Beeline Holdings, Inc.

Summary Risk Factors

Our business and an investment in our Common Stock are subject to numerous risks and uncertainties, including those highlighted in the “Item 1A - Risk Factors” section below. Some of these risks include:

Financial Risks Related to the Company

Risks Related to Beeline’s Business

Risks Related to Beeline’s Operations and Financial Results

Risks Related to Beeline’s Debt and Warehouse Credit Lines

Risks Related to Beeline’s Products, Technology, and Intellectual Property

Regulatory Risks

Risks Relating to our Spirits Business

Risks Relating to Our Common Stock

Investing in our common stock involves a high degree of risk. Investors should carefully consider the following Risk Factors before deciding whether to invest in the Company. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition. If any of the events discussed in the Risk Factors below occur, our business, consolidated financial condition, results of operations or prospects could be materially and adversely affected. In such case, the value and marketability of our securities could decline.

Following our acquisition of Old Beeline on October 7, 2024, our focus is on, and our future revenue and operating results are anticipated to be derived both from, the Beeline mortgage business and the Spirits business. As such, the following risks, as they relate to our business, are divided among financial risks, Beeline-related risks, Spirits-related risks, and risks related to our combined Company as a whole.

Financial Risks Related to the Company

Because there is substantial doubt as to the Company’s ability to continue as a going concern, we may not be successful and our ability to continue our operations is in doubt unless we can access sufficient working capital within the timeframe needed.

The Company has limited capital and substantial accumulated deficit as of the date of this Report. We do not have sufficient working capital and cash flows for continued operations for at least the next 12 months, which raises a risk of our potential inability to continue as a going concern. Our continued existence is dependent upon our obtaining the necessary capital to meet our expenditures, and we can provide no assurance that we will be able to raise adequate capital to meet our future working capital needs.

We have substantial indebtedness which becomes due and payable in the near future, and if we are unable to repay this indebtedness as and when it comes due, it could materially adversely affect our business and your investment in us.

We presently have a total of $8.2 million of current outstanding indebtedness, not including amounts due under its warehouse line to place mortgage loans, whereby mortgage loans are then resold to third parties.

Our Spirits assets secure $1.3 million of this outstanding indebtedness and if we are unable to repay it as it comes due, we could lose the Spirits business. Further, if we are unable to repay these notes as of May 14, 2025, the notes will accrue a special one-time interest payment of 30% which will increase the principal of each note in addition to 18% default interest.

In January 2025, we began to make monthly installment payments of $0.4 million and will continue through September 2025 under certain indebtedness, which is secured by Beeline’s assets, and if we are unable to meet these obligations, it could jeopardize that business. If we are unable to meet these obligations with respect to the indebtedness described above, it would have a material adverse effect on our business and financial condition, and you could lose all or most of your investment as a result.

Further, we have relied heavily upon capital infusions from our Chief Executive Officer and principal shareholder. As of the date of this Report, he has directly invested $3.9 million in purchases of securities from the Company since December 2024. If he is unable or unwilling to continue to fund us in the future, your investment could be materially and adversely affected.

We have a very limited operating history since our merger with Old Beeline in October 2024 which makes it difficult to forecast our future results, making any investment in us highly speculative.

While Old Beeline commenced operations in 2020, we have a limited operating history as a combined company following the merger from which to evaluate our prospects. Importantly, our executive officers come from Beeline, so our operations going forward are subject to ordinary integration risks where two companies and two cultures are combined. Further, our limited personnel could pose challenges to us in our integration efforts and operations moving forward, including due to our lack of liquidity, the highly competitive and regulated industries in which each of Beeline and Spirits operate in addition to our status as a public company required to prepare and file reports with the SEC. Further, we may not accurately forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us, and, therefore, we may fail to make accurate financial forecasts or budgetary predictions. Our current and future expense levels are based largely on our budget plans and estimates of future revenue, which are in part contingent on our ability to access capital as needed and planned, which remains uncertain including due to factors described elsewhere in these Risk Factors. Additionally, our current revenue projections are based largely on customer and partner relationships and trends, including general trends in the mortgage lending industry, which remain uncertain. Similarly, if we are able to raise sufficient capital in the future, we may use a portion of the proceeds to acquire other operating businesses in our segments or related segments to facilitate strategic growth and build our market presence and revenue potential. If we continue to face challenges and/or if new challenges arise in servicing our debt obligations, raising the necessary capital or generating revenue in the future, we may be unable to adjust our spending or source the necessary funding in a timely manner to address for any unexpected capital or revenue shortfall, which could then force us to curtail or cease our business operations or plan of operations or acquisitions or incur new debt or securities on terms which are not favorable to us. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations and growth process and facing integration challenges following a recent merger and acquisition transaction. Due to these contingencies, we may be unable to achieve profitability in some or all of our businesses in a timely manner or at all, in which case you could lose all or some of your investment.

Because we have a history of operating losses, if we fail to generate operating cash flow, you may lose all or most of your investment.

We have a history of continued operating losses, and we may not become profitable in future periods. In addition, Old Beeline commenced operations in 2020, has a limited operating history and has generated substantial ongoing losses since inception. Our expenses in 2024 include $3.2 million in salaries and benefits, $1.0 million in general and administrative expenses and $1.1 million in professional fees. We expect to incur losses and experience negative cash flows from operations for the foreseeable future. If we cannot achieve positive cash flow from operations or net income, we will need to raise additional capital, which we may not be able to do on favorable terms, if at all. Our ongoing losses raise substantial uncertainty about its future profitability and success.

Risks Related to Beeline’s Mortgage Lending Business

Because Beeline depends on third party partners and vendors to maintain and grow its business, the loss of some or all of these third parties may have a material adverse effect on its results of operations.

To grow its customer base and business Beeline relies on relationships with third-party partnerships and other commercial vendors, including services to help Beeline close loans and for capital markets analytics. Beeline also requires the use of such third-party partnerships and vendors to engage and attract customers and originate mortgages. If Beeline is unable to grow its third-party partners and relationships with vendors, it may be unable to grow its business. Further, if Beeline’s current third-party partnerships and vendors were to stop providing services to it on acceptable terms or at all, or if Beeline’s commercial partners were to terminate their relationships with it, Beeline may be unable to procure alternatives in a timely and efficient manner and on acceptable terms, or at all. Beeline may incur significant costs to resolve any such disruptions in services or the loss of commercial partnerships, and this could materially and adversely affect its business, financial condition, and results of operations. Further, any loss of third-party partnerships and vendors may decrease Beeline’s customer base or inhibit its ability to gain new customers and disrupt its existing business operations. Beeline’s third-party partners and vendors may also choose to cease doing business with it and instead do business with its competitors.

Beeline is also subject to regulatory risks associated with all of the above relationships, including changes in law or interpretations of law that could result in increased scrutiny of these relationships, require restructuring of these relationships, and/or diminish the value of these relationships.

If Beeline loses the services of the vendor that provides it with loan origination or customer relationship management software, its short-term results of operations will be materially and adversely affected.

Beeline licenses loan origination software and customer relationship management software from privately-held third-parties. If those parties were to cease providing platform services to Beeline, Beeline would be required to obtain software from another party, which could be on more expensive terms. Further, the integration of another loan origination software product would entail technical challenges and expenses and generally be disruptive to operations. If Beeline was cut off without notice, such disruption could also negatively impact borrowers with loans at various points of the process. This could lead to liability to Beeline if borrowers end up with financial loss. As a result, our short-term results of operations would be materially and adversely affected.

Because Beeline depends on its ability to sell loans and MSRs in the secondary market to a limited number of loan purchasers and to secondary market participants for each relevant product, its ability to originate loans and offer related mortgage service rights would be materially and adversely affected, if its ability to sell loans and mortgage service rights became impaired.

Beeline’s business depends on its ability to sell its loan production to third party investors. Its ability to sell and the prices it receives for its loans vary from time-to-time and may be materially adversely affected by several factors, including, without limitation: (i) an increase in the number of similar loans available for sale; (ii) conditions in the loan securitization market or in the secondary market for loans in general or for its loans in particular, which could make its loans less desirable to potential purchasers; (iii) defaults under loans in general; (iv) loan-level pricing adjustments imposed by investors and Fannie Mae and Freddie Mac (together, the “GSEs”), including adjustments for the purchase of loans in forbearance or refinancing loans; (v) the types and volume of loans being originated or sold by Beeline; (vi) the level and volatility of interest rates; and (vii) unease in the banking industry caused by, among other things, recent bank failures. An inability to sell or a decrease in the prices paid to Beeline upon sale of its loans and MSRs would be detrimental to its business, as Beeline is dependent on the cash generated from such sales to fund its future loan production and repay borrowings under its warehouse lines of credit. If Beeline lacks liquidity to continue to fund future loans, its revenues from new loan originations would be materially and adversely affected, which in turn would materially and adversely affect its potential to achieve profitability.

Substantially all of Beeline’s loan production and related MSRs are sold to a limited number of purchasers in the secondary market. If any of those buyers decide to not purchase loans from Beeline going forward, it would have a materially adverse impact on Beeline’s operations and ability to originate new loans and generate revenue.

Because Beeline relies on the secondary mortgage market for loan sales, an economic downturn or other adverse market trends or developments could halt or limit its ability to sell its loans and lend money to future borrowers.

Beeline’s business operations depend on selling loans to a limited pool of purchasers in the secondary mortgage market, including secondary mortgage market participants and investors. Its business model requires it to sell its loans on the secondary mortgage market to replenish its lending funding and to help shift lending risks.

