Beeline Holdings, Inc. — requested 2022 Q2 filing summary
Entity mismatch: The supplied filing is Eastside Distilling, Inc.’s Form 10-Q, not a Beeline Holdings, Inc. filing. It covers the quarter and six months ended June 30, 2022, and was signed August 11, 2022. The figures below summarize the supplied Eastside filing. Dollar amounts are in millions unless noted.
Business context and reporting period
Eastside produces and sells spirits and operates Craft Canning + Printing (Craft C+P), including mobile canning, digital can printing, and co-packing. The new digital can printer began operating in April 2022; the company also acquired production-facility assets to add co-packing capabilities. The company reported two operating segments: Spirits and Craft C+P.
Financial results and liquidity
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Net sales | $4.86 | $8.60 |
| Gross profit / margin | $1.45 / 30% | $2.40 / 28% |
| Operating loss | $(1.13) | $(2.76) |
| Net loss | $(1.79) | $(3.82) |
| Net loss attributable to common shareholders | $(1.82) | $(3.90) |
| Basic and diluted loss per share | $(0.12) | $(0.26) |
- For the six-month comparison with 2021, net sales rose from $6.59 million to $8.60 million, while gross margin improved from 22% to 28%. Operating loss narrowed from $3.69 million to $2.76 million. Net results worsened from $1.94 million income to a $3.82 million loss; 2021 included $3.89 million of income from discontinued operations and $2.22 million of other income, including PPP loan forgiveness and a deferred-consideration remeasurement.
- Second-quarter net sales increased from $3.45 million to $4.86 million year over year; gross margin rose from 26% to 30%. Net loss was $1.79 million versus $1.77 million a year earlier.
- Cash was $1.02 million at June 30, down from $3.28 million at year-end 2021. Current assets were $8.26 million and current liabilities $9.96 million, implying negative working capital of about $1.70 million. The company reported that working capital fell $6.3 million during the half, including the reclassification of $4.3 million of printer prepayments to equipment.
- Six-month cash flow: $0.27 million provided by operating activities, $2.49 million used in investing activities, and $0.04 million used in financing activities. Capital spending on property and equipment was $2.50 million. Cash paid for interest was $0.59 million.
- Total liabilities were $20.18 million. At quarter-end, notes payable were $8.68 million, related-party notes were approximately $2.00 million, and the current secured-credit-facility balance was $3.11 million; these amounts exclude lease liabilities. The company had $3.0 million drawn on a TQLA related-party loan. A separate $7.75 million note balance was scheduled to mature in April 2024.
Material changes and management commentary
- Spirits six-month net sales increased to $6.19 million from $2.54 million. Management attributed much of the increase to bulk whiskey sales totaling $4.1 million in the first half. Spirits gross margin improved to 45% from 18%, but the segment still reported a $0.91 million net loss.
- Craft C+P six-month net sales declined to $2.41 million from $4.05 million, and gross margin fell to negative 17% from 24%. Management cited lower service sales, customer insourcing, competition, product mix, higher input costs, and start-up costs for the digital printer. The segment reported a $2.92 million net loss.
- Management said the printer produced nearly 750,000 cans in the quarter, with orders for nearly 750,000 more over the following month and a half; it reported printing nearly 650,000 cans in July. These are management-reported operating figures, not financial guidance.
- Management said spirits volumes were soft, particularly for Azuñia tequila after discounting was reduced, and cited distribution-related out-of-stocks and missed retail programming. It expected imported tequila and other material cost pressures to continue in the second half. Can-supply uncertainty, price increases, and hiring and retention challenges were also noted.
Outlook, risks, and unusual items
- No quantified revenue, earnings, or cash-flow guidance is provided. Management said meeting operating cash needs over the next 12 months depends on sales and margin growth, positive operating cash flow, and expense control. It may seek additional financing or, if unavailable on acceptable terms, sell assets, cut costs, or reduce marketing.
- The company reported a $62.5 million accumulated deficit and a $3.8 million six-month net loss. It disclosed that its 2021 auditor’s report included a going-concern explanatory paragraph expressing substantial doubt about its ability to continue as a going concern.
- In May 2022, forbearance agreements accelerated certain Craft C+P note maturities to December 30, 2022. A $0.5 million revolving line was past its stated January 2022 maturity, and the company was discussing an extension with First International Bank (FIB). Subsequent to quarter-end, on August 4, TQLA amended the related-party facility to $3.5 million and received additional warrants; the filing also says Eastside was discussing an extension with FIB.
- One distributor and one wholesale customer represented 49% of consolidated sales for the first half of 2022. Two distributors represented 23% of receivables at quarter-end.
- A former CEO and board chair’s lawsuit alleges fraud, contract breaches, defamation, and other claims. Eastside disputes the allegations and intends to defend the case. The filing reports no other material legal proceedings.
- The company said it had no material changes to risk factors from its 2021 Form 10-K. It assessed certain intangible and long-lived assets as not impaired at June 30, 2022.
Important facts for investors to verify
- Confirm the intended issuer: the provided document identifies Eastside Distilling, Inc., not Beeline Holdings, Inc.
- Review the company’s near-term liquidity, access to financing, and ability to address negative working capital and debt maturities, including the status of the FIB discussions and subsequent TQLA amendment.
- Assess whether Craft C+P can increase printer utilization and improve margins, and whether its reported can orders translate into revenue and cash flow.
- Evaluate the sustainability of Spirits performance given reliance on bulk whiskey sales, lower Azuñia volumes, and customer and distributor concentration.
- Review the former executive’s litigation and the potential financial or operational consequences; the filing does not quantify a possible loss.