United
States
Securities
and Exchange Commission
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No. )
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
| ☐ |
Preliminary
Proxy Statement |
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| ☐ |
Confidential,
For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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| ☒ |
Definitive
Proxy Statement |
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| ☐ |
Definitive
Additional Materials |
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| ☐ |
Soliciting
Materials Pursuant to Rule 14a-12 |
Eastside
Distilling, Inc.
(Name
of Registrant as Specified in Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check all boxes that apply):
| ☒ |
No
fee required. |
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| ☐ |
Fee
paid previously with preliminary materials |
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| ☐ |
Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
EASTSIDE
DISTILLING, INC.
755 Main Street
Monroe, Connecticut 06468
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
To
be held on November 25, 2024
To
the Stockholders of Eastside Distilling, Inc.
NOTICE
IS HEREBY GIVEN that a Special Meeting of Stockholders (the “Special Meeting”) of Eastside Distilling, Inc. (the “Company”)
will be held on November 25, 2024, beginning at 11:00 a.m. Eastern Time. The Special Meeting will be held solely
in a virtual meeting format online at www.virtualspecialmeeting.com/EAST2024SM. You will not be able to attend the Special
Meeting at a physical location. At the Special Meeting, stockholders will act on the following matters:
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To
adopt and approve an amendment to our Articles of Incorporation to effect a reverse stock split of our issued shares of common stock,
at a specific ratio, ranging from one-for-two (1:2) to one-for-ten (1:10), at any time prior to the one-year anniversary date of
the Special Meeting, with the exact ratio to be determined by the Board of Directors without further approval or authorization of
our stockholders (the “Reverse Split Proposal”); |
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To
adopt and approve an amendment to our Articles of Incorporation to increase the number of authorized shares of the Company’s
common stock, par value $0.0001 per share, from 6,000,000 to 40,000,000, which we refer to as the “Charter Amendment
Proposal”; and |
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To
approve the adjournment of the Special Meeting to a later date or dates, if necessary or appropriate, to permit further solicitation
and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Reverse
Split Proposal or the Charter Amendment Proposal (the “Adjournment Proposal”). |
Pursuant
to the Company’s Amended and Restated Bylaws (the “Bylaws”), the Board has fixed the close of business on October
31, 2024 as the record date for determination of the stockholders entitled to vote at the Special Meeting and any adjournments or
postponements thereof.
Your
vote is important. We urge you to submit your proxy (1) over the internet, (2) by telephone, or (3) by mail, whether or not you plan
to attend the meeting in person. For specific instructions, please refer to “About the Meeting” beginning on the first
page of the proxy statement and the instructions on the proxy card relating to the special meeting. We would appreciate receiving your
proxy at your earliest convenience.
By
Order of the Board of Directors
Geoffrey
Gwin
CEO
Monroe, Connecticut
November
4, 2024
Proxy
Statement
For
the Special Meeting of
Stockholders
To Be Held on November 25, 2024
TABLE
OF CONTENTS
EASTSIDE
DISTILLING, INC.
755 Main Street
Monroe, Connecticut 06468
PROXY
STATEMENT
This
proxy statement contains information related to our Special Meeting of Stockholders to be held on November 25, 2024, at 11:00
a.m. Eastern Time, or at such other time and place to which the Special Meeting may be adjourned or postponed (the “Special
Meeting”). The enclosed proxy is solicited by the Board of Directors (the “Board”) of Eastside Distilling, Inc. (the
“Company”). The proxy materials relating to the Special Meeting are being mailed to stockholders entitled to vote at the
meeting on or about November 4, 2024. A list of record holders of the Company’s common stock entitled to vote at the Special
Meeting will be available for examination by any stockholder, for any purpose germane to the Special Meeting, at our principal offices
at 755 Main Street, Monroe, Connecticut, during normal business hours for ten days prior to the Special Meeting and available
during the Special Meeting.
ABOUT
THE MEETING
When
and where will the Special Meeting be held?
The
Special Meeting will be held on November 25, 2024, at 11:00 a.m. Eastern Time, in a virtual meeting format online
at www.virtualshareholdermeeting.com/EAST2024SM, and at any adjournment or postponement thereof. You will not be able to
attend the Special Meeting at a physical location.
What
is the purpose of the Special Meeting?
We
are calling the Special Meeting to seek the approval of our stockholders:
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To
adopt and approve an amendment to our Articles of Incorporation (the “Charter”) to effect a reverse stock split of our
issued shares of common stock, at a specific ratio, ranging from one-for-two (1:2) to one-for-ten (1:10), at any time prior to the
one-year anniversary date of the Special Meeting, with the exact ratio to be determined by the Board without further approval or
authorization of our stockholders (the “Reverse Split Proposal”); |
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To
adopt and approve an amendment to our Articles of Incorporation to increase the number of authorized shares of the Company’s
common stock, par value $0.0001 per share, from 6,000,000 to 40,000,000, which we refer to as the “Charter Amendment
Proposal”; and |
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To
approve the adjournment of the Special Meeting to a later date or dates, if necessary or appropriate, to permit further solicitation
and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Reverse
Split Proposal or the Charter Amendment Proposal (the “Adjournment Proposal”). |
What
are the Board’s recommendations?
The
Board recommends you vote:
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FOR
the Reverse Split Proposal; |
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FOR
the Charter Amendment Proposal; and |
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FOR
the Adjournment Proposal. |
If
you are a stockholder of record and you return a properly executed proxy card or submit a proxy to vote over the Internet but do not
mark the boxes showing how you wish to vote, your shares will be voted in accordance with the recommendations of the Board, as set forth
above.
