Beeline Holdings, Inc.

We are a Nevada corporation organized in 2004. Prior to October 7, 2024, we operated two businesses, the business which Spirits is now engaged in as a subsidiary and our digital printing can operation which we called our “craft business.”

As we were negotiating the acquisition of Old Beeline, we understood that we had to eliminate the substantial debt on our balance sheet. This led to discussions with our creditor where the craft business would be sold and 47% of the Spirits business would also be sold to these creditors and other third parties. On September 4, 2024, we entered into a Merger Agreement with Old Beeline and ultimately closed the merger on October 7, 2024. The merger occurred immediately after the closing of the Debt Exchange Agreement described below. In the merger, we issued the shareholders of Old Beeline 517,771 shares of Series F-1 Preferred Stock (“Series F-1”) and 69,482,229 shares of Series F Preferred Stock (“Series F), both of which were non-voting and convertible only upon a post-merger shareholder approval. Because the merger would ultimately result in a change of control upon post-merger shareholder approval, we were required to obtain approval from the Nasdaq Stock Market, LLC (“Nasdaq”) and our shareholders before more than 19.99% of our Common Stock could be issued to the former Old Beeline shareholders as well as investors who provided financing during the following six months. Those approvals subsequently occurred with our shareholders approving the voting and conversion of the Series F and Series F-1 on March 7, 2025 and Nasdaq approving the change of control on March 5, 2025. Due to the Nasdaq rules, Old Beeline appointed two directors out of the six directors serving following the merger and our Chief Executive Officer remained as Chief Executive Officer until March 7, 2025. Old Beeline’s Chief Financial Officer became our Chief Financial Officer since our Chief Executive Officer had been serving in both roles prior October 7, 2024.

On September 4, 2024, the Company and its new subsidiary, Craft, entered into a Debt Exchange Agreement, which closed on October 7, 2024, resulting in the assignment by the Company of 720 barrels of spirits to Craft, followed by the merger of Craft into a limited liability company owned by certain creditors of the Company.

Subsequent to the execution of the Debt Exchange Agreement, the Company organized Spirits and assigned the Company’s business of manufacturing and marketing spirits to Spirits, which manufactures, acquires, blends, bottles, imports, markets and sells a wide variety of alcoholic beverages. Spirits’ brands span several alcoholic beverage categories, including whiskey, vodka, rum, and tequila. Spirits sells products on a wholesale basis to distributors in open states and through brokers in control states.

Our business fundamentally changed on October 7, 2024, when we acquired Old Beeline and simultaneously sold our craft business which was our largest business and a large minority ownership interest in Spirits. The Company’s business lines entail the following: (1) Beeline Financial Holdings, Inc., a wholly-owned subsidiary which in turn owns subsidiaries which operate as a fintech mortgage lender and title provider and (2) Spirits in which the Company owns 53%. Following shareholder approval, we changed our name from our former name of Eastside Distilling, Inc. to Beeline Holdings, Inc., and appointed Nicholas Liuzza, Jr., Old Beeline’s Chief Executive Officer, as the Company’s Chief Executive Officer, in the furtherance of our shifted focus towards the Beeline business. In addition, Geoffrey Gwin, Stephanie Kilkenny and Robert Grammen resigned as directors and Mr. Gwin resigned as Chief Executive Officer of the Company, and Nicholas Liuzza, Jr. and Stephen Romano were appointed as directors to fill two vacancies on the Board of Directors, following which there is one vacancy existing on the Board of Directors. Geoffrey Gwin was also appointed as Chief Executive Officer of Spirits. The following are descriptions of each of our new Beeline business and our legacy Spirits business.

Beeline’s Business

Beeline Overview and History

Beeline is a fintech mortgage lender and title provider transforming the home loan process into a shorter, easier path than conventional mortgage lending for millions of Americans seeking a digital experience. Beeline has built a proprietary mortgage and title platform leveraging advanced technical tools with sophisticated language learning models and combining an appropriate amount of human interaction to create a better outcome for mortgage borrowers. Beeline was founded in 2019 with principal offices located in Providence, Rhode Island. An Australian subsidiary has offices in Burleigh Heads, Australia. Beeline also has executive office suites in three locations in the United States.

Beeline’s business model is focused on providing an efficient process for consumers to more easily access mortgage lending using our online portal and services. In 2024, approximately 59% of the loans Beeline originated and brokered through December 31, 2024, were Non-QM loans where the consumer, for example, lacked traditional income from full-time employment in contrast to investment, rental income or other 1099 income or where the consumer has sufficient assets to support the loan.