Demand in the secondary market for home loans and Beeline’s ability to sell the loans that it produces depend on many factors that are beyond its control, including general economic conditions and the threat of a recession, prevailing interest rates, a major war affecting the United States, the willingness of lenders to provide funding for and purchase home loans, the risk of another pandemic like COVID-19, and changes in regulatory requirements. Beeline’s inability to make new loans and sell the loans that it produces in the secondary market in a timely manner and on favorable terms would materially and adversely affect its business. In particular, market fluctuations may alter the types of loans and other products that it is able to originate and sell. For example, higher mortgage rates following the U.S. Federal Reserve’s rate hikes to combat inflation have, and may continue to have, an adverse impact on demand for new mortgage originations because existing homebuyers are hesitant to move or give up their current low interest rate loan in the event of a refinancing. The higher cost of home ownership adversely impacts move-up, new homebuyers and refinancings, which trend adversely affects and may continue to adversely affect our business. In addition, it is unclear how recent governmental actions or the threats of certain actions, such as tariffs, reductions of governmental employees and spending, tax reform, and actions taken to address the debt ceiling and deficit, will impact the U.S. economy and the residential real estate market. Any uncertainty or deterioration in market conditions that leads to a decrease in loan originations would likely have an adverse effect on our operating results and financial condition. Lower loan origination volumes in the industry also generally place downward pressure on margins, thus compounding the effect of the deteriorating market conditions. If it is not possible or economical for Beeline to continue originating and selling its loans in the secondary mortgage market, Beeline’s business, financial condition, and results of operations, could be materially and adversely affected. Further, volatility from changes in prevailing interest rates can adversely affect the value of our MSR portfolio and servicing revenue and changes in the value, or inaccuracies in the estimates of their value, could adversely affect our financial condition and liquidity.

Because we are required to comply with many financial, legal, and regulatory laws and regulations, its failure to comply with all of the applicable laws and regulations could result in large fines, suspensions of its licenses to make loans in one or more states and could otherwise have a material adverse effect on Beeline.

Beeline’s business operations require it to comply with numerous state and federal laws and regulations applicable to the mortgage loan industry. See “Business-Government Regulations Affecting Beeline” earlier in this Report for a description of certain of the laws and regulations to which Beeline and its operations are subject. While we currently have compliance and risk management policies for maintaining compliance with such laws and regulations, we cannot assure you that such policies are perfect or will guarantee full compliance. Any failure in our current compliance and risk management policies may subject us to regulatory or legal proceedings and financial penalties, which may negatively impact us and our financial condition and results of operations and divert our management’s attention from its business. Further, the legal and regulatory scheme is always subject to change, and we may be unable to timely comply with new laws and regulations applicable to our business.

Our mortgage business faces intense competition that could materially and adversely affect it if it cannot adequately address competitive challenges.

Competition in the mortgage lending industry is intense and is dominated by major national and regional banks as well as local banks and large non-depository lending institutions. In addition, the mortgage and other consumer lending business is highly fragmented and dominated by legacy players. Some of Beeline’s competitors have better name recognition and greater financial and other resources than it does (including access to capital). Other competitors, such as correspondent lenders who produce loans using their own funds, may have more operational flexibility in approving loans. Commercial banks and savings institutions may also have significantly greater access to potential customers, given their deposit-taking and other banking functions and locations near potential borrowers.

Also, some of these competitors are less reliant than we are on the sale of mortgage loans into the secondary markets to maintain their liquidity and may be able to participate in government programs that Beeline is unable to participate, all of which may place us at a competitive disadvantage. Additionally, Beeline operates at a competitive disadvantage when compared to U.S. federal banks and thrifts and their subsidiaries because, such other industry participants enjoy federal preemption from compliance with state law and, as a result, conduct their business under relatively uniform U.S. federal rules and standards and are generally not subject to the mortgage-related laws of the states in which they do business. Unlike its federally chartered competitors, Beeline is generally subject to all state and local laws applicable to lenders in each jurisdiction in which it operates, and such regulatory changes may increase Beeline’s costs or limit its activities, such as more restrictive licensing, disclosure, or fee-related laws, or laws that may impose conditions to licensing that it or its personnel are unable to meet. To compete effectively, Beeline must have a very high level of operational, technological, and managerial expertise, as well as access to capital at a competitive cost.

Further, we compete with other mortgage originators and other businesses across the broader real estate and mortgage industry for those consumers that consider obtaining loans online or non-conforming loans. Digitally native home buying technology platforms are increasingly moving into the loan production space. Such online mortgage originators, and digitally native entrants primarily compete on name recognition, price and on the speed of the loan application, underwriting and approval process, and any increase in these competitive pressures could materially and adversely affect our business, including as a result of higher performance marketing and advertising spend due to greater demand for customer leads.

Competition in our industry can take many forms, including the variety of loan programs being made available, interest rates and fees charged for a loan, convenience in obtaining a loan, customer service levels, the amount and term of a loan and marketing and distribution channels. Fluctuations in interest rates and general economic conditions may also materially and adversely affect our competitive position. During periods of rising rates, competitors that have locked in low borrowing costs may have a competitive advantage. Furthermore, a cyclical decline in the industry’s overall level of loan producers, or decreased demand for loans due to a higher interest rate environment or a housing market or general economic downturn, may lead to increased competition for the remaining loans. Additionally, more restrictive loan underwriting standards have resulted in a more homogenous product offering, which has increased competition across the mortgage loan industry for loan originations. Furthermore, our existing and potential competitors may decide to modify their business models to compete more directly with our loan origination models. Post COVID-19, many banks and depository institutions withdrew from mortgage origination, leaving large non-depository mortgage lenders with greater access to market share. In addition, technological advances and heightened e-commerce activities have increased consumers’ accessibility to products and services. This has intensified competition among banks and non-banks in offering mortgage loans. Any increase in these competitive pressures could materially and adversely affect our business.

Our loans to customers originated outside of GSE guidelines or the guidelines of the Federal Housing Authority or Veterans Administration involve a high degree of business and financial risk, which can result in substantial losses to us.

Loans originated outside of Fannie Mae or Freddie Mac guidelines, or the guidelines of the Federal Housing Authority (“FHA”) or Veterans Administration (“VA”) (“non-conforming loans”), are sold to private investors and other entities. Approximately 59% of Beeline’s loans in 2024 were non-conforming loans, specifically non-qualified mortgage loans (“Non-QM loans”). If Beeline is unable to sell such loans to private investors, it may be required to hold such loans for an extended period, which exacerbates working capital needs. For these loans, a customer’s ability to repay may be adversely impacted by numerous factors, including a healthcare event of the borrower, a change in the borrower’s financial condition, or other negative local or more general economic conditions. Deterioration in a customer’s financial condition and prospects may be accompanied by deterioration in the value of the collateral. These risks will increase in prevalence and impact if general economic conditions deteriorate in the U.S., such as due to a recession.

In addition, some loans that Beeline produces that it believes will be conforming loans may not meet Fannie Mae or Freddie Mac guidelines, or the guidelines of the FHA or VA, in which case Beeline would be subject to a high degree of business and financial risk.

Because we rely on highly-skilled personnel with knowledge of the mortgage industry, the loss of key personnel which may negatively impact its business.

Our future success depends on its ability to attract, hire, train, and retain a number of highly skilled employees and management that have knowledge of the mortgage industry. The loss of the services of our Chief Executive Officer, Nicholas Liuzza, Jr., Old Beeline’s Chief Operating Officer, Jessica Kennedy, Esq., or other key employees could cause substantial disruption to our business operations, which would adversely affect its business. Competition for qualified employees in the mortgage industry remains high, and we may fail to attract or retain the employees necessary to execute its business model successfully. Further, as a smaller company with a limited operating history, we rely on a smaller workforce, particularly in its accounting, legal, and compliance departments, which places us at a disadvantage in attracting and retaining experienced talent.

If we encounter material fraud, it could result in significant financial losses and harm to our reputation.

In deciding whether to approve loans or to enter into other transactions with its customers or counterparties, we rely on information furnished to it by or on behalf of customers and such counterparties, including credit applications, property appraisals, title information and valuation, employment and income documentation, and other financial information. We also rely on representations of customers and such counterparties as to the accuracy and completeness of that information. If any of this information is intentionally or negligently misrepresented and such misrepresentation is not detected prior to loan funding, the fair value of the loan may be significantly lower than expected or it may not be possible for us to sell the loan. Additionally, there is a risk that, following the date of the credit report that we obtain and its review of a person’s credit worthiness, a borrower may have become delinquent in the payment of an outstanding obligation, defaulted on a pre-existing debt obligation, taken on additional debt, lost his or her job or other sources of income, or sustained other adverse financial events. This risk is exacerbated since we originate Non-QM loans, primarily debt service coverage ratio (“DSCR”) loans which relies on the rental income associated with a property and not the borrower’s income from traditional employment. However, we ameliorate this risk through credit monitoring through each closing date.

We use automated underwriting engines from the GSEs to assist us in determining if a loan applicant is creditworthy, as well as other proprietary and third-party tools and safeguards to detect and prevent fraud. We are unable, however, to prevent every instance of fraud that may be engaged in by our customers or staff, and any seller, real estate broker, notary, settlement agent, appraiser, title agent or third-party originator that misrepresents facts about a loan, including the information contained in the loan application, property valuation, title information and employment and income stated on the loan application. If any of this information was misrepresented and such misrepresentation was not detected prior to the acquisition or closing of the loan, the value of the loan could be significantly lower than expected, resulting in a loan being approved in circumstances where it would not have been, had Beeline been provided with accurate data. These loans can materially and adversely affect our operations by reducing our available capital to underwrite new loans. A loan subject to a material misrepresentation is typically unsalable or subject to repurchase if it is sold before detection of the misrepresentation. In addition, the persons and entities making a misrepresentation are often difficult to locate and it is often difficult to collect from them any monetary losses we may suffer.

High profile fraudulent activity also could negatively impact our brand and reputation, which could materially and adversely affect our business. In addition, significant increases in fraudulent activity could lead to regulatory intervention, which could increase its costs and also materially and adversely affect our business.

We market our services through advertising on search engines, social media platforms, and other online sources, and if we fail to drive traffic through our marketing we may have to spend more to drive traffic and improve our search results, any of which could materially and adversely affect our business operations.

Our success will depend on our ability to attract potential consumers to our website and convert them into customers in a cost-effective manner. We depend, in large part, on performance marketing leads (e.g., pay-per-click) that we purchase from search engine results, social media platforms, and other online sources for traffic to our website. We expect to continue to devote significant resources to acquire customers, including advertising to our third-party partners’ significant consumer networks, and offering discounts and incentives to consumers. To the extent that our traditional approach to customer acquisitions is not successful in achieving the levels of transaction volume that we seek, we may be required to devote additional financial resources and personnel to our sales, marketing, and advertising efforts and to increase discounts to consumers, which would increase the cost base for our services.