No
other matters may be brought before the Special Meeting.
Who
is entitled to vote at the Special Meeting?
The
Board of Directors has set October 31, 2024 as the record date for the special meeting. If you were a stockholder of record at
the close of business on the record date, October 31, 2024, you are entitled to receive notice of the meeting and to vote your
shares at the meeting and at any postponement or adjournment thereof. Holders of the Company’s common stock are entitled to one
vote per share. Holders of the Company’s Series B Preferred Stock are entitled to 0.016129 votes per share of Series B Preferred
Stock. Holders of the Company’s Series F-1 Preferred Stock are entitled to one vote per share.
What
constitutes a quorum?
The
presence at the Special Meeting, in person or by proxy, of the holders of one-third of our common stock outstanding on the record
date will constitute a quorum for the Special Meeting. Pursuant to the corporation law of the State of Nevada, abstentions will be counted
for the purpose of determining whether a quorum is present. If brokers have, and exercise, discretionary authority on at least one item
on the agenda for the Special Meeting, uninstructed shares for which broker non-votes occur will constitute voting power present for
the discretionary matter and will therefore count towards the quorum.
Do
I need to attend the Special Meeting?
No.
It is not necessary for you to attend the virtual Special Meeting in order to vote your shares. You may vote by telephone, through the
Internet or by mail, as described in more detail below.
How
do I vote my shares without attending the Special Meeting?
Stockholder
of record: shares registered in your name. If you are a stockholder of record, you may authorize a proxy to vote on your behalf
at the Special Meeting in any of the following ways:
By
Telephone or via the Internet. You can submit a proxy to vote your shares by telephone or via the Internet by following the instructions
on the enclosed proxy card. Proxies submitted by telephone or via the Internet must be received by 11:59 p.m. Eastern Time, on
the day before the Special Meeting. Have your proxy card in hand as you will be prompted to enter your control number.
By
Mail. You can submit a proxy to vote your shares by mail if you received a printed proxy card by completing, signing, dating and
promptly returning your proxy card in the postage-prepaid envelope provided with the materials. Proxies submitted by mail must be received
by the close of business on the day before the Special Meeting in order to ensure that your vote is counted.
To
facilitate timely receipt of your proxy, we encourage you to promptly vote via the Internet or telephone following the instructions on
the enclosed proxy card. If you are submitting your proxy by telephone or through the Internet, your voting instructions must be received
by 11:59 p.m., Eastern Time on the day before the Special Meeting.
Submitting
your proxy by mail, by telephone or through the Internet will not prevent you from casting your vote at the Special Meeting. You are
encouraged to submit a proxy by mail, by telephone or through the Internet even if you plan to attend the Special Meeting via the virtual
meeting website to ensure that your shares are represented at the Special Meeting.
Beneficial
owner: shares registered in the name of bank, broker or other nominee. If you are a beneficial owner of shares registered
in the name of your bank, broker or other nominee, you should have received voting instructions from that organization rather than from
us. Simply complete and mail the voting instruction form to ensure that your vote is counted. Alternatively, you may vote by telephone
or over the Internet as instructed by your bank, broker or other nominee. Follow the instructions from your broker, bank or other nominee
included with this proxy statement, or contact your bank, broker or other nominee to request a proxy form.
Even
if you plan to attend the Special Meeting live via the Internet, we encourage you to vote in advance by Internet, telephone, or mail
so that your vote will be counted if you later decide not to attend the Special Meeting live via the Internet.
May
I change my vote after I have mailed my proxy card or after I have submitted my proxy by telephone or through the Internet?
Yes.
You may revoke your proxy or change your vote at any time before the proxy is exercised at the Special Meeting. You may revoke your proxy
by delivering a signed written notice of revocation stating that the proxy is revoked and bearing a date later than the date of the proxy
to the Company’s Secretary, Stephanie Kilkenny, at Eastside Distilling, Inc., 755 Main Street, Monroe, Connecticut 06468.
You may also revoke your proxy or change your vote by submitting another proxy by telephone or through the Internet in accordance with
the instructions on the enclosed proxy card. You may also submit a later-dated proxy card relating to the same shares. If you voted by
completing, signing, dating and returning the enclosed proxy card, you should retain a copy of the voter control number found on the
proxy card in the event that you later decide to revoke your proxy or change your vote by telephone or through the Internet. Alternatively,
your proxy may be revoked or changed by attending the Special Meeting via the virtual meeting website and voting at the meeting by following
the internet voting instructions on your proxy card. However, simply attending the Special Meeting without voting will not revoke or
change your proxy. “Street name” holders of shares of our common stock should contact their bank, broker, trust or other
nominee to obtain instructions as to how to revoke or change their proxies.
What
is the difference between holding shares as a stockholder of record and as a beneficial owner?
Many
of our stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below,
there are some distinctions between shares held of record and those owned beneficially.
Stockholder
of Record
If
your shares are registered directly in your name with our transfer agent, Transfer Online, you are considered, with respect to those
shares, the stockholder of record. As the stockholder of record, you have the right to directly grant your voting proxy or to vote in
person at the Special Meeting.
Beneficial
Owner
If
your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held
in street name, and these proxy materials are being forwarded to you by your broker, bank or nominee which is considered, with respect
to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker as to how to vote and are
also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote these shares in
person at the Special Meeting unless you obtain a signed proxy from the record holder giving you the right to vote the shares. If you
do not provide the stockholder of record with voting instructions or otherwise obtain a signed proxy from the record holder giving you
the right to vote the shares, broker non-votes may occur for the shares that you beneficially own. The effect of broker non-votes is
more specifically described in “What vote is required to approve each proposal?” below.