Beeline primarily serves as the lender for its conventional loans, where it is also fully responsible for the underwriting. Beeline is the lender on a non-delegated underwriting basis on most of its Non-QM loans. Beeline also serves as a mortgage broker for certain loans with third party lenders - primarily for the remainder of Non-QM loans. In 2024, Beeline has acted as lender in 62% of its loan transactions, and as mortgage broker in 38% of its loan transactions. Beeline leverages its industry-specific knowledge and infrastructure, using a combination of licensed and proprietary technology, to provide an alternative to a more manual, non-technology focused lending process for residential properties in the United States.

Beeline’s Mortgage Lending Business

Beeline is licensed to operate in 28 states including California, Florida and Texas. Beeline’s services and platform are designed to address the evolving US real estate market, including the increasing use of online and digital means of financing access as well as a trend away from conventional lending qualification practices, in part by placing consumers in front of financing opportunities that may not be available from lenders using the conventional approach to loan qualification processing. Its focus is on residential properties. However, a small portion of Beeline’s originated loans (less than 10%) are for commercial properties.

Beeline can generate mortgage approvals that are more reliable than traditional pre-approvals and in as little as 7 to 10 minutes. Beeline’s unique customer experience was built for digital-first consumers and property investors who grew up in the gig economy and who desire a frictionless, digital experience. Beeline offers a unique variety of mortgage products when compared to other mortgage lenders, including the “top 50” lenders, allowing borrowers a higher probability of home ownership or to take cash out of their property through a refinance transaction.

Most top 50 lenders will deny a borrower if they are not approved for a conventional mortgage backed by Freddie Mac or Fannie Mae, the two government-sponsored enterprises (“GSEs”) that back a majority of mortgages in the U.S. (“QM loans”). In this instance, Beeline will re-route the borrower to a non-traditional mortgage process offering solutions not offered by larger lending institutions. Combining QM loans and Non-QM loans through a single streamlined platform available any time provides strong differentiation and provides additional options for Beeline’s customers.

As the real estate industry has evolved, Non-QM loans have become more popular, relying on a different set of underwriting criteria which are more suited to borrowers whose situations do not line up with more stringent guidelines created for and based on the previous generations and less flexible economy. Beeline is one of the few direct-to-consumer digital mortgage lenders that offer both QM loans and Non-QM loans from a single platform, allowing Beeline to better serve the 100 million Millennials and Gen Z quickly emerging as home buyers and currently representing approximately 60% of the home purchase market. In 2024, 25% of Beeline’s loan originations were home purchases, and 75% were refinance transactions.

As described elsewhere in this section, Beeline’s business is multi-faceted, and Beeline can serve multiple roles in the home lending process. In addition to the lending operation, Beeline also has two title agencies in its umbrella. One title agency is wholly owned and the other title agency is a joint venture with an asset manager in which Beeline holds 50.9% of the ownership. Beeline also has a minority investment in a subsidiary focused on the development of artificial intelligence (“AI”) that Beeline’s lending operation leverages in text chat on its website.

Beeline breaks down the legacy role-based mortgage process into tasks for faster processing. Beeline has built automation to satisfy underwriting conditions in the loan file in real time. This expedites the time to close while minimizing headcount and expense for Beeline. Beeline expects that its technology and systems will continue to evolve, which will permit growth over the next three to five years. However, there are no assurances that Beeline will grow during this period.

Beeline generates its leads exclusively online relying heavily on Google advertising, which generated over 49% of its leads in 2024. One other source accounted for more than 10% of Beeline’s leads. Its marketing processes and strategies are further described under “Marketing” below.

Beeline’s Services

Beeline is a digital mortgage operation leveraging proprietary AI, streamlined task-based processing, data integrations and human capital for originating, evaluating, approving and closing a mortgage.

Sources of Revenue

Beeline generates revenue from three key sources, listed below. The numbers reflect the approximate percentages of Beeline’s 2024 revenue through December 31, 2024:

Beeline Labs

Beeline Labs, Inc. (“Beeline Labs”), a subsidiary of Beeline Financial, specializes in developing and licensing proprietary software to mortgage lenders. Established in early 2025, Beeline Labs focuses on creating business-to-business (B2B) software solutions designed to enhance efficiency and reduce costs for lenders and related financial institutions.

