Eastside Distilling (EAST) S-1IPO registration

As filed with the Securities and Exchange Commission on December 13, 2024

Registration No. 333-_______

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

EASTSIDE DISTILLING, INC.

(Exact name of Registrant as specified in its charter)

755 Main Street

Building 4, Suite 3

Monroe, CT 06468

(458) 800-9154

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Geoffrey Gwin
Chief Executive Officer
Eastside Distilling, Inc.

755 Main Street

Building 4, Suite 3

Monroe, CT 06468

(458) 800-9154

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Michael Harris, Esq.

Constantine Christakis, Esq.
Edward Schauder, Esq.
Nason, Yeager, Gerson, Harris & Fumero, P.A.
3001 PGA Boulevard, Suite 305
Palm Beach Gardens, Florida 33410
(561) 686-3307

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act of 1934.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

The information in this Prospectus is not complete and may be changed. The Selling Stockholders may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is declared effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED December 13, 2024

EASTSIDE DISTILLING, INC.

PROSPECTUS

545,406 Shares of Common stock

On November 14, 2024, Eastside Distilling, Inc. (the “Company” or “Eastside”) closed a financing in which it received gross proceeds of $1,615,000 before deducting fees to the placement agent and other offering expenses payable by the Company (the “Private Placement”). In the Private Placement, the Company executed Securities Purchase Agreements (the “Purchase Agreement”) with accredited investors (each, an “Investor” and together the “Investors”), under which each Investor received a Senior Secured Note (the “November Notes”) and Pre-Funded Warrants with an exercise price of $0.50 per share (the “Warrants”) to purchase a total of 363,602 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). Of the $0.50 exercise price of the Warrants, $0.499 was pre-funded and received by us at the closing of the Private Placement and is included in the above gross proceeds.

In this Prospectus, we refer to each Investor as a “Selling Stockholder” and collectively, the “Selling Stockholders”.

We are obligated to register the Common Stock underlying the Warrants sold in the Private Placement pursuant to a registration rights agreement by and between us and the Selling Stockholders dated Novembre 14, 2024 (the “Registration Rights Agreement”) that we entered into with the Selling Stockholders on November 14, 2024. Pursuant to the Registration Rights Agreement we are required to register 150% of the number of shares of the Common Stock issuable upon full exercise of the Warrants.

This Prospectus relates to the offering and resale by the Selling Stockholders, of 545,406 shares of our Common Stock (the “Shares”), which is comprised of Shares that we are required to register pursuant to the Registration Rights Agreement obligating us to register 150% of the maximum number of Shares issuable upon exercise of the Warrants in full at an exercise price of $0.50 per share (subject to adjustments as provided in the Warrants).

For a detailed description of each of the transactions in which the Selling Stockholders obtained the Shares being registered in the Prospectus and the terms of such Shares, see “The Private Placement” on page 46 of this Prospectus.

The Company is not selling any securities in this offering, and therefore will not receive any proceeds from the sale of the Shares by the Selling Stockholders, other than the nominal remaining proceeds from the exercise price of the Warrants. See “Use of Proceeds” on page 39 of this Prospectus.

We have agreed to pay the expenses of the registration of the Common Stock offered and sold under the Prospectus by the Selling Stockholders. Each Selling Stockholder will pay any commissions or discounts applicable to the Shares it sells.

Our Common Stock is traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol “EAST.” On December 10, 2024, the last reported sale price of our Common Stock on the Nasdaq was $0.84 per share.

Investing in our securities involves various risks. See “Risk Factors” beginning on page 5 of this Prospectus for a discussion of information that should be considered in connection with an investment in our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus is _____ __, 202_

Table of Contents

You should rely only on information contained in this Prospectus. We have not authorized anyone to provide you with information that is different from that contained in this Prospectus. The Selling Stockholders are not offering to sell or seeking offers to buy securities in jurisdictions where offers and sales are not permitted. We are responsible for updating this Prospectus to ensure that all material information is included and will update this Prospectus to the extent required by law.

Glossary

For the convenience of investors, this glossary contains most of the defined words and terms we use in this Prospectus including technical terms and abbreviations for the many laws that we define later in this Prospectus. Certain words and terms like the Company and Beeline are not included in this Glossary.

“APOR” means the average prime offer rate.

“ATDS” means automatic telephone dialing systems.

“BSA” means the Bank Secrecy Act.

“CCPA” means the California Consumer Protection Act.

“CFPB” means the Consumer Financial Protection Bureau.

“Dodd-Frank Act” means the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“DSCR” means debt service coverage ratio.

“DTI” means debt-to-income ratio.

“EFTA” means the Electronic Fund Transfer Act of 1978.

“FCC” means the Federal Communications Commission.

“FCPA” means the Foreign Corrupt Practices Act.

“FCRA” means the Fair Credit Reporting Act.

“FHA” means the Federal Housing Authority.

“FTC” means the Federal Trade Commission.

“GLBA” means the Gramm-Leach-Bliley Act.

“GSEs” means government-sponsored enterprises, or Fannie Mae and Freddie Mac, together.

“HMDA” means the Home Mortgage Disclosure Act.

“HOEPA” means the Home Ownership and Equity Protection Act.

“HUD” means the Department of Housing and Urban Development.

“IAM” means Identity and Access Management.

“LIBOR” means the London Inter-Bank Offered Rate.

“MSRs” means mortgage service rights.

“non-conforming loans” are loans originated outside of Fannie Mae, Freddie Mac, FHA, and VA guidelines.

“Non-QM loans” means non-qualified mortgage loans.

“NPI” means nonpublic personal information.

“PI” means personal information.

“QC” means quality control.

“QM” means qualified mortgage.

“QM loans” means qualified mortgage loans.

“Regulation N” means the Mortgage Acts and Practices Advertising Rule.

“RESPA” means the Real Estate Settlement Procedures Act.

“SAFE Act” means the Secure and Fair Enforcement for Mortgage Licensing Act.

“SOFR” means the Secured Overnight Financing Rate.

“TCPA” means the Telephone Consumer Protection Act.

“TILA” means the Truth in Lending Act.

“TRID rule” means the TILA-RESPA Integrated Disclosure.

“USA Patriot Act” means the Uniting and Strengthening America by providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act.

“VA” means the Veterans Administration.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Prospectus are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology.

Forward-looking statements are neither historical facts nor assurances of future performance, and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

You should read this Prospectus and the documents we have filed as exhibits to the Registration Statement, of which this Prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. You should not assume that the information contained in this Prospectus is accurate as of any date other than the date on the front cover of those documents.

Risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from those expressed or implied in our written or oral forward-looking statements may be found in this Prospectus under the heading “Risk Factors.”

Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this Prospectus particularly our forward-looking statements, by these cautionary statements.

RISK FACTORS

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 Beeline on October 7, 2024, our focus is on, and our future revenue and operating results are anticipated to be derived both from, what we call our spirits business and Beeline’s business. As such, the following risks, as they relate to our business, are divided among risks related to our spirits business, financial risks, Beeline-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 Prospectus. 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 $9,553,333 of outstanding indebtedness, which includes $2,386,333 of indebtedness outstanding under the November Notes due March 13, 2025 and $3,600,000 of indebtedness outstanding under the Beeline 10% Senior Secured Debentures (the “Debentures”). In addition, Beeline has approximately $265,000 of other indebtedness as of November 30, 2024, not including sums due under its warehouse line which it uses to place mortgage loans, which mortgage loans are then resold to third parties. The November Notes are secured by our Spirits assets. If we are unable to repay the November Notes when they come due, we could lose the Spirits business. Further, if we are unable to repay the November Notes within 180 days of November 14, 2024, the November Notes will accrue a special one-time interest payment of 30% which will increase the principal of each November Note in addition to 18% default interest. In January 2025, Beeline will begin to make monthly installment payments of $440,328 through September 2025 under the Beeline Debentures. These Debentures are 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.

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

While Beeline had operations prior to the October 7, 2024 Merger in which we acquired Beeline, we have a limited operating history as a combined company following the Merger from which to evaluate our prospects. Importantly, two of 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. 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 face further challenges in raising the necessary capital or generating revenue in the future, we may be unable to adjust our spending in a timely manner to address for any unexpected revenue shortfall, which could then force us to curtail or cease our business operations or plan of operations or acquisitions. 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 and Beeline each have a history of operating losses since inception, if we fail to generate operating cash flow, you may lose all or most of your investment.

At September 30, 2024, we had an accumulated deficit of $86,959,000 which reflects our history of continued operating losses. On a pro forma basis assuming we acquired Beeline on September 30, 2024, our accumulated deficit would have been $78,993,141. Beeline was organized in 2019, has a limited operating history and has generated substantial ongoing losses since inception. It recorded net losses of $10,899,722 and $10,552,236 for 2023 and 2022, respectively. For 2023, salaries expense was $6,418,989 on total revenues of $3,793,946. Interest expense was $1,253,728. For the nine months ended September 30, 2024, Beeline generated net income of $1,038,808, including approximately $1,430,412 of interest expense and salary expenses of $4,885,059 on revenues of $3,637,207. In June 2024, Beeline restructured its indebtedness, which accounted for the $11,344,207 gain on extinguishment of debt. We expect will we continue 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 and Beeline’s ongoing losses raise substantial uncertainty about its future profitability and success.

Special Risks Related to our Common Stock

Because the Company received two non-compliance letters from Nasdaq, its failure to maintain its Nasdaq listing, and any delisting 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 is financial in nature. The Company has been 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 Beeline, there can be no assurances that Nasdaq will ultimately agree. The second deficiency relates to the minimum bid price being below $1.00. While we have a stockholders meeting scheduled for December 23, 2024, at which we are asking our stockholders to approve a reverse stock split in the range of 1-for-2 to 1-for-10, there are no assurances that this proposal will pass. Further, once we implement a reverse stock split, we may again fail to meet the minimum bid price in which case our Common Stock will be delisted. 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.

If we fail to obtain the vote to amend our Articles of Incorporation to increase our authorized Common Stock, we will not be able to raise equity capital to fund our ongoing operations, which will impair our ability to remain operational.

We have a very limited number of authorized and unissued shares of our Common Stock, which has impeded our ability to raise capital. Because of our need to raise capital to fund our operations and growth objectives, we will need to seek stockholder approval to amend our Articles of Incorporation to increase our authorized Common Stock to 100 million shares to enable us to conduct capital raising transactions. We plan to seek that approval in a Proxy Statement we will send to our stockholders after we clear that Proxy Statement with the Securities and Exchange Commission (the “SEC”). Amendment of our Articles of Incorporation will require stockholders holding 50.1% of the voting power as of the record date for the meeting to approve the proposal at a special meeting. Because many clearing broker-dealers will not vote the shares of “street name” stockholders, it has been increasingly harder to get stockholder approvals to amend charters. Any delays in having the special meeting or getting the necessary majority vote could make it difficult to raise the necessary capital we need. Ultimately, if we fail to obtain the vote in favor, we will very likely be unable to remain operational, unless our Common Stock no longer trades on Nasdaq.

If we fail to obtain further stockholder approval in order to permit our Series F to convert and vote and permit the Warrants to be exercised, we may face significant challenges including the loss of attention from former Beeline stockholders which could result in a decline in Beeline’s business.

