nine months ended September 30, 2017:

Risk-free interest rate	1.71	%
Expected term (in years)	6.6
Dividend yield	-
Expected volatility	75	%

Warrant [Member]

Schedule of Weighted-average Assumptions used in Black-Scholes Valuation Method

The estimated fair value of the warrants at issuance was $1,944,553, based on a combination of closing market trading price on the date of issuance for the public offering warrants, and the Black-Scholes option-pricing model using the weighted-average assumptions below:

Volatility		75	%
Risk-free interest rate		1.47	%
Expected term (in years)		2.83
Expected dividend yield		-
Fair value of common stock	$	4.74

Summary of Warrant Activity

A summary of activity in warrants is as follows:

	Warrants			Weighted Average Remaining Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at December 31, 2016		846,765			2.77 years	$	6.48	$	0
Nine months ended September 30, 2017:
Granted		1,862,019			4.27 years	$	5.77	$	40,180
Exercised		(40,834	)		2.00 years	$	3.90		-
Forfeited and cancelled		(74,873	)		2.00 years	$	6.00		-
Outstanding at September 30, 2017		2,593,077			3.63 years	$	5.99	$	40,180

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Description of Business (Details Narrative)	May 01, 2017
Ownership percentage	90.00%
Big Bottom Distilling, LLC [Member]
Ownership percentage	90.00%

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Liquidity (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) Business	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Net loss	$ 1,411,160	$ 1,436,449	$ 3,602,104	$ 3,760,629
Accumulated deficit	16,419,011		16,419,011		$ 12,813,044
Net cash provided by financing activities			8,033,942	3,397,157
Cash on hand	$ 4,190,085	$ 400,178	4,190,085	$ 400,178	$ 1,088,066	$ 141,317
Working capital			$ 6,469,391
Number of businesses acquired | Business			2

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Summary of Significant Accounting Policies (Details Narrative)	9 Months Ended		12 Months Ended
	Sep. 30, 2017 USD ($) Number	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Number of operating segments | Number	1
Customer programs and incentives paid	$ 118,389	$ 72,918
Advertising expense	1,499,751	951,293
Cash equivalents
Unrecognized income tax benefit, interest and penalties
Excise taxes	654,136	469,936
Stock-based compensation	$ 900,130	427,947
Percentage of factored and non-factored amount description	Under the prior program, we had the option to sell certain customer account receivables in advance of payment for 75% of the amount due. When the customer remitted payment, we would receive the remaining 25%. We were charged interest on the advanced 75% payment at a rate of 1.5% per month. Under the terms of the agreement with the factoring provider, any factored invoices had recourse should the customer fail to pay the invoice. Thus, we recorded factored amounts as a liability until the customer remitted payment and we received the remaining 25% of the non-factored amount.
Accounts receivable factored invoices		184,875
Accounts receivable factored program	63,238	21,500
Amount of factored invoice		560,172
Proceeds from accounts receivable invoice		$ 420,129
Minimum [Member]
Property and equipment estimated useful lives	3 years
Maximum [Member]
Property and equipment estimated useful lives	7 years
Trade Receivables [Member] | Four Customers [Member]
Concentration of credit risk percentage	82.00%
Trade Receivables [Member] | Three Customers [Member]
Concentration of credit risk percentage			91.00%
Sales Revenue, Net [Member] | Three Customers [Member]
Concentration of credit risk percentage		57.00%
Sales Revenue, Net [Member] | Two Customers [Member]
Concentration of credit risk percentage	48.00%

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Business Acquisition (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2016	May 01, 2017
Business acquisition revenue	$ 375,000
Ownership percentage		90.00%
Big Bottom Distilling, LLC [Member]
Business acquisition revenue	$ 201,000
Ownership percentage		90.00%

XML

Business Acquisition - Schedule of Business Acquisition Assets and Labilities (Details)	9 Months Ended
	Sep. 30, 2017 USD ($)
MotherLode Craft Distillery, LLC [Member]
Consideration given	$ 377,000
Cash (overdraft)	7,062
Inventory	103,488
Property and equipment	46,250
Intangible assets - customer list and license	376,431
Goodwill	28,182
Accounts payable	(5,180)
Customer deposits	(179,233)
Total assets and liabilities assumed	377,000
Big Bottom Distilling, LLC [Member]
Consideration given	134,858
Noncontrolling interests	14,984
Total value of acquisition	149,842
Cash (overdraft)	(2,521)
Accounts receivable	6,224
Inventory	129,922
Property and equipment	22,717
Intangible assets - customer list and license	25,000
Goodwill	193,374
Accrued liabilities	(52,841)
Notes payable	(172,033)
Total assets and liabilities assumed	$ 149,842