New Services

In addition to its core mortgage lending business, Beeline is now offering two new software services where it licenses software (“SaaS”) to third parties. The SaaS services are:

Through these innovative offerings, Beeline Labs is committed to transforming traditional mortgage processes by integrating advanced AI technology, thereby improving efficiency and outcomes for both businesses and consumers.

Marketing

Unlike major national, regional and local banks, Beeline generates new customers solely from online advertising. Beeline has no local branded offices appealing to consumers, in contrast to banks which offer deposit services and check cashing at local offices. As stated above, Google advertising has accounted for more than 49% of new leads in 2024; one other source, FreeRateUpdate.com, generated more than 10% of Beeline’s new customers during this same period.

Beeline’s marketing strategy plays a pivotal role in propelling its growth, focusing on key areas to drive customer acquisition, optimize return on investment, and enhance customer satisfaction. Through targeted campaigns, Beeline attracts new customers and explores untapped product and audience segments. The marketing team’s deep analysis of customer value, along with return on ad spend, supports strategic planning and resource allocation. Predictive models that Beeline deploys further estimate customer lifetime value, enabling the Beeline team to tailor campaigns to maximize long-term profitability.

Sophisticated measurement, reporting, and attribution methods provide the foundation for assessing campaign performance, ensuring that every marketing dollar spent is contributing toward Beeline’s goals. Beeline often experiments with new traffic sources and campaign types, which positions it well to keep Beeline’s marketing strategy agile and competitive. Through clear and compelling communication of Beeline’s unique value propositions, the marketing team strengthens customer relationships. Simultaneously, its ongoing focus on improvements to the customer experience make Beeline’s offerings more accessible and user-friendly, adding value at every stage of the customer journey. The Beeline marketing team operates within four primary pillars: Acquisition, Marketing Data, Marketing Communications, and Product - each contributing uniquely to its overall growth strategy. An overview of these pillars is included below.

Intellectual property

Beeline primarily relies upon a combination of trade secrets, service marks and technology licensing, as described below.

Competition

Banks and other savings institutions (depositories) have historically dominated the mortgage lending business. Their competitive advantages are financial strength, which includes the availability of capital to fund loans, management and employee skills, experience and availability, the ability to use their financial strength to leverage compliance costs and local visibility. Because of policy changes and shifts in the marketplace, independent mortgage lenders (IMBs) have come back in force. By 2016, nonbank mortgage origination for the first time surpassed that of the banks. The rapid rise of the nonbank mortgage lenders could have been possible only with the assistance of federal subsidies. In the decade from 2010 to 2020, nonbanks effectively doubled their market share of Fannie, Freddie, and FHA lending. By 2024, IMBs had over 80% market share leaving less than 20% for the depositories. In other market segments, such as the jumbo mortgage market, banks have continued their dominance.

Digital direct-to-consumer mortgage lending has grown rapidly, especially post-COVID, as the trend toward remote communication and digitization of the economy accelerated. As a result, many younger consumers demand a much faster, more efficient mortgage processes. Key trends include the adoption of AI and machine learning for underwriting, online document management, and personalized loan options.

The market for online mortgage lending is substantial, with projections suggesting continuous growth due to convenience, cost-efficiency, and customer demand for transparency and lower fees.

Beeline’s key online competitors are:

However, as of the date of this Report, Beeline does not believe that the above competitors provide Non-QM loans in any material way. Beeline believes the combination of its mortgage product offerings and its focus on a digital first experience, provides it with a competitive advantage.

On the other hand, certain of Beeline’s competitors have greater resources and brand recognition than Beeline or otherwise pose a competitive threat to our business. See Item 1A “Risk Factors” for risks related to the competition Beeline faces in its industry.

Strategy for success

Beeline’s strategy is focused on developing and leveraging excellent technology to enable better scale at a reduced cost while delivering an exceptional customer experience. This is being done through AI, automation and task-based workflows. The industry cost to originate a mortgage is approximately $9,000 to $13,000. Beeline’s goal is to reduce that to below $6,000.

Additionally, Beeline’s strategy includes the ability to keep the consumer in the Beeline ecosystem - keeping that customer for the title work and escrow/settlement services. This increases Beeline’s revenue per file by an average of $1,700 and spreads customer acquisition costs over multiple revenue opportunities.

None of this is possible without a great brand and great user experience when interacting with Beeline’s technology and staff. Beeline’s strategy in this area is to continue to push digital content to the right audiences who are interested in a lending experience like the one it offers. When human touch points are necessary or requested, Beeline provides the consumer with a knowledgeable, friendly and solutions-based support system.