At another stockholders meeting to be held next year, we will also seek stockholder approval for former Beeline stockholders to be able to convert and vote their preferred stock issued in the Merger and also approve the exercise of the Warrants issued to the Selling Stockholders as well as exercises and conversions of other Warrants and shares of the Series G issued in a subsequent private placement offering. The Proxy Statement we use for that meeting will need to comply with the SEC’s merger and acquisitions Proxy Statement rules. These rules require comprehensive and lengthy disclosure about the Beeline Merger including a summary of all telephone calls, emails, texts and written communications between us and Beeline through the October 7^th Merger closing. In addition, the Proxy Statement will require extensive disclosure about the businesses of Beeline and the Company including the risk factors facing each company, the management of each company and our Board of Directors (the “Board”), principal stockholders, related party transactions for the prior two year period for each company, and financial statements for the Company and Beeline for two prior years as well as interim financial statements and a discussion about the results of operations and financial condition of each of us for the periods in the financial statements.

As a public company required to comply with both Nasdaq and SEC rules as they relate to stockholder approval of corporate actions, the process for taking these actions will be prolonged, complex and costly. Under SEC rules, before conducting any stockholder meeting we must first prepare and file a preliminary Proxy Statement with the SEC. Because we expect the SEC Staff may issue extensive comments, we are uncertain when we can schedule the special meeting of stockholders. We will need to allow 45-60 days following the record date to have a meeting; the record date will be before the mailing. In addition, we face a deadline of February 14^th to mail the Proxy Statement without waiting for completion of our 2024 financial statements, which could further delay our ability to have the meeting.

The Series F and Series F-1 Certificates of Designation contemplate former Beeline stockholders owning 82.5% of the Company upon conversion subject to future dilution. Most of the former Beeline capital stock is contained in the Series F. If our stockholders approve the conversion and voting of the Series F, Nicholas Liuzza, Jr., Beeline’s Chief Executive Officer, will beneficially own 24.5% of our Common Stock. If this proposal fails, it is possible Mr. Liuzza and other former Beeline stockholders who are our employees will lose their motivation and fail to focus on Beeline.

Because our Common Stock is listed on Nasdaq, if we obtain stockholder approval for the conversion of our Series F we will at the same time be required to meet the initial listing requirements which are more stringent than the continued listing rules.

When we acquired Beeline, it did not result in a change of control. Whenever there is a change of control under The Nasdaq Stock Market Rules, it is treated as a new listing and subject to the new listing requirements. If our stockholders (other than the holders of the Series F and F-1) approve the conversion and voting of the Series F and F-1, it will be deemed a change of control. The new listing requirements including stock price are more stringent than the requirements for a continued listing. We cannot assure you that Nasdaq will approve the new listing application. Delisting would have a negative effect on the price of our Common Stock and would impair your ability to sell our Common Stock when you wish to do so.

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 17 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.

Risks Related to Beeline’s 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 mortgage service rights (“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 could halt or limit its ability to sell its loans and lend money to future borrowers.

Beeline’s business operations depends 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, 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. 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.

Because Beeline is 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. While Beeline currently has compliance and risk management policies for maintaining compliance with such laws and regulations, Beeline cannot assure you that such policies are perfect or will guarantee full compliance. Any failure in Beeline’s current compliance and risk management policies may subject Beeline to regulatory or legal proceedings and financial penalties, which may negatively impact Beeline and our financial condition and results of operations and divert Beeline’s management’s attention from its business. Further, the legal and regulatory scheme is always subject to change, and Beeline may be unable to timely comply with new laws and regulations applicable to its business.

Beeline 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 more 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 Beeline is 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 Beeline at a competitive disadvantage. Additionally, Beeline operates at a competitive disadvantage to U.S. federal banks and thrifts and their subsidiaries because they 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 Beeline’s federally chartered competitors, it 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, Beeline competes 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 Beeline’s business, including as a result of higher performance marketing and advertising spend due to greater demand for customer leads.

Competition in Beeline’s 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 Beeline’s 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, 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, Beeline’s existing and potential competitors may decide to modify their business models to compete more directly with Beeline’s loan origination and servicing models. Post COVID-19, many banks and depository institutions withdrew from mortgage origination, leaving large non-depository mortgage lenders with more 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 Beeline’s business.

Beeline’s 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 Beeline.

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 58% of Beeline’s loans in 2024 through October 31^st 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.

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

Beeline’s 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 Beeline’s Chief Executive Officer, Nick Liuzza, Jr, or its Chief Operating Officer, Jessica Kennedy, Esq., or other key employees could cause substantial disruption to Beeline’s business operations, which would adversely affect its business. Competition for qualified employees in the mortgage industry remains high, and Beeline 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, Beeline relies on a smaller workforce, particularly in its accounting, legal, and compliance departments, which places Beeline at a disadvantage in attracting and retaining experienced talent.

Beeline is exposed to interest rate volatility, which could result in higher-than-market interest rates and may have a material adverse effect on its business, financial condition, results of operations, and prospects.

Recently, the U.S.-dollar London Inter-bank Offered Rate (“LIBOR”) was replaced with the Secured Overnight Financing Rate (“SOFR”), a new index calculated by reference to short-term repurchase agreements for U.S. Treasury securities. In light of guidance from the Alternative Reference Rate Committee, comprised of a broad set of industry regulators and market participants, Beeline adopted SOFR as an index for the interest rate of its variable-rate indebtedness and this is the interest rate used on adjustable-rate loans offered to customers. However, because SOFR is a broad U.S. Treasury repurchase agreement financing rate that represents overnight secured funding transactions, it differs fundamentally from U.S.-dollar LIBOR. In addition, daily changes in SOFR have, on occasion, been more volatile than daily changes in other benchmark or market rates, including LIBOR, which results from the volatility of SOFR reflecting the underlying volatility of the overnight U.S. Treasury repurchase market. The Federal Reserve Bank of New York has at times conducted operations in the overnight U.S. Treasury repurchase market in order to help maintain the federal funds rate within a target range. There can be no assurance that the Federal Reserve Bank of New York will continue to conduct such operations in the future, and the duration and extent of any such operations is inherently uncertain. The effect of any such operations, or of the cessation of such operations to the extent they are commenced, is uncertain and could be materially adverse to investors or issuers or borrowers of SOFR-linked floating debt. If Beeline is not able to effectively manage these and other risks associated with the use of SOFR, its business, financial condition, and results of operations could be materially and adversely affected.

If Beeline encounters material fraud, it could result in significant financial losses and harm to Beeline’s reputation.

In deciding whether to approve loans or to enter into other transactions with its customers or counterparties, Beeline relies 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. Beeline also relies 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 Beeline to sell the loan. Additionally, there is a risk that, following the date of the credit report that Beeline obtains 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 Beeline originates 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.

Beeline uses automated underwriting engines from the GSEs to assist it in determining if a loan applicant is creditworthy, as well as other proprietary and third-party tools and safeguards to detect and prevent fraud. It is unable, however, to prevent every instance of fraud that may be engaged in by its 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 Beeline’s operations by reducing its 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 Beeline may suffer.

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

Beeline markets its services through advertising on search engines, social media platforms, and other online sources, and if Beeline fails to drive traffic through its marketing it may have to spend more to drive traffic and improve its search results, any of which could materially and adversely affect Beeline’s business operations.

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

Currently a substantial majority of Beeline’s advertising is spent with Google. If Google were to materially increase its prices, Beeline may be unable to replace Google and sustain materially increased costs. Beeline faces several challenges to its ability to maintain and increase the number of visitors directed to its website. Its competitors may increase their online marketing efforts and outbid Beeline for placement for search terms on various search engines, resulting in their websites receiving a higher search result page ranking than Beeline. Additionally, internet search engines could revise their methodologies in a way that would adversely affect the prominence of Beeline’s search results rankings. If internet search engines modify their search algorithms in ways that are detrimental to Beeline, or if Beeline’s competitors’ marketing or promotional efforts are more successful than Beeline, overall growth in its customer base could slow or its 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 Beeline’s website will be effective. Any reduction in the number or credit quality of prospective borrowers directed to Beeline’s platform through internet search engines, Google, and other search engines, social networking sites or any new strategies Beeline employs could materially and adversely affect Beeline’s 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, acting on an investigation commenced by the Department of Housing and Urban Development (“HUD”), entered a settlement agreement with Meta that required Meta to replace the software used in Facebook for housing ads, claiming 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 Consumer Financial Protection Bureau (the “CFPB”) takes a more stringent and aggressive interpretation of laws governing Beeline’s interaction with lead aggregators, including the Real Estate Settlement Procedures Act (“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 go into effect in early 2025, which will impact our compliance costs and subject us to new regulatory and legal risks for noncompliance

In January 2025, the FCC’s new rule under the TCPA will require 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 Beeline fails 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.

Risks Related to Beeline’s Operations and Financial Results

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 have continually increased since 2021 until a dip in September 2024; since then, 30-year rates have been increasing. It is difficult to predict the direction of interest rates. Following the Federal Reserve’s lowering of interest rates by a half-point in September 2024, in the week ended October 25^th, the 30-year average rate rose and was 60 basis points above the mid-September decrease. Then, on November 7^th, the Federal Reserve reduced rates by a quarter-point. But in the week ended November 22^nd, 30-year rates increased to the highest level since July 2024. By December 1, 2024, rates started easing again, with the 30-year mortgage rate around 6.45%, which was down approximately 15 basis points from the week prior.

The effect of the increased mortgage rates was to reduce loan volume, margins, revenue, and profitability in the mortgage origination industry, including in Beeline’s 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 the market is predicting that interest rates will decline further in 2024 and possibly in 2025, such predictions offer no assurance of returning to pre-2021 loan origination volumes. If mortgage interest rates continue to rise, fewer individuals may pursue home ownership or refinance, and the decreased profitability and loan originations will negatively impact Beeline’s business operations.

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. Future economic downturns and recessions may negatively impact the real estate market and the demand for Beeline’s 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 Beeline cannot predict the impact such an event could have on Beeline or the industry in the future.

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

A majority of Beeline’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. Beeline’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 Beeline’s business.

Beeline must comply with the underwriting guidelines of aggregators and the GSEs to successfully originate conforming GSE loans. Beeline also must comply with the underwriting guidelines of federal agency insurers/guarantors, such as the FHA and VA for those loan types. If Beeline fails to do so, it may be required to repurchase these loans, indemnify the insurers/guarantors, or be subject to other penalties or remedial measures. If Beeline is 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 Beeline fails 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. Beeline does 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 it is required to repurchase loans or indemnify loan purchasers, it may not be able to recover amounts from third parties from whom it could seek indemnification due to financial difficulties or otherwise. As a result, Beeline 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 Beeline’s business.