What
vote is required to approve each proposal?
Assuming
that a quorum is present, the following votes will be required:
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With
respect to the Reverse Split Proposal, the affirmative vote of the holders of a majority of the voting power in the Company is
required to approve this proposal. For purposes of counting votes on this matter, abstentions and broker non-votes will have
the effect of voting against the matter. |
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With
respect to the Charter Amendment Proposal, the affirmative vote of the holders of a majority of the voting power in the Company is
required to approve this proposal. For purposes of counting votes on this matter, abstentions and broker non-votes will have
the effect of voting against the matter. |
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With
respect to the Adjournment Proposal, the affirmative vote of a majority of the votes cast by all stockholders present in person or
represented by proxy at the Special Meeting and entitled to vote on the proposal is required to approve this proposal. For purposes
of counting votes on this matter, abstentions will have the effect of voting against the matter and broker non-votes will have no
effect on the vote. |
Where
can I find the voting results of the Special Meeting?
The
preliminary voting results will be announced at the Special Meeting, and we will publish final results in a Current Report on Form 8-K
filed with the SEC within four business days of the Special Meeting.
How
are we soliciting this proxy?
We
are soliciting this proxy on behalf of our Board and will pay all expenses associated therewith. Some of our officers, directors and
other employees also may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal
conversations, or by telephone or other electronic means.
We
will also, upon request, reimburse brokers and other persons holding stock in their names, or in the names of nominees, for their reasonable
out-of-pocket expenses for forwarding proxy materials to the beneficial owners of the capital stock and to obtain proxies.
PROPOSAL
NO. 1
THE
REVERSE SPLIT PROPOSAL
Overview
Our
Board has determined that it is advisable and in the best interests of the Company and its stockholders to authorize our Board to amend
our Charter to effect a reverse stock split of our issued shares of common stock at a specific
ratio, ranging from one-for-two (1:2) to one-for-ten (1:10) (the “Approved Split Ratios”), to be determined by the Board
without further approval or authorization of our stockholders (the “Reverse Split”).
Accordingly,
stockholders are asked to adopt and approve the filing of a Certificate of Change to effect the Reverse Split, subject to the
Board’s determination, in its sole discretion, whether or not to implement the Reverse Split, as well as the specific ratio within
the range of the Approved Split Ratios, and provided that the Reverse Split must be effected on or prior to the one-year anniversary
date of the Special Meeting.
If
adopted and approved by our stockholders, the Reverse Split would be effected at an Approved Split Ratio approved by the Board prior
to the one-year anniversary date of the Special Meeting, if at all. To effect the Reverse Stock Split, a Certificate of Change setting
forth the Approved Split Ratio approved by the Board would be filed with the Secretary of State of the State of Nevada and any amendment
to effect the Reverse Split at the other Approved Split Ratios would be abandoned. The Board reserves the right to elect to abandon the Reverse Split at any of the Approved Split Ratios if it determines, in its sole discretion, that the Reverse
Split is no longer in the best interests of the Company and its stockholders.
Purpose
and Rationale for the Reverse Split
Avoid
Delisting from Nasdaq. Nasdaq Listing Rule 5550(a)(2) requires that, for continued listing on Nasdaq, the common stock of the Company
must sustain a $1.00 minimum bid price (the “Minimum Bid Price Requirement”). On August 29, 2024, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”)
of the Nasdaq Stock Market (“Nasdaq”) notifying Eastside Distilling that, for the preceding 32 consecutive business days,
the closing bid price for Eastside Distilling’s Common Stock was below the minimum $1.00 per share requirement for continued inclusion
on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”). In accordance with
Nasdaq rules, the Company has been provided a period of 180 calendar days, or until February 25, 2025 (the “Compliance Date”),
to regain compliance with the Bid Price Requirement. If, at any time before the Compliance Date, the closing bid price for the Common
Stock is at least $1.00 for a minimum of 10 consecutive business days, the Staff will provide the Company written confirmation of compliance
with the Bid Price Requirement. If Eastside Distilling does not regain compliance by the Compliance Date, the Company may be eligible
for an additional grace period if, as of the Compliance Date, the Company meets the continued listing requirement for market value of
publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price
requirement.
If Eastside Distilling does not regain compliance with the Bid Price Requirement by the Compliance Date and is not
eligible for an additional compliance period at that time, the Staff will provide written notification to Eastside Distilling that the
Common Stock will be subject to delisting. Our shares may then trade on the OTCQB or other small trading markets, such as the OTC Pink
market. In that event, our common stock could trade thinly as a microcap or penny stock, adversely decrease to nominal levels of trading
and may be avoided by retail and institutional investors, resulting in the impaired liquidity of our common stock.
Other
Effects. The Board also believes that the increased market price of our common stock expected as a result of implementing the Reverse
Split could improve the marketability and liquidity of our common stock and will encourage interest and trading in our common stock.
The Reverse Split, if effected, could allow a broader range of institutions to invest in our common stock (namely, funds that are prohibited
from buying stock whose price is below a certain threshold), potentially increasing the trading volume and liquidity of our common stock.
The Reverse Split could help increase analyst and broker’s interest in common stock, as their policies can discourage them from
following or recommending companies with low stock prices. Because of the trading volatility often associated with low-priced stocks,
many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced
stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Some of those policies and practices
may make the processing of trades in low-priced stocks economically unattractive to brokers. Additionally, because brokers’ commissions
on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, a low average
price per share of our common stock can result in individual stockholders paying transaction costs representing a higher percentage of
their total share value than would be the case if the share price were higher.
Our
Board does not intend for this transaction to be the first step in a series of plans or proposals to effect a “going private transaction”
within the meaning of Rule 13e-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Risks
of the Proposed Reverse Split
We
cannot assure you that the proposed Reverse Split will increase the price of our common stock and have the desired effect of regaining
and maintaining compliance with Nasdaq listing rules.
If
the Reverse Split is implemented, our Board expects that it will increase the market price of our common stock so that we are able to
regain and maintain compliance with the Minimum Bid Price. However, the effect of the Reverse Split upon the market price of our common
stock cannot be predicted with any certainty, and the history of similar stock splits for companies in like circumstances is varied.
It is possible that (i) the per share price of our common stock after the Reverse Split will not rise in proportion to the reduction
in the number of shares of our common stock outstanding resulting from the Reverse Split, (ii) the market price per post-Reverse Split
share may not exceed or remain in excess of the $1.00 minimum bid price for a sustained period of time, or (iii) the Reverse Split may
not result in a per share price that would attract brokers and investors who do not trade in lower priced stocks. Even if the Reverse
Split is implemented, the market price of our common stock may decrease due to factors unrelated to the Reverse Split. In any case, the
market price of our common stock will be based on other factors which may be unrelated to the number of shares outstanding, including
our future performance. If the Reverse Split is consummated and the trading price of our common stock declines, the percentage decline
as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the
Reverse Split. Even if the market price per post-Reverse Split share of our common stock remains in excess of $1.00 per share, we may
be delisted due to a failure to meet other continued listing requirements, including the Equity Rule and the Nasdaq requirements related
to the minimum number of shares that must be in the public float and the minimum market value of the public float.
A
decline in the market price of our common stock after the Reverse Split is implemented may result in a greater percentage decline than
would occur in the absence of a reverse stock split.
If
the Reverse Split is implemented and the market price of our common stock declines, the percentage decline may be greater than would
occur in the absence of a reverse stock split. The market price of our common stock will, however, also be based upon our performance
and other factors, which are unrelated to the number of shares of common stock outstanding.
The
proposed Reverse Split may decrease the liquidity of our common stock.
The
liquidity of our common stock may be harmed by the proposed Reverse Split given the reduced number of shares of common stock that would
be outstanding after the Reverse Split, particularly if the stock price does not increase as a result of the Reverse Split.
Determination
of the Ratio for the Reverse Split
If
this Reverse Split Proposal is approved by stockholders and the Board determines that it is in the best interests of the Company and
its stockholders to move forward with the Reverse Split, the Approved Split Ratio will be selected by the Board, in its sole discretion.
However, the Approved Split Ratio will not be less than a ratio of one-for-two (1:2) or exceed a ratio of one-for-ten (1:10). In determining
which Approved Split Ratio to use, the Board will consider numerous factors, including the historical and projected performance of our
common stock, prevailing market conditions and general economic trends, and will place emphasis on the expected closing price of our
common stock in the period following the effectiveness of the Reverse Split. The Board will also consider the impact of the Approved
Split Ratios on investor interest. The purpose of selecting a range is to give the Board the flexibility to meet business needs as they
arise, to take advantage of favorable opportunities and to respond to a changing corporate environment. Based on the number of shares
of common stock issued and outstanding as of October 31, 2024, after completion of the Reverse Split, we will have between 2,400,533 and 480,107 shares of common stock issued and outstanding, depending on the Approved Split Ratio selected by the Board.
Principal
Effects of the Reverse Split
After
the effective date of the proposed Reverse Split, each stockholder will own a reduced number of shares of common stock. Except for adjustments
that may result from the treatment of fractional shares as described below, the proposed Reverse Split will affect all stockholders uniformly.
The proportionate voting rights and other rights and preferences of the holders of our common stock will not be affected by the proposed
Reverse Split except for adjustments that may result from the treatment of fractional shares as described below. For example, a holder
of 2% of the voting power of the outstanding shares of our common stock immediately prior to the Reverse Split would continue to hold
2% of the voting power of the outstanding shares of our common stock immediately after the Reverse Split. The number of stockholders
of record also will not be affected by the proposed Reverse Split.
The
following table contains approximate number of issued and outstanding shares of common stock, and the estimated per share trading price
following a 1:2 to 1:10 Reverse Split as of October 31, 2024, without giving effect to any adjustments for fractional shares of
common stock or the issuance of any derivative securities.
After
Each Reverse Split Ratio
| | |
Current | | |
1:2 Split | | |
1:5 Split | | |
1:10 Split | |
| Common stock authorized(1) | |
| 6,000,000 | | |
| 40,000,000 | | |
| 40,000,000 | | |
| 40,000,000 | |
| Common stock outstanding | |
| 4,801,065 | | |
| 2,400,533 | | |
| 960,213 | | |
| 480,107 | |
| Common stock outstanding – fully diluted(2) | |
| 5,124,833 | | |
| 2,562,417 | | |
| 1,024,967 | | |
| 512,484 | |
| Shares of common stock authorized but unissued and not reserved | |
| 875,167 | | |
| 37,437,583 | | |
| 38,975,033 | | |
| 39,487,516 | |
| Price per share, based on
closing price on October 25, 2024(4) | |
$ | 0.59 | | |
$ | 1.18 | | |
$ | 2.95 | | |
$ | 5.90 | |
| (1) |
This table assumes that the
Charter Amendment Proposal is approved, and that the number of shares of common stock authorized in the Company’s Charter is
increased from 6,000,000 to 40,000,000. |
| (2) |
Includes 40,322 common shares
issuable on conversion of outstanding Series B Preferred Stock and 283,446 shares issuable upon exercise of outstanding warrants and options. |
| (4) |
The price per share indicated
reflects solely the application of the applicable Reverse Split ratio to the closing price of the common stock on October 25,
2024. |
After
the effective date of the Reverse Split, our common stock would have a new committee on uniform securities identification procedures
(CUSIP) number, a number used to identify our common stock.
Our
common stock is currently registered under Section 12(b) of the Exchange Act, and we are subject to the periodic reporting and other
requirements of the Exchange Act. The proposed Reverse Split will not affect the registration of our common stock under the Exchange
Act. Our common stock would continue to be reported on Nasdaq under the symbol “EAST,” assuming that we are able to regain
compliance with Nasdaq Continued Listing Requirements, although it is likely that Nasdaq would add the letter “D” to the
end of the trading symbol for a period of twenty trading days after the effective date of the Reverse Split to indicate that the Reverse
Split had occurred.
Effect
on Outstanding Derivative Securities
The
Reverse Split will require that proportionate adjustments be made to the per share exercise price and the number of shares issuable upon
the exercise of the following outstanding derivative securities issued by us, in accordance with the Approved Split Ratio (all figures
are as of October 31, 2024 and are on a pre-Reverse Split basis), including:
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40,322
shares of common stock issuable upon conversion of 2,500,000 outstanding shares of Series B Preferred Stock. |
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|
|
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130,914
shares of common stock issuable upon conversion of secured convertible promissory notes in the aggregate principal amount of $399,290,
with a conversion price of $3.05 per share; |
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|
|
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190,833
shares of common stock issuable upon the exercise of outstanding warrants, with a weighted average exercise price of $26.14 per share; |
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2,021
of common stock issuable upon exercise of stock options, with a weighted average exercise price of $57.95 per share; and |
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|
|
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239,254
shares of common stock reserved for future issuance under the Company’s 2016 Equity Incentive Plan (the “2016 Plan”). |
The
adjustments to the above securities, as required by the Reverse Split and in accordance with the Approved Split Ratio, would result in
approximately the same aggregate price being required to be paid under such securities upon exercise, and approximately the same value
of shares of common stock being delivered upon such exercise or conversion, immediately following the Reverse Split as was the case immediately
preceding the Reverse Split.
Effect
on our Equity Incentive Plan
As
of October 31, 2024, we had 2,021 shares of common stock reserved for issuance pursuant to the exercise of outstanding options
issued under our 2016 Plan, as well as 239,254 shares of common stock available for issuance under the 2016 Plan. Pursuant to the terms
of the 2016 Plan, the Board, or a designated committee thereof, as applicable, will adjust the number of shares of common stock underlying
outstanding stock options, the exercise price per share of outstanding stock options and other terms of outstanding awards issued pursuant
to the 2016 Plan to equitably reflect the effects of the Reverse Split. Furthermore, the number of shares available for future grant
under the 2016 Plan will be similarly adjusted.
Effective
Date
The
proposed Reverse Split would become effective on the date of filing of the Charter Amendment with the office of the Secretary of State
of the State of Nevada unless another effective date is set forth in the Charter Amendment. On the effective date, shares of common stock
issued immediately prior thereto will be combined and reclassified, automatically and without any action on the part of our stockholders,
into new shares of common stock in accordance with the Approved Split Ratio set forth in this Reverse Split Proposal. If the proposed
Charter Amendment is not adopted and approved by our stockholders, the Reverse Split will not occur.
Treatment
of Fractional Shares
No
fractional shares of common stock will be issued as a result of the Reverse Split. Instead, record holders of our common stock who otherwise
would be entitled to receive a fractional share because they hold a number of shares not evenly divisible by the Approved Split Ratio
will automatically be entitled to receive an additional fraction of a share of common stock to round up to the next whole share. In any
event, cash will not be paid for fractional shares.
Record
and Beneficial Stockholders
If
the Reverse Split is authorized by our stockholders and our Board elects to implement the Reverse Split, stockholders of record holding
some or all of their shares of common stock electronically in book-entry form under the direct registration system for securities will
receive a transaction statement at their address of record indicating the number of shares of common stock they hold after the Reverse
Split. Non-registered stockholders holding common stock through a bank, broker or other nominee should note that such banks, brokers
or other nominees may have different procedures for processing the consolidation than those that would be put in place by us for registered
stockholders. If you hold your shares with such a bank, broker or other nominee and if you have questions in this regard, you are encouraged
to contact your nominee.
If
the Reverse Split is authorized by the stockholders and our Board elects to implement the Reverse Split, stockholders of record holding
some or all of their shares in certificated form (i.e., shares represented by one or more physical stock certificates) will be requested
to exchange their old stock certificate(s) (“Old Certificate(s)”) for shares held in book-entry form at our transfer agent,
Transfer Online, in their direct registration system representing the appropriate number of whole shares of our common stock resulting
from the Reverse Split. Stockholders of record upon the effective time of the Reverse Split will be furnished the necessary materials
and instructions for the surrender and exchange of their Old Certificate(s) at the appropriate time by our transfer agent. As soon as
practicable after the effective time of the Reverse Split, our transfer agent will send a transmittal letter to each stockholder advising
such holder of the procedure for surrendering Old Certificate(s) in exchange for new shares held in book-entry. Your Old Certificate(s)
representing pre-split shares cannot be used for either transfers or deliveries. Accordingly, you must exchange your Old Certificate(s)
in order to effect transfers or deliveries of your shares. Any stockholder whose Old Certificate(s) have been lost, destroyed or stolen
will be entitled to new shares in book-entry only after complying with the requirements that we and our transfer agent customarily apply
in connection with lost, stolen or destroyed certificates.
STOCKHOLDERS
SHOULD NOT DESTROY ANY PRE-SPLIT STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL THEY ARE REQUESTED TO DO SO.
Accounting
Consequences
The
par value per share of our common stock would remain unchanged at $0.0001 per share after the Reverse Split. As a result, on the effective
date of the Reverse Split, the stated capital on our balance sheet attributable to the common stock will be reduced proportionally, based
on the Approved Split Ratio selected by the Board, from its present amount, and the additional paid-in capital account shall be credited
with the amount by which the stated capital is reduced. The per share common stock net income or loss and net book value will be increased
because there will be fewer shares of common stock outstanding. The shares of common stock held in treasury, if any, will also be reduced
proportionately based on the Approved Split Ratio selected by the Board. Retroactive restatement will be given to all share numbers in
our financial statements, and accordingly all amounts including per share amounts will be shown on a post-split basis. We do not anticipate
that any other accounting consequences would arise as a result of the Reverse Split.
Dissenter’s
Rights of Appraisal
Any
stockholders who dissent from the Reverse Split have no right to appraisal under the Nevada Revised Statutes, our Articles of Incorporation,
or our bylaws.
Material
Federal U.S. Income Tax Consequences of the Reverse Split
The
following is a summary of the material U.S. federal income tax consequences of a Reverse Split to our U.S. Holders (as defined below).
The summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), applicable Treasury Regulations promulgated
thereunder, judicial authority and current administrative rulings and practices as in effect on the date of this Proxy Statement. Changes
to the laws could alter the tax consequences described below, possibly with retroactive effect. We have not sought and will not seek
an opinion of counsel or a ruling from the Internal Revenue Service regarding the federal income tax consequences of a Reverse Split.
This discussion only addresses U.S. Holders who hold common stock as capital assets. It does not purport to be complete and does not
address U.S. Holders subject to special tax treatment under the Code, including, without limitation, financial institutions, tax-exempt
organizations, insurance companies, dealers in securities, foreign stockholders, stockholders who hold their pre-reverse stock split
shares as part of a straddle, hedge or conversion transaction, and stockholders who acquired their pre-reverse stock split shares pursuant
to the exercise of employee stock options or otherwise as compensation. If a partnership (or other entity treated as a partnership for
U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal income tax treatment of a partner in
the partnership will generally depend on the status of the partner and the activities of the partnership. Accordingly, partnerships (and
other entities treated as partnerships for U.S. federal income tax purposes) holding our common stock and the partners in such entities
should consult their own tax advisors regarding the U.S. federal income tax consequences of the proposed Reverse Split to them. In addition,
the following discussion does not address the tax consequences of the Reverse Split under state, local and foreign tax laws. Furthermore,
the following discussion does not address any tax consequences of transactions effectuated before, after or at the same time as the Reverse
Split, whether or not they are in connection with the Reverse Split.
For
purposes of the discussion below, a “U.S. Holder” is a beneficial owner of shares of the Company’s common stock that
for U.S. federal income tax purposes is: (i) an individual citizen or resident of the United States; (ii) a corporation (or other entity
taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state
therein or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its
source; or (iv) a trust with respect to which a U.S. court is able to exercise primary supervision over its administration and one or
more U.S. persons have the authority to control all of its substantial decisions of the trust, or that has a valid election in effect
to be treated as a U.S. person under applicable U.S. Treasury Regulations.
The
Reverse Split is expected to constitute a “recapitalization” for U.S. federal income tax purposes pursuant to Section 368(a)(1)(E)
of the Code. A U.S. Holder generally will not recognize gain or loss on the deemed exchange of shares pursuant to the Reverse Split,
except potentially with respect to any additional fractions of a share of our common stock received as a result of the rounding up of
any fractional shares that otherwise would be issued, as discussed below. Subject to the following discussion regarding a U.S. Holder’s
receipt of a whole share of the Company’s common stock in lieu of a fractional share, a U.S. Holder’s aggregate tax basis
in the shares of common stock received in the Reverse Split will equal the U.S. Holder’s basis in its old shares of common stock
and such U.S. Holder’s holding period in the shares received will include the holding period in its old shares exchanged. The Treasury
Regulations provide detailed rules for allocating the tax basis and holding period of shares of common stock surrendered in a recapitalization
to shares received in the recapitalization.
As
described above under “Treatment of Fractional Shares,” no fractional shares of the Company’s common stock will be
issued as a result of the Reverse Split. Instead, record holders of our common stock who otherwise would be entitled to receive a fractional
share because they hold a number of shares not evenly divisible by the Approved Split Ratio will automatically be entitled to receive
an additional fraction of a share of common stock to round up to the next whole share. A U.S. Holder who receives one whole share of
the Company’s common stock in lieu of a fractional share may recognize income or gain in an amount not to exceed the excess of
the fair market value of such share over the fair market value of the fractional share to which such U.S. Holder was otherwise entitled.
We
will not recognize any gain or loss as a result of the proposed Reverse Split.
THE
PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL U.S. INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT AND DOES NOT
PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. YOU SHOULD CONSULT YOUR OWN TAX ADVISORS
AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE REVERSE SPLIT IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.
Required
Vote and Recommendation
In
accordance with our Charter and Nevada law, approval and adoption of this Reverse Split Proposal requires the affirmative vote of the
holders of a majority of the voting power held by all stockholders. Abstentions will have the effect of voting against the Reverse Split
Proposal and broker non-votes will have no effect on the vote.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE REVERSE SPLIT PROPOSAL.
PROPOSAL
NO. 2
THE
CHARTER AMENDMENT PROPOSAL
Overview
As
of October 31, 2024, there were: 6,000,000 shares of the Company’s common stock authorized and a total of 4,801,065
shares of common stock issued and outstanding. As a result, the Company currently has only 1,198,935 authorized shares of common
stock that are available for issuance, other than to the holders of outstanding derivative securities.
On October 7, 2024 the Company was party to a forward merger in which Beeline Financial Solutions, Inc. was merged
into a subsidiary of the Company in exchange for 69,482,229 shares of the Company’s Series F Preferred Stock and 517,775 shares
of the Company’s Series F-1 Preferred Stock. The Series F shares have no voting power; the Series F-1 may cast one vote per share.
The Merger Agreement requires the Company to seek the approval of its shareholders to the conversion of the Series F and Series F-1 shares
into shares of common stock of the Company on a one-for-one basis; that special meeting of shareholders will be held early in 2025. In
the event that the shareholders of the Company approve the conversion of the Series F and Series F-1 shares into shares of common stock,
the Company will not be able to comply unless the shareholders approve an increase in the authorized shares accompanied by the reverse
stock split that is the subject of Proposal No. 1.
After
consideration, our Board of Directors determined it would be in the best interest of Eastside and its stockholders to seek stockholder
approval for an amendment to the Articles of Incorporation which would increase the number of authorized shares of Common Stock
for various purposes described below. The amendment would increase Eastside’s total number of authorized shares of common stock
from 6,000,000 shares to 40,000,000 shares. We are not requesting any increase to the authorized number of shares of preferred
stock, which would remain unchanged at 100,000,000 shares.
Rationale
for the Amendment and Factors to Consider
The
amendment is intended to, among other things, allow Eastside to have shares of our common stock available to provide flexibility for
Eastside to use its capital stock for business and financial purposes in the future, without the expense and delay of an additional special
meeting of stockholders, unless such approval is expressly required by applicable law or Nasdaq Rules. In addition to providing a reserve in the event that the shareholders approve the conversion of Series F and Series
F-1 shares into common stock, the additional shares may
be used for various purposes, including for: (i) capital-raising, financing or refinancing transactions involving the issuance of shares
of our common stock, the issuance of convertible securities or the issuance of other equity securities; (ii) future acquisitions and
investment opportunities; (iii) strategic business transactions; (iv) current or future equity compensation plans; (v) stock splits;
(vi) stock dividends; and (vii) other corporate purposes.
In
particular, under Eastside’s current circumstances, a significant reserve of authorized common stock may be useful to Management
in its efforts to improve the Company’s balance sheet and so enable us to finance growth, particularly growth in our new Beeline
subsidiary. Such efforts could entail sales of equity securities to institutional investors. Such efforts could also involve Eastside’s
acquisition of one or more operating businesses that are compatible with our existing business operations and are attracted by the opportunities
for liquidity that participation in a Nasdaq-listed company would provide. Management believes that the availability of a significant
amount of authorized common stock could make opportunities available for investment or expansion transactions that would strengthen Eastside’s
balance sheet and facilitate the expansion of our operations.
At
this time, we have no specific plans, arrangements or understandings to issue any of the shares of common stock that would be authorized
by the Charter Amendment Proposal, as our other outstanding securities will not be convertible into common stock unless the approval
of the stockholders is obtained. However, we believe that it is critical to have the flexibility to issue shares of common stock
beyond the limited amount that approval of the Reverse Stock Proposal and implementation of a Reverse Stock Split would make available.
We believe the failure to approve the Charter Amendment Proposal would likely hinder our ability to pursue stockholder value-enhancing
transactions. We have not proposed the increase in the authorized number of shares of Common stock with the intention of using the additional
shares for anti-takeover purposes, although we could theoretically use the additional shares to make it more difficult or to discourage
an attempt to acquire control of Eastside.
The
issuance of any shares of common stock, or securities convertible into common stock, in connection with any financing or refinancing
or acquisition transaction, may dilute the proportionate ownership and voting power of existing stockholders and depress the market price
of our common stock. Although the future issuance of additional shares of common stock would dilute the relative ownership interests
of existing stockholders, our Board believes that having the flexibility to issue additional shares in appropriate circumstances could
increase the overall value of Eastside to its stockholders.
Effect
of Approval
Approval
of Proposal 2 will constitute approval of the amendment to Section 4.1 of Eastside’s Articles of Incorporation. If Proposal 2 is
approved, the Company intends to file an amendment to the Articles of Incorporation with the Secretary of State of the State
of Nevada, and Proposal 2 will become effective at the time of that filing.
Dissenter’s
Rights of Appraisal
Any
stockholders who dissent from the Charter Amendment have no right to appraisal under the Nevada Revised Statutes, our Articles of Incorporation,
or our bylaws.
Required
Vote and Recommendation
In
accordance with our Articles of Incorporation and Nevada law, approval and adoption of this Charter Amendment Proposal requires the affirmative
vote of a majority of the voting power held by all stockholders. Abstentions will have the effect of voting against the Charter Amendment
Proposal and broker non-votes will have no effect on the vote.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE CHARTER AMENDMENT PROPOSAL.
PROPOSAL
NO. 3
APPROVAL
OF THE ADJOURNMENT OF THE SPECIAL MEETING
IF
THERE ARE INSUFFICIENT PROXIES AT
THE
SPECIAL MEETING TO APPROVE THE PROPOSALS
Adjournment
of the Special Meeting
In
the event that the number of shares of common stock present or represented by proxy at the Special Meeting and voting “FOR”
the adoption of the Reverse Split Proposal and the Charter Amendment Proposal is insufficient to approve such proposals, we may
move to adjourn the Special Meeting in order to enable us to solicit additional proxies in favor of the adoption of any such proposal.