Currently a substantial majority of our advertising is spent with Google. If Google were to materially increase its prices, we may be unable to replace Google and sustain materially increased costs. We face several challenges to our ability to maintain and increase the number of visitors directed to our website. Our competitors may increase their online marketing efforts and outbid us for placement for search terms on various search engines, resulting in their websites receiving a higher search result page ranking than us. Additionally, internet search engines could revise their methodologies in a way that would adversely affect the prominence of our search results rankings. If internet search engines modify their search algorithms in ways that are detrimental to us, or if our competitors’ marketing or promotional efforts are more successful than ours, overall growth in our customer base could slow or our customer base could decline.

There can be no assurance that any increased marketing and advertising spend to maintain and increase the number of visitors directed to our website will be effective. Any reduction in the number or credit quality of prospective borrowers directed to our platform through internet search engines, Google, and other search engines, social networking sites or any new strategies we employ could materially and adversely affect our business, financial condition, results of operations, and prospects.

Regulatory changes may also require search engines, social media platforms and other online sources to adjust their outreach techniques and algorithms, which may negatively impact the effectiveness of these platforms. For instance, in 2019, the U.S. Department of Justice, entered into a settlement agreement with Meta that required Meta to replace the software used in Facebook for housing ads, as a result of claims that the software allowed advertisers to discriminate based on protected characteristics such as race, national origin, religion, sex, family status and disability. As a result, platforms using similar software found it necessary to replace their advertising systems. Additionally, in the event the CFPB takes a more stringent and aggressive interpretation of laws governing Beeline’s interaction with lead aggregators, including RESPA, it could result in a material reduction in the availability of leads from such sources, increased costs, and increased regulatory risk.

New TCPA regulations in 2025 will impact our compliance costs and subject us to new regulatory and legal risks for noncompliance

Effective January 2025, the FCC’s new rule under the TCPA requires explicit, one-to-one consent for any form of communication involving messaging or calling between a business and consumer. In April 2025, the FCC is imposing new text and call opt-out rules, requiring companies who utilize robocalls and robotexts to broaden the standard terms consumers can use to revoke consent and treat natural language revocation requests beyond the standard opt-out terms as valid opt-out requests. Further, all reasonable opt-out requests must now be complied with within a reasonable time frame, which is generally considered as 10 business days. Both new rules may require us to modify our consent and opt-out processes and policies relating to outreach to consumers for marketing, sales, and customer service. The failure to comply with the new TCPA rules could result in fines between $500 to $1,500 per violation. If we fail to comply with the rules, it may be subject to legal and regulatory fines, which may negatively impact its financial condition and results of operations.

If the United States experiences rising mortgage interest rates, it may continue to negatively impact Beeline’s business and loan origination volumes, and the negative impact could intensify in the future particularly if an economic downturn or recession results.**

Mortgage interest rates continually increased since 2021 until a dip in September 2024. It is difficult to predict the direction of interest rates. In 2025, there has been a small decrease in rates which are relatively stable and under 7%.

The effect of the increased mortgage rates was to reduce loan volume, margins, revenue, and profitability in the mortgage origination industry, including in our business. Following the September decrease, Beeline experienced its best origination month in terms of units closed since March of 2022 and best origination month in terms of volume since October 2021. While some industry participants are predicting that interest rates could decline further in 2025, such predictions could prove to be incorrect, and in any case offer no assurance of returning to pre-2021 loan origination volumes. An increase in interest rates may cause a reduction in demand for our offerings and/or increased delinquency default and foreclosure, which may adversely affect our business by increasing our expenses and reducing the number of mortgage service fees that are collected. Furthermore, interest rates depend on action taken by the Federal Reserve, which in turn depends on the current state of inflation and the U.S. economy. The recent impositions of tariffs by the U.S. and any retaliatory actions by foreign countries could contribute to higher inflation and reduced economic activity for a prolonged period of time, thereby delaying any rate reductions or potentially resulting in rate increases in the future, as well as reduced demand for mortgages. If mortgage interest rates rise, fewer individuals may pursue home ownership or refinance, and the decreased profitability and loan originations will negatively impact Beeline’s business operations, operating results and financial condition.

In addition, higher interest rates come with an increased probability for an economic downturn or recession by making it more difficult for businesses to borrow money and individuals to maintain employment. Contributing further to an increased probability for a recession or economic downturn in the U.S. in the near term are recent and threatened tariffs, trade wars, geopolitical conflicts, increased unemployment including due to widescale layoffs and staff reductions in the federal government, and volatility and declines in the stock market, any or all of which could cause the U.S. economy to experience a significant decline including a reduction in consumer sentiment and spending. Future economic downturns and recessions may negatively impact the real estate market and the demand for our services, which in turn would have a material adverse effect on its business and operating results. Because of the high purchase prices for homes relative to other items that may be purchased in the market, the real estate market tends to be particularly hard hit during economic downturns or recessions, and we cannot predict the impact such an event could have on us or the industry in the future.

The Company’s business is subject to underwriting limitations and the potential of mortgage defaults.

A majority of the Company’s loan originations have been Non-QM loans. Non-QM loans are not underwritten in accordance with guidelines defined by the GSEs, as well as additional requirements in some cases, designed to predict a borrower’s ability and willingness to repay. Non-QM loans typically involve persons who do not derive their income from traditional employment. The Company’s Non-QM loans are primarily DSCR loans, where the income calculation is derived from the rental income on the subject property. Accordingly, there may be more risk of non-payment, especially if the real estate rental market collapses and rents decrease or rental vacancies increase. The QM loans Beeline originates are subject to underwriting requirements set by the GSEs and aggregators who purchase QM loans. There could be default risk on these loans, which for example would increase if there are macroeconomic or geopolitical conditions that cause unemployment to increase or home values to decrease.

Failure to comply with underwriting guidelines of aggregators or GSEs could materially and adversely impact our business.

We must comply with the underwriting guidelines of aggregators and the GSEs to successfully originate conforming GSE loans. We also must comply with the underwriting guidelines of federal agency insurers/guarantors, such as the FHA and VA for those loan types. If we fail to do so, we may be required to repurchase these loans, indemnify the insurers/guarantors, or be subject to other penalties or remedial measures. If we are found to have violated GSE underwriting guidelines, it could face regulatory penalties and damages in litigation, and suffer reputational damage, any of which could materially and adversely impact its business, financial condition, and results of operations. If we fail to meet the underwriting guidelines of the GSEs, federal agency insurers/guarantors, or of non-GSE loan purchasers it could lose its ability to underwrite and/or receive insurance/guaranty on loans for such loan purchasers and insurers/guarantors, which could have a material adverse effect on its business, financial condition, results of operations, and prospects. We try to mitigate its repurchase risk with repurchase insurance, however, this insurance may not cover the reason for the repurchase and it may not be able to sell a repurchase demand loan at a discount. It may not be able to meet its repurchase obligations in the future. If we are required to repurchase loans or indemnify loan purchasers, we may not be able to recover amounts from third parties from whom we could seek indemnification due to financial difficulties or otherwise. As a result, the Company is exposed to counterparty risk in the event of non-performance by a borrower or other counterparties to various contracts, including, without limitation, as a result of the rejection of an agreement or transaction in bankruptcy proceedings, which could result in substantial losses for which it may not have insurance coverage.

Changes in the GSEs’, the FHA’s or the VA’s requirements could materially and adversely affect the Company’s business.

The Company is required to follow specific guidelines and eligibility standards that impact the way it originates GSE and U.S. government agency loans, including guidelines and standards with respect to:

Changes to GSE and U.S. government agency rules and guidance can materially and adversely impact the conforming loans that the Company is able to originate and sell and/or insure, as well as the servicing decisions and actions that t is required to undertake.

In addition, further changes to GSE, the FHA or VA loan programs, or coverage provided by private mortgage insurers, could also have broad material and adverse market implications. Any future increases in guarantee fees or changes to their structure or increases in the premiums the Company is required to pay to the FHA, VA or private mortgage insurers for insurance or for guarantees could increase loan production costs and insurance premiums for its customers. Additionally, as the Trump Administration continues to pursue reductions in spending by the federal government, it could take action which adversely affects VA loan programs or other programs or organizations on which certain of our operations depend, which could have a material adverse effect on us. These industry changes could negatively affect demand for our mortgage product offerings and consequently for conforming loans its production volume, which could materially and adversely affect its business. We cannot predict whether the impact of any proposals to move Fannie Mae and Freddie Mac out of conservatorship would require them to increase their fees.

Risks Related to Our Debt and Warehouse Credit Lines

Because we rely on indebtedness to fund our mortgage operations and growth objectives, its future results of operations and financial condition are subject to numerous risks arising from its incurring this indebtedness.

Old Beeline has incurred in the past, and we expect to incur in the future, a high level of indebtedness to finance operations. We may be unable to timely repay our debt in accordance with the terms of the debt, which could lead to legal proceedings being instituted against our subsidiary. In particular, we engage in warehouse borrowing to provide the capital to originate loans. Warehouse lending is essentially a line of credit issued by a lender that permits us to borrow funds on a short-term basis. We use the warehouse loan to originate loans which we resell on the secondary market and then use the proceeds of the sale to reduce the line of credit as well as provide working capital.

Borrowings under the warehouse lines of credit are at variable rates of interest, which also expose us to interest rate risk. If interest rates increase, our debt service obligations on certain of its variable-rate indebtedness will increase even though the amount borrowed remains the same, and our net losses will increase and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease, which will negatively impact our financial condition and potential business operations.

For more information on our other debt, see the risk factor titled “We have substantial indebtedness which becomes due and payable in the near future, and if we are unable to repay this indebtedness as and when it comes due, it could materially adversely affect our business and your investment in us” on page 20. Our debt obligations could materially and adversely impact us. For example, these obligations could:

Our ability to comply with the terms and conditions of our debt may be affected by events beyond our control, and if we are unable to meet or maintain the necessary covenant requirements or satisfy, or obtain waivers for, the covenants, we may lose the ability to borrow under all of our debt facilities, which could materially and adversely affect our business.