Beeline 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 Beeline is able to originate and sell and/or insure, as well as the servicing decisions and actions that t is required to undertake. For example, during the COVID-19 pandemic, both the GSEs and FHA issued guidance on the restrictive conditions under which they would purchase or insure loans going into forbearance pursuant to the CARES Act shortly after the loan was produced, but before the loan was purchased by a GSE or insured by the FHA. Moreover, even if loan purchasers and agencies were willing to purchase or insure loans to borrowers who were impacted by the COVID-19 pandemic, they could adjust loan terms that made additional borrowing less attractive to consumers. For instance, during the pandemic, the GSEs announced significant loan-level price adjustments for first-time home buyers and other eligible consumers, implemented operational flexibility that was later revoked, and tightened underwriting criteria. Such changes could significantly slow loan production growth. The GSEs’ COVID-19 specific loan sale restrictions generally were retired by the first quarter of 2023, while certain FHA COVID-19 specific restrictions remain in effect.

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 Beeline 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. These industry changes could negatively affect demand for Beeline’s mortgage product offerings and consequently for conforming loans its production volume, which could materially and adversely affect its business. Beeline 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 Beeline’s Debt and Warehouse Credit Lines

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

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

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

For more information on Beeline’s other debt, see the Other Recent Financings Section, below on page 48. Beeline’s debt obligations could materially and adversely impact it. For example, these obligations could:

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

If Beeline is unable to access or utilize the warehouse lines of credit in the future, it 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 Beeline originates loans ineligible for warehouse funding or experiences increases in buybacks, its loan advance rates may be negatively impacted which may present a liquidity risk.

Beeline’s ability to meet its payment obligations depends on its 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 Beeline’s control. There can be no assurance that Beeline’s business will generate cash flow from operations, or that additional capital will be available to it, in amounts sufficient to enable it to meet its debt payment obligations and to fund other liquidity needs.

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

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

Like Spirits, Beeline’s business model requires the use of a secure, efficient technological infrastructure to successfully operate. Its reliance on technology exposes it to cybersecurity threats. A cybersecurity breach or hacking of Beeline’s systems could result in significant disruptions in its operations and negatively impact the public perception of its business.

Technology disruptions or failures in, and cyberattacks or other breaches relating to, Beeline’s technological infrastructure, or those of third parties with whom it does business, could disrupt its business, cause legal or reputational harm, and materially and adversely impact its business, financial condition, and results of operations.

Beeline is dependent on the secure, efficient, and uninterrupted operation of its 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. Beeline’s technology must provide a loan application experience that equals or exceeds the experience provided by its competitors.

Beeline 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 Beeline’s ability to provide its services to its customers and could also impair the ability of third parties to provide critical services to Beeline. Although Beeline has undertaken measures intended to protect the safety and security of its 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 Beeline’s team member, customer, and loan applicant information, and its disaster recovery planning may not be sufficient to address all technology-related risks, which are constantly evolving. Beeline 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 it uses.

Any prolonged service disruption affecting its platform could damage Beeline’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, Beeline’s insurance policies may not adequately compensate it for any losses, although Beeline 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 Beeline’s customer base and range of product offerings continue to expand, it may not be able to scale its 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 Beeline’s capacity requirements could result in interruptions or delays in access to its platform or impede its ability to grow its business and scale its operations. If Beeline’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 Beeline 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 Beeline’s operations.

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

If Beeline 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.

Beeline receives, maintains and stores the personal information (“PI”) of its loan applicants, customers and staff. On the customer side, Beeline 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 Beeline. 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 Beeline. 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.

Beeline 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 Beeline’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 Beeline’s business operations and subject it to increased costs, litigation, and other liabilities. Claims could also be made against Beeline 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. Security breaches (including ransomware attacks) could also materially and adversely affect Beeline’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 Beeline’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, Beeline’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, Beeline’s current security measures may not prevent all security breaches. Beeline may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. Beeline also faces risks associated with security breaches affecting third parties, including its third-party partners and vendors. In addition, Beeline 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 Beeline’s businesses and/or those of third parties, whether actual or perceived, may discourage consumers from doing business with Beeline, 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, Beeline 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. Beeline 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, Beeline’s remediation efforts may not be successful and it may not have adequate insurance to cover these losses. If Beeline is unable to protect its customers’ PI, Beeline’s business, financial condition, and results of operations can be materially and adversely affected.

Beeline heavily relies on third-party software to operate its business, creating technological risks that it cannot mitigate.

Beeline heavily relies on third-party technology in running its business. Because it utilizes third-party technology, its 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 Beeline reputational harm, create financial losses, and harm Beeline’s business operations. All of the cybersecurity risks Beeline faces can also impact its business partners and vendors.

Beeline depends, in part, on third party vendor relationships and its ability to become profitable and service its 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, Beeline 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 its business, financial condition and operating results.

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

Beeline’s intellectual property, principally its trade secrets and licensed technology, is a key asset. Beeline regards the protection of its intellectual property as critical to its success. Beeline 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 Beeline’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 Beeline’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 Regulatory Risks

Beeline operates in a heavily regulated industry, and its business operations expose it to risks of noncompliance with a large and increasing body of complex 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 business.

Both the scope of the laws and regulations and the intensity of the supervision to which Beeline’s business is subject have increased over time, in response to the 2008 financial crisis as well as other factors such as technological and market changes. 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 Beeline’s or our financing arrangements which could limit or prohibit its access to liquidity to operate its business. In addition, while the Biden Administration 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 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 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 manufactured by MagicBlocks, a company in which Beeline has a minority interest. If Beeline is unable to use this AI product in the future or if MagicBlocks begins imposing usage fees, Beeline may experience additional costs and business disruptions.

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 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 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 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 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 the CFPB expands its loan regulations and exerts more stringent enforcement of existing regulations, it could result in Beeline facing increased compliance costs, enforcement actions, fines, penalties and the inherent reputational harm that results from such actions.

Beeline is subject to the regulatory, supervisory, and examination authority of the CFPB, which has oversight of federal and state non-depository lending and servicing institutions, including residential mortgage originators and loan servicers. The CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, including TILA and RESPA. The CFPB has issued or amended a number of regulations pursuant to the Dodd-Frank Act relating to loan production and servicing activities, including ability-to-repay and “qualified mortgage” underwriting standards, loan originator compensation standards, and other production standards and practices as well as servicing requirements that address, among other things, periodic billing statements, certain notices and acknowledgments, prompt crediting of borrowers’ accounts for payments received, additional notice, review and timing requirements with respect to delinquent borrowers, loss mitigation, prompt investigation of complaints by borrowers, and lender-placed insurance notices. The CFPB has also amended provisions of the HOEPA regarding the determination of high-cost mortgages, and of Regulation B, to implement additional requirements under the Equal Credit Opportunity Act with respect to valuations, including appraisals and automated valuation models. The CFPB has also issued guidance to loan servicers to address potential risks to borrowers that may arise in connection with transfers of servicing. Additionally, the CFPB has increased the focus on lender liability and vendor management across the mortgage and settlement services industries, which may vary depending on the services being performed.

In addition, the CFPB has established expectations for a financial institution’s development and maintenance of a sound compliance systems that is integrated into the overall framework for product design, delivery, and administration across the institution’s entire product and service lifecycle, and that ensures that an institution’s vendors effectively manage their compliance. The CFPB expects an institution’s compliance systems to include board and management oversight and a compliance program that includes policies and procedures, training, monitoring and/or audit, and consumer complaint response. Beeline’s compliance systems could be criticized, for example, if it is determined that management oversight should be strengthened, certain aspects of its employee training program should be augmented, the audit function should be more independent, or Beeline has not sufficiently identified and/or facilitated correction of compliance issues in a timely fashion, due to inadequate allocation of resources or staffing or other causes. Any patterns of violations of consumer financial laws could be considered evidence of compliance systems weaknesses.

Under the Biden Administration, there has been increased anti-discrimination attention including what may be perceived as the stretching of the parameters of existing laws. The Department of Justice, the FTC and the CFPB have all been active in this area and in arguing that disparate impact on a protected class is enough to prove discrimination. Very recently, the CFPB fined a mortgage lender $10 million for allegedly discriminating against racial minorities. In that case, the CFPB found the lender’s ratio of lending in majority-white versus majority-black areas was higher than other lenders. While Beeline does not consciously lend money using racial or other protected identity class information, it is possible it could be exposed to liability if its loan patterns differ from other lenders.

The CFPB also has broad enforcement powers and can order for violations of its regulation and standards, among other things, rescission or reformation of contracts, the return of funds or real property, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, limits on activities or functions, remediation of practices, external compliance monitoring and civil money penalties. The CFPB has been active in investigations and enforcement actions and, when necessary, has issued civil money penalties to parties the CFPB determines have violated the laws and regulations it enforces. Beeline’s failure to comply with the federal consumer protection laws and regulations to which it is subject, whether actual or alleged, could expose it to enforcement actions, potential litigation liabilities, or reputational harm. The CFPB has the authority to obtain cease-and-desist orders, orders for restitution or rescission of contracts and other kinds of affirmative relief and monetary penalties ranging from up to approximately $6,800 per day for ordinary violations of federal consumer financial laws to approximately $34,000 per day for reckless violations and to approximately $1,360,000 per day for knowing violations.

In addition, the occurrence of one or more of the foregoing events or a determination by the CFPB or any court or regulatory agency that its policies and procedures or other aspects of Beeline’s compliance systems are inadequate or do not comply with applicable law could materially and adversely affect Beeline’s business, financial condition, results of operations.

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.

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 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 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 relationships 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.

In 2023, the CFPB clarified its interpretation of RESPA’s longstanding prohibitions on payments for the referral of settlement service business and unearned fees that implicate mortgage lenders’ affiliate relationships, marketing/advertising arrangements, and strategic relationships, and it brought its first public enforcement action alleging RESPA Section 8 violations since 2017. Similar future clarifications, enforcement actions, or potential novel interpretations could implicate Beeline’s affiliate and third-party 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 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 recent U.S. presidential election, rate of inflation, the Federal Reserve decisions on interest rates particularly in the short term, supply chain shortages, recession fears, and geopolitical turmoil including the wars in Ukraine and the Middle East. The current prolonged delay in providing new miliary aid to Ukraine and Israel are evidence of the political uncertainties. 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 price.

An active trading market for our Common Stock may not develop.

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 the rules of The Nasdaq Stock Market. 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 new cybersecurity rules and if upheld the new climate change 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 may 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. While in our Form 10-K for the year ended December 31, 2023, we reported that we did maintain effective disclosure controls over financial reporting and in our Form 10-Q, with the addition of Beeline and the integration we may experience issues with our disclosure controls and internal controls including experiencing material weaknesses. If we disclose any maternal weaknesses or disclosure control issues in our form 10-K for the year ending December 31, 2024, investors may not purchase or hold our Common Stock as a result of these failures, which may result in lower prices.

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 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 exercise of our outstanding preferred stock and the Warrants.

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.

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.

USE OF PROCEEDS

This Prospectus relates to the Shares that may be offered and sold from time-to-time by the Selling Stockholders. We will not receive any proceeds upon the sale of the Shares by the Selling Stockholders in this offering. Of the $0.50 exercise price of the Warrants, $0.499 was pre-funded and received by us at the closing of the Private Placement. If all of the Warrants are exercised we will receive approximately $364.00.

DIVIDEND POLICY

We have never declared nor paid any cash dividends on our Common Stock, and currently intend to retain all our cash and any earnings for use in our business and, therefore, do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends on our Common Stock will be at the discretion of the Board and will be dependent upon our consolidated financial condition, results of operations, capital requirements and such other factors as the Board deems relevant.