Government Regulations Affecting Beeline

The statements in this section describe the government regulations specific to Beeline’s industry and should be considered carefully in conjunction with other information contained in this Report including the “Item 1A Risk Factors”.

These statutes and regulations regulate how Beeline operates, and the licenses Beeline and its employees are required to maintain. They also dictate the education and training required by employees, disclosures that are required to be made to consumers, etc. Any changes to the regulatory structure may impact how Beeline does its business.

Government Regulations Affecting Mortgage Loan Origination

Beeline operates in a heavily regulated industry that is highly focused on consumer protection. The extensive regulatory framework to which Beeline is subject includes U.S. federal and state laws and regulations. Governmental authorities and various U.S. federal and state agencies have broad oversight and supervisory authority over all aspects of Beeline’s business.

The discussion concerning federal regulation of the mortgage lending business is subject to significant potential change as the Trump administration seeks to scale back the federal government, eliminate agencies and strengthen the President’s control over independent agencies. There has been a strong reaction with the filing of many lawsuits and for the most part lower courts have put a break on many of President Trump’s executive orders. Ultimately, it is likely that the U.S. Supreme Court may rule on the scope of the executive powers, which may impact the following discussion.

Under the Dodd-Frank Act, the Consumer Financial Protection Bureau (the “CFPB”) was established to ensure, among other things, that consumers receive clear and accurate disclosures regarding financial products and to protect consumers from hidden fees and unfair, deceptive or abusive acts or practices. The CFPB’s jurisdiction includes those persons producing or brokering residential mortgage loans. It also extends to Beeline’s other lines of business title insurance. The CFPB has broad supervisory and enforcement powers with regard to non-depository institutions, such as Beeline, that engage in the production of home loans.

President Trump has targeted the CFPB as an agency to be eliminated or substantially reduced. As part of its enforcement authority, the CFPB can order, among other things, rescission or reformation of contracts, the refund of moneys or the return of real property, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, remediation of practices, external compliance monitoring and civil money penalties. The CFPB has been active in investigations and enforcement actions and has issued large civil money penalties since its inception to parties the CFPB determines have violated the laws and regulations it enforces.

Effective October 1, 2022, the CFPB revised the definition of a QM which permits mortgage lenders to gain a presumption of compliance with the CFPB’s ability to repay requirements if a loan meets certain underwriting criteria. Lenders are now required to comply with a new QM definition in order to receive a safe-harbor or rebuttable presumption of compliance under the ability-to-repay requirements of TILA and its implementing Regulation Z. The revision to the QM definition created additional compliance burdens and removed some of the legal certainties afforded to lenders under the prior QM definition. Specifically, the revised QM rule eliminated the previous requirement limiting QMs to a 43% debt-to-income ratio (“DTI”) and replaced it with pricing-based thresholds. Loans at 150 basis points or less over the average prime offer rate (“APOR”) as of the date the interest rate is set, receive a safe harbor presumption of compliance, while loans between 151 and 225 basis points over the APOR benefit from a rebuttable presumption of compliance. The new rule also created new requirements for a lender to “consider” and “verify” a borrower’s income and debts and associated DTI, along with several other underwriting requirements. Additionally, the new QM definition eliminated a path to regulatory compliance that was available for originating loans that were eligible to be sold to GSEs, which was heavily relied upon by a large segment of the mortgage industry. Due to the transition to the new QM definition, there may be residual compliance and legal risks associated with the implementation of these new underwriting obligations.

The CFPB’s loan originator compensation rule prohibits compensating loan originators based on a term of a transaction, prohibits loan originators from receiving compensation directly from a consumer or another person in connection with the same transaction, imposes certain loan originator qualification and identification requirements, and imposes certain loan originator compensation recordkeeping requirements, among other things.

Beeline is also supervised by regulatory agencies under state law. From time-to-time, Beeline receives examination requests from the states in which Beeline is licensed. State attorneys general, state mortgage licensing regulators, state insurance departments, and state and local consumer protection offices have authority to investigate consumer complaints and to commence investigations and other formal and informal proceedings regarding Beeline’s operations and activities. With the enforcement power of the CFPB at risk under the Trump administration, state regulatory agencies and state attorneys general may increase their enforcement activities in certain areas. In addition, the government-sponsored enterprises, or GSEs, the FHA, the FTC, and others subject Beeline to periodic reviews and audits. This broad and extensive supervisory and enforcement oversight will continue to occur in the future. Beeline maintains dedicated staff on the legal and compliance team to ensure timely responses to regulatory examination requests and to investigate consumer complaints in accordance with regulatory regulations and expectations.