If we are unable to access or utilize the warehouse lines of credit in the future, we will be unable to fund loans and thus continue its business operations as a lender and would need to act as a broker on all loans it originates or completely discontinue operations. If we originate loans ineligible for warehouse funding or experience increases in buybacks, our loan advance rates may be negatively impacted which may present a liquidity risk.

Our ability to meet its payment obligations depends on our ability to generate significant cash flows or obtain external financing in the future. This ability, to some extent, is subject to market, economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. There can be no assurance that our business will generate cash flow from operations, or that additional capital will be available to us, in amounts sufficient to enable us to meet our debt payment obligations and to fund other liquidity needs.

Risks Related to Beeline’s Mortgage Lending Products, Technology, and Intellectual Property

Beeline’s mortgage lending business relies on technology infrastructure, which exposes us to cybersecurity and technology infrastructure risks.

Our mortgage lending business requires the use of a secure, efficient technological infrastructure to successfully operate. Our reliance on technology exposes us to cybersecurity threats. A cybersecurity breach or hacking of our systems could result in significant disruptions in its operations and negatively impact the public perception of our business.

Technology disruptions or failures in, and cyberattacks or other breaches relating to, our technological infrastructure, or those of third parties with whom we do business, could disrupt our business, cause legal or reputational harm, and materially and adversely impact our business, financial condition, and results of operations.

We are dependent on the secure, efficient, and uninterrupted operation of our technology infrastructure, including computer systems, and related software applications, as well as those of certain third parties. Its website and computer/telecommunication networks must accommodate a high volume of traffic and deliver frequently updated information, the accuracy and timeliness of which is critical to its business. Our technology must provide a loan application experience that equals or exceeds the experience provided by its competitors.

We may experience service disruptions and failures caused by system or software failure, fire, power loss, telecommunications failures, including those of internet service providers, team member misconduct, human error, denial of service or information, cyberattacks, and phishing emails, including computer hackers, computer viruses and disabling devices, malicious or destructive code, as well as natural disasters, health pandemics and other similar events. Any such disruption could interrupt or delay our ability to provide our services to our customers and could also impair the ability of third parties to provide critical services to us. Although we have undertaken measures intended to protect the safety and security of our information systems, there can be no assurance that disruptions, failures, and cyberattacks will not occur or, if they do occur, that they will be adequately addressed in a timely manner. Such measures may in the future fail to prevent or detect unauthorized access to our team member, customer, and loan applicant information, and our disaster recovery planning may not be sufficient to address all technology-related risks, which are constantly evolving. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage, interrupt, or otherwise disrupt the third-party resources or services we use.

Any prolonged service disruption affecting our platform could damage the Company’s reputation with current and potential customers, expose it to liability, cause it to lose customers, or otherwise materially and adversely affect its business, financial condition, and results of operations. In the event of damage or interruption, the Company’s insurance policies may not adequately compensate it for any losses, although the Company does have coverage under a cyber liability insurance policy. It may not cover all business losses or costs of reporting to consumers and/or state regulatory bodies

As our customer base and range of product offerings continue to expand, we may not be able to scale our technology to accommodate the increased capacity requirements, which may result in interruptions or delays in service. In addition, the failure of third-party service providers to meet our capacity requirements could result in interruptions or delays in access to our platform or impede our ability to grow our business and scale our operations. If the Company’s third-party service agreements are terminated, or there is a lapse of service, interruption of internet service provider connectivity, or damage to data centers, it could experience interruptions in access to its platform as well as delays and additional expense in arranging new facilities and services. Any service disruption affecting its platform could damage its reputation with current and potential customers, expose it to liability, cause it to lose customers, or otherwise materially and adversely affect its business, financial condition, and results of operations.

Additionally, the technology and other controls and processes the Company has created to help it identify misrepresented information in its loan production operations were designed to obtain reasonable, not absolute, assurance that such information is identified and addressed appropriately. Accordingly, such controls may not have detected, and may fail in the future to detect, all misrepresented information in our operations.

If our operations are disrupted or otherwise negatively affected by a technology disruption or failure, this could result in customer dissatisfaction and damage to our reputation and brand, and materially and adversely affect our business, financial condition, and results of operations. We do not carry business interruption insurance sufficient to compensate us for all losses that may result from interruptions in our service as a result of systems disruptions, failures and similar events. The Company carries $1 million in coverage of direct business interruption coverage and contingent business interruption coverage under its cyber liability policy.

If the Company is not able to protect the privacy, use, and security of customer information, it could sustain damages that may have a material adverse effect on its business, financial condition and results of operations.

The Company receives, maintains and stores the personal information (“PI”) of its loan applicants, customers and staff. On the customer side, the Company captures and stores thousands of data points per customer during the loan transaction process. The storage, sharing, use, disclosure, processing and protection of this information are governed by the privacy and data security policies maintained by the Company. Moreover, there are federal and state laws regarding privacy and the storage, sharing, use, disclosure, processing and protection of PI, personally identifiable information, and user data. Specifically, PI and nonpublic personal information (“NPI”) are increasingly subject to legislation and regulations in numerous jurisdictions. For example, federal law, including the GLBA, the GLBA Safeguards Rule, and the FCRA, among other laws, set forth privacy and data security requirements for NPI and consumer report information. At the state level, state privacy laws, such as the California Consumer Protection Act (the “CCPA”), provide new data privacy rights for consumers and new operational requirements for the Company. The CCPA also includes a statutory damages framework for violations of the CCPA and a private right of action against businesses that fail to implement and maintain reasonable security procedures and practices appropriate to the nature of the information to prevent data breaches.

The Company could be materially and adversely affected if legislation or regulations are expanded to require changes in business practices or privacy policies (particularly to the extent such changes would affect the manner in which it stores, shares, uses, discloses, processes and protects such data), or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect its business, financial condition, results of operations, and prospects. In addition, even if legislation or regulation does not expand in a manner that affects the Company’s business directly, changing consumer attitudes or the perception of the use of personal information also could materially and adversely affect its business, financial condition, and results of operations.

Any penetration of network security or other misappropriation or misuse of PI or personal consumer information, including through ransomware attacks, could cause interruptions in the Company’s business operations and subject it to increased costs, litigation, and other liabilities. Claims could also be made against the Company for other misuse of PI, such as the use of personal information for unauthorized purposes or identity theft, which could result in litigation and financial liabilities, and information security incidents also could involve investigations and enforcement from governmental authorities. Such events could also occur as a result of the use of AI and other technologies by us and others with whom we do business or on whom our operations and systems depend, and any defects or vulnerabilities which may exist or arise in such technologies. Security breaches (including ransomware attacks) could also materially and adversely affect the Company’s reputation with consumers and third parties with whom it does business, as well as expose it to regulatory and litigation risk, which could be exacerbated if it is determined that known security issues were not addressed adequately prior to any such breach. It is possible that advances in computer capabilities, new discoveries, undetected fraud, inadvertent violations of the Company’s policies or procedures or other developments could result in a compromise of information or a breach of the technology and security processes that are used to protect consumer transaction data. In addition, the Company’s current work-from-home policy may increase the risk of security breaches, which could result in the misappropriation or misuse of PI. As a result, the Company’s current security measures may not prevent all security breaches. The Company may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. The Company also faces risks associated with security breaches affecting third parties, including its third-party partners and vendors. In addition, the Company faces risks resulting from unaffiliated third parties who attempt to defraud, and obtain personal information directly from, its customers by imitating it. Any publicized security problems affecting the Company’s businesses and/or those of third parties, whether actual or perceived, may discourage consumers from doing business with the Company, which could materially and adversely affect its business, financial condition, and results of operations.

There can be no assurance that any of the above risks will not occur or, if they do occur, that they will be adequately addressed in a timely manner. If any loan applicant, customer, or team member’s information is inappropriately accessed or acquired and used by a third party or a team member for illegal purposes, such as identity theft, Beeline may be responsible to the affected applicant or customer for any losses he, she or they may have incurred as a result of misappropriation or other improper use. In such an instance, we may also be subject to regulatory action, investigation or be liable to a governmental authority for fines or penalties associated with a lapse in the integrity and security of its loan applicants’, customers’ or team members’ information. he Company may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. In addition, our remediation efforts may not be successful and it may not have adequate insurance to cover these losses. If the Company is unable to protect its customers’ PI, our business, financial condition, and results of operations can be materially and adversely affected.

We rely heavily on third-party software to operate our mortgage lending business, creating technological risks that it cannot mitigate.**

We rely heavily on third-party technology in running our mortgage lending business. Because we utilize third-party technology, our ability to maintain and control the technology is limited. Such utilization of this technology creates potential risks, including service interruptions, product errors, or failure, all of which could cause us reputational harm, create financial losses, and harm our business operations. The cybersecurity risks we face can also impact our business partners and vendors.

We depend, in part, on third party vendor relationships, and our ability to become profitable and service our customer base is dependent on the continuation of those relationships.

In addition to the third-party technology platforms described above, there are other vendors who provide other products and services required for mortgage origination fulfillment, like credit reporting companies, title companies, appraisal management companies and other data providers. If these providers stop providing services to us on acceptable terms or at all, or if the relationship is terminated, we may be unable to replace that vendor in a timely manner on acceptable terms, or at all. This could result in service disruptions and materially and adversely affect our business, financial condition and operating results.

If the Company is unable to protect its intellectual property rights, it may be unable to effectively compete with its competitors

The Company’s intellectual property, principally its trade secrets and licensed technology, is a key asset. The Company regards the protection of its intellectual property as critical to its success. The Company has taken steps to protect its intellectual property by entering into confidentiality agreements with its employees, third-party partners, and third-party vendors. These agreements may not be enforceable or may not effectively prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of an unauthorized disclosure. Monitoring and protecting the Company’s intellectual property is difficult and may not be adequate. Costly and time-consuming litigation could be necessary to enforce and determine the scope of the Company’s intellectual property rights, and failure to obtain or maintain protection of its intellectual property rights could materially and adversely affect its business and financial results.

Beeline’s Mortgage Regulatory Risks

Beeline’s mortgage business is a heavily regulated industry, and its business operations expose it to risks of noncompliance with a large and increasing body of complex mortgage and lending laws and regulations at the federal and state levels.