In that event, we may ask stockholders to vote only upon the Adjournment Proposal. If the adjournment is for more than thirty (30) days,
a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Required
Vote and Recommendation
In
accordance with our Articles of Incorporation and Nevada law, approval and adoption of this Adjournment Proposal requires the affirmative
vote of a majority of the votes cast by all stockholders present in person or represented by proxy at the Special Meeting and entitled
to vote on the proposal. Abstentions and broker non-votes, if any, with respect to this proposal are not counted as votes cast and will
not affect the outcome of this proposal.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADJOURNMENT OF THE SPECIAL MEETING IF THERE ARE INSUFFICIENT PROXIES AT THE
SPECIAL MEETING TO APPROVE THE REVERSE SPLIT PROPOSAL.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Common
Stock
The
following table sets forth information as of the date of the Record Date as to each person or group who is known to us to be the beneficial
owner of more than 5% of our outstanding common stock and as to the security and percentage ownership of each of our executive officers
and directors and of all of our officers and directors as a group. As of the Record Date, the Company had 4,801,065 shares of
common stock outstanding.
Beneficial
ownership is determined under the rules of the SEC and generally includes voting or investment power over securities. Except in cases
where community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the
table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder.
Shares
of common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of the Record Date are considered
outstanding and beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person
but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
| Name and Address (1) | |
Number of Common Shares Beneficially
Owned | | |
Percentage Owned | |
| Geoffrey Gwin | |
| 635,751 | | |
| 13,24 | % |
| Eric Finnsson | |
| 19,880 | (2) | |
| 0.41 | % |
| Stephanie Kilkenny | |
| 200,851 | (3) | |
| 3.67 | % |
| Robert Grammen | |
| 124,650 | (4) | |
| 2.60 | % |
| Joseph Freedman | |
| — | | |
| — | |
| Joseph Caltabiano | |
| — | | |
| — | |
| All directors and executive officers as a group (6 persons) | |
| 981,132 | | |
| 19.82 | % |
| |
(1) |
Unless
otherwise noted, the address is c/o Eastside Distilling, Inc., 755 Main Street, Monroe, Connecticut 06468. |
| |
|
|
| |
(2) |
Includes
250 shares underlying presently exercisable stock options. |
| |
|
|
| |
(3) |
Includes
7,292 shares held in Ms. Kilkenny’s capacity as trustee of the Stephanie A. Kilkenny Trust, 145,833 shares issuable upon exercise
of warrants held by TQLA, LLC, which Ms. Kilkenny, together with her spouse, owns and controls; 1,389 warrants held directly by Patrick
J. Kilkenny, Trustee of the Patrick J. Kilkenny Revocable Trust, and 46,337 shares owned by two companies managed by Patrick Kilkenny.
Mr. Kilkenny is the spouse of the Reporting Person. |
| |
|
|
| |
(4) |
Includes
250 shares underlying presently exercisable stock options. |
Series
B Preferred Stock
The
following table sets forth information as of Record Date as to each person or group who is known to us to be the beneficial owner of
more than 5% of our outstanding Series B preferred stock. As of the Record Date, we had 2,500,000 shares of Series B preferred
stock outstanding.
Beneficial
ownership is determined under the rules of the SEC and generally includes voting or investment power over securities. Except in cases
where community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the
table possesses sole voting and investment power over all shares of capital stock shown as beneficially owned by the stockholder.
Shares
of Series B preferred stock subject to options or warrants that are currently exercisable or exercisable within 60 days of the Record
Date are considered outstanding and beneficially owned by the person holding the options for the purpose of computing the percentage
ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
| Name And
Address | |
Number
of Series B Preferred Shares Beneficially Owned | | |
Percentage
Owned | |
| 5% Stockholders: | |
| | |
| |
| Crater Lake Pte Ltd | |
| 2,500,000 | | |
| 100.00 | % |
| 111 North Bridge Road #08-19 Peninsula
Plaza, Singapore 179098 | |
| | | |
| | |
HOUSEHOLDING
Proxy
Materials Delivered to a Shared Address
Stockholders
who have the same mailing address and last name may have received a notice that your household will receive only one set of proxy materials.
This practice, commonly referred to as “householding,” is designed to reduce the volume of duplicate information and reduce
printing and postage costs. A single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions
have been received from the affected stockholders. Once you have received notice, from us or from your bank, broker or other registered
holder, that it will be householding communications to your address, householding will continue until you are notified otherwise or until
you revoke your consent. A number of banks, brokers and other registered holders with account holders who are our stockholders will be
householding our proxy materials. If you hold your shares in street name, and no longer wish to participate in householding and would
prefer to receive a separate proxy statement in the future, or currently receive multiple copies of the proxy materials and would like
to request householding, please notify your bank, broker or other registered holder. If you are a holder of record, and no longer wish
to participate in householding and would prefer to receive a separate proxy statement in the future, or currently receive multiple copies
of the proxy materials and would like to request householding, please notify us in writing at 755 Main Street, Monroe, CT 06468,
or by telephone at (971) 888-4264. Any stockholder residing at a shared address to which a single copy of the proxy materials was delivered
who wishes to receive a separate copy of our proxy statement may obtain a copy by written request addressed to 755 Main Street, Monroe,
CT 06468, attention: Secretary. We will deliver a separate copy of our proxy statement to any stockholder who so requests in writing
promptly following our receipt of such request.
OTHER
MATTERS
Management
and the Board of the Company know of no matters to be brought before the Special Meeting other than as set forth herein.
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