Federal Lending Laws and Regulations

Numerous U.S. federal regulatory consumer protection laws impact Beeline’s business, including but not limited to:

Beeline is also subject to a variety of regulatory and contractual obligations imposed by entities purchasing loans from Beeline insurers and guarantors of the loans Beeline produces or facilitates.

State Lending Laws and Regulations

Beeline must comply with state laws and regulations, including licensing requirements and other regulations which vary by state, in order to conduct its business.

To conduct residential mortgage lending operations in the United States, Beeline is licensed in 28 states and the District of Columbia including California, Florida and Texas. Its title agencies also maintain licenses to operate in certain of these states. Generally speaking, the licensing process includes the submission and approval of an application to the applicable state agency, a character and fitness review of key individuals, and an administrative review of our business operations. Such requirements occur at the initial stage of license acquisition and throughout the period of licensure.

Under the SAFE Act, all states have laws that require mortgage loan originators employed by non-depository institutions to be individually licensed to offer mortgage loan products. These licensing requirements require individual loan originators to register in a nationwide mortgage licensing system, submit application and background information to state regulators for a character and fitness review, submit to a criminal background check, complete a minimum of 20 hours of pre-licensing education, complete an annual minimum of eight hours of continuing education and successfully complete an examination.

In addition to applicable federal laws and regulations governing Beeline’s operations, its ability to originate loans in any particular state is subject to that state’s laws, regulations and licensing requirements, which may differ from the laws, regulations and licensing requirements of other states. State laws often include fee limitations and disclosure and other requirements. Many states have adopted regulations that prohibit various forms of “predatory” lending and place obligations on lenders to substantiate that a customer will derive a tangible benefit from the proposed home financing transaction and/or have the ability to repay the loan. These laws have required most lenders, including Beeline, to devote considerable resources to maintain automated systems to perform loan-by-loan analysis of points, fees and other factors set forth in the laws, which often vary depending on the location of the mortgaged property.

Additionally, our business is subject to numerous types of state laws that are continuously changing, including laws related to mobile-and internet-based businesses, data privacy and advertising laws, which limit how companies can use customer data, impose obligations on companies in their management of such data, and require us to modify our data processing practices and policies, which results in substantial costs and expenses in an effort to comply.

In particular, there are numerous U.S. federal and state laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal data. In the loan origination process, Beeline obtains substantial personal data including credit reports, tax returns, social security numbers and income and asset sources, all of which must be kept confidential. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions. Following the European Union, California became the first state to adopt a data privacy law when in June 2018 it enacted the CCPA. The CCPA requires covered companies to provide California consumers with new disclosures and will expand the rights afforded consumers regarding their data. Fines for noncompliance may be up to $7,500 per violation.

Since the CCPA was enacted, the U.S. has at least 20 states – which includes Colorado, Connecticut, Delaware, Indiana, Iowa, Kentucky, Maryland, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, Oregon, Rhode Island, Tennessee, Texas, Utah and Virginia – that have comprehensive data privacy laws in place or are about to be effective. At least seven additional states have enacted narrower privacy laws – Florida, Maine, Michigan, Nevada, New York, Vermont, and Washington. Other states have introduced privacy bills that address a range of issues, including protecting biometric identifiers and health data, or governing the activities of specific entities. This patchwork approach to privacy legislation could pose compliance and liability risks for companies that have multistate operations. Proposed and enacted bills in various states contemplate similar rights in preexisting privacy legislation but differ in implementation and enforcement. In addition, proposed federal legislation could further expand the regulatory framework for data privacy, data security, and other matters that impact our business at the federal level.

The costs of compliance with, and other burdens imposed by the CCPA, and similar laws may limit the use and adoption of our products and services and/or require us to incur substantial compliance costs, which could have an adverse impact on our business.

Beeline’s compliance team strives to comply with all applicable laws and regulations relating to privacy, data security, and data protection and other activities in which Beeline engages or is otherwise subject to in the operation of its business. However, its limited resources may adversely affect its compliance efforts. There has been increased government regulation as governments including the federal government are continuing to focus on updating laws and regulations to address the ever-evolving digital world, including through laws and regulations aimed at privacy and data security, and it is possible that new laws will be passed, or existing laws will be amended in a way that is material and adverse to Beeline’s business. As regulation increases, Beeline anticipates an increase in its compliance costs and a higher risk of regulatory fines or sanctions, which may be material.