Due to the heavily regulated nature of the mortgage, home ownership, real estate, and insurance industries, Beeline is required to comply with a wide array of federal and state laws and regulations that regulate, among other things, the manner in which Beeline conducts its loan production, the fees that it may charge, and the collection, use, retention, protection, disclosure, transfer and other processing of personal information. Governmental authorities and various U.S. federal and state agencies have broad oversight and supervisory authority over Beeline’s mortgage lending business.

Both the scope of the laws and regulations and the intensity of the supervision to which Beeline’s mortgage lending business is subject have increased over time. Failure to satisfy certain requirements or restrictions could result in a variety of regulatory actions such as fines, directives requiring certain steps to be taken, suspension of authority to operate or ultimately a revocation of authority or license. Certain types of regulatory actions could result in a breach of representations, warranties and covenants, and potentially cross-defaults in our financing arrangements which could limit or prohibit our access to liquidity to operate our business. In addition, while the federal government promulgates new rules or guidance, it also may interpret existing laws and regulations in novel ways and/or expand enforcement priorities at certain federal agencies, such as the CFPB and the Federal Trade Commission (the “FTC”). It is therefore possible that new rulemakings, interpretations, or enforcement actions will materially and adversely affect its business, affiliates, and strategic relationships.

Beeline expects that its mortgage lending business will remain subject to extensive regulation and supervision. Although it has systems and procedures designed to comply with developing legal and regulatory requirements, Beeline cannot assure you that more restrictive laws and regulations will not be adopted in the future, or that governmental bodies or courts will not interpret existing laws or regulations in a different or more restrictive manner than it has, which could render its current business practices non-compliant or which could make compliance more difficult or expensive. Any of these or other changes in laws or regulations could materially and adversely affect Beeline’s business, financial condition, and results of operations.

Changes in GSEs and other applicable government programs could negatively impact Beeline’s business operations.

While the majority of the loans Beeline originates are non-conforming, Beeline does originate conforming loans which must comply with guidelines of the GSEs and government-backed programs. It is possible that the federal government may change the rules and regulations regarding GSEs and other government-backed programs. Beeline cannot guarantee that the federal government will maintain the GSEs and government-backed programs on which it relies. Any such changes could negatively impact Beeline’s ability to do business with such entities and its ability to originate loans. Further, any changes in these entities’ roles or structures could significantly impact Beeline’s business operations and financial condition.

Future AI or technology characteristics and regulations could negatively impact Beeline’s business and use of technology.

Beeline’s business model and competitive edge requires the use of AI and various technologies to process loans and service its customers. While there is currently no federal legislation regarding AI, it is possible that new federal legislation regarding AI may be adopted, which could negatively impact Beeline’s business operations. Further, any new regulations regarding technology or AI that impact Beeline’s business would increase its compliance costs and risks of regulatory proceedings against it. Should Beeline be unable to comply with any applicable technology or AI regulations, its business operations, financial condition and results of operation will be adversely affected. In addition, Beeline uses an AI product developed by MagicBlocks, a company in which Beeline has a minority interest. If Beeline is unable to use this AI product in the future, Beeline may experience additional costs and business disruptions.

In addition, the emergent nature of AI presents numerous risks and uncertainties, including the potential for defects in the design and development of the technologies used to automate processes, misapplication of technologies, the reliance on data, rules or assumptions that may prove inaccurate, incomplete or inadequate, information security vulnerabilities and failure to meet customer expectations. For example, the use of AI algorithms may give rise to operational or legal issues due to perceived or actual unintentional bias in the processing and servicing of mortgage loans. While we aim to use and to partner with organizations that use AI responsibly, we or organizations with whom we do business may be unsuccessful in identifying or resolving issues before they arise or navigating the complex and evolving landscape inherent in AI and other novel technologies, including regulatory implications and competitive forces. We and many of our competitors and other market participants are beginning to deploy AI and machine learning technology into a growing number of systems and processes. As such, our ability to successfully adopt, implement, maintain and oversee AI and other technological advancements into our processes efficiently and effectively, and to establish systems and protocols and otherwise prepare for and address the myriad of potential issues that could arise with respect thereto, will impact our future competitiveness and operating results and capabilities, and any failure to do so by us and our strategic partners could materially adversely affect our business and prospects.

Further, if the content, analyses, or recommendations that the AI uses to assist Beeline in processing loans and servicing customers are or are alleged to be deficient, inaccurate, or biased, Beeline could be subject to reputational harm and legal liability, either of which could result in a diversion of management’s attention. The use of AI in Beeline’s business may also result in cybersecurity incidents. Because Beeline’s use of AI involves the collection of its customers’ personal information and data, it is possible that cybersecurity incidents or breaches of the AI Beeline uses could result in the exposure of its customers’ personal information and data. Any such cybersecurity incident could adversely affect its business, create legal liability, result in operational downtime, result in reputational harm, and negatively impact Beeline’s financial condition. State and federal legislation or regulations regarding AI which may be adopted or enforced in the future could negatively impact Beeline’s business operations. Any new regulations or the occurrence of one or more of the risks and uncertainties described above regarding technology or AI that impact Beeline’s business would increase its compliance costs and risks of regulatory proceedings against it, which could materially harm our operating results and financial condition. A majority of states have enacted either some form of AI legislation or created a task force or committee. We are not certain how present, or future AI legislation will affect us.

Because Beeline’s mortgage lending business is subject to various telecommunications, data protection and privacy laws and regulations, as well as various consumer protection laws, including predatory lending laws, its failure to comply with such laws can result in material adverse effects and financial losses.

Beeline’s mortgage business is currently subject to a variety of, and may in the future become subject to additional U.S. federal, state, and local laws and regulations that are continuously evolving and developing, including laws on advertising, as well as privacy laws and regulations, such as the Telephone Consumer Protection Act (the “TCPA”), the Telemarketing Sales Rule, the CAN-SPAM Act, the Gramm-Leach-Bliley Act (the “GLBA”), and, at the state level, numerous state privacy laws such as the CCPA.

These types of laws and regulations directly impact Beeline’s business and require ongoing compliance, monitoring and internal and external audits as they continue to evolve and may result in ever-increasing public and regulatory scrutiny and escalating levels of enforcement and sanctions. Subsequent changes to data protection and privacy laws and regulations could also impact how Beeline processes personal information and, therefore, limit the effectiveness of its product offerings or its ability to operate or expand its business, including limiting strategic relationships that may involve the sharing of personal information.

Beeline must also comply with a number of federal and state consumer protection laws and regulations including, among others, the Truth in Lending Act (“TILA”), RESPA, the Equal Credit Opportunity Act, the Fair Credit Reporting Act (“FCRA”), the Fair and Accurate Credit Transactions Act of 2003, the Red Flags Rule, the Fair Housing Act, the Electronic Fund Transfer Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Fair Debt Collection Practices Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act (“HMDA”), the Home ownership and Equity Protection Act (“HOEPA”), the Secure and Fair Enforcement for Mortgage Licensing Act (the “SAFE Act”), the Federal Trade Commission Act, the FTC Credit Practices Rules and the FTC Telemarketing Sales Rule, the Mortgage Acts and Practices Advertising Rule, the Bank Secrecy Act (“BSA”) and anti-money laundering requirements, the Foreign Corrupt Practices Act (“FCPA”), the Electronic Signatures in Global and National Commerce Act and related state-specific versions of the Uniform Electronic Transactions Act, the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (the “Dodd Frank Act”) and other U.S. federal and state laws prohibiting unfair, deceptive or abusive acts or practices as well as the Bankruptcy Code and state foreclosure laws. These statutes apply to loan production, loan servicing, marketing, use of credit reports or credit-based scores, safeguarding of nonpublic, personally identifiable information about its customers, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features, and mandate certain disclosures and notices to customers.

In particular, U.S. federal, state and local laws have been enacted that are designed to discourage predatory lending and servicing practices. The HOEPA prohibits inclusion of certain provisions in residential loans that have mortgage rates or origination fees in excess of prescribed levels and requires that borrowers be given certain disclosures prior to origination. Some states have enacted, or may enact, similar laws or regulations which, in some cases, impose restrictions and requirements greater than those imposed by the HOEPA. In addition, under the anti-predatory lending laws of some states, the production of certain residential loans, including loans that are not classified as “high cost” loans under applicable law, must satisfy a net tangible benefits test with respect to the related borrower. This test may be highly subjective and open to interpretation. As a result, a court may determine that a residential loan, for example, does not meet the test even if the related originator reasonably believed that the test was satisfied. Failure of residential loan originators or servicers to comply with these laws, to the extent any of their residential loans are or become part of its mortgage-related assets, could subject Beeline, as an originator, to monetary penalties and could result in the borrowers rescinding the affected loans. Lawsuits have been brought in various states making claims against originators, servicers, assignees and purchasers of high-cost loans for violations of state law. Named defendants in these cases have included numerous participants within the secondary mortgage market. Due to its size and financial condition, Beeline faces greater challenges in defending litigation. If Beeline’s loans are found to have been produced in violation of predatory or abusive lending laws, it could be subject to lawsuits or governmental actions or it could be fined or incur losses and incur reputational damage.

Beeline’s failure to comply with applicable U.S. federal and state lending, telecommunications, data protection, privacy and consumer protection laws could lead to:

Since the lending laws and regulations to which Beeline is subject are constantly evolving, its compliance costs continue to increase.

As with any regulated business, the smaller the business, the more difficult it is to comply with applicable laws and regulations. Similarly, smaller companies like Beeline are more adversely affect by compliance costs. Large competitors have substantially greater financial resources and revenue to be able pay for and absorb the compliance costs in contrast to Beeline.