DETERMINATION OF OFFERING PRICE

Each Selling Stockholder will determine at what price(s) such Selling Stockholder may sell the Shares, and such sales may be made at prevailing market prices, or at privately negotiated prices.

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2024:

The pro forma and pro forma as adjusted information below is illustrative. You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes and the pro forma consolidated financial statements and the related notes included elsewhere in this Prospectus.

SELLING STOCKHOLDERS

The shares of Common Stock being offered by the Selling Stockholders are those issuable to the Selling Stockholders upon exercise of the Warrants. For additional information regarding the issuance of the Warrants, see “The Private Placement”. We are registering the Shares in order to permit the Selling Stockholders to offer the Shares for resale from time-to-time. Except for the ownership of the warrants issued pursuant to the Securities Purchase Agreement or as otherwise disclosed herein, the selling stockholders have not had any material relationship with us within the past three years.

Because of limitations imposed by Nasdaq, the Shares cannot be sold until our stockholders have approved their issuance.

The table below lists the Selling Stockholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of the shares of Common Stock held by each of the Selling Stockholders. The second column lists the number of shares of Common Stock beneficially owned by the Selling Stockholders, based on their respective ownership of shares of Common Stock and Warrants, as of the date of this Prospectus, assuming exercise of the Warrants held by each such Selling Stockholder as of December 4, 2024 but taking account of any limitations on exercise set forth therein.

The third column lists the shares of Common Stock being offered by this Prospectus by the Selling Stockholders and does not take into account any limitations on exercise of the Warrants set forth therein.

In accordance with the terms of a Registration Rights Agreement with the holders of the Warrants, this Prospectus generally covers the resale of 150% of the maximum number of shares of Common Stock issued or issuable pursuant to the Warrants. Because the exercise price of the Warrants may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered by this Prospectus. The fourth column assumes the exercise of the Warrants and the sale of all of the Shares offered by the Selling Stockholders pursuant to this Prospectus.

Under the terms of the Warrants, a Selling Stockholder may not exercise the Warrants to the extent (but only to the extent) such Selling Stockholder or any of its affiliates would beneficially own a number of shares of our Common Stock which would exceed 4.99% (the “Maximum Percentage”) of the outstanding shares of the Company. The number of Shares in the second column reflects these limitations. The Selling Stockholders may sell all, some or none of their shares in this Offering. See “Plan of Distribution.”

*Less than 1%

Material Relationships with Selling Stockholders

As disclosed above, Cavalry Investment Fund, LP, an affiliate of Cavalry Fund I, LP, was a former investor in Beeline, and, in connection with the Merger, received shares of Series F and Series F-1. WVP Emerging Manager Onshore Fund LLC- Structured Small Cap Lending Series, is a fund under common control with Cavalry Fund I, LP and Cavalry Investment Fund, LP. For more information on the Merger see page 44 of this Prospectus. Bigger and District 2 were lenders to the Company and on October 7, 2024, closed a Debt Exchange Agreement (the “Exchange Agreement”) with the Company whereby such parties exchanged unsecured debt of the Company for shares of Series C, Series D and Series E (the “Debt Agreement”). For more information on the Exchange Agreement and related transactions see “The Merger – First Amended and Restated Debt Exchange Agreement.” Messrs. Dols and Nash were investors and lenders of Beeline and acquired Series F and Series F-1. Messrs. Dols and Nash received shares of Series F and Series F-1 in the Merger. In addition, Messrs. Dols and Nash currently hold a $250,000 and $1,100,000 Debenture, respectively, and pursuant to side letters dated November 15, 2024 received additional shares of Series F having a stated value of 50% of their investment amount in Beeline.

THE MERGER

Agreement and Plan of Merger and Reorganization

On September 4, 2024, Eastside entered into the Merger Agreement with East Acquisition Inc. Merger Sub and Beeline. On October 7, 2024, the parties executed Amendment No. 1 to the Merger Agreement and the closing occurred pursuant to the Merger Agreement pursuant to which Beeline merged into Merger Sub and with the name of the surviving corporation being changed to Beeline Financial Holdings, Inc. In the Merger, the stockholders of Beeline received a total of 69,482,229 shares of Series F and a total of 517,775 shares of Series F-1. The ratio in the Merger was 4.89252978530683 shares of Eastside common stock for each share of Beeline Common Stock, in each case determined on an as-converted basis.

The sale of the Eastside Series F and Series F-1 to the former Beeline stockholders was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”) and Rule 506(b) thereunder.

Simultaneously with the Merger, the Company engaged in the following transactions and actions:

First Amended and Restated Debt Exchange Agreement

On September 4, 2024, Eastside and its then subsidiary, Craft Canning & Bottling, LLC (“Craft”) entered into a Debt Exchange Agreement with The B.A.D. Company, LLC (the “SPV”), Aegis Security Insurance Company (“Aegis”), Bigger, District 2, LDI Investments, LLC (“LDI”), William Esping ((“Esping”), WPE Kids Partners (“WPE”) and Robert Grammen (“Grammen”), a director of the Company. Subsequent to the execution of the Debt Exchange Agreement, the assets of the SPV were distributed to its members, i.e. Aegis, Bigger, District 2 and LDI. To reflect the effect of the distribution on the transactions contemplated by the Debt Exchange Agreement, the parties, on October 3, 2024, executed the First Amended and Restated Debt Exchange Agreement (the “Debt Agreement”).

Subsequent to execution of the Debt Exchange Agreement, Eastside organized Spirits as a subsidiary and assigned to Spirits all of the assets held by Eastside in connection with its business of manufacturing and marketing spirits. Spirits issued 1,000,000 shares of Common Stock to Eastside.

On October 7, 2024 the closing of the following transactions under the Debt Agreement occurred:

In accordance with the Debt Agreement on November 7, 2024, Eastside transferred a total of 361,101 shares of Spirits to Aegis, Bigger, District 2 and LDI. In consideration for those shares, those four lenders surrendered to Eastside a total of 580,899 shares of Eastside Common Stock.

Upon completion of the transaction contemplated by the Debt Agreement, Eastside was no longer involved in the business of canning, and presently owns 53% of the capital stock of Spirits, which is in the business of manufacturing and marketing spirits.

Amendment to Articles of Incorporation

On October 7, 2024 Eastside filed with the Nevada Secretary of State a Certificate of Designation of 255,474 shares of Series D and a Certificate of Designation of 200,000 shares of Series E and a Certificate of Designation of 70,000,000 shares of Series F and a Certificate of Designation of Series F-1. The material terms of each class of Preferred Stock are summarized under “Description of Securities” on page 93.

Appointment of Officer and Directors

Pursuant to the terms of the Merger Agreement, in connection with the closing of the Merger, the Board voted to increase the number of members of the Board from four to six and appointed to the vacancies two individuals designated by Beeline: Joseph Freedman and Joseph Caltabiano. In addition, the Eastside Board appointed Christopher Moe, the Chief Financial Officer of Beeline, to serve as the Chief Financial Officer of Eastside. Information concerning the three new members of management is provided under “Management.”

Employment Agreement: Chief Executive Officer

The Merger Agreement provided that, as a condition to closing of the Merger, the Employment Agreement between Eastside and Geoffrey Gwin, Eastside’s Chief Executive Officer, would be amended in a manner satisfactory to Eastside, Beeline and Mr. Gwin. Accordingly, at the time of the Merger, Eastside’s Employment Agreement with Geoffrey Gwin was amended as follows:

THE PRIVATE PLACEMENT

On November 14, 2024 (the “Closing Date”), the Company sold $1,938,000 in aggregate principal amount of Notes and Warrants and received gross proceeds of $1,615,000 in connection with the Offering. The Notes and Warrants were sold pursuant to a the Purchase Agreement with the Selling Stockholders. The Company is using the net proceeds from the Offering for, among other things, working capital and general corporate expenses.

The Notes have a maturity date of 120 days from issuance, were issued with a 20% original issue discount and do not bear interest unless and until one or more of the customary events of default set forth therein (an “Event of Default”) occurs, whereupon each Note will bear interest at a rate of 18% per annum. If the Note remains outstanding for 180 days, the Note also requires a special one-time interest payment of 30% which will increase the principal of each Note accordingly. Upon the occurrence of an Event of Default, each holder also has the right to require the Company to pay all or any portion of the Note at a 25% premium. Further, the Company is required to prepay the Notes in connection with certain sales of securities or assets at each holder’s election in an amount equal to 35% of the gross proceeds from such sales. The Company also has the right to prepay all, but not less than all, of the outstanding amounts under the Notes, at its election. The Notes contain certain restrictive covenants, including covenants precluding the Company and its subsidiaries from incurring indebtedness, transferring assets, changing the nature of its business, and engaging in certain other actions, subject to certain exceptions.

The Warrants have a term of five years from issuance and are exercisable at an exercise price of $0.50 per share (of which $0.499 per share was pre-funded by each holder which effectively increased the original issue discount). The Warrants will be exercisable beginning upon stockholder approval of the issuance of the Common Stock issuable upon exercise of such Warrants in accordance with the rules of Nasdaq and an increase in the authorized Common Stock of the Company. If at any time after exercising the Warrants, there is no effective Registration Statement registering, or the Prospectus contained therein is not available for use, then the Warrants may also be exercised, in whole or in part, by means of a “cashless exercise.”

The Company is required to convene a meeting of its stockholders within 150 days of the Closing Date and solicit proxies in favor of resolutions increasing the number of authorized shares of Common Stock and approving the issuance of the Common Stock upon exercise of the Warrants.

Pursuant to the Purchase Agreement, the Company entered into a Shareholder Pledge Agreement by and among the Company and the holders, under which the Company pledged the Company’s equity in Spirits, to secure its obligations under the Purchase Agreement, Notes, Warrants, and the Registration Rights Agreement (collectively, the “Transaction Documents”). Spirits concurrently entered into a Security and Pledge Agreement by and between Spirits and the holders, under which Spirits granted a security interest in all of its property and assets to secure the obligations of the Company under the Transaction Documents. Further, Spirits and Nicholas Liuzza, Jr. Chief Executive Officer of Beeline, guaranteed the Company’s obligations under the Transaction Documents.

Concurrently with the Purchase Agreement, the Company entered into a Registration Rights Agreement with each holder under which the Company agreed to file a Registration Statement to register the shares of Common Stock underlying the Warrants within 30 days of the Closing Date, and to cause such Registration Statement to be declared effective within 60 days thereafter (or 120 days thereafter if such Registration Statement is subject to a full review). The Company filed the Registration Statement, of which this Prospectus is a part, with the SEC registering the sale of the Shares by the Selling Stockholders pursuant to the Registration Rights Agreement.

The Company also entered in three forms of side letters with the holders which (i) permitted one holder which with an affiliate invested $448,333.33 to exchange that amount of stated value of shares of Series F for a $448,333.33 120-day promissory note to another affiliate, which note was issued immediately prior to the closing of the Offering and has substantially identical terms to the Notes issued therein, except it is subordinated with respect to its security interest, (ii) permit two holders to convert Series D beginning on April 7, 2025 at a conversion price equal to the lower of (i) $0.50 per share; or (ii) the five-day volume weighted average price ending on April 7, 2025, subject to a floor price of $0.25 per share, and (iii) permit two holders to receive a number of shares of Series F equal to 50% of their investment amount, or $125,000 each, using the stated value of the Series F, which is $0.50 per share, to determine the number of shares of Series F.

