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Lost Spirits Distillery, Inc.

Q4 2023 Update

Bryan Davis

Published on Feb 10, 2024

Dear Shareholders,

THE GOOD:

I'm delighted to post the first profitable quarter at Lost Spirits since the COVID-19 closures. The biggest drivers of the annual gains for 2023 came from the show format changes made in Q2 & Q3 of 2022. The format changes carried a significant cost in 2022, but ultimately made the show competitive in the Las Vegas market.

I'm also delighted to say the first quarter 2024 sales figures (so far) are continuing the trend.


(See financials below for disclaimers and caveats).



THE BAD:

While the Company has largely stabilized in recent months, it is carrying a significant debt burden from the COVID-19 closures and the previous 2 years losses prior to achieving positive EBITDA.

With cash reserves perilously low, revenues were down in November 2023 (attributed largely the Formula 1 race, which impacted other entertainment companies similarly.) The temporary drop forced the Company to miss payments and complicated the Company's relationship with creditors.

Despite the newfound stability in the business itself, there is no guarantee that management will be able to continue to negotiate with creditors and continue as a going concern.

WHATS NEW:

Lost Spirits secured permission from the City of Las Vegas to allow minors in the building during daytime hours. Parents traveling with children is a large market which Lost Spirits has not been able to access.

In February, the Company is trialing an afternoon Seance Show, which is teenager friendly. If the trial is successful, management may opt to develop a new afternoon show targeting parents traveling with children.


Q4 2023 also saw the introduction of Japonisme. A rum distilled entirely from Okinawa Black Sugar. While too expensive to be a major seller, the refined spirit won a double gold medal in its first competition.

Double Gold - Japonisme Rum - Lost Spirits Distillery






Liked by Jack Zullo, Bryan Davis, Bronwen Aker, and 9 others
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Thank for the update and congratulations on achieving positive EBITDA. I am still surprised after all this time it is still difficult to procure bottles, as mentioned by others as well. Furthermore, I figure more emphasis would be placed on the alcohol side of the business rather than the shows. I understand the need for the show and revenue diversification, but it’s seems as though we have invested in a show business who sells alcohol during intermission. 1. Can we get some more insight of the alcohol side of the business? 2. Are we planning on ramping up production? 3. Are we planning on restocking previous production? 4. Are investments being made to increase production? (I think the demand is there) 5. Is anything is the works to supply the former home base? I believe Los Angeles still has a big fan base.
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Dear Theodore, I agree with you on the demand. The key is distribution. In the US we are required to use a licensed distributor. The systems is almost a monopoly and controlled unofficially by the big booze companies. We are working on it. But it's not as easy as you might think. As for emphasis, the hardest part of my job is setting priorities. Because of the debt structure, I have been focused on revenue generation over brand value creation. But if we can keep from being destabilized by the creditors, then I will be spending the next year on expansing the beverage side of things. Cheers, Bryan
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Why not another wefunder? I'm sure there's some regulatory and compliance hurdes, but if the distillery is in a tough cash position I'm sure we'd raise enough here to get past the creditor issues
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Dear Jacob, The institutional investors have the right in their loans to approve raises. Plus I think it would take more than we can raise on Wefunder to get completely out of default.
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Thanks for the update Bryan! There’s always twists and turns in the world of business and navigating the near term cash vs long term growth is part of the fun. Also to share, one of mine and my friends favorite parts of lost spirits was the resurrection of spirits lost to the world- and the unique stories about those spirits and about how the team tracked down the ingredients to resurrect them. So, if you ever did decide to offer an exclusive monthly membership dedicated to limited “resurrection” runs of liquor I’d expect you would find a strong DTC demand. Excited to see where you and the team take it in 2024! Cheers, Don
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That would be amazing! If they ever change the legal rules, it would be a dream Job!!!
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Had a blast at the New Year Soirée! I hope there are more in the future. Any opportunities or plans for LS distribution in California liquor stores?
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We're trying to make a deal for Nevada and CA soon!
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Where can we purchase Japonisme?
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For the moment, only in our gift shop. We're working on distribution. It's a current project.
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You have a unique venue and a tremendous amount of talent there. I hope the positive trend continues. I'll toast to that and a great 2024 with a little Japonisme rum. Cheers.
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Thank you!!!
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Great news! I am still kind of bummed that after eight emails and four voicemails, I was still never responded to for the New Year’s event invitations. Especially since I’m a local.
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Not sure what happened, but I sent an email personally.
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Thank you for the update, can we please see a balance sheet along with the P&L?
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Just published the annual report!
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Keep the faith. Debt can be overcome. And IMO, moving to allow families with children to enjoy the mania that is Lost Spirits was a brilliant move. Now you just need to add "virgin" beverages and mocktails for the kids and abstainers to enjoy. ;-)
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Hi team, great update! But like some others in the comments below, keen to hear more about the plans for the liquor side of the business. We first fell in love with Lost Spirits before the LA experience and when bottles could be found at a few liquor stores in California, and it’s a shame now that it’s so hard to buy. I believe collectors would snap up cool products like Japonisme, if only they could. I think even a quarterly subscription model would do well. So while I’m super happy the Vegas site is going well, the heart and soul of Lost Spirits (to me) is the world class, delightfully unusual, highly collectible liquor that Bryan the wizard produces. Really keen to understand the strategy for this part of the business. Thank you!