Beeline’s title agencies are also subject to state laws that may require licensure and prohibit, limit, or require approval to engage in certain conduct. For example, several states have implemented laws and regulations aimed at prohibiting kickbacks and other inducements associated with referrals to or from title insurance agents or corporations. In some instances, these requirements are more extensive than RESPA.

Other Laws

Beeline is also subject to various other laws, including employment laws related to hiring practices, overtime, and termination of team members, health and safety laws, environmental laws and other federal, state and local laws in the jurisdictions in which Beeline operates.

As states and possibly the federal government start to enact laws and regulations relating to AI, we will be subject to such changes.

Seasonality

The consumer lending sector, particularly with regard to mortgage loan origination volumes, is shaped by broader economic factors such as interest rates, inflation, unemployment levels, home price trends, and consumer sentiment. Additionally, seasonality plays a key role, as home sales generally experience an uptick in the second and third quarters and see a decline in the first and fourth quarters of the calendar year. This seasonal pattern arises from homebuyers with children preferring to make purchases during the spring and summer months in order to move before the school year begins.

Refinancing mortgage loans are particularly influenced by current levels as well as expected trends in interest rates. Nevertheless, the traditional patterns of seasonality seen in the housing market were less pronounced in 2021, 2022 and 2023 largely due to rising interest rates and a tight housing supply. Currently, Beeline is observing a continued weakening of seasonality’s impact on its operations.

Beeline Business Initiatives

Beeline’s business initiatives include adding lending products to its current suite. This may include VA and FHA originated and underwritten fully in-house at Beeline. Additionally, it anticipates expansion of its commercial loan offerings.

Beeline also plans to have direct seller approval with Fannie Mae and Freddie Mac in the second half of 2025. During this timeframe, Beeline may also engage in a holistic hedging strategy to increase the revenue per file by selling loans on a mandatory basis to its investors.

To diversify revenue, Beeline plans to offer SaaS products to the mortgage industry - the MagicBlocks and BlinkQC products referenced previously.

There may be time, resource or other constraints that impede Beeline’s ability to execute on these initiatives which may delay them or prevent them from occurring.

Warehouse Line of Credit

In addition to traditional equity and debt financing, Beeline uses a warehouse line of credit to provide the capital for it to originate mortgage loans. Generally, warehouse lines of credit are used as interim, short-term financing which bears interest at a fixed margin over an industry index rate. The outstanding balance of the Company’s warehouse line of credit will fluctuate based on its lending volume. The advances received under the warehouse lines of credit are based upon a percentage of the fair value or par value of the mortgage loans collateralizing the advance, depending upon the type of mortgage loan. Should the fair value of the pledged mortgage loans decline, the warehouse provider may require the Company to provide additional cash collateral or mortgage loans to maintain the required collateral level under the relevant warehouse line. The Company did not incur any significant issuance costs related to its warehouse lines of credit. Presently Beeline’s warehouse line of credit has a $5 million limit. As loans are closed, Beeline sells the note and mortgage and reduces the balance on its warehouse line. Beeline is working towards increases to this amount, but no assurance can be given that an increase will occur.

Spirits Overview and History

Spirits commenced its operations in 2014, focusing on manufacturing and marketing of both its own products and third-party products. Over the past decade, Spirits has diversified its business by developing a canning and can printing operation targeting the craft beer industry in the Pacific Northwest.

Since 2014, Spirits has developed or acquired award-winning spirits while evolving to meet the growing demand for quality products and services associated within the burgeoning craft and premium beverage trade. Spirits’ portfolio includes originals like the Quercus garryana barrel-finished Burnside Whiskey family, Portland Potato Vodka, Hue-Hue Coffee Rum, and Azuñia Tequilas

Production and Supply

Spirits’ production and supply chain involves several important stages, including bottle and label design, raw materials procurement, production and packaging in various configurations for shipment. To achieve a unique flavor profile for each brand, we use one or more of the following techniques: infusion of fruit, addition of natural flavorings, blending of products, and aging in selected casks. Once the final profile is approved and quality control standards are met, we filter the liquid as needed and bottle the product.

We rely on a limited number of suppliers for the sourcing of our spirit products and raw materials, including our distillate products and other ingredients. These suppliers consist of third-party producers in the U.S. and Mexico. One key supplier is Agaveros Unidos de Amatitan, SA. de CV., which supplies tequila to us. In 2024, we entered into production agreement with Rose City Distilling. We do not have long-term, written agreements with any of our other suppliers for the production of raw materials. However, we believe that we have consistent and reliable third-party sources for the needed materials.