Joseph Gunnar & Co., LLC acted as placement agent receiving a commission of $115,908 and reimbursement of $50,000 in legal fees. The Company entered into a Placement Agency Agreement with the placement agent in connection with the transactions described above. The placement agent received a 12-month right of first refusal with respect to future financings.

All of the securities described above were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.

Other Recent Financings

As of December 10, 2024, Beeline has outstanding $3.6 million of Debentures accruing interest at 10% per annum. In January 2025, Beeline is required to make monthly payments of $440,328 through September 2025.

From November 26 to December 10, 2024, the Company sold 1,617,647 shares of Series G and five-year Warrants to purchase a total of 808,824 shares of Common Stock for total gross proceeds of $705,000.

Registered Offering of Common Stock and Pre-Funded Warrants

On September 5, 2024, Eastside entered into a Placement Agent Agreement with Joseph Gunnar & Co., LLC, pursuant to which Eastside has agreed to pay Joseph Gunnar & Co. an aggregate fee equal to 9.0% of the aggregate gross proceeds received by Eastside from the sale of the securities in the offering contemplated thereby. Eastside also agreed to reimburse Joseph Gunnar for all of its actual out-of-pocket accountable expenses in connection with the offering.

On September 5, 2024, the Company entered into a Securities Purchase Agreement with a single institutional investor for the sale by the Company of 92,815 shares of Common Stock and Pre-Funded Warrants to purchase 349,227 shares of Common Stock in a registered direct offering at a purchase price of $1.00 per share or $0.9999 per Pre-Funded Warrant. The closing of the offering occurred on September 6, 2024, at which time the investor exercised each Pre-Funded Warrant to purchase one share of Common Stock at a price per share of $0.0001. The gross proceeds to the Company from the offering were approximately $442,000, before deducting the placement agent fees and other estimated expenses in the offering. Eastside used the net proceeds from the offering for working capital and general corporate purposes.

The offering of the shares was made pursuant to a shelf registration statement on Form S-3 (File No. 333-259295), which was initially filed by Eastside with the SEC on September 3, 2021, and declared effective on September 14, 2021.

Registered Offering of Common Stock and Warrants

On November 22 and November 25, 2024, Eastside entered into Securities Purchase Agreements with four accredited investors for the sale by Eastside of units of securities consisting of a total of 686,273 shares of Eastside Common Stock and Warrants to purchase a total of 343,313 shares of Common Stock in a registered direct offering at a purchase price of $510 for each unit consisting of 1,000 shares of Common Stock and a Warrant to purchase 500 Shares. The gross proceeds to Eastside from the offering were $350,000, before deducting the expenses of the offering.

Each Warrant is exercisable to purchase Common Stock at a price per share of $0.65 (as adjusted equitably from time-to-time in accordance with the terms thereof). The Warrants may be exercised after the stockholders of Eastside approve an increase in the authorized shares of Eastside Common Stock. The holder’s ability to exercise a Warrant will terminate on the later of (a) the third anniversary of the issue date for the Warrant or (b) the first anniversary of the stockholder approval. The holder of a Warrant is prohibited from exercising such Warrants to the extent that such exercise would result in the number of shares of Common Stock beneficially owned by such holder and its affiliates exceeding 4.99% or 9.99% (at the election of the investor) of the total number of shares of Common Stock outstanding immediately after giving effect to the exercise. If the market price of Eastside Common Stock exceeds 175% of the Warrant exercise price for a period of 20 consecutive trading days, Eastside may redeem at a nominal sum on 20 days notice, during which period the holders may exercise the Warrants. The offering described above was made pursuant to a shelf Registration Statement on Form S-3 (File No. 333-282095), which was declared effective by the SEC on October 2, 2024.

For a description of the Notes and Warrants issued to the Selling Stockholders, see “The Private Placement”.

BUSINESS

Following the closing of the Merger on October 7, 2024, and the sale of the Craft business, the Company’s business lines entail the following: (1) Spirits, which operates as a distributor of various liquors, and (2) Beeline, which operates as a fintech mortgage lender and title provider. The following is a description of each of these businesses.

Spirits Business Overview and History

The Company was incorporated in 2004. Eastside commenced its current operations in 2014 as a distillery that markets its own products as well as third party products. During the past decade, the Company diversified by developing a canning and can printing business that marketed to the craft beer industry in the Pacific Northwest, and then, on October 7, 2024, the Company acquired Beeline. Throughout this time, however, the Company remained involved in the business of distributing beverage spirits.

On October 7, 2024, the Company organized Spirits as its subsidiary, and assigned to Spirits all of the assets and liabilities relating to the Company’s spirits operations. As part of a company-wide recapitalization effected on October 7, 2024, the Company assigned 10.9% of the outstanding shares of Spirits to creditors in satisfaction of $888,247 in debt. Later in 2024, the Company exchanged 36.1% of the outstanding shares of Spirits for 580,899 shares of the Company’s Common Stock. The Company retains 53% of the outstanding Spirits capital stock.

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

Production and Supply

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

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

Distribution Network

In the United States, we are required by law to use state-licensed distributors or, in the control states, state-owned agencies performing this function, to sell our brands to retail outlets. In the 33 open states, the distributors are generally large, privately held companies. The distributors and wholesalers in turn sell to individual retailers, such as liquor stores, restaurants, bars, supermarkets and other outlets licensed to sell alcoholic beverages. Through our internal sales team, we have established relationships for our brands with wholesale distributors in six open states: California, Arizona, Colorado, Texas, Washington and Florida.

In the 17 control states, the states themselves function as the distributor, and regulate suppliers, including our Company. In control states, producers and importers sell their products directly to state liquor authorities, which distribute the products and either operate retail outlets or license the retail sales function to private companies, while maintaining strict control over pricing and profit. Our largest distribution channel is in the state of Oregon through the Oregon Liquor Control Commission. Sales to the Oregon Liquor Control Commission, accounted for approximately 19% and 18% of our consolidated sales for the years ended December 31, 2023 and 2022, respectively.

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

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

Spirits’ Intellectual Property

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

Spirits’ Competition

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

Government Regulation Applicable to Spirits

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

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

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

Craft

In 2019 Eastside acquired Craft, which provided contract bottling, canning, and packaging services for beer, wine and spirits producers. Soon thereafter, Craft expanded the scope of its operations: first to provide mobile canning services to the nascent craft beverages industry in the Pacific Northwest. Then in 2022, Craft initiated operations of an innovative digital can printing facility that allowed it to digitally print high quality graphics on aluminum beverage cans.

The prospects for growth in the digital can printing business were significant; but management determined that the business will require considerable capital investment to provide that revenue growth before achieving profitability. For that reason, on October 7, 2024 Eastside transferred its ownership interest in 100% of the equity in Craft to seven of the Company’s creditors in exchange for release by the seven creditors of the Company from liability on 13 debt instruments as well as their surrender of 44,279 shares of the Company’s Series C. The debt instruments from which the Company was released consisted of:

The 44,279 shares of Series C were surrendered by the SPV, which was owned by four of the creditors. The book value of the 44,279 Series C shares was $1,240,919. On the financial statements of Eastside for the nine months ended September 30, 2024 included in this Prospectus, the Company’s investment in Craft is classified as assets/liabilities held for sale.

Beeline’s Business

Beeline Overview and History

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

Beeline’s business model is focused on providing an efficient process for consumers to more easily access mortgage lending using our online portal and services. In 2024, approximately 58% of the loans Beeline originated and brokered through October 31, 2024, were Non-QM loans where the consumer, for example, lacked traditional income from employment in contrast to investment, rental income or other 1099 income or where the consumer has sufficient assets to support the loan. Although Beeline faces significant competition from major national, regional and local banks as well as other online lenders and many conventional mortgage lenders, it does not believe that these other lenders seek to originate non-conforming loans in any material way.

Beeline primarily serves as the lender for its conventional loan underwriting and on most of its Non-QM loans. Beeline also serves as a mortgage broker for certain loans with third party lenders - primarily for the remainder of Non-QM loans. In the first 10 months of 2024, Beeline has acted as lender in 59% of its loan transactions, and as mortgage broker in 41% of its loan transactions. Beeline leverages its industry-specific knowledge and infrastructure, using a combination of licensed and proprietary technology, to provide an alternative to a more manual, non-technology focused lending process for residential properties in the United States.

Beeline’s Mortgage Lending Business

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

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

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

As the real estate industry has evolved, Non-QM loans have become more popular, relying on a different set of underwriting criteria which are more suited to borrowers whose situations do not line up with more stringent guidelines created for and based on the previous generation and economy. Beeline is one of the few direct-to-consumer digital mortgage lenders that offer both QM loans and Non-QM loans from a single platform allowing Beeline to better serve the 100 million Millennials and Gen Z quickly emerging as home buyers and currently representing approximately 60% of the home purchase market. In the first 10 months of 2024 , 24% of Beeline’s loan originations were home purchases, and 76% were refinance transactions.

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

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

Beeline generates its leads exclusively online relying heavily on Google advertising, which generated over 85% of its leads during the 10-month period ended October 31, 2024. One other source accounted for more than 10% of Beeline’s leads. Its marketing processes and strategizes are further described under “Marketing” below.

Beeline’s Services

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

Sources of Revenue

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

Beginning in 2025, Beeline expects to start licensing its proprietary software to other mortgage lenders, which would create recurring revenue if it is successful in implementing this goal.

Marketing

Unlike major national, regional and local banks, Beeline generates new customers solely from online advertising. Beeline has no local branded offices appealing to consumers in contrast to banks which offer deposit services and check cashing at local offices. As stated above, Google advertising has accounted for more than 85% of new customers in 2024; one other source, FreeRateUpdate.com, generated more than 10% of Beeline’s new customers during this same period.

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

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

Intellectual property

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

Competition

Banks and other savings institutions have historically dominated the mortgage lending business. Their competitive advantages are financial strength, which includes the availability of capital to fund loans, management and employee skills, experience and availability, the ability to use their financial strength to leverage compliance costs and local visibility. Because of policy changes and shifts in the marketplace, nonbank mortgage lenders have come back in force. By 2016, nonbank mortgage origination for the first time surpassed that of banks. The rapid rise of the nonbank mortgage lenders could have been possible only with the assistance of federal subsidies. In the decade from 2010 to 2020, nonbanks effectively doubled their market share of Fannie, Freddie, and FHA lending. In market segments not dominated by government lenders, such as the jumbo mortgage market, banks continued their dominance.

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

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

Beeline’s key online competitors are:

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

On the other hand, certain of Beeline’s competitors have greater resources and brand recognition than us, or otherwise pose a competitive threat to our business. See “Risk Factors” at page 5 for risks related to the competition Beeline faces in its industry.

Strategy for success

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

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

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

Building different mortgage products at scale is critical as well, therefore another strategy is a separation of the Non-QM and QM loans into their own verticals. Each type of loan has specific needs and nuances so ensuring smooth workflow for each is part of Beeline’s long-term success. Keeping Non-QM and QM products as offerings is important to revenue diversification.

