Eastside Distilling, Inc.

Good day and welcome to the Eastside Distilling Fourth Quarter and Year End 2021 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Amy Broussard, Eastside's Corporate Affairs Director and Corporate Secretary. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us today to discuss Eastside Distilling's financial results for the fourth quarter and year-end 2021. I'm Amy Broussard, Eastside's Corporate Affairs Director and Corporate Secretary, and I'll be your moderator for today's call. Joining us on today's call to discuss these results are Mr. Jeffrey Gwynn, the company's interim chief executive officer and chief financial officer, Ms. Tiffany Milton, the company's controller, and Ms. Amy Lancer, the company's chief commercial officer. Following their remarks, we will open the call to your questions. I also wanted all shareholders to be on the lookout for announcements regarding our Q1 results release mid-May, our 2022 annual meeting date, and we are also planning to host an investor day in Portland sometime mid to late summer. More details to come. Now, before we begin with prepared remarks, we submit for the record the following statement. Certain matters discussed on this conference call by the management of Eastside Distilling may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements describe future expectations, plans, results, or strategies, and are generally preceded by the words such as may, future, plan or plan, will or should, expected, anticipates, draft, eventually, or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially, include but are not limited to the company's acceptance and the company's products in the market, success in obtaining new customers, success in product development, ability to execute the business model and strategic plans, success in integrating acquired entities and assets, ability to obtain capital. ability to continue its going concern, and all the risks and related information described from time to time in the company's filings with the Securities and Exchange Commission, including the financial statements and related information pertaining to the company's annual report on Form 10-K for the year ended December 31st, 2021, filed with the Securities and Exchange Commission. Now, with that said, I'd like to turn the call over to Jeffrey Gwynn. Jeffrey, please proceed.

Thank you, Amy. As Amy said, I'm Jeffrey Gwynn, the interim CEO and CFO, and I would like to add my welcome to our fourth quarter and fiscal year 2021 conference call. I will begin my remarks with some major accomplishments in the year and talk about our performance in the fourth quarter, areas we're clearly need to improve upon, and finally, what you can expect from us in 2022. Tiffany Milton will take us through the details of the quarter, the year, and of course, we will answer your questions. I've asked Amy Lancer, our Chief Commercial Officer, to join us on the call, and she can add her perspective during the quarter, about the quarter, in the question and answer section of our call today. So 2021 was an important year for Eastside Distilling as we successfully navigated a dynamic environment and delivered on some key objectives, such as margin improvement in spirits. We restructured the balance sheet, and we began our investment program outlined in our three-year strategic plan. However, we were disappointed in our other performance metrics. We failed to grow volume and spirits, and we struggled through the year with a challenging environment at Kraft. However, I do believe we are still on track to deliver our long-term financial growth goals, and I'm confident you will see progress there this year. We entered 2022 with a completely revamped Kraft business, strategically focused on a significant opportunity to leverage state-of-the-art digital can printing technology to bring new products and services to our network in the Pacific Northwest. This has gone from an idea on paper to having built out a digital printing facility, one of its kind in Portland, in just a handful of months. This is a testament to the vision, the dedication, and the resilience of the entire craft team, and I celebrate them. In spirits, we are executing performance improvement plans that will drive sustainable growth. The focus of this is on near-term improvements specifically in our business in Oregon. And the plans require innovation, investment, and execution. And we have proven that we can do these things. We invested in key partnerships such as the Portland Trailblazers and the Moda Center to bring our waterway experience to thousands and thousands of new customers. And last year, We partnered with Lays to launch a potato vodka and saw that product sell out in a few hours. And I think this is a great example of the innovation our team is capable of delivering. We have also increased our commitment to our community by working with organizations such as American Forest to plant trees, heal the bay, go to coast, and recently developed a campaign to donate proceeds from Portland potato vodka sales in Oregon to Ukraine refugees via the IRC. These partnerships are important for a number of reasons, and they play a key role in our plan to revive growth in our home market. A significant portion of our spirit strategy has been to drive growth in key markets, including California, Arizona, and Texas. Last year, we have struggled in this effort as we met with the distributor resistance to support and invest in our brands above competing brands, and this largely impacted our the Eastside Legacy brand launch that we talked about last year. Now, we've redoubled our efforts, and we believe we are on the path to improving our engagement from our key distributor partners in 2022. But there's a lot of work to be done there. As Craft Spirits recovers, both on and off-premise to pre-pandemic demand levels, we believe we will be positioned to renew growth across our portfolio. But throughout the year, we have invested time and effort in improving our supply chain and our ability to manage our gross margins. Now, this has required skewed rationalization, price increases, which in some cases meant lost volume, and it's also required investment in supply chain initiatives. All these things take time. Although these initiatives had a negative impact on sales volume, and we saw that again in the fourth quarter, they are critical initiatives for the long-term profitable growth of the company. We have more work to do in our spirits business, and I believe you should expect to see progress through the year. We are starting with outstanding products in a compelling market category. The pace of improvement there will pick up as we execute on our go-to-market strategy and build awareness in our key markets. Crafts faces a transformative year ahead. Now, we've been talking about this business for the last few calls, but I'm excited to say that we are getting close to taking a key next step in our growth plans at Kraft. In the first quarter of 2022, we have moved out of our old facility and into the newly built 50,000 square foot digital can printing facility. This facility is the first of its kind in the Pacific Northwest and will serve our vast Kraft beverage customer base. Kraft's expanded assortment of services will make us unique in our market, truly offering a one-stop shop to all needs of the growing Kraft beverage customer. We still have incremental investments to make to get us to our key milestones in our three-year plan. However, the first step was securing the Hintercroft partnership. And since then, we've made other sequential steps, including financing, can supply, facility buildup, and installation that gets to this point. It's critical we execute well from here in order to deliver this component of our strategic plan. Digital can printing will also improve our existing craft business, which we didn't have last year. I believe this new technology in digital can printing will highlight the power of hyperlocal marketing, specifically in craft beverage. Now, this term hyperlocal marketing is not well understood when it comes to consumer products specifically in craft beverage. But in truth, we are still dreaming of what is possible. Now, this technology is expanding what is possible and allowing us to merchandise craft beverage like it's never been done before. I would argue we are in a key craft market that is in the forefront of this creative trend, and we are delivering our customers tools they have never had before. So in summary, I'm excited about some of the opportunities we have before us. I'm also excited that we plan to deliver improvements that are measurable in both businesses this year. I want to assure you a near-term goal is to drive growth to a point where we no longer need external capital to sustain the business. I believe we can accomplish that this year. That doesn't mean we may not seek the ability to grow faster with incremental capital. However, we will continue to be measured and disciplined with capital allocations. You should expect us to be vocal about our progress in the year, and we will work to engage as many external stakeholders as possible to highlight our strategy and the progress we are making. Now, I would like to turn it over to Tiffany Milton, our controller, who can take us through the financial performance of the company.