Distribution Network

In the United States, we are required by law to use state-licensed distributors or, in the control states, state-owned agencies performing this function, to sell our brands to retail outlets. In the 14 open states, the distributors are generally large, privately held companies. The distributors and wholesalers in turn sell to individual retailers, such as liquor stores, restaurants, bars, supermarkets and other outlets licensed to sell alcoholic beverages. Through our internal sales team, we have established relationships for our brands with wholesale distributors in six open states: California, Arizona, Colorado, Texas, Washington and Florida.

We operate in one control state, Oregon, where the state functions as the distributor, and regulates suppliers, including our Company. In control states, producers and importers sell their products directly to state liquor authorities, which distribute the products and either operate retail outlets or license the retail sales function to private companies, while maintaining strict control over pricing and profit. Our largest distribution channel is in the state of Oregon through the Oregon Liquor Control Commission. Sales to the Oregon Liquor Control Commission, accounted for approximately 75% and 55% of our consolidated sales for the years ended December 31, 2024 and 2023, respectively.

We hold the federal importer and wholesaler license required by the Alcohol and Tobacco Tax and Trade Bureau of the U.S. Treasury Department and the requisite state licenses within the states in which we conduct business.

Our inventory is maintained in offsite bonded warehouses at our producers, our bonded warehouse in Milwaukie, Oregon, and at bonded warehouses managed by Park Street, our fulfillment and logistics partner. We also typically have inventory in transit that we ship nationally through our network of licensed and bonded carriers.

Spirits Intellectual Property

Trademarks are an important aspect of our business. We sell our products under a number of trademarks which we own. Our brands are protected by trademark registrations or are the subject of pending applications for trademark registration in the U.S. where we distribute our brands. The trademarks may be registered in the names of our subsidiaries. In the U.S., trademark registrations need to be renewed every 10 years. We expect to register our trademarks in additional markets as we expand our distribution territories.

Spirits Competition

Over the past 10 years, the U.S. wine and spirits industry has undergone dramatic consolidation and realignment of brands and brand ownership. The number of major importers in the U.S. has declined significantly. Today, large major companies dominate the market: Diageo PLC, Pernod Ricard S.A., Bacardi Limited, Brown-Forman Corporation, Beam Suntory Inc., Davide Campari-Milano S.p.A., and Rémy Cointreau S.A. These competitors have substantially greater resources than we have due to their scale and ability to more effectively leverage the national distribution system. Spirits has been repositioned to compete regionally in key markets where we believe we have the greatest competitive advantage.

Government Regulation Applicable to Spirits

We are subject to the jurisdiction of the Federal Alcohol Administration Act, U.S. Customs laws, and the Alcoholic Beverage Control laws of the states where our products are distributed, among many other regulations. The U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau regulates the production, blending, bottling, sales and advertising and transportation of alcohol products. Also, each state regulates the advertising, promotion, transportation, sale and distribution of alcohol products within its jurisdiction. We are also required to conduct business in the U.S. only with holders of licenses to import, warehouse, transport, distribute and sell spirits. The distribution of alcohol-based beverages is also subject to extensive federal and state taxation.

We are subject to U.S. regulations on spirits marketing and advertising, such as style, media and messages. Labeling of spirits is also regulated in many markets, varying from health warning labels to importer identification, alcohol strength and other consumer information. All beverage alcohol products sold in the U.S. must include warning statements related to risks of drinking beverage alcohol products.

In the U.S. control states, the state liquor commissions act in place of distributors and decide which products are to be purchased and offered for sale in their respective states. Products are selected for purchase and sale through listing procedures which are generally made available to new products only at periodically scheduled listing interviews. Consumers may purchase products not selected for listings only through special orders, if at all.

We are currently subject to newly implemented U.S. import tariffs, which are expected to have the greatest impact on two key areas: the importation of European ethanol and tequila from Mexico. If the Company is unable to secure an alternative source for its potato-based ethanol, it could face a significant negative impact on its operations. In addition, the tariffs on Mexican import of tequila—if not offset through price increases to consumers—could also materially affect the business.

Beeline Employees

As of December 31, 2024 Beeline has 76 employees. Certain of its employees serve in dual roles such as Beeline’s Chief Operating Officer who also serves as General Counsel and plays a key role in compliance. Beeline also uses certain third parties who operate as independent contractors. Additionally, Beeline leverages independent contractors in marketing and technology/development.