Government Regulations Affecting Beeline

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

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

Government Regulations Affecting Mortgage Loan Origination

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

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

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

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

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

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

Federal Lending Laws and Regulations

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

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

State Lending Laws and Regulations

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

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

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

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

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

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

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

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

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

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

Other Laws

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

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

Seasonality

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

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

Beeline Business Initiatives

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

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

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

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

Warehouse Line of Credit

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

Cybersecurity

Beeline maintains highly confidential personal information including social security numbers of its borrowers and applicants. Beeline prioritizes the security, confidentiality, integrity, and availability of its systems, data, and other assets. Operating in a highly regulated sector, Beeline understands the critical importance of protecting its infrastructure and sensitive data, including highly confidential information submitted by and relating to consumers and proprietary company data. Its management actively oversees its risk management program, including the management of cybersecurity risks. Its comprehensive cybersecurity and disaster recovery strategy is designed to mitigate a broad spectrum of risks, including unauthorized access, data breaches, system outages, and other potential threats. Its cybersecurity and disaster recovery program includes the following key components:

Despite Beeline’s efforts, no security system can provide absolute protection. Beeline recognizes that a significant cybersecurity breach or disaster event could result in operational disruptions, reputational damage, regulatory scrutiny, financial loss, and potential legal liabilities. Nonetheless, Beeline believes its comprehensive cybersecurity and disaster recovery strategy effectively mitigates these risks and supports its commitment to protecting its customers, investors, and stakeholders.

Employees

At the Eastside holding company level, we have three employees, our Chief Executive Officer, our Chief Financial Officer and our controller.

Spirits’ Employees

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

Beeline Employees

As of December 10, 2024, Beeline has 67 employees. Certain of its employees serve in dual roles such as Beeline’s Chief Operating Officer who also serves as General Counsel and plays a key role in compliance Beeline also uses certain third parties who operate as independent contractors. Beeline also leverages independent contractors in marketing and technology/development.

Properties

Eastside maintains its principal place of business at 755 Main Street, Monroe CT. The office consists of 1,100 square feet, for which Eastside Distilling pays $1,100 per month.

Spirits carries on its operations at 2150 SE Hanna Harvester Drive, Milwaukie OR. At that location, blending, bottling and warehousing are conducted within 14,644 square feet. Spirits pays $16,841 per month for use of the facility.

Beeline operates out of its headquarters in Providence, Rhode Island where it has a long-term lease of approximately 9,282 square feet with current rent of $19,561 per month. Beeline’s other key facility is located in Burleigh Heads, Australia where an Australian subsidiary leases 3,455 square feet at a rent of approximately $108,781 per annum U.S. dollars based on exchange rates as of October 31, 2024. In addition, Beeline leases small offices in executive suites at three business offices and three virtual regus offices in Virginia, Texas, Louisiana, Massachusetts, and California. The total monthly cost for these facilities is $3,650.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read together with our financial statements and accompanying notes, and our appearing elsewhere in this Prospectus. This Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” set forth in the beginning of this Prospectus and see “Risk Factors” for a discussion of certain risk factors applicable to our business, financial condition, and results of operations. Operating results are not necessarily indicative of results that may occur in future periods.

Overview

Eastside was incorporated in Nevada in 2004 under the name of Eurocan Holdings, Ltd. In December 2014, we changed our corporate name to Eastside Distilling, Inc. to reflect our acquisition of Eastside Distilling, LLC. On September 4, 2024, we entered into the Merger Agreement with Beeline. The Merger closed on October 7, 2024, at which time Beeline became a wholly-owned subsidiary of the Company. Beeline is a mortgage technology company that operates an end-to-end, all-digital, AI-enhanced platform for homeowners and property investors.

On September 4, 2024, we and our then subsidiary, Craft, entered into the Debt Agreement, which closed on October 7, 2024, resulting in 720 barrels of spirits being assigned by the Company to Craft, and Craft being merged into a limited liability company owned by certain creditors of the Company. Given that the effect of the Debt Agreement meets all the initial criteria of ASC Topic 205-20, Presentation of Financial Statements – Discontinued Operations for the classification of held for sale, the assets, liabilities, and operating results of Craft have been classified as held for sale as of September 30, 2024 and December 31, 2023 and for the three and nine month periods ended September 30, 2024 and 2023. The consolidated financial statements for the prior periods have been adjusted to reflect comparable information.

Subsequent to the execution of the Debt Agreement, we organized Spirits as a subsidiary on October 3, 2024, and assigned to Spirits the Company’s business of manufacturing and marketing spirits. Spirits manufactures (through sub-contractors), acquires, blends, bottles, imports, markets and sells a wide variety of alcoholic beverages under recognized brands. Spirits’ brands span several alcoholic beverage categories, including whiskey, vodka, rum, and tequila. Spirits sells products on a wholesale basis to distributors in open states and through brokers in control states.

The following discussion and analysis relates to the financial condition and results of operations of each of (1) Eastside as of and for the periods ended December 31, 2023 and 2022 and September 30, 2024 and 2023 and (2) Beeline as of and for the periods ended December 31, 2023 and 2022 and September 30, 2024 and 2023.

Mission and Strategy

Spirits mission is to offer great products and services in the craft beverage space. Our spirits brands span several alcoholic beverage categories, including whiskey, vodka, rum and tequila.

Our strategy is to expand Spirits in our regional market where our brand equity and concentration of investment will have the greatest return. Our spirits portfolio is to be positioned as a leading regional craft spirits provider that develops brands, expands geographic presence growing revenue and cash flow.

Segments

As of September 30, 2024, our internal management financial reporting consisted of Spirits and corporate. The Spirits brands span several alcoholic beverage categories, including whiskey, vodka, rum, and tequila and are sold on a wholesale basis to distributors in open states, and to brokers in control states. Our principal area of operation is in the U.S. Pacific Northwest. Corporate consists of key executive and accounting personnel and corporate expenses such as public company and Board costs, as well as interest on debt.

Spirits

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

Recent Developments

Spirits reduced its sale of bulk barrels in the third quarter of 2024 and saw total volume decline by 12% in the quarter. The majority of the decline was driven by the reduction in distribution of Azuñia tequila as we realigned the brand with new distribution partners. Spirits case shipments in the quarter were down 12% with Portland Potato Vodka down 6% and Burnside down 17%.

The following management discussion and analysis includes the results of operations, cash flow activities and liquidity and capital resources for each of East and Beeline and are marked accordingly below.

Eastside Results of Operations

Nine Months ended September 30, 2024 Compared to the Nine Months ended September 30, 2023

Spirits sales were $2.1 million and $3.1 million for the nine months ended September 30, 2024 and 2023, respectively. The primary factor in the year-to-year reduction was tactical: we rationalize our barrel inventory by repositioning our bulk spirits portfolio for anticipated future products and forecasted demand. For example, during the nine months ended September 30, 2024 we sold 65 barrels for gross proceeds of $0.1 million. By comparison, during the nine months ended September 30, 2023, we sold 250 barrels for gross proceeds of $0.6 million. The remainder of the reduction in sales was primarily attributable to lower sales of tequila and bourbon during the 2024 period. For the nine months ended September 30, 2024, spirits sold 17,431 cases compared to 19,485 cases in the prior year.

Cost of sales consists of all direct costs for raw materials, labor, overhead, packaging, and in-bound freight charges. Cost of sales declined by 21% from the first nine months of 2023 to the first nine months of 2024, despite the 32% decline in sales. The discrepancy primarily reflected the inefficiency of our operations when sales decline – the lease for our warehouse, for example, is a fixed cost.

Gross profit was $0.5 million and $1.0 million for the nine months ended September 30, 2024 and 2023, respectively. Gross margin was 25% and 34% for the nine months ended September 30, 2024 and 2023, respectively. Gross profit and gross margin decreased for the nine months ended September 30, 2024 primarily due to the bulk spirit sales during the nine months ended September 30, 2023, which involve much lower cost of sales.

Sales and marketing expenses were $0.7 million and $1.2 million for the nine months ended September 30, 2024 and 2023. The principal reason for the reduction was management’s determination to reduce headcount and enable the spirits division to achieve sustainable operating results. General and administrative expenses were $1.1 million and $1.3 million for the nine months ended September 30, 2024 and 2023, with the reduction primarily attributable due to a reversal of $0.1 million related to compensation expense in the third quarter of 2023.

On September 29, 2023, we issued an entity 296,722 shares of Common Stock and 200,000 shares of Series C. In exchange for that equity, our debts to the members of the entity were reduced by a total of $6.5 million. As a result of that transaction, we recognized a non-cash loss on the debt to equity conversion of $1.3 million.

Net loss was $2.3 million and $3.6 million for the nine months ended September 30, 2024 and 2023, respectively. As noted above, our operating results were generally better during the nine months ended September 30, 2023, but were diminished by the loss on debt to equity conversion.

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

Spirits sales were $4.0 million and $8.7 million for the years ended December 31, 2023 and 2022, respectively. The primary reason for the reduction was significant bulk spirits sales that we completed during 2022. For the year ended December 31, 2023, we sold 300 barrels for gross proceeds of $0.8 million. For the year ended December 31, 2022, we sold nearly 1,500 barrels for gross proceeds of $4.4 million. In addition, sales of tequila decreased during 2023, as we redirected investment into our higher margin Oregon brands. Lower, but more profitable tequila sales substantially reduced revenue in the spirits segment.

Cost of sales were $2.6 million and $5.1 million for the years ended December 31, 2023 and 2022, respectively. Cost of sales decreased primarily due to reductions in overall sales, but the decrease was made greater by a shift to a higher mix of lower cost vodka sales.

Gross profit was $1.2 million and $3.3 million for the years ended December 31, 2023 and 2022, respectively. Bulk sales gross profit was $0.6 million and $2.4 million for the years ended December 31, 2023 and 2022, respectively. Our gross margin was 10% and 18% for the years ended December 31, 2023 and 2022, respectively, again due to the large amount of higher margin bulk sales during 2022.

Sales and marketing expenses were $1.5 million for the year ended December 31, 2023, which general and administrative expenses were $1.8 million in the same year. By comparison, total operating expenses were $4.5 million for the year ended December 31, 2022. The reduction in operating expenses was attributable primarily to lower sponsorship costs, decreased professional fees, and reduced headcount as part of spirits restructuring.

Interest expense was $1.1 million and $2.2 million for the years ended December 31, 2023 and 2022, respectively. Higher interest expense during 2022 was primarily due to the amortization of debt issuance costs on agreements that matured during that year. In 2023, however, we recorded a non-cash $1.3 million loss on the debt to equity conversion that we implemented on September 29, 2023.

Net loss was $2.7 million and $10.9 million for the years ended December 31, 2023 and 2022, respectively, after recording impairment charges of $0.4 million and $7.5 million on the value of the Azuñia assets for the years ended December 31, 2023 and 2022, respectively.

Beeline Results of Operations

Overview

Beeline is a full service Direct-to-Consumer lender specializing in conventional conforming and non-conforming residential first-lien mortgages and providing title services. Beeline also has an emerging business in anonymized data sales and technology licensing.