As federal and state laws evolve, it may be more difficult for Beeline to identify legal and regulatory developments comprehensively, to interpret changes accurately, and to train its team members effectively with respect to these laws and regulations. Adding to these difficulties, laws may conflict with each other and, if Beeline complies with the laws of one jurisdiction, it may find that it is violating the laws of another jurisdiction. These difficulties potentially increase its exposure to the risks of noncompliance with these laws and regulations, which could materially and adversely affect Beeline’s business. In addition, Beeline’s failure to comply with these laws and regulations may result in reduced payments by customers, modification of the original terms of loans, permanent forgiveness of debt, delays or defenses in the foreclosure process, increased servicing advances, litigation, enforcement actions and repurchase and indemnification obligations, as well as potential allegations that such compliance failures demonstrate weaknesses in its compliance systems. A failure to adequately supervise Beeline’s service providers and vendors, including outside foreclosure counsel, may also have a material adverse effect.

The laws and regulations applicable to Beeline are subject to administrative or judicial interpretation, but some of these laws and regulations have been recently enacted and may not be interpreted yet or may be interpreted infrequently or inconsistently. Ambiguities in applicable laws and regulations may leave uncertainty with respect to permitted or restricted conduct and may make compliance with laws and risk assessment decisions with respect to compliance with laws difficult and uncertain. In addition, ambiguities make it difficult, in certain circumstances, to determine if, and how, compliance violations may be cured. The adoption by industry participants of different interpretations of these laws and regulations has added uncertainty and complexity to compliance. Beeline may fail to comply with applicable statutes and regulations even if acting in good faith, due to a lack of clarity regarding the interpretation of such laws and regulations, which may lead to regulatory investigations, governmental enforcement actions or private causes of action with respect to Beeline’s compliance.

To resolve issues raised in examinations or other governmental actions, Beeline may be required to take various corrective actions, including changing certain business practices, making refunds or taking other actions that could be financially or competitively detrimental to its. In addition, certain legislative actions and judicial decisions could give rise to the initiation of lawsuits against it for activities it conducted in the past. Furthermore, provisions in Beeline’s mortgage loan and other loan product documentation, including but not limited to the mortgage and promissory notes it uses in loan originations, could be construed as unenforceable by a court. Beeline expects to incur continued costs in complying with applicable government laws and regulations.

If Beeline fails to comply with laws and regulations regarding its use of telemarketing, including the TCPA, it could increase its operating costs and materially and adversely impact its business, financial condition and results of operations, and prospects.**

In its mortgage lending business, Beeline engages in outbound telephone and text communications with consumers and accordingly must comply with a number of laws and regulations that govern said communications and the use of automatic telephone dialing systems (“ATDS”), including the TCPA and Telemarketing Sales Rules. The Federal Communications Commission (“FCC”), and the FTC have responsibility for regulating various aspects of these laws. Among other requirements, the TCPA requires Beeline to obtain prior express written consent for certain telemarketing calls and to adhere to “do-not-call” registry requirements which, in part, mandate Beeline maintain and regularly update lists of consumers who have chosen not to be called and restrict calls to consumers who are on the national do-not-call list. Many states have similar consumer protection laws regulating telemarketing. These laws limit Beeline’s ability to communicate with consumers and reduce the effectiveness of its marketing programs. The TCPA does not distinguish between voice and data, and, as such, SMS/MMS messages are also “calls” for the purpose of TCPA obligations and restrictions.

For violations of the TCPA, the law provides for a private right of action under which a plaintiff may recover monetary damages of $500 for each call or text made in violation of the prohibitions on calls made using an “artificial or pre-recorded voice” or an ATDS. A court may treble the amount of damages upon a finding of a “willful or knowing” violation. There is no statutory cap on maximum aggregate exposure (although some courts have applied in TCPA class actions constitutional limits on excessive penalties). An action may be brought by the FCC, a state attorney general, an individual, or a class of individuals. If in the future Beeline is found to have violated the TCPA, the amount of damages and potential liability could be extensive and materially and adversely impact Beeline’s business, financial condition and results of operations. Accordingly, were such a class certified or if Beeline is unable to successfully defend such a suit, then TCPA damages could materially and adversely affect its business, financial condition, results of operations, and prospects. Moreover, defense of any class action is expensive and may divert employees from their normal tasks.

If Beeline is unable to comply with the TILA-RESPA Integrated Disclosure (the “TRID rules”), its business and operations could be materially and adversely affected.

The CFPB implemented loan disclosure requirements, to combine and amend certain TILA and RESPA disclosures. The TRID rules significantly changed consumer-facing disclosure rules and added certain waiting periods to allow consumers time to shop for and consider the loan terms after receiving the required disclosures. If Beeline fails to comply with the TRID rules, including but not limited to disclosure timing requirements and the requirements related to disclosing fees within applicable tolerance thresholds, it may be unable to sell loans that it originates, it may be required to sell such loans at a discount compared to other loans, or it may be subject to repurchase or indemnification demands from purchasers or insurers/guarantors of such loans. Further, the right to rescind certain loans could be extended, Beeline could be required to issue refunds to consumers, and it could be subject to regulatory action, penalties, or civil litigation.

Federal and state lending laws regulate Beeline’s strategic relationships with third-party partnerships and vendors; a determination that it has failed to comply with such laws could require restructuring of the relationships, result in material financial liabilities, and expose Beeline to regulatory enforcement and litigation risk, and/or diminish the value of these relationships.

Beeline must comply with a number of federal and state lending laws including, among others, RESPA, TILA and HMDA. Because its business relies on strategic relationships with third parties and affiliates, it is particularly important that it comply with RESPA, which requires lenders to make certain disclosures to mortgage loan borrowers regarding their settlement costs and affiliate relatio nships with other settlement service providers, and prohibits kickbacks, referral fees, and unearned fees associated with settlement service business. RESPA-related risk arises, for example, to the extent that certain services provided by one of Beeline’s affiliates or third-party partners are considered to be settlement services, consumers are not able to choose whether such services are provided by the affiliate or Beeline, and consumers are deemed to pay a charge attributable to such services, or if loans are deemed not purchased in the secondary market at fair market value. Additionally, it is important that Beeline comply with TILA and other applicable federal and state laws. Risks related to such laws arise, for example, if points and fees for a transaction exceed certain applicable thresholds, loan originator compensation requirements (including incentive compensation requirements) are not satisfied, and/or TRID or other required disclosures are determined to be noncompliant, and these laws are subject to interpretational complexities in the co-branded mortgage broker context. In addition, Beeline’s lead generation and advertising activities and strategic relationships carry RESPA-related risk depending on certain factors, such as whether a third-party endorses or refers business to Beeline, whether any payments between the parties constitute fair market value, and any potential direct or indirect benefit to Beeline’s third-party partners in addition to benefits provided directly to consumers. Federal and state regulators or courts could adopt interpretations of laws and regulations-including with respect to RESPA and its governance over affiliated business arrangements, bona fide joint ventures and marketing services arrangements, TILA’s provisions applicable to transactions involving mortgage brokers, and other disclosure requirements-that could increase the regulatory risk and scrutiny of Beeline’s affiliate and third-party strategic relationships, raise licensing/registration questions, require restructuring of these relationships (as well as suspend its operations in a given jurisdiction pending such restructuring), result in financial liabilities (including indemnification, repurchase demands or financial penalties), carry litigation risk (including, potentially, false claim-related risk), and/or diminish the value of these relationships.

If Beeline fails to comply with employment and labor laws and regulations could materially and adversely affect its business, financial condition, and results of operations.

Beeline is subject to a variety of federal and state employment and labor laws and regulations, including the Americans with Disabilities Act, the Federal Fair Labor Standards Act, and other laws related to working conditions, wage-hour pay, over-time pay, employee benefits, anti-discrimination, and termination of employment. Noncompliance with applicable laws or regulations could subject Beeline to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, or injunctions. An adverse outcome in any such litigation could require Beeline to pay contractual damages, compensatory damages, punitive damages, attorneys’ fees and costs.

Claims, enforcement actions, or other proceedings could harm Beeline’s reputation, business, financial condition and results of operations. Beeline could be materially and adversely affected by any such litigation. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees.

Risks Relating to our Spirits Business

We are susceptible to cybersecurity breaches and cyber-related fraud.

We depend on information technology (“IT”) systems, networks, and services, encompassing internet sites, data hosting and processing facilities, as well as hardware (including laptops and mobile devices), along with software and technical applications and platforms. Some of these are overseen, hosted, supplied, and/or utilized by third parties or their vendors, supporting us in the administration of our business.

The escalation of IT security threats and the increasing sophistication of cyber-crime pose a potential hazard to the security of our IT systems, networks, and services, as well as to the confidentiality, availability, and integrity of our data. Should the IT systems, networks, or service providers we rely on encounter malfunctions or if we experience a loss or disclosure of sensitive information due to various causes such as catastrophic events, power outages, or security breaches, and our business continuity plans fail to address these issues promptly, we could face disruptions in managing operations. This may result in reputational, competitive, and/or business harm, potentially adversely impacting our business operations and financial condition. Furthermore, such incidents could lead to the unauthorized disclosure of critical confidential information, causing financial and reputational damage due to the loss or misappropriation of confidential information belonging to us, our partners, employees, customers, suppliers, or consumers, particularly with Beeline’s storage of confidential consumer information including social security numbers. In such scenarios, significant financial and other resources might be required to rectify the damage caused by a security breach or to repair and replace networks and IT systems.

We must maintain adequate terms from our supply partner Agaveros Unidos de Amatitan, SA. de CV, which if not done, will likely result in deteriorating performance of our Azuñia brand.

We have a long-term exclusive agreement with Agaveros Unidos de Amatitan, SA. de CV (“Agaveros Unidos”) for the Azuñia Tequila brand. The termination of our relationship or an adverse change in the terms of our arrangement with Agaveros Unidos could have a negative impact on our business. If Agaveros Unidos increases its prices, we may not be able to secure alternative suppliers, and may not be able to raise the prices of our products to cover all or even a portion of the increased costs. Also, any failure by Agaveros Unidos to perform satisfactorily or handle increased orders, or delays in shipping, could cause us to fail to meet orders for our products, lose sales, incur additional costs and/or expose us to product quality issues. In turn, this could cause us to lose credibility in the marketplace and damage our relationships with distributors, ultimately leading to a decline in our business and results of operations. If we are not able to renegotiate these contracts on acceptable terms or find suitable alternatives, our business, financial condition or results of operations could be negatively impacted.

Failure of our distributors to distribute our products adequately within their territories or any “under-investment” by our distributors in our brands could result in deteriorating operating performance.