Spirits Employees

Spirits has five employees, who are engaged in production, sales, marketing and executive management. Most of our administrative functions are carried out by employees of the Company.

Recent Financings

Equity Line of Credit

On March 7, 2025, the Company entered into an Amended and Restated Common Stock Purchase Agreement and an Amended and Restated Registration Rights Agreement (collectively the “ELOC Agreement”) in connection with an equity line of credit transaction (the “ELOC”) with C/M Capital Master Fund LP as the purchaser. The ELOC Agreement amended and restated the original ELOC Agreement originally entered into on December 31, 2024 to, among other things, (i) reduce the maximum amount under the ELOC Agreement from $35 million to $10 million, and (ii) extend the filing deadline for the registration statement required under the ELOC Agreement to 30 days following the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The ELOC as amended and restated entitles us to sell shares of our Common Stock to the purchaser at a purchase price per share determined based on a discount to the market price using a formula tied to the trading prices and volumes of our Common Stock as of applicable sale dates, and subject to certain limitations based on such metrics.

As of March 31, 2025, the Company sold and issued a total of 1,090,622 shares of Common stock for an aggregate purchase price of $2.1 million to the purchaser under the ELOC.

Series G and Warrants

On February 27, 2025, the Company increased its offering of Series G Convertible Preferred Stock (“Series G”) and accompanying Warrants to a total of up to 13,878,040 shares of Series G (which are convertible into 1,387,804 shares of common stock, subject to adjustment) and warrants to purchase up to 693,902 shares of common stock (representing 50% warrant coverage) for total gross proceeds of up to $7.1 million, which offering was increased from its previous amount of up to $5.0 million following approval by the Company’s Board on February 27, 2025. Since the offering of Series G shares and warrants originally commenced on November 26, 2024, the Company has sold to accredited investors a total of 12,274,024 shares of Series G and accompanying warrants to purchase 613,709 shares of common stock for total gross proceeds of $6.3 million. The Company also issued 1,088,720 shares of Series G in transactions outside of the offering.

November 2024 Secured Notes and Warrant Financing

On November 14, 2024, the Company sold $1.9 million of principal amount of senior secured notes and pre-funded warrants to purchase 36,360 shares of Common Stock for net proceeds of $1.6 million. The notes have a maturity date of 120 days following issuance and include a 20% original issue discount and do not bear interest until event of default, and thereafter at a rate of 18% per annum. If the note remains outstanding as of May 14, 2025 the note requires a special one-time interest payment of 30% which will increase the principal of each note accordingly. Upon the occurrence of an Event of Default, each investor also has the right to require the Company to pay all or any portion of the note at a 25% premium. Further, the Company is required to prepay the notes in connection with certain sales of securities or assets at each Investor’s election in an amount equal to 35% of the gross proceeds from such sales. The Company also has the right to prepay all, but not less than all, of the outstanding amounts under the notes, at its election. The notes contain certain restrictive covenants, including covenants precluding the Company and its subsidiaries from incurring indebtedness, transferring assets, changing the nature of its business, and engaging in certain other actions, subject to certain exceptions.

In March 2025, the Company and certain of the holders agreed to an extension of the maturity date to April 14, 2025 in exchange for an increase to the principal of the notes by 10%, and two lenders were each paid their principal balance plus 2.5% interest of $0.3 million.

On April 14, 2025, the Company and the remaining Note holders entered into an agreement for a second extension of the maturity dates of the Notes held by such holders to May 14, 2025. The terms of the recent extension are as follows: (i) if the Notes are paid off on or before April 29, 2025, then there will be no additional principal payment required; and (ii) if the principal of the applicable Notes are not paid off on or before April 29, 2025 but are paid on or before May 13, 2025, then an additional payment in an amount equal to 5% of the outstanding principal of the applicable Notes will be due.

The warrants have a term of five years from issuance and are exercisable at an exercise price of $5.00 per share (of which all but $0.001 per share was pre-funded by each investor). The warrants became exercisable beginning on March 7, 2025 when the Company’s shareholders approved the issuance of the common stock issuable upon exercise of such warrants in accordance with the rules of The Nasdaq Capital Market. If at any time after exercising the warrants, there is no effective registration statement registering, or the prospectus contained therein is not available for use, then the warrants may also be exercised, in whole or in part, by means of a “cashless exercise.”