Year ended December 31, 2023 Compared to the Year Ended December 31, 2022

Beeline generates revenue through the production and sale of mortgage loans and other product offerings. The revenue and mix of revenue as a percentage of total revenue attributable to Beeline’s sale of mortgage loan production, title and data and tech sales for the years ended December 31, 2023 and 2022 was as follows:

As the table above indicates, revenue from Beeline’s mortgage loan production increased by 45% in 2023 compared to 2022 while revenue from Beeline’s title operations decreased by 23% in 2023 compared to 2022. Beeline’s total net revenues for the year ended December 31, 2023 increased by 29% compared to the year ended December 31, 2022.

Funding Sources

In the ordinary course of Beeline’s operations, Beeline finances the majority of its loan volume on a short-term basis, typically less than 10 days, mainly utilizing a warehouse line of credit with a capacity of $5 million. The repayments of Beeline’s borrowings come from the revenue generated by selling its loans to a network of purchasers, which includes GSEs. Beeline had approximately $2.8 million and $6.9 million of available capacity under its warehouse facilities as of December 31, 2023 and 2022, respectively.

Factors Affecting Beeline’s Performance

Fluctuations in Interest Rates

Changes in interest rates influence mortgage loan refinancing volumes and Beeline’s mortgage loan volumes. In a decreasing interest rate environment, mortgage loan refinance volumes typically increase. Conversely, in an increasing interest rate environment, mortgage loan refinancing volumes and home purchase volumes typically decline, with mortgage loan refinancing volumes being particularly sensitive to increasing interest rates as customers are no longer incentivized to refinance their current mortgage loans at lower interest rates. However, increasing interest rates are also indicative of overall economic growth and inflation that could generate demand for more cash-out refinancings, purchase mortgage loan transactions and home equity loans, which may partially offset the decline in rate and term refinancings resulting from a rising interest rate environment.

For many years, including in particular the year ended December 31, 2020 and the first quarter of 2021, there was a prolonged period of historically low and declining interest rates. Beginning in April 2021, the United States began experiencing a significant rise in interest rates, which increased for a variety of reasons, including inflation, increases to the federal funds rate and other monetary policy tightening, market capacity constraints and other factors, which continued in 2022 and 2023, resulting in a decrease in overall funding activities in the mortgage market generally. As interest rates increase, the pool of customers who can reduce their monthly payment by refinancing, because their existing mortgage rate is higher than current mortgage rates, declines.

In addition, higher prevailing market rates both reduce the propensity of new home buyers to enter the market and reduce those willing to sell their homes or take existing equity out of their homes through a cash-out refinance. This creates a supply-demand imbalance where mortgage lenders are competing for fewer customers, and become increasingly price competitive to win business, thereby accepting lower potential gain on sale margin. This competition manifests in an industry-wide gain on sale compression and a decreased industry origination volume in higher rate environments. Starting in the second half of 2021, and continuing through the majority of 2023, Beeline experienced this trend where volume declined, and gain on sale margin compressed due to heightened interest rates and an increasingly competitive market for lenders.

Market and Economic Environment

Various economic conditions significantly influence the consumer lending market and the related volumes of mortgage loan origination. Key factors include the interest rate environment, unemployment rates, appreciation in home prices, and consumer confidence. Purchase mortgage loan origination volumes are typically impacted by a wide array of economic elements such as shifts in interest rates, the overall economic health, unemployment levels, and housing prices, in addition to seasonal trends, with home sales generally peaking in the second and third quarters. Nonetheless, in 2022 and 2023, the usual seasonal patterns in the housing market were overshadowed by rising interest rates and ongoing limitations in housing supply. As a result, Beeline is noticing a continued reduction in the influence of seasonality on its business due to these and other factors.

The volume of mortgage loan refinancing is largely influenced by changes in mortgage interest rates. Although the demand for consumer credit from borrowers usually stays robust across various economic conditions, potential borrowers may choose to postpone financing when faced with high or volatile interest rates or unfavorable economic situations. Consequently, Beeline’s revenue can fluctuate considerably from one quarter to the next, and the recent hikes in interest rates, along with inflationary macroeconomic trends, have a notable impact on its financial performance.

Limited Housing Supply Ultimately Stimulates Increased Construction and Purchase Activity

The availability of homes for sale and their corresponding market prices are key factors influencing mortgage purchase volumes. Beeline believes that limited housing supply has played a role in curbing both new home sales and mortgage purchase activity. At the same time, this constrained supply—exacerbated by rising interest rates—paired with strong demand has led to escalating home prices, which subsequently hinders the growth of new home sales and mortgage borrowing. Nevertheless, in the long run, Beeline believes that these imbalances between supply and demand could encourage higher levels of home construction, resulting in increased housing supply and a corresponding rise in mortgage purchase volumes in the future.

Ongoing Expansion and Acceptance of Digital Loan Solutions

Beeline’s success in attracting new clients largely hinges on its ability to offer a smooth and exceptional customer experience, maintain competitive pricing, and meet or surpass its customers’ expectations. Consumers are increasingly open to making substantial and intricate purchases through digital channels, a shift that was hastened by the COVID pandemic. In recent years, Beeline has observed a growing consumer inclination to conduct online transactions in higher-value categories such as furniture, travel, and automobiles, a trend that was further propelled by the pandemic. Beeline anticipates that this inclination will also influence consumer preferences regarding loans, especially as homeownership rates among Millennials and Generation Z continue to rise. Beeline’s platform delivers a seamless and convenient customer experience, which gives it a considerable edge over traditional systems.

Advancing Beeline’s Technological Innovation

Beeline’s proprietary technology is designed to enhance the experiences of its customers by increasing efficiency, reducing costs, and improving the quality of loan production. By investing in this proprietary technology, Beeline is automating and streamlining various tasks involved in the origination process for consumers, employees, and partners alike. Beeline’s tailored user interfaces eliminate the need for paper applications and direct human interaction, enabling its customers and partners to quickly and effectively identify, price, apply for, and finalize mortgage loans. Beeline plans to continue its investment in developing technology, tools, and features aimed at further automating the loan manufacturing process, which will help lower its production and customer acquisition costs while enhancing the overall customer experience.

Capability to Acquire New Customers and Expand Customer Acquisitions

Beeline aims to efficiently reach a diverse range of new customers while offering a highly personalized experience during digital interactions throughout the entire customer journey.

If Beeline’s traditional customer acquisition strategies fail to achieve desired growth levels, particularly in a climate of rising interest rates or limited housing availability, or if Beeline falls short of maintaining a prominent position on lead aggregator websites, it may need to allocate additional financial resources and personnel toward its sales and marketing initiatives. This, in turn, would elevate the overall expenses associated with Beeline’s services.

Revenue

Total net revenues were $3.79 million and $2.94 million for the years ended December 31, 2023 and 2022, respectively. Gain on sale of loans increased substantially over the prior year offset by lower origination and title fees. Loan origination increased from $132.1 million in 2022 to $144.1 million in 2023.

Operating Expenses

Operating expenses consist of all direct costs related to loan origination and sale activities including salaries, marketing expenses, software and technology development expenses. Total operating expenses were $13.73 million compared to $13.39 million for the years ended December 31, 2023 and 2022, respectively. Employee related expenses increased year over year. Beeline continues to invest heavily in technology development and marketing related expenses in anticipation of the roll out of new AI related selling tools in 2024.

Operating Loss

Beeline’s operating loss was $9.93 million and $10.44 million for the years ended December 31, 2023 and 2022 respectively. Operating losses diminished by 4.9% due to higher revenues compared to the prior year.

Net Loss

Beeline’s net loss was $10.90 million and $10.55 million for the years ended December 31, 2023 and 2022 respectively. Net loss increased by 3.3% due to higher interest expense compared to the prior year.

Nine Months ended September 30, 2024 Compared to Nine Months ended September 30, 2023

Total net revenues were $3.64 million and $2.91 million for the periods ended September 30, 2024 and 2023, respectively. Gain on sale of loans increased by 8.1% over the prior year while loan origination increased by 102.5% and title fees increased by 91%. Loan origination increased from $102.8 million in 2023 to $140.1 million in 2024, an increase of more than 36%.

Operating Expenses

Operating expenses consist of all direct costs related to loan origination and sale activities including salaries, marketing expenses, software and technology development expenses. Total operating expenses were $12.21 million compared to $10.23 million for the periods ended September 30, 2024 and 2023, respectively. Employee related expenses increased year over year. Beeline continues to invest heavily in technology development and marketing related software.

Operating Loss

Beeline’s operating loss was $8.58 million and $7.32 million for the periods ended September 30, 2024 and 2023 respectively. Operating losses increased by 17.2% due to higher professional fees and marketing and advertising expenses compared to the prior year.

Net Income (Loss)

Beeline’s net income was $1.0 million for the period ended September 30, 2024 and the net loss was $7.27 million for the period ended September 30, 2023 respectively. The positive net income for 2024 was wholly related to $11.34 gain on extinguishment of debt.

Liquidity and Capital Resources

Through September 30, 2024, the Eastside’s primary capital requirements have been for cash used in operating activities and for the repayment of debt. Funds for our cash and liquidity needs have historically not been generated from operations but rather from short-term credit in the form of extended payment terms from suppliers as well as proceeds from loans and the sale of convertible debt and equity. We have been dependent on raising capital from debt and equity financing to meet our operating needs.

At September 30, 2024, Eastside had an accumulated deficit of $86,959,000 which reflects our history of continued operating losses. On a pro forma basis assuming we acquired Beeline on September 30, 2024, our accumulated deficit would have been $78,993,141. As of September 30, 2024, we had $0.3 million of cash on hand with negative working capital of $12.6 million.

On October 7, 2024 Eastside satisfied all secured debt and $2.5 million of unsecured debt by assigning ownership of Craft to the creditors of that debt, who additionally surrendered to us 44,279 shares of Series C. The transaction substantially reduced our debt obligations. On the same day, however, Eastside acquired Beeline.

Our ability, therefore, to meet our ongoing operating cash needs over the next 12 months will depend, in part, on the success of Beeline in expanding sales and achieving cash-positive operations. In larger part, however, our ability to meet near-term operating cash needs will depend on our success in securing debt and/or equity financing as needed. On November 14, 2024, we closed on a sale of $1.9 million in secured debt, from which we received approximately $1.6 million in net cash before payment of the transaction costs. On November 22 and 25, 2024 we closed on sales of $350,000 in Common Stock and warrants, from which we received approximately $345,000. These funds should be adequate to fund our cash flow requirement into early 2025.

We are presently seeking to raise additional equity capital through the sale of Series G and Warrants. Through December 10, 2024 we have raised $705,000 from this offering.

As of December 10, 2024, we have approximately $476,408 in cash. We do not have sufficient capital to meet our working capital and debt obligations for the next 12 months. Among other things, Beeline must pay $2,386,333 of secured Notes by March 13, 2025. In addition, beginning in January 2025, Beeline must make monthly payments of $444,328 to the holders of its $3,600,000 Debentures through the due date of September 5, 2025. The availability of additional financing will be largely dependent on increasing our authorized Common Stock and the operating success of Beeline, including improved gross margins as well as operational improvements, which will be necessary to attract investors.