We currently distribute our Spirits products in seven states. We are required by law to use state-licensed distributors or, in certain states known as “control states,” state-owned agencies to sell our products to retail outlets, including liquor stores, bars, restaurants and national chains in the United States. We have established relationships for our brands with a limited number of wholesale distributors. In the past two years, at least one distributor has significantly reduced its investment in our spirits brands, which had an adverse effect our business, sales and growth. We have engaged new distributors; however they do not have the same scale as the former distributor.

Over the past decade, there has been increasing consolidation in production, distribution, and retail (the three tiers of the current system) that challenges the growth of small businesses in the marketplace. Our distributors also distribute competitive brands for much larger companies with significant pricing power. The ultimate success of our products depends in large part on our distributors’ ability and desire to distribute our products, as we rely significantly on them for product placement and retail store penetration. In many key states, we have signed contracts that greatly limit our ability to replace and pursue recourse with distributor partners that fail to meet their obligations. We cannot assure you that our U.S. distributors will commit sufficient time and resources to promote and market our brands and product lines. If they do not, our sales will be harmed, resulting in a decline in our results of operations.

Failure of our products to secure and maintain listings in the control states would result in a decline in revenue.

In the 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 selected for listing in control states must generally reach certain sales volumes and/or profit levels to maintain their listings. Products in control states are selected for purchase and sale through listing procedures, which are generally made available to new products only at periodically scheduled listing interviews. Products not selected for listings can only be purchased by consumers in the applicable control state through special orders, if at all. If, in the future, we are unable to maintain our current listings in the control states, or secure and maintain listings in those states for any additional products we may develop or acquire, sales of our products could decrease significantly, which would have a material adverse financial effect on our results of operations and financial condition.

Failure to maintain adequate inventory levels would negatively impact operational profitability.

We maintain inventories of our product aging in barrels, as well as inventory needed to meet customer delivery requirements. We have used our barreled spirits inventory at market value as collateral in the Company’s financing. If we do not make timely payments on our financing obligations, or we breach our covenants in any financing document, including maintaining loan-to-value ratios, the lenders may foreclose and take possession of our inventory. In addition, this inventory is always at risk of loss due to theft, fire, evaporation, spoilage, or other damage, and any such loss, whether insured against or not, could cause us to fail to meet our orders and harm our sales and operating results. Also, our inventory may become obsolete as we introduce new products, cease to produce old products or modify the design of our products’ packaging, which would increase our operating losses and negatively impact our results of operations.

We have been unsuccessful in launching new products and recent launches have negatively impacted the rate of loss.

A component of our growth strategy has been the addition of other brands that are complementary to our existing portfolio. Toward this end, during recent years we have launched new services and acquired new assets. Future growth requires we continue to invest in the newly acquired businesses. The addition of new products or businesses entails numerous risks with respect to integration and other operating issues, any of which could have a detrimental effect on our results of operations and/or the value of our equity. These risks include, but are not limited to, the following:

Our ability to grow through the acquisition of additional brands is also dependent upon identifying acceptable acquisition targets and opportunities, our ability to consummate prospective transactions on favorable terms, or at all, and the availability of capital to complete the necessary acquisition arrangements. We intend to finance our brand acquisitions through a combination of our available cash resources, third-party financing and, in appropriate circumstances, the further issuance of equity and/or debt securities. Acquiring additional brands could have a significant effect on our financial position and could cause substantial fluctuations in our quarterly and yearly operating results. Also, acquisitions could result in the recording of significant goodwill and intangible assets on our financial statements, the amortization or impairment of which would reduce reported earnings in subsequent years.

We face substantial competition in the spirits industry and have limited financial resources compared to other competitors.

We compete on the basis of product taste and quality, brand image, price, service and ability to innovate in response to consumer preferences. The global spirits industry is highly competitive and is dominated by several large, well-funded international companies. Many of our competitors have longer operating histories and have substantially greater financial, sales, marketing and other resources than we do, as well as larger installed customer bases, greater name recognition and broader product offerings. These large competitors can devote financial and other greater resources to the development, promotion, sale and support of their products. As a result, it is possible that our competitors may either respond to industry conditions or consumer trends more rapidly or effectively or resort to price competition to sustain market share, which could adversely affect our sales and profitability.

We face unique risks relating to class actions or other litigation relating to alcohol abuse or the misuse of alcohol.

Our industry faces the possibility of class action or similar litigation alleging that the continued excessive use or abuse of beverage alcohol has caused death or serious health problems or that we failed to adequately warn consumers of the risks of alcohol consumption. It is also possible that governments could assert that the use of alcohol has significantly increased government-funded healthcare costs. Litigation or assertions of this type have adversely affected companies in the tobacco industry, and it is possible that we, as well as our suppliers, could be named in litigation of this type.

Lawsuits have been brought in a number of states alleging that beverage alcohol manufacturers and marketers have improperly targeted underage consumers in their advertising. Plaintiffs in these cases allege that the defendants’ advertisements, marketing and promotions violate the consumer protection or deceptive trade practices statutes in each of these states and seek repayment of the family funds expended by the underage consumers. While we have not been named in these lawsuits, we could be named in similar lawsuits in the future. Any class action or other litigation asserted against us could be expensive and time-consuming to defend against, depleting our cash and diverting our personnel resources and, if the plaintiffs in such actions were to prevail, our business could be harmed significantly.

We face substantial regulatory risks including compliance with local and national laws, as well as the possibility of adverse changes in law, regulation or tax policy.

Our business is subject to extensive government regulation. This includes regulations regarding production, distribution, marketing, advertising and labelling of beverage alcohol products. We are required to comply with these regulations and to maintain various permits and licenses. We are also required to conduct business only with holders of licenses to import, warehouse, transport, distribute and sell beverage alcohol products. We cannot assure you that these and other governmental regulations applicable to our industry will not change or become more stringent. Moreover, because these laws and regulations are subject to interpretation, we may not be able to predict when and to what extent liability may arise. Additionally, due to increasing public concern over alcohol-related societal problems, including driving while intoxicated, underage drinking, alcoholism and health consequences from the abuse of alcohol, various levels of government may seek to impose additional restrictions or limits on advertising or other marketing activities promoting beverage alcohol products. Failure to comply with any of the current or future regulations and requirements relating to our industry and products could result in monetary penalties, suspension or even revocation of our licenses and permits. Costs of compliance with changes in regulations could be significant and could harm our business, as we could find it necessary to raise our prices in order to maintain profit margins, which could lower the demand for our products and reduce our sales and increase our losses.

Also, the distribution of beverage alcohol products is subject to extensive taxation (at both the federal and state government levels), and beverage alcohol products themselves are the subject of national import and excise duties in most countries around the world. An increase in taxation or in import or excise duties could also significantly harm our sales revenue and margins, both through the reduction of overall consumption and by encouraging consumers to switch to lower-taxed categories of beverage alcohol.

We are exposed to product liability or other related liabilities which could have significant negative financial repercussions on Spirits’ solvency.

Although we maintain liability insurance and will attempt to limit contractually our liability for damages arising from consumer, stakeholder and other lawsuits, these measures may not be sufficient for us to successfully avoid or limit product liability or other related liabilities. Our general liability insurance coverage is limited to $1 million per occurrence and $3 million in the aggregate and $2 million products/completed operations aggregate, and our general liability umbrella policy is limited to $5 million per occurrence and $5 million in the aggregate and $5 million products/completed operations aggregate. We do not have insurance covering employee lawsuits. Further, any contractual indemnification and insurance coverage we have from parties supplying our products is limited, as a practical matter, to the creditworthiness of the indemnifying party and the insured limits of any insurance provided by these suppliers. Extensive product liability claims could be costly to defend and/or costly to resolve and could harm our reputation or business.

We could face issues including the risk of contamination of our products and/or counterfeit or confusingly similar products.

The success of our brands depends upon the positive image that consumers have of them. Contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our brands, could affect the demand for our products. Contaminants in raw materials purchased from third parties and used in the production of our products or defects in the distillation and fermentation processes could lead to low beverage quality, as well as illness among, or injury to, consumers of our products and could result in reduced sales of the affected brand or all of our brands and potentially serious damage to our reputation for product quality, as well as product liability claims. Also, to the extent that third parties sell products that are either counterfeit versions of our brands or brands that look like our brands, consumers of our brands could confuse our products with products that they consider inferior. This could cause them to refrain from purchasing our brands in the future and in turn could impair our brand equity and adversely affect our sales and operations.

Recent and threatened tariffs imposed by the U.S. and other countries could materially adversely affect our Spirits business.

A portion of Spirits’ inventory are produced using materials sourced from other countries such as Mexico. In addition, a portion of Spirits’ sales are made in foreign jurisdictions. The Trump Administration’s imposition of tariffs on various goods from Mexico, Canada, China, and other jurisdictions, and retaliatory tariffs and other measures which these jurisdictions may take in response, could therefore materially adversely affect our Spirits operations and operating results.

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 imports—if not offset through price increases to consumers—could also materially affect the business.

Risks Relating to Our Common Stock

The market price of our shares of common stock is subject to volatility, which could result in substantial losses to investors.

The market price of shares of our common stock may fluctuate and has fluctuated significantly in response to factors, some of which are beyond our control, including:

Recently, the stock market, in general, has experienced extreme price and volume fluctuations due to, among other factors, concerns involving the new U.S. presidential administration, rate of inflation, the Federal Reserve decisions on interest rates particularly in the short term, the impact of tariffs and trade wars, supply chain shortages, recession fears, and geopolitical turmoil including the wars in Ukraine and the Middle East. The ongoing discourse on the conflicts in Ukraine and Israel are evidence of the political uncertainties. These and other factors have contributed to extreme volatility in the stock market in early 2025. Continued market fluctuations could result in extreme market volatility in the price of our common stock which could cause a decline in the value of our common stock below its recent prices.

Further, in the wake of these events, the U.S. and global capital markets have demonstrated substantial volatility in the first quarter of 2025, as many investors consider economic outlooks to be uncertain and consider the risk of a recession and a decline in the marketplace to be increasingly probable or imminent. Ultimately the economy may deteriorate into a recession with uncertain and potentially severe impacts upon the public capital markets and us. Among the potential consequences could be a substantial decline in stock prices including ours, a reduction in demand for securities of public companies (which may be more prevalent for smaller companies such as us) and more difficulty for us to raise capital we need and accessing capital on favorable terms or at all as a result. These and related consequences could also impact our vendors which could have negative impacts on us and our operations. We cannot predict how this will affect our business, but the impact may be material and adverse.

A failure to maintain our Nasdaq listing could negatively impact our future capital-raising abilities.

In 2024, the Company failed to comply with two applicable Nasdaq Listing Rules and received non-compliance letters. One letter was financial in nature. The Company was notified that Nasdaq is continuing to monitor its compliance with Nasdaq Listing Rule 5550(b)(1), which requires a listed company to maintain stockholders’ equity of at least $2.5 million (the “Stockholders’ Equity Rule”). While the Company believes it has regained compliance with the Stockholders Equity Rule as the result of its merger with Old Beeline, there can be no assurances that we will not violate such rule again in the future. The second deficiency relates to the minimum bid price being below $1.00. While we effected a reverse stock split at a ratio of 1-for-10 to increase our stock price in March 2025, there are no assurances that this reverse split and other events will allow us to maintain the minimum bid price required to comply with Nasdaq’s rules. In addition, a new Nasdaq rule recently took effect which precludes listed issuers that have already effected a reverse split within the prior one-year period from receiving a grace period for bid price deficiencies. Prior to the rule taking effect, such issuers would receive the general 180-day grace period to cure a bid price deficiency (plus the potential for an additional 180-day extension at the end of such initial grace period) to regain compliance with the minimum bid price requirement. Therefore, if the trading price of our common stock is below $1.00 for 30 consecutive trading days, before March 12, 2026, it would result in us receiving an immediate delist notice from Nasdaq without any 180-day grace period to regain compliance. Additionally, the new Nasdaq rule also provides that a reverse split cannot be used to cure a bid price deficiency if there have been two or more reverse splits within a two-year period and the combined ratios of such reverse splits are 250:1 or greater. These new rules will make it difficult to cure a bid price deficiency if the timing and circumstances are such that we cannot obtain a grace period or otherwise take the necessary actions and obtain the required approvals to effect a reverse split before a bid price deficiency occurs. If the Company’s common stock is delisted it would negatively impact the Company’s ability to raise capital and negatively impact our stockholders’ ability to trade their common stock.

The sale or issuance of our Common Stock under the ELOC and other financing transactions we may undertake will create dilution to our other shareholders and could cause the price of our Common Stock to fall, and such transactions may not be effective in raising sufficient capital as and when needed.

Pursuant to the ELOC Agreement, as amended, we may sell up to $10.0 million of our Common Stock to the purchaser thereunder. The shares of Common Stock that may be sold pursuant to the ELOC Agreement may be sold by us to such purchaser at our discretion from time-to-time. The purchase price for the shares that we may sell under the ELOC Agreement will fluctuate based on the price of our Common Stock and will be at a discount to the market prices of the Common Stock. Depending on market liquidity at the time, sales of such shares may cause the trading price of our Common Stock to fall. Additionally, the amount that we may sell under the ELOC will be limited to the daily trading dollar volume on the day of, or day before, the applicable put of shares of Common Stock, as well as certain other limitations set forth in the ELOC Agreement. These limitations will limit our ability to raise capital under the ELOC Agreement, and may significantly delay the amount of time it takes us to raise capital thereunder, which could prove harmful to us and our ability to meet our working capital and operational needs through use of the ELOC Agreement.

Sales by us under the ELOC Agreement and other financing we may undertake could result in substantial dilution to the interests of other holders of our Common Stock. Additionally, the sale of a substantial number of shares of our Common Stock, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

In addition to the ELOC, beginning in November 2024 and continuing to-date we have offered and sold shares of Series G and Warrants which are convertible and exercisable for shares of our Common Stock. We have also entered into an engagement letter with a broker-dealer in March 2025 which will be our exclusive sales agent under an at-the-market offering. Subject to their due diligence and customary conditions, we expect to enter into a definitive At-the Market Offering Agreement in April 2025. We cannot assure you we will enter into a definitive agreement or receive any proceeds from the at-the-market offering. If obtaining sufficient funding from these offerings were to prove unavailable or prohibitively dilutive, we will need to secure another source of funding in order to satisfy our working capital needs. Even if we sell the maximum amount of $10 million of shares of Common Stock under the ELOC Agreement, we may still need additional capital to fully implement our business, operating and development plans. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it or expose us to substantial restrictive covenants or limitations, the consequences could be a material adverse effect on our business, operating results, financial condition and prospects.

Further, certain of our outstanding derivatives securities, including convertible preferred stock and warrants, contain anti-dilution price protection provisions which provide for adjustments to conversion and exercise prices, and an increase in the shares underlying such securities, if we sell shares at a per share price below the applicable conversion or exercise price. Therefore, to the extent we issue shares at prices that are lower than these conversion and exercise prices and we do not obtain waivers of these provisions, these conversion and exercise prices will be lowered to the new lower sale price, and the shares of common stock underlying such securities will increase accordingly. This would cause additional dilution to our common stockholders and result in our receiving less cash upon exercise of warrants.

By virtue of the terms of the ELOC Agreement or any At-The-Market Offering Agreement if and when we enter into such an agreement, it is not possible to predict the number of shares we will sell nor the prices at which we will sell the shares in such transactions, the amount of proceeds we will raise and the timing thereof including whether they will be sufficient for our working capital needs and business plans (including the timely payment of our debt obligations), nor the consequences (including dilution to existing shareholders) which may result therefrom.

With limited exceptions, the volume of sales of our common stock has not been high. Although our common stock trades on Nasdaq, an active trading market for our shares may never develop or be sustained. If an active market for our common stock does not develop, it may be difficult to sell our common stock without depressing the market price for the common stock, or at all.

We are incurring significant additional costs as a result of being a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

As a public company, we are incurring increased costs associated with corporate governance requirements, including rules and regulations of the SEC under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Customer Protection Act of 2010, and the Securities Exchange Act of 1934 (the “Exchange Act”), as well as Nasdaq rules. These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs and make some activities more time consuming, including due to increased training of our current employees, additional hiring of new employees, and increased assistance from consultants. The SEC’s cybersecurity rules will increase our compliance costs. We also expect these rules and regulations to make it more expensive for us to maintain directors’ and officers’ liability insurance. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board, or as executive officers. Furthermore, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs. In addition, our management team will need to devote substantial attention to interacting with the investment community and complying with the increasingly complex laws pertaining to public companies, which may divert attention away from the day-to-day management of our business, including operational, research and development and sales and marketing activities. Increases in costs incurred or diversion of management’s attention as a result of becoming a publicly traded company may adversely affect our business, prospects, financial condition, results of operations, and cash flows.

Our failure to maintain effective disclosure controls and internal controls over financial reporting could have an adverse impact on us.

We are required to establish and maintain appropriate disclosure controls and internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting has identified and may in the future identify weaknesses and conditions that need to be addressed or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock. With the addition of Old Beeline and the integration of that business we may experience issues with our disclosure controls and internal controls including experiencing material weaknesses.

If we raise capital in the future, it is likely to dilute our existing stockholders’ ownership and/or have other adverse effects on us, our securities or our operations.

Because we must raise capital principally through the sale of equity including securities convertible into common stock, if we are successful our existing stockholders’ percentage ownership will decrease, and these stockholders may experience substantial dilution. Additionally, the issuance of additional shares of common stock or other securities could result in a decline in our stock price. Further, if we are required to raise additional funds by issuing debt instruments, these debt instruments could impose significant restrictions on our operations, including liens on our assets and negative covenants prohibiting us from engaging in certain transactions or corporate actions that may have the effect of limiting our ability to pursue our business strategy and growth objectives. Our ability to raise debt, however, is subject to complying the Nasdaq Stockholders’ Equity Rule.

Common stock eligible for future sale may adversely affect the market.

We have a substantial number of shares of common stock issuable upon conversion or exercise of our outstanding preferred stock and warrants. In addition, certain of these outstanding derivative securities are subject to adjustment provisions which may result in increased shares of common stock underlying such securities and/or lower conversion or exercise prices based on security issuances we have made and may undertake in the future.

Future sales of substantial amounts of our common stock in the public market, or the anticipation of these sales, could materially and adversely affect market prices prevailing from time-to-time, and could impair our ability to raise capital through sales of equity or equity-related securities. In addition, the market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market or the perception that these sales may occur.

Our Board may authorize and issue shares of new series of preferred stock that could be superior to or adversely affect current holders of our common stock.

Our Board has the power to authorize and issue shares of classes of stock, including preferred stock that have voting powers, designations, preferences, limitations and special rights, including preferred distribution rights, conversion rights, redemption rights and liquidation rights without further stockholder approval which could adversely affect the rights of the holders of our common stock. In addition, our Board could authorize the issuance of a series of preferred stock that is convertible into our common stock, which could result in dilution to our existing common stockholders.

Any of these actions could significantly adversely affect the investment made by holders of our common stock. Holders of common stock could potentially not receive dividends that they might otherwise have received. In addition, holders of our common stock could receive less proceeds in connection with any future sale of the Company, in liquidation or on any other basis.

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our common stock, the market price for our common stock and trading volume could decline.

The trading market for our common stock will be influenced by research or reports that industry or securities analysts publish about our business. We do not currently have any analysts publish research reports about us, and we cannot assure you that any will. If analysts do, and one or more analysts who cover us downgrade our common stock, the market price for our common stock would likely decline.

We have never paid dividends on our common stock and we do not expect to pay dividends on our common stock for the foreseeable future.

Except for dividends we are required to pay on our preferred stock. We intend to retain earnings, if any, to finance the growth and development of our business and do not intend to pay cash dividends on shares of our common stock in the foreseeable future. The payment of future cash dividends, if any, depend upon, among other things, conditions then existing including earnings, financial condition and capital requirements, restrictions in financing agreements, business opportunities and other factors. As a result, capital appreciation, if any, of our common stock, will be your sole source of gain for the foreseeable future.