Beeline Holdings, Inc. — Filing Summary
Entity and period mismatch: The supplied filing is Eastside Distilling, Inc.’s Form 10-K for the fiscal year ended December 31, 2022, filed March 31, 2023. It does not appear to be a Beeline Holdings, Inc. filing, and it reports annual results rather than standalone 2022 Q4 results. The summary below reflects the filing as provided.
Business context and reporting period
Eastside Distilling operated two segments: Spirits, which makes and sells alcoholic beverages, and Craft Canning + Printing (Craft C+P), which provides mobile canning, digital can printing, and co-packing services. Its spirits were sold in 30 states; Craft C+P operated in Oregon, Washington, and Colorado.
Financial performance and liquidity
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Sales | $14.327 million | $12.890 million |
| Net sales | $13.883 million | $12.394 million |
| Gross profit / margin | $2.441 million / 18% | $2.910 million / 23% |
| Operating loss | $6.649 million | $6.900 million |
| Net loss | $16.266 million | $2.196 million |
| Cash from (used in) operations | $(0.877) million | $(5.948) million |
Interest expense was $2.216 million, including $1.155 million of debt-issuance-cost amortization. The company recorded a $7.453 million impairment of Azuñia assets. No income tax provision was recorded.
At year-end, cash was $0.723 million, current assets $6.620 million, current liabilities $13.011 million, and working capital was negative $6.4 million. Total liabilities were $22.992 million, against total assets of $21.476 million; stockholders’ equity was a deficit of $1.516 million. The balance sheet listed $3.442 million of current secured credit facilities, $4.598 million of current related-party notes, and $7.749 million of notes payable due in 2024, in addition to lease liabilities and other obligations.
Material changes versus FY 2021
- Net sales rose 12%, but gross profit fell and gross margin narrowed five percentage points, to 18%.
- Spirits net sales increased to $8.357 million from $5.176 million, supported in part by a bulk sale of roughly 1,450 barrels for $4.4 million. Spirits gross margin rose to 39%, but the segment reported a $10.917 million net loss, including the Azuñia impairment.
- Craft C+P net sales declined to $5.526 million from $7.218 million; its gross margin swung from 20% to negative 15%, and its net loss widened to $5.349 million. Management cited competitive pressure in mobile canning and underutilization and ramp-up costs at the new printer.
- Cash used in operating activities improved year over year, partly due to bulk spirits sales and increased accrued liabilities. Investing activities used $2.317 million, chiefly for equipment, including the digital can printer.
- Net loss increased substantially, in part because FY 2021 included $3.858 million of income from discontinued operations and $2.1 million of other income, while FY 2022 included the impairment and higher interest expense.
Outlook, risks, contingencies, and unusual items
- Going concern and financing: The auditor’s report includes a substantial-doubt paragraph regarding the company’s ability to continue as a going concern. Management said it expected further net losses in 2023 and that cash needs could exceed income from sales. Continued operations depended on additional financing, improved sales and margins, and positive operating cash flow; none was assured.
- Debt default: $3.4 million of senior convertible notes came due October 18, 2022 and remained unpaid after a one-time extension to November 18, 2022. The company was discussing further extension or refinancing; holders retained remedies, including potential foreclosure on liens. The filing also describes an Aegis secured note with $4.5 million principal, 9.25% interest, and an October 2023 maturity, subject to conditional extensions.
- Potential asset sale: In December 2022 the company announced it intended to pursue a sale of one or more spirits assets, but the process was incomplete. It warned that a sale might not occur on favorable terms or provide substantial cash.
- Nasdaq status: The company reported that Nasdaq had granted an extension through May 30, 2023 to meet listing requirements and expected delisting, with a move to OTC Markets potentially making equity financing harder.
- Operations and outlook: Digital printing began in April 2022; nearly 5 million cans were printed during the year, but the printer was not at break-even throughput. Management said the fourth-quarter order backlog was below expectations. Spirits volumes were affected by reduced Azuñia discounting, limited marketing investment, distribution issues, and input-cost increases. These pressures were expected to continue into 2023.
- Regulatory and legal matters: Following a TTB investigation, the company received notices citing 24 violations across three distilling plants and was required to pay $0.3 million and correct the conditions. A March 2023 lawsuit sought $285,000; the company disputed the claim. A separate former-executive lawsuit was also being contested.
- Controls and accounting: Management reported effective disclosure controls but identified a material weakness in internal control over financial reporting related to the absence of a formal policy governing impairment-testing inputs; audit adjustments followed. The Azuñia impairment relied on estimates of future cash flows and other judgments.
- Other risk concentrations: One customer, the Oregon Liquor Control Commission, represented approximately 18% of 2022 consolidated sales. Elsewhere, the filing states that two spirits customers represented 40% of revenue; investors should confirm the customer-concentration disclosures. A limited supplier base, distributor dependence, secured borrowing against inventory and assets, and potential dilution from financing were also cited risks.
Important facts for investors to verify
- Confirm the intended issuer: the supplied document names Eastside Distilling, Inc., not Beeline Holdings, Inc.
- Review subsequent filings for the status of the $3.4 million overdue convertible notes, Aegis debt, creditor remedies, and any debt amendments or refinancing.
- Verify whether Nasdaq delisting occurred and the company’s subsequent listing and financing access.
- Assess cash runway, working-capital deficit, going-concern disclosures, and any subsequent asset sales or additional capital raises.
- Review the assumptions supporting the $7.453 million Azuñia impairment and progress toward digital-printer utilization and profitability.
- Check the outcomes of the TTB corrective actions and pending legal matters, and reconcile the filing’s customer-concentration disclosures.