Eastside Cash Flow Results

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

Our cash flow results for the years ended December 31, 2023 and 2022 were as follows:

Operating Activities

Total cash used in operating activities was $1.8 million during the year ended December 31, 2023 compared to cash used of $0.9 million during the year ended December 31, 2022. The increase in cash used was primarily attributable to our continued net losses and decreased accrued interest.

Investing Activities

Total cash provided by investing activities was $0.1 million during the year ended December 31, 2023 representing net proceeds from purchases and sales of fixed assets. Total cash used in investing activities was $2.3 million during the year ended December 31, 2022 representing our investment in digital can printing equipment.

Financing Activities

Total cash provided by financing activities was $1.4 million during the year ended December 31, 2023 primarily consisted of proceeds from the issuance of stock. Total cash provided by financing activities was $0.6 million during the year ended December 31, 2022 primarily consisted of net proceeds from sale of a note payable to a related party of $4.5 million and the issuance of common stock of $0.2 million, offset by $2.8 million of principal payments to our secured credit facilities and $1.2 million of payments on principal of notes payable.

Nine Months ended September 30, 2024 Compared to Nine Months ended September 30, 2023

Our cash flow results for the nine months ended September 30, 2024 and 2023 (which do not include any cash flows attributable to Beeline) were as follows:

Operating Activities

Total cash used in operating activities was $1.6 million during the nine months ended September 30, 2024 compared to $1.7 million used during the nine months ended September 30, 2023. The use of cash was similar, even as we lost $1.3 million more during the 2023 period, primarily because the 2023 loss included a $1.3 million loss on the debt to equity conversion that occurred during the nine months ended September 30, 2023

Investing Activities

Total cash provided by investing activities was $0.1 million during the nine months ended September 30, 2024, representing net proceeds from the sale by Craft of fixed assets. During the nine months ended September 30, 2023, cash used in investing activities was $0.1 million representing net purchases of fixed assets.

Financing Activities

Total cash provided by financing activities was $1.5 million during the nine months ended September 30, 2024, consisting of $1.1 million from the sale of secured notes in May 2024 and $0.4 million from an at-the-market sale of Common Stock in September 2024. Total cash provided by financing activities was $1.4 million during the nine months ended September 30, 2023 primarily consisted of proceeds from the issuance of securities.

Critical Accounting Policies for Eastside Distilling, Inc.

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.

In connection with the preparation of our financial statements for the nine months ended September 30, 2024, there was one accounting estimate we made that was subject to a high degree of uncertainty and was critical to our results, as follows:

Intangible Assets

On September 12, 2019, we purchased the Azuñia brand, the direct sales team, existing product inventory, supply chain relationships and contractual agreements from Intersect Beverage, LLC, an importer and distributor of tequila and related products. The Azuñia brand has been determined to have an indefinite life and will not be amortized. We do, however, on an annual basis, test the indefinite life assets for impairment. If the carrying value of the indefinite life assets are found to be impaired, then we will record an impairment loss and reduce the carrying value of the asset’s estimate the useful life of the brand and amortize the asset over the remainder of its useful life.

We estimate the brand’s fair value using market information to estimate future cash flows and will impair it when its carrying amount exceeds its estimated fair value, in which case we will write it down to its estimated fair value. We consider market values for similar assets when available. Considerable management judgment is necessary to estimate fair value, including making assumptions about future cash flows, net sales and discount rates.

We have the option, before quantifying the fair value, to evaluate qualitative factors to assess whether it is more likely than not that our brand is impaired. If we determine that is not the case, then we are not required to quantify the fair value. That assessment also takes considerable management judgment.

As of December 31, 2022, as a result of the review described above, we found the Azuñia brand to be impaired and reduced its carrying cost by $7.5 million. As of December 31, 2023, as a result of the review described above, we found the Azuñia brand to be again impaired and reduced its carrying cost by $0.4 million. Management expects further impairment charges in the year ending December 31, 2024 as a result of the foregoing, which charges may be material.

MANAGEMENT

The following is a brief description of the principal occupation and recent business experience of each of our executive officers and directors and their ages:

Our Board currently consists of six members. All directors hold office until their successors have been elected and qualified or until their earlier death, resignation, disqualification, or removal. Board vacancies and newly created directorships resulting from an increase in the authorized number of directors may be filled by a majority vote of the directors then in office, even if less than a quorum, or by a sole remaining director. Our Board may establish the authorized number of directors from time-to-time by resolution.

Our executive officers are each appointed by the Board and serve at the Board’s discretion.

There are no family relationships among our officers or directors.

Executive Officers

Geoffrey Gwin was appointed as our Chief Executive Officer on February 1, 2022. He also served as our Chief Financial Officer from June 15, 2020 until October 7, 2024. Mr. Gwin has served as a member of the Board from August 2019 through June 2020 and again from August 8, 2023 to the present. Mr. Gwin formed Group G Capital Partners, LLC in 2003 and has continuously managed its related strategies as its Chief Investment Officer. From June 2018 until February 2020, Mr. Gwin was a Member of Quad Capital Management Advisors, LLC and the Managing Member of Group G Capital Partners, LLC.

Christopher R. Moe was appointed as our Chief Financial Officer on October 7, 2024. Since June of 2023, Mr. Moe has served as the Chief Financial Officer of Beeline. Mr. Moe has been a director of Red Cat Holdings, Inc. [Nasdaq: RCAT] since February 16, 2022. From 2018 until 2023, he was the Chief Financial Officer and a director of Yates Electrospace Corporation, a heavy payload, contested logistics drone provider.

Nicholas R. Liuzza Jr. is the Chief Executive Officer of Beeline. Mr. Liuzza co-founded Beeline in 2019 and has served as its Chief Executive Officer since 2019. He has been a director of Red Cat Holdings, Inc. [Nasdaq: RCAT] since June 1, 2019. Beginning 2016, Mr. Liuzza served as Executive Vice President of Real Matters until May, 2018.

Non-Employee Directors

Eric Finnsson was appointed to our Board on July 30, 2020. From March 2019 to June 2020 Mr. Finnsson served as Chief Financial Officer of GLG Life Tech Corporation, a producer of zero calorie natural sweeteners. Prior to joining GLG Life Tech Corporation, Mr. Finnsson worked as an independent consultant, offering finance and business consulting services to start-ups and individuals investing in China. A retired audit partner, Mr. Finnsson worked for KPMG for over 25 years in Canada, Europe and China, including three years specializing in Global Risk Management in KPMG’s International Headquarters. . He received his designation as a Canadian Chartered Accountant in 1990 and his Certified Public Accountant license in 2002 in Illinois, which is currently inactive.

Robert Grammen was appointed to our Board on June 15, 2020. Since 1999, Mr. Grammen has been affiliated with EFO Management, LLC, where he currently serves as a managing director. EFO Management, LLC is a family investment office, where Mr. Grammen is responsible for the origination, analysis, structure and execution of direct debt and equity investments across a wide range of asset classes that include IT, healthcare, hospitality, spirits and real estate.

Stephanie Kilkenny was appointed to our Board on October 24, 2019. Ms. Kilkenny was the former managing director of Azuñia Tequila, and together with her spouse, owns and controls TQLA, LLC (“TQLA”). See “Related Party Transactions.”

Joseph Caltabiano was appointed to our Board on October 7, 2024 in connection with the Merger. Mr. Caltabiano’s career is currently focused on emerging medicine industries. As co-founder and CEO of Healing Realty Trust, a real estate investment company, he is devoted to developing clinical infrastructure necessary to support the administration of healthcare services and novel therapies in the behavioral health market. As founder of JSC Fund, Mr. Caltabiano helps uncover and advance opportunities in cannabis and other regulated sectors. Mr. Caltabiano helped pioneer the cannabis industry by co-founding Cresco Labs, one of North America’s largest vertically integrated cannabis operators, which he grew into a multi-state operator with annualized revenue of over $250 million. Before focusing on emerging medicine industries, Mr. Caltabiano served as Senior Vice President of Mortgage Banking at Guaranteed Rate, one of the largest mortgage providers in the U.S.

Joseph Freedman was appointed to the Board on October 7, 2024 in connection with the Merger. Mr. Freedman joined the Board of Beeline in 2023. Mr. Freedman also serves as Lead Director for Red Cat Holdings Inc. (Nasdaq: RCAT) and as a member of the Board of ResiCom Capital Partners, a real estate investment firm, and Fluid Capital Network, a financial services company. Mr. Freedman co-founded and served as Chief Executive Officer of Event Works Rental, a full-service event rental company, from April 2006 to January 2024. Mr. Freedman is a past president of the Nashville Chapter of Entrepreneurs Organization, and currently serves as its Governance Chair. He also founded Drones for Good Worldwide, a 501(c)(3) organization that provides life-saving drones for humanitarian efforts worldwide.

Board Committees

Audit Committee

Our Audit Committee oversees the engagement of our independent public accountants, reviews our audited financial statements, meets with our independent public accountants to review internal controls and reviews our financial plans. Our Audit Committee currently consists of Eric Finnsson, who is the Chair of the Committee, Robert Grammen and Joseph Freedman. Each of Messrs. Finnsson, Grammen and Freedman has been determined by our Board to be independent in accordance with Nasdaq and SEC standards. Our Board has also designated Mr. Finnsson as an “audit committee financial expert” as the term is defined under SEC regulations and has determined that Mr. Finnsson possesses the requisite “financial sophistication” under applicable Nasdaq rules. The Audit Committee operates under a written charter which is available on our website at https://www.eastsidedistilling.com/investors. Our website is not part of this Prospectus. Both our independent registered accounting firm and internal financial personnel regularly meet with our Audit Committee and have unrestricted access to the audit committee. Each member of the Audit Committee is able to read and understand fundamental financial statements, including our consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows. Further, no member of the Audit Committee has participated in the preparation of our consolidated financial statements, or those of any of our current subsidiaries, at any time during the past three years.

Compensation Committee

Our Compensation Committee reviews and recommends policies, practices, and procedures relating to compensation for our directors, officers and other employees and advising and consulting with our officers regarding managerial personnel and development. Our Compensation Committee currently consists of Joseph Caltabiano, who is the Chair of the Committee, Joseph Freedman, and Robert Grammen. Each of Messrs. Caltabiano, Freedman and Grammen has been determined by our Board to be independent in accordance with Nasdaq standards. Each member of our Compensation Committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. The Compensation Committee operates under a written charter. Under its charter, the functions of the Compensation Committee include:

The Compensation Committee may delegate any of its responsibilities, along with the authority to take action in relation to such responsibilities, to one or more subcommittees as the Compensation Committee may deem appropriate in its sole discretion.

Pursuant to its charter, the compensation committee has the authority, in its sole discretion, to select, retain and obtain the advice of a compensation consultant, outside legal counsel, or other advisors as it deems necessary to fulfill its duties and responsibilities under its charter. The compensation committee did not engage any consultants during the year ended December 31, 2023 or subsequently.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee has at any time been an officer or employee of Eastside or of any subsidiary or affiliate of Eastside. None of the members was party to any transaction or had any related party relationship with Eastside or any of its subsidiaries or affiliates during the year ended December 31, 2023, except as disclosed in “Related Party Transactions”. In addition, Messrs. Freedman, Moe and Liuzