Beeline Holdings, Inc. — Filing Summary
Filing identity: The supplied filing is Eastside Distilling, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2020, not a filing identified as Beeline Holdings, Inc. Verify the issuer before relying on this summary.
Business context and reporting period
Eastside manufactures, markets and distributes alcoholic beverages and provides contract canning and bottling services. The filing reports the three and six months ended June 30, 2020, compared with the same 2019 periods. In March 2020, the company closed its four Portland tasting rooms and classified those retail operations as discontinued operations.
Financial performance and position
- Revenue: Second-quarter sales were $4.29 million versus $4.00 million; net sales were $4.01 million versus $3.74 million. First-half sales were $8.04 million versus $7.46 million; net sales were $7.40 million versus $7.09 million.
- Profit and margins: Second-quarter gross profit was $1.57 million and gross margin was 39%, compared with $1.40 million and 38%. First-half gross profit was $2.44 million and gross margin was 33%, down from $2.50 million and 35%. First-half operating loss was $4.87 million; net loss attributable to common shareholders was $5.69 million, or $0.58 per share. The comparable 2019 net loss was $5.89 million, or $0.65 per share.
- Cash flow: First-half operating cash use was $2.11 million, compared with $6.21 million in 2019. Investing activities provided $0.09 million, versus $3.57 million used in 2019; financing activities provided $3.59 million, versus $0.09 million used. Cash increased to $1.92 million from $0.34 million at year-end 2019.
- Liquidity: At June 30, cash was $1.92 million and working capital was positive by approximately $0.4 million. Inventories were $10.75 million, down from $12.33 million at year-end.
- Debt and obligations: Notes payable totaled $5.71 million, including $3.91 million current. The balance sheet also reported a $6.32 million current secured trade credit facility and $15.45 million of long-term deferred consideration for the Azuñia acquisition. Total liabilities were $31.31 million; stockholders’ equity was $2.44 million.
Material changes versus the prior comparable period
- First-half net sales rose about 4%; wholesale finished-goods sales increased, including $1.4 million in Azuñia sales, while Redneck Riviera sales declined. Canning and bottling revenue was slightly lower overall, as increased mobile canning was offset by weaker co-packing and bottling activity.
- First-half gross margin fell two percentage points, reflecting product and service mix, higher raw-material costs and under-absorbed manufacturing overhead.
- First-half operating expenses declined by $0.61 million, mainly from lower general and administrative costs, while sales and marketing expense increased by $0.29 million. Interest expense increased by $0.40 million.
- Management attributed lower operating cash use partly to expense reductions and a $1.58 million inventory drawdown; accounts payable also declined by $0.76 million.
Outlook, risks and unusual items
- Liquidity and going concern: The company reported a $5.7 million first-half net loss and a $49.9 million accumulated deficit. It said meeting cash needs over the next 12 months depends on cost reductions, inventory use, additional financing, asset sales and improved operating cash flow. The filing notes that the 2019 auditor’s report included a going-concern qualification expressing substantial doubt.
- COVID-19: Bar and restaurant closures weakened demand for the predominantly on-premise Azuñia brand. Eastside reported stronger mobile-canning bookings as customers shifted from kegs to cans, but noted can-stock shortages. The company said it believed it had sourced enough cans for its current plan. The effects of the pandemic remained uncertain.
- Financing and covenant matter: Live Oak Bank’s facility matures January 14, 2021 and permits the lender to demand repayment, with repayment due within 30 days of a demand. The lender notified Eastside of technical covenant defaults in May; the company said the defaults were waived after conditions were met and that it was compliant as of August 13, 2020.
- PPP loan: Eastside received approximately $1.4 million under the Paycheck Protection Program. It warned that a government review could require repayment and entail costs, fines or penalties.
- Strategy and guidance: Management emphasized growing branded wholesale sales and canning and bottling services, controlling expenses and improving margins. No quantified earnings or revenue guidance is provided.
- Other items: Eastside recorded a $0.3 million inventory allowance for obsolete inventory in the first half. It reported no material legal proceedings and stated disclosure controls were effective at June 30, 2020.
Important facts for investors to verify
- Confirm the issuer: the supplied filing names Eastside Distilling, Inc., despite the request identifying Beeline Holdings, Inc.
- Review cash runway, debt maturities and the terms, borrowing base and demand provisions of the Live Oak facility.
- Track whether operations generate positive cash flow without continued inventory reductions or external financing.
- Verify the PPP loan’s forgiveness or repayment status and any related government review.
- Assess Azuñia’s sales performance and the $15.45 million deferred acquisition consideration, alongside COVID-related demand and can-supply risks.