UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 15, 2020
EASTSIDE DISTILLING, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 001-38182 | 20-3937596 | ||
| (State
or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS
Employer Identification No.) |
1001 SE Water Avenue, Suite 390
Portland, OR 97214
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (971) 888-4264
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Common Stock, $0.0001 par value | EAST | The Nasdaq Stock Market LLC | ||
| (Title of Each Class) | (Trading Symbol) | (Name of Each Exchange on Which Registered) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (CFR §240.12b-2 of this chapter). Emerging growth company [ ]
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. [ ]
Item 1.01. Entry into a Material Definitive Agreement.
On January 15, 2020, Eastside Distilling, Inc. (the “Eastside”) entered into a loan agreement (the “Loan Agreement”) between Eastside and its wholly-owned subsidiaries MotherLode LLC, an Oregon limited liability company, Big Bottom Distilling, LLC, an Oregon limited liability company, Craft Canning + Bottling, LLC, an Oregon limited liability company, Redneck Riviera Whiskey Co., LLC, a Tennessee limited liability company, and Outlandish Beverages LLC, an Oregon limited liability company (collectively, the “Borrowers” and each a “Borrower”) and Live Oak Banking Company, a North Carolina banking corporation (“Lender”) to refinance existing debt of the Borrowers and to provide funding for general working capital purposes. Under the Loan Agreement, Lender has committed to make up to two loan advances to the Borrowers in an aggregate principal amount not to exceed the lesser of (i) $8,000,000 and (ii) a borrowing base equal to 85% of the appraised value of the Borrowers’ eligible inventory of whisky in barrels or totes less an amount equal to all service fees or rental payments owed by Borrowers during the 90 day period immediately succeeding the date of determination to any warehouses or bailees holding eligible inventory (the “Loan”).
The Loan matures on January 14, 2021 (the “Maturity Date”). On the Maturity Date, all amounts outstanding under the Loan will become due and payable. The Lender may at any time demand repayment of the Loan in whole or in part, in which case the Borrowers will be obligated to repay the Loan (or portion thereof for which repayment is demanded) within 30 days following the date of demand. The Borrowers may prepay the Loan, in whole or in part, at any time without penalty or premium.
The Loan bears interest at a rate equal to the prime rate plus a spread of 2.49%, adjusted quarterly. Accrued interest is payable monthly, with the final installment of interest being due and payable on the Maturity Date. The Borrowers are also obligated to pay a servicing fee, unused commitment fee and origination fee in connection with the Loan.
The Loan Agreement contains affirmative and negative covenants that include covenants restricting each Borrower’s ability to, among other things, incur indebtedness, grant liens, dispose of assets, merge or consolidate, make investments, or enter into restrictive agreements, subject to certain exceptions.
The obligations of the Borrowers under the Loan Agreement are secured by substantially all of their respective assets, except for accounts receivable and certain other specified excluded property.
The Loan Agreement includes customary events of default that include among other things, non-payment defaults, covenant defaults, inaccuracy of representations and warranties, cross default to material indebtedness, bankruptcy and insolvency defaults and change in control defaults. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default under the Loan Agreement at a per annum rate equal to 2.00% above the applicable interest rate.
In connection with the Loan Agreement, Eastside issued to Lender a warrant to purchase up to 100,000 shares of Eastside’s common stock at an initial exercise price of $3.9425 per share (the “Warrant”). The Warrant expires on January 15, 2025. In connection with the issuance of the Warrant, Eastside granted the Lender piggy-back registration rights with respect to the shares of common stock issuable upon exercise of the Warrant, subject to certain exceptions.
The foregoing summary of the Loan Agreement and Warrant is qualified in its entirety by reference to the Loan Agreement and Warrant, copies of which will be filed as exhibits to Eastside’s Annual Report on Form 10-K for the year ended December 31, 2019.
Item 1.02. Termination of a Material Definitive Agreement.
On January 16, 2020, in connection with Eastside’s consummation of the Loan Agreement described in Item 1.01 above, Eastside repaid in full and terminated the Secured Line of Credit Promissory Note that Eastside had issued to TQLA, LLC (“Holder”) on November 29, 2019 (the “TQLA Note”). Since Eastside repaid the TQLA Note in full prior to its maturity date, the Common Stock Purchase Warrant that Eastside had issued to Holder on November 29, 2019 will not be exercisable and is cancelled. No prepayment or early termination penalties were incurred by Eastside as a result of repaying the TQLA Note.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information regarding the Loan Agreement set forth in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03 in its entirety.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
The following exhibits are furnished with this Current Report on Form 8-K:
| Exhibit No. | Description | |
| 99.1 | Press Release of Eastside dated January 16, 2020 |
SIGNATURE
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 hereunto duly authorized.
Date: January 16, 2020
| EASTSIDE DISTILLING, INC. | ||
| By: | /s/ Lawrence Firestone | |
| Lawrence Firestone | ||
| Chief Executive Officer | ||
Exhibit 99.1
Eastside Announces New $8 Million Inventory Credit Facility
PORTLAND, Ore., January 16, 2020 – Eastside Distilling, Inc. (NASDAQ: EAST), today announced it has closed a new asset-based revolving credit facility of up to $8 million in available principal amount with Live Oak Bank backed by the Company’s spirits inventory. The Company expects to use this new credit facility to pay off and replace the two existing inventory facilities of $5 million capacity with KFK and TQLA and to fund general working capital. In addition to the increased availability of up to $3 million, the new credit facility offers a number of potential advantages to Eastside, including a reduction in the interest rate. The new credit facility, coupled with the $2 million Accounts Receivable factoring agreement signed in December 2019, provides the Company with up to $10 million of aggregate financing to refinance existing debt and fund growth in the business.
“We are extremely pleased to have closed this new $8 million inventory facility with Live Oak Bank allowing us to consolidate our debt and increase our borrowing capacity by further leveraging our valuable spirits inventory,” commented Lawrence Firestone, Eastside’s CEO. “The completion of this inventory facility, coupled with our recently signed accounts receivable facility, were key objectives to access capital in a non-dilutive structure to fund the growth of the business going forward. We look forward to working with Live Oak Bank on an ongoing basis, as they have demonstrated a strong understanding of the value of our spirits inventory as an appreciable asset and are supportive of our going forward strategy to grow Eastside Distilling.”
Additional details on the new credit facility can be found in an 8-K filed today at www.sec.gov.
About Eastside Distilling
Eastside Distilling, Inc. (NASDAQ: EAST) has been producing high-quality, craft spirits in Portland, Oregon since 2008. The company is known for its award-winning product line, including Redneck Riviera Whiskeys, Azuñia Tequila, Hue-Hue Coffee Rum, Burnside Bourbons, Portland Potato Vodkas, and a distinctive line of fruit infused spirits. All Eastside spirits are crafted from natural ingredients for quality and taste. Eastside’s Craft Bottling + Canning subsidiary is one of the Northwest’s leading independent spirit bottlers and ready-to-drink canners. For more information visit: www.eastsidedistilling.com or follow the Company on Twitter and Facebook.
Important Cautions Regarding Forward-Looking Statements
Certain matters discussed in this press release may be forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: the availability of credit under the Company’s new credit facility, which is subject to a borrowing base; the Company’s ability to execute its business model and strategic plans; acceptance of the Company’s products in the market; changes in economic conditions; general competitive factors; the Company’s success in obtaining new customers; the Company’s success in product development; the Company’s success in integrating acquired entities and assets, and all the risks and related information described from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”), including the financial statements and related information contained in the Company’s Annual Report on Form 10-K and interim Quarterly Reports on Form 10-Q. Examples of forward-looking statements in this release may include statements related to our use of proceeds and our ability to utilize our credit facilities to the maximum amount available. The Company assumes no obligation to update the cautionary information in this release.
| Company Contact: | Investor Relations Contact: |
| Eastside Distilling | Lytham Partners, LLC |
| (971) 888-4264 | Robert Blum |
| inquiries@eastsidedistilling.com | (602) 889-9700 |
| east@lythampartners.com |
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