Beeline Holdings, Inc. quarterly report, Q1 FY2024

Business context and reporting period

The supplied filing is Eastside Distilling, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2024—not a filing identified as Beeline Holdings, Inc. The company operates Craft Canning + Printing (Craft C+P) and spirits businesses.

Financial results and position

Unless stated otherwise, amounts are in millions of dollars.

  • Net sales were $2.411, down 15% from $2.853 a year earlier. Gross profit fell to $0.186 from $0.641; gross margin was 8%, versus 22%.
  • Operating loss was $1.050, compared with $1.240. Net loss was $1.293, compared with $1.598; loss attributable to common shareholders was $1.331. Basic and diluted loss per share was $0.78, versus $2.00.
  • Cash used in operations was $0.081, improved from $0.428 used in Q1 2023. Investing activities provided $0.014, financing activities were zero, and cash declined $0.067 to $0.336.
  • At quarter-end, current assets were $4.696 and current liabilities $15.902, yielding negative working capital of about $11.2. Total liabilities were $17.498 versus assets of $17.022; stockholders’ deficit was $0.476.
  • Notes payable were $8.079 and secured credit facilities were about $3.044, all presented as current at March 31. Lease liabilities totaled $2.499. The filing reports no financing cash inflows during the quarter.

Changes versus prior-year quarter

  • Craft C+P net sales rose to $1.814 from $1.477, and segment gross profit improved to $0.049 from a $0.101 loss. The company printed 4.8 million cans, versus 2.5 million.
  • Spirits net sales fell to $0.597 from $1.376; segment gross profit declined to $0.137 from $0.742. Management cited prior-year bulk-barrel sales and a less favorable product mix. Spirits volume declined 4%.
  • Sales and marketing expense decreased to $0.251 from $0.511, and general and administrative expense to $1.105 from $1.364, primarily reflecting reduced headcount and closure of unprofitable operations. Interest expense decreased to $0.248 from $0.329.
  • The prior-year comparison benefited from bulk spirits sales; management attributed much of the overall gross-margin decline to that mix difference, despite improved Craft C+P performance.

Outlook, risks and unusual items

  • Management says meeting cash needs over the next 12 months depends on asset sales, external financing and improved operating results, including higher can-printing revenue and better margins. It is negotiating with creditors and states there is no assurance of agreement or adequate funding.
  • The company reported an $84.0 million accumulated deficit and cited substantial doubt about its ability to continue as a going concern in the auditor’s report accompanying its 2023 financial statements. It may need to sell assets, cut costs or reduce marketing if financing is unavailable.
  • Interest payments to certain creditors were deferred in Q1. The company disclosed $0.6 million of advances from a related party during February and a further $0.6 million advanced by creditors after quarter-end.
  • Nasdaq notified the company that it failed the $2.5 million stockholders’ equity requirement; quarter-end equity was a $0.5 million deficit. Nasdaq set May 23, 2024 as the deadline to submit a compliance plan. A separate notice cited noncompliance with independent-director and audit-committee requirements, with a cure period extending to the earlier of the next annual meeting or January 22, 2025.
  • Two disclosed lawsuits remain: Sandstrom Partners seeks $285,000, which the company disputes; a former CEO’s claims are also disputed. The company recorded no new Azuñia impairment in Q1, following a $0.4 million impairment in 2023.
  • Management described new Craft C+P business and improved production throughput, but also noted elevated shipping and materials costs expected to continue through 2024. No numerical financial guidance was provided.

Key facts for investors to verify

  1. Confirm the filing identity: the request names Beeline Holdings, Inc., while the supplied 10-Q is for Eastside Distilling, Inc.
  2. Check the outcome of Nasdaq’s equity-compliance plan and the separate governance cure process.
  3. Verify creditor negotiations, deferred interest, debt maturities and access to cash after the disclosed post-quarter advances.
  4. Assess whether Craft C+P growth can translate into sustained gross-margin and operating-cash-flow improvement, and whether spirits declines persist.
  5. Review the filing’s preferred-dividend disclosures: the financial statements show approximately $38,000 for Q1, while the MD&A contains an apparent “$37,500 million” unit error.