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Business Acquisition - Schedule of Business Acquisition Assets and Labilities (Details) (Parenthetical)	9 Months Ended
	Sep. 30, 2017 $ / shares shares
MotherLode Craft Distillery, LLC [Member]
Business consideration shares of common stock | shares	86,667
Common stock valued per share | $ / shares	$ 4.35
Big Bottom Distilling, LLC [Member]
Business consideration shares of common stock | shares	28,096
Common stock valued per share | $ / shares	$ 4.80
Business acquisition, percentage	90.00%

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Inventories - Schedule of Inventories (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Raw materials	$ 2,077,989	$ 439,739
Finished goods	338,957	340,298
Total inventories	$ 2,416,946	$ 780,037

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Property and Equipment (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Property, Plant and Equipment [Abstract]
Purchases of property and equipment	$ 381,837	$ 6,952
Depreciation expense	$ 25,736	$ 16,579

XML

Property and Equipment - Schedule of Property and Equipment Net (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Total cost	$ 533,251	$ 152,181
Less accumulated depreciation	(64,869)	(52,965)
Total property and equipment, net	468,382	99,216
Furniture and Fixtures [Member]
Total cost	252,049	70,140
Leasehold Improvements [Member]
Total cost	18,266	8,607
Vehicles [Member]
Total cost	49,483	38,831
Construction In-Progress [Member]
Total cost	$ 213,453	$ 34,603

XML

Intangible Assets and Goodwill (Details Narrative) - USD ($)	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible assets and goodwill
Amortization of intangible assets	$ 28,033

XML

Intangible Assets and Goodwill - Schedule of Intangible Assets (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Total intangible assets and goodwill	$ 622,987
Less accumulated amortization	(28,033)
Intangible assets and goodwill - net	594,954
Permits and Licenses [Member]
Total intangible assets and goodwill	50,000
Customer Lists [Member]
Total intangible assets and goodwill	$ 351,431
Intangible assets and goodwill, useful life	7 years
Goodwill [Member]
Total intangible assets and goodwill	$ 221,556

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Notes Payable - Schedule of Notes Payable (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Total notes payable	$ 1,433,583	$ 564,142
Less current portion	(39,032)	(4,537)
Less debt discount for detachable warrant	(63,544)	(131,849)
Long-term portion of notes payable	1,331,007	427,756
Notes Payable [Member]
Total notes payable		16,642
Note Payable 1 [Member]
Total notes payable	460,000	547,500
Note Payable 2 [Member]
Total notes payable	2,608
Note Payable 3 [Member]
Total notes payable	55,125
Note Payable 4 [Member]
Total notes payable	$ 915,850

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Notes Payable - Schedule of Notes Payable (Details) (Parenthetical)	9 Months Ended	12 Months Ended
	Sep. 30, 2017 USD ($) $ / shares	Dec. 31, 2016 USD ($) $ / shares
Notes Payable [Member]
Debt instrument interest rate	7.99%	7.99%
Debt instrument principal and interest	$ 472	$ 472
Debt instrument maturity date description	through December, 2020.	through December, 2020.
Note Payable 1 [Member]
Debt instrument interest rate	8.00%	8.00%
Debt instrument maturity date description	various dates between September 19, 2018 – October 19, 2018	various dates between September 19, 2018 – October 19, 2018
Note Payable 2 [Member]
Debt instrument interest rate	2.74%	2.74%
Debt instrument principal and interest	$ 100	$ 100
Debt instrument maturity date description	through December, 2019.	through December, 2019.
Note Payable 3 [Member]
Debt instrument interest rate	4.00%	4.00%
Debt instrument principal and interest	$ 9,614	$ 9,614
Debt instrument maturity date description	through March, 2019.	through March, 2019.
Note Payable 4 [Member]
Debt instrument interest rate	4.00%	4.00%
Debt instrument maturity date description	various dates between April 3, 2020 – September 30, 2020.	various dates between April 3, 2020 – September 30, 2020.
Debt instrument aggregated Principle	$ 4,000,000	$ 4,000,000
Debt instrument convertible conversion ratio	0.80	0.80
Debt instrument convertible conversion share price | $ / shares	$ 6.00	$ 6.00
Debt instrument purchase price | $ / shares	$ 7.50	$ 7.50

XML

Notes Payable - Schedule of Maturities on Notes Payable (Details)	Sep. 30, 2017 USD ($)
Debt Disclosure [Abstract]
2017	$ 9,280
2018	497,940
2019	10,513
2020	915,850
Thereafter
Total	$ 1,433,583

XML

Income Taxes (Details Narrative)	9 Months Ended
	Sep. 30, 2017 USD ($)
Net operating loss carryforward	$ 12,200,000
Federal [Member]
Net operating loss carryforward year	20 years
Net operating loss expiration year	2034
State [Member]
Net operating loss carryforward year	15 years
Net operating loss expiration year	2029

XML

Income Taxes - Schedule of Effective Tax Rates Reconciliation (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Tax Disclosure [Abstract]
Expected federal income tax benefit			$ 1,204,479	$ (798,000)
State income taxes after credits			237,739	(155,000)
Change in valuation allowance			1,442,218	953,000
Total provision for income taxes

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Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Income Tax Disclosure [Abstract]
Net operating loss carryforwards	$ 4,824,563	$ 3,557,909
Stock-based compensation	410,575	213,181
Total deferred tax assets	5,235,138	3,771,090
Depreciation and amortization	(92,647)	(70,816)
Total deferred tax liabilities	(92,647)	(70,816)
Valuation allowance	(5,142,491)	(3,700,274)
Net deferred tax assets

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Commitments and Contingencies (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Operation lease expiration	expire through October 2021.
Rent expense	$ 248,535	$ 304,000
Operating lease agreements expiration	The Termination Agreement provides that the original lease agreement dated July 17, 2014 terminated on June 30, 2017 rather than October 30, 2020.
Minimum [Member]
Monthly lease payments	$ 1,802
Maximum [Member]
Monthly lease payments	$ 6,400

XML

Commitments and Contingencies - Schedule of Future Minimum Lease Payments Under Operating leases (Details)	Sep. 30, 2017 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2017	$ 82,000
2018	133,000
2019	114,000
2020	96,000
2021	64,000
Thereafter
Total	$ 489,000

XML

Net Loss Per Common Share - Schedule of Basic and Diluted Net Loss Per Common Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Earnings Per Share [Abstract]
Net loss attributable to Eastside Distilling, Inc. common shareholders (numerator)	$ (1,411,461)	$ (1,456,049)	$ (3,605,967)	$ (3,797,988)
Weighted average shares (denominator)	4,142,632	1,587,285	3,342,332	1,106,832
Basic and diluted net loss per common share	$ (0.34)	$ (0.92)	$ (1.08)	$ (3.43)

XML

Stockholder's Deficit (Details Narrative) - USD ($)										1 Months Ended								2 Months Ended	3 Months Ended	9 Months Ended
	Sep. 08, 2017	Aug. 24, 2017	Jun. 15, 2017	May 01, 2017	Apr. 05, 2017	Mar. 08, 2017	Jan. 02, 2017	Oct. 18, 2016	Jan. 29, 2015	Sep. 30, 2017	Aug. 31, 2017	Jun. 30, 2017	May 31, 2017	Apr. 30, 2017	Mar. 31, 2017	Feb. 16, 2017	Jan. 22, 2017	Jun. 02, 2017	Jun. 17, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Sep. 08, 2016
Reverse Stock Splits			3-for-1 reverse stock split					20-for-1 reverse stock split
Number of common stock shares sold											1,200,000
Sale of stock price per share											$ 4.50
Proceeds from issuance of common stock																		$ 1,560,000		$ 6,707,487
Number of common stock shares issued											1,200,000							400,019
Number of warrant shares of common stock										400,019	1,200,000					40,834		400,019		400,019
Number of common stock shares issued value																				$ 58,500
Proceeds from issuance of warrant exercises																$ 159,250				$ 159,250
Warrants term											5 years
Percentage of convertible promissory notes											6.00%
Stock options exercises																				(9,260)
Warrants exercise price per share											$ 5.40
Proceeds from issuance of public offering											$ 5,400,000
Option to purchase of common stock shares																				233,167
Common stock issued for stock based compensation																				279,322
Stock based compensation, shares value																				$ 486,194
Number of units issued for service value																				$ 334,634
Preferred stock, shares outstanding										0										0		300
Vesting period of option																				5 years
Aggregate intrinsic value of options outstanding										$ 25,095										$ 25,095
Number of unvested options										250,334										250,334
Aggregate grant date fair value unvested options																				$ 745,883
Aggregate intrinsic value of unvested options										$ 23,003										$ 23,003
Number of vested options																				87,499
Weighted-average grant-date fair value of stock options granted																				$ 2.97
Fair value of stock option granted																				$ 692,835
Stock option plan expenses																				373,278	$ 154,707
Compensation cost related to stock options not yet recognized										$ 772,636										$ 772,636
Period of compensation cost related to stock options not yet recognized																				2 years 11 months 26 days
2016 Equity Incentive Plan [Member]
Number of RSU's issued																				89,185
Option to purchase of common stock shares																				354,936
Number of shares available for grant							307,139																166,667
Outstanding capital stock shares percentage							8.00%
Stock option exercise price percentage description	The exercise price per share of each stock option shall not be less than 100 percent of the fair market value of the Company’s common stock on the date of grant.
Vesting period of option																				5 years
2016 Equity Incentive Plan [Member] | October 18 2017 [Member]
Number of common stock shares issued																				192,861
Number of common stock shares reserved for future issuance										500,000										500,000
2015 Equity Incentive Plan [Member]
Number of shares available for grant									50,000
Stock option exercise price percentage description									The exercise price per share of each stock option shall not be less than 20 percent of the fair market value of the Company’s common stock on the date of grant.
Number of options issued																				14,584
Description of vesting percentage																				vest at the rate of at least 25 percent in the first year, starting 6-months after the grant date, and 75% in year two.
Non Plan Options [Member]
Number of unregistered option outstanding										16,667										16,667
Series A Convertible Preferred Stock [Member]
Number of common stock shares issued																			972	499
Number of common stock shares issued value																			$ 972,000	$ 499,000
Number of units issued for cancellation outstanding indebt																			50
Number of units issued for cancellation outstanding indebt, value																			$ 50,000
Outstanding indebtedness net of issuance costs																			69,528
Preferred stock stated value																			$ 1,000
Fixed conversion price per share																			$ 4.50
Preferred stock accrued dividend rate																			8.00%
Description of participation rights																			Dividends are payable quarterly in arrears at the Company’s option either in cash or “in kind” in shares of Common Stock; provided, however that dividends may only be paid in cash following the fiscal year in which the Company has net income (as shown in its audited financial statements contained in its Annual Report on Form 10-K for such year) of at least $500,000, to the extent permitted under applicable law out of funds legally available therefore. For ‘in-kind” dividends, holders will receive that number of shares of Common Stock equal to (i) the amount of the dividend payment due such stockholder divided by (ii) 90% of the average of the per share market values during the twenty (20) trading days immediately preceding a dividend date.
Preferred stock, shares outstanding
Description of liquidation rights																			In the event of any voluntary or involuntary liquidation, dissolution or winding up, or sale of the Company, each holder of Series A Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to: (i) $1,000 multiplied by (ii) the total number of shares of Series A Preferred Stock issued under the Series A Certificate of Designation multiplied by (iii) 2.5.
Warrant [Member]
Number of common stock shares issued																				400,019
Number of warrant shares of common stock										40,834										40,834
Proceeds from issuance of warrant exercises																				$ 159,250
Fair value of warrants																				$ 1,944,553
Public Warrant [Member]
Number of common stock shares issued																				1,380,000
Over-Allotment [Member]
Option to purchase of common stock shares		180,000
Gross proceeds before deducting offering expenses		$ 810,000
Chief Executive Officer [Member]
Common stock closing share price per share														$ 4.80
Number of shares issued upon conversion					10,217
Number of RSU's issued														33,334
Independent Directors [Member]
Common stock closing share price per share														$ 5.40
Stock options exercises														4,630
Big Bottom Distilling, LLC [Member]
Number of common stock shares issued													28,096
Number of common stock shares issued value				$ 134,858
Common stock closing share price per share													$ 4.80
Issuance of common stock for acquisition costs				$ 14,400
Percentage of common stock unit													90.00%
Third Party Consultant [Member]
Number of common stock shares issued for service rendered											5,209
Directors and Employees [Member]
Common stock issued for stock based compensation										14,760
Stock based compensation, shares value										$ 56,221
Officer [Member]
Number of common stock shares issued for service rendered																			423
Number of units issued for service value																			$ 423,000
Four Consultants [Member]
Number of common stock shares issued																				82,000
Conversion Shares [Member]
Number of shares issued upon conversion														16,667	83,334
Number of preferred stock shares issued upon conversion												250		50
8% Convertible Promissory Notes [Member]
Number of shares issued upon conversion															22,436
Debt conversion on converted amount															$ 87,500
Percentage of convertible promissory notes															8.00%
6% Convertible Promissory Note [Member]
Number of shares issued upon conversion											83,334
Debt conversion on converted amount											$ 500,000
MotherLode Craft Distillery, LLC [Member]
Number of common stock shares issued						86,667
Number of common stock shares issued value						$ 377,000
Common stock closing share price per share						$ 4.35
Issuance of common stock for acquisition costs						$ 5,580
Minimum [Member] | Third Party Consultant [Member]
Common stock closing share price per share											$ 3.40
Minimum [Member] | Directors and Employees [Member]
Common stock closing share price per share										$ 3.78										$ 3.78
Minimum [Member] | Individual Option Limit [Member] | October 18 2017 [Member]
Number of common stock shares issued																				8,333
Minimum [Member] | Individual Award Limit [Member] | October 18 2017 [Member]
Number of common stock shares issued																				8,333
Minimum [Member] | Individual Performance Award Limit [Member] | October 18 2017 [Member]
Number of common stock shares issued																				8,333
Maximum [Member] | Third Party Consultant [Member]
Common stock closing share price per share											$ 3.50
Maximum [Member] | Directors and Employees [Member]
Common stock closing share price per share										$ 4.38										$ 4.38
Maximum [Member] | Individual Option Limit [Member] | October 18 2017 [Member]
Number of common stock shares issued																				200,000
Maximum [Member] | Individual Award Limit [Member] | October 18 2017 [Member]
Number of common stock shares issued																				200,000
Maximum [Member] | Individual Performance Award Limit [Member] | October 18 2017 [Member]
Number of common stock shares issued																				200,000
Accredited Investors [Member]
Number of common stock shares sold																	15,001
Sale of stock price per share																	$ 3.90
Proceeds from issuance of common stock																	$ 58,500
Four Third-party Consultants [Member ]
Number of common stock shares issued for service rendered															19,796
Four Third-party Consultants [Member ] | Minimum [Member]
Common stock closing share price per share															$ 3.90
Four Third-party Consultants [Member ] | Maximum [Member]
Common stock closing share price per share															4.35
Employees [Member]
Common stock closing share price per share															$ 4.38
Number of shares issued employees												2,716			575
Value of shares issued to employees												$ 15,943			$ 2,517
Employees [Member] | Minimum [Member]
Common stock closing share price per share												$ 4.38
Employees [Member] | Maximum [Member]
Common stock closing share price per share												$ 6.00
Three Third-party Consultants [Member ]
Number of common stock shares issued for service rendered														50,335
Three Third-party Consultants [Member ] | Minimum [Member]
Common stock closing share price per share														$ 4.35
Three Third-party Consultants [Member ] | Maximum [Member]
Common stock closing share price per share														$ 4.50

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Stockholder's Deficit - Schedule of Balance of Stockholder's Equity (Details) - USD ($)	1 Months Ended	2 Months Ended	3 Months Ended		9 Months Ended
	Aug. 31, 2017	Jun. 02, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Balance					$ 1,132,833
Issuance of common stock					58,500
Issuance of common stock, shares	1,200,000	400,019
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants					6,648,987
Issuance of common stock from warrant exercise for cash					159,250
Issuance of common stock for services by third parties					334,634
Issuance of common stock for services by employees					174,302
Stock options exercises					$ 50,000
Stock options exercises, shares					(9,260)
Stock-based compensation					$ 486,194
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580					371,420
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400					135,442
Shares Issued for payoff of long-term notes					505,637
Cumulative dividend on Series A preferred
Common shares issued for preferred conversion					$ (15,000)
Adjustment of shares for reverse stock-split, shares
Net loss attributable to noncontrolling interests			$ 301		$ (1,174)
Net loss attributable to common shareholders			(1,411,160)	$ (1,436,449)	(3,602,104)	$ (3,760,629)
Balance			6,440,095		6,440,095
Convertible Series A Preferred Stock [Member]
Balance					$ 245,838
Balance, shares					300
Issuance of common stock
Issuance of common stock, shares
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants, shares
Issuance of common stock from warrant exercise for cash
Issuance of common stock from warrant exercise for cash, shares
Issuance of common stock for services by third parties
Issuance of common stock for services by third parties, shares
Issuance of common stock for services by employees
Issuance of common stock for services by employees, shares
Stock options exercises
Stock options exercises, shares
Stock-based compensation
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580, shares
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400, shares
Shares Issued for payoff of long-term notes
Shares Issued for payoff of long-term notes, shares
Cumulative dividend on Series A preferred					$ 5,037
Common shares issued for preferred conversion					$ (250,875)
Common shares issued for preferred conversion, shares					(300)
Adjustment of shares for reverse stock-split, shares
Net loss attributable to noncontrolling interests
Net loss attributable to common shareholders
Balance
Balance, shares
Common Stock [Member]
Balance					$ 254
Balance, shares					2,542,504
Issuance of common stock					$ 1
Issuance of common stock, shares					15,001
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants					$ 178
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants, shares					1,780,019
Issuance of common stock from warrant exercise for cash					$ 4
Issuance of common stock from warrant exercise for cash, shares					40,834
Issuance of common stock for services by third parties					$ 8
Issuance of common stock for services by third parties, shares					78,340
Issuance of common stock for services by employees					$ 4
Issuance of common stock for services by employees, shares					38,167
Stock options exercises					$ 1
Stock options exercises, shares					9,260
Stock-based compensation
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580					$ 9
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580, shares					86,667
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400					$ 3
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400, shares					28,096
Shares Issued for payoff of long-term notes					$ 10
Shares Issued for payoff of long-term notes, shares					105,770
Cumulative dividend on Series A preferred
Common shares issued for preferred conversion					$ 10
Common shares issued for preferred conversion, shares					100,001
Adjustment of shares for reverse stock-split, shares					331
Net loss attributable to noncontrolling interests
Net loss attributable to common shareholders
Balance			$ 482		$ 482
Balance, shares			4,824,990		4,824,990
Paid-in Capital [Member]
Balance					$ 13,699,785
Issuance of common stock					58,499
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants					6,648,809
Issuance of common stock from warrant exercise for cash					159,246
Issuance of common stock for services by third parties					334,626
Issuance of common stock for services by employees					174,298
Stock options exercises					49,999
Stock-based compensation					486,194
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580					371,411
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400					120,455
Shares Issued for payoff of long-term notes					505,627
Cumulative dividend on Series A preferred
Common shares issued for preferred conversion					$ 235,865
Adjustment of shares for reverse stock-split, shares
Net loss attributable to noncontrolling interests
Net loss attributable to common shareholders
Balance			$ 22,844,814		22,844,814
Accumulated Deficit [Member]
Balance					(12,813,044)
Issuance of common stock
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants
Issuance of common stock from warrant exercise for cash
Issuance of common stock for services by third parties
Issuance of common stock for services by employees
Stock options exercises
Stock-based compensation
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400
Shares Issued for payoff of long-term notes
Cumulative dividend on Series A preferred					(5,037)
Common shares issued for preferred conversion
Adjustment of shares for reverse stock-split, shares
Net loss attributable to noncontrolling interests
Net loss attributable to common shareholders					(3,600,930)
Balance			(16,419,011)		(16,419,011)
Total Eastside Distilling, Inc. Stockholders' Equity [Member]
Balance					1,132,833
Issuance of common stock					58,500
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants					6,648,987
Issuance of common stock from warrant exercise for cash					159,250
Issuance of common stock for services by third parties					334,634
Issuance of common stock for services by employees					174,302
Stock options exercises					50,000
Stock-based compensation					486,194
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580					371,420
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400					120,458
Shares Issued for payoff of long-term notes					505,637
Cumulative dividend on Series A preferred
Common shares issued for preferred conversion					$ (15,000)
Adjustment of shares for reverse stock-split, shares
Net loss attributable to noncontrolling interests
Net loss attributable to common shareholders					(3,600,930)
Balance			6,426,285		6,426,285
Non-controlling interests [Member]
Balance
Issuance of common stock
Issuance of common stock, net of issuance costs of $1,120,323, with detachable warrants
Issuance of common stock from warrant exercise for cash
Issuance of common stock for services by third parties
Issuance of common stock for services by employees
Stock options exercises
Stock-based compensation
Issuance of common stock for acquisition of MotherLode, net of issuance costs of $5,580
Issuance of common stock for 90% acquisition of Big Bottom Distilling, net of issuance costs of $14,400					14,984
Shares Issued for payoff of long-term notes
Cumulative dividend on Series A preferred
Common shares issued for preferred conversion
Adjustment of shares for reverse stock-split, shares
Net loss attributable to noncontrolling interests					$ (1,174)
Net loss attributable to common shareholders
Balance			$ 13,810		$ 13,810

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Stockholder's Deficit - Schedule of Balance of Stockholder's Equity (Details) (Parenthetical)	9 Months Ended
	Sep. 30, 2017 USD ($)
Common stock, net of issuance costs	$ 1,120,323
MotherLode [Member]
Issuance of common stock for acquisition costs	5,580
Big Bottom Distilling [Member]
Issuance of common stock for acquisition costs	$ 14,400
Percentage of common stock unit	90.00%

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Stockholder's Deficit - Summary of Stock Option Activity (Details)	9 Months Ended
	Sep. 30, 2017 $ / shares shares
Equity [Abstract]
Number of Options Outstanding, Beginning Balance | shares	173,750
Number of Options Outstanding, Granted | shares	233,167
Number of Options Outstanding, Exercised | shares	(9,260)
Number of Options Outstanding, Canceled | shares	(20,760)
Number of Options Outstanding, Ending Balance | shares	376,897
Number of Options Exercisable, Ending Balance | shares	126,564
Weighted- Average Exercise Price Options Outstanding, Beginning Balance | $ / shares	$ 9.24
Weighted- Average Exercise Price Options Outstanding, Granted | $ / shares	4.35
Weighted- Average Exercise Price Options Outstanding, Exercised | $ / shares	5.40
Weighted- Average Exercise Price Options Outstanding, Canceled | $ / shares
Weighted- Average Exercise Price Options Outstanding, Ending Balance | $ / shares	6.52
Weighted- Average Exercise Price Options Exercisable, Ending Balance | $ / shares	$ 10.45

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Stockholder's Deficit - Schedule of Weighted-average Assumptions used in Black-Scholes Valuation Method (Details)	9 Months Ended
	Sep. 30, 2017 $ / shares
Risk-free interest rate	1.71%
Expected term (in years)	6 years 7 months 6 days
Expected dividend yield
Expected volatility	75.00%
Warrant [Member]
Risk-free interest rate	1.47%
Expected term (in years)	2 years 9 months 29 days
Expected dividend yield
Expected volatility	75.00%
Fair value of common stock	$ 5.00

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Stockholder's Deficit - Summary of Warrant Activity (Details)	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Equity [Abstract]
Warrants Outstanding, Beginning Balance | shares	846,765
Warrants Outstanding, Granted | shares	1,862,019
Warrants Outstanding, Exercised | shares	(40,834)
Warrants Outstanding, Forfeited and Cancelled | shares	(74,873)
Warrants Outstanding, Ending Balance | shares	2,593,077
Warrants Outstanding Weighted Average Remaining Life, Beginning Balance	2 years 9 months 7 days
Warrants Outstanding Weighted Average Remaining Life, Granted	4 years 3 months 8 days
Warrants Outstanding Weighted Average Remaining Life, Exercised	2 years
Warrants Outstanding Weighted Average Remaining Life, Forfeited and Cancelled	2 years
Warrants Outstanding Weighted Average Remaining Life, Ending Balance	3 years 7 months 17 days
Warrants Outstanding Weighted Average Exercise Price, Beginning Balance	$ 6.48
Warrants Outstanding Weighted Average Exercise Price, Granted	5.77
Warrants Outstanding Weighted Average Exercise Price, Exercised	3.90
Warrants Outstanding Weighted Average Exercise Price, Forfeited and Cancelled	6.00
Warrants Outstanding Weighted Average Exercise Price, Ending Balance	$ 5.99
Warrants Outstanding Aggregate Intrinsic Value, Beginning Balance | $	$ 0
Warrants Outstanding Aggregate Intrinsic Value, Granted	$ 40,180
Warrants Outstanding Aggregate Intrinsic Value, Ending Balance | $	$ 40,180

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Related Party Transactions (Details Narrative) - USD ($)													1 Months Ended	2 Months Ended	9 Months Ended	33 Months Ended
	Aug. 23, 2017	Aug. 10, 2017	Jun. 02, 2017	Dec. 30, 2016	Nov. 21, 2016	Nov. 04, 2016	Sep. 19, 2016	Jul. 07, 2016	Jun. 30, 2016	Jun. 22, 2016	Jun. 09, 2016	Apr. 04, 2016	Aug. 31, 2017	Jun. 02, 2017	Sep. 30, 2017	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Assets from related party transaction																$ 120,000
Percentage of average of assets net																1.00%
Warrant exercise price													$ 5.40
Number of units purchased													1,200,000
Purchase price													$ 4.50
Debt interest rate													6.00%
Note payable															$ 39,032	$ 39,032	$ 4,537
Stock issued during period value															58,500
Stock issued during period shares													1,200,000	400,019
Number of stock for services rendered, value															$ 334,634
Promissory Note [Member]
Number of warrant to purchase of common stock																	43,590
Warrant exercise price								$ 6.00	$ 6.00								$ 3.90
Debt interest rate									8.00%
Proceeds from related party debt								$ 120,000	$ 50,000
Number of warrant acquire								20,000	8,334
Grover T. Wickersham [Member]
Number of warrant to purchase of common stock																	11,218
Warrant exercise price			$ 7.50											$ 7.50
Number of units purchased			15,189								83,334
Purchase price			$ 3.90								$ 3.00			$ 3.90
Total purchase price											$ 250,000
Proceeds from related party debt			$ 59,237
Grover T. Wickersham [Member] | Private Placement [Member]
Cancelation of warrant				8,334
Number of units purchased										38,334
Purchase price										$ 3.00
Total purchase price										$ 115,000
Number of warrant assigned				24,680
Education Trust [Member]
Number of units purchased										16,667
Purchase price										$ 3.00
Total purchase price										$ 50,000
Irrevocable Trust [Member]
Number of units purchased										66,667
Purchase price										$ 3.00
Total purchase price										$ 200,000
Michael Fleming [Member]
Warrant exercise price										$ 6.00
Number of units purchased										8,334
Purchase price										$ 3.00
Total purchase price										$ 25,000
Wickersham Trust [Member]
Number of warrant to purchase of common stock																	20,834
Warrant exercise price					$ 6.00				$ 6.00								$ 3.90
Proceeds from related party debt					$ 75,000				$ 50,000
Number of warrant acquire					12,500				8,334
Lawrence Hirson [Member]
Number of warrant to purchase of common stock							25,000
Warrant exercise price							$ 6.00
Principal amount							$ 150,000
Warrant Term							3 years
Wickersham and Affiliates [Member]
Purchase price		$ 4.50
Stock issued during period value		$ 55,555
Stock issued during period shares		250,000
Sandstrom Partners [Member]
Cash paid	$ 80,000
Number of stock for services rendered	33,334
Number of stock for services rendered, value	$ 145,000
Steven Earles [Member]
Number of units issued for services												185
Value of units issued for services												$ 185,000
Number of warrant to purchase of common stock												223
Warrant exercise price												$ 6.00
Steven Shum [Member]
Number of units issued for services												97
Value of units issued for services												$ 97,000
Martin Kunkel [Member]
Number of units issued for services												58
Value of units issued for services												$ 58,000
Carrie Earles [Member]
Number of units issued for services												83
Value of units issued for services												$ 83,000
Number of shares converted						185
Conversion of stock shares issued						41,111
Cancelation of warrant						41,107
Chief Executive Officer [Member]
Due to Related parties																		$ 8,000
Note payable																		$ 12,500

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Subsequent Events (Details Narrative) - Subsequent Event [Member]	Oct. 26, 2017 USD ($) shares
Warrant to purchase of common stock	1,123,516
Gross proceeds from warrant | $	$ 7,993,736
Maximum [Member]
Warrant to purchase of common stock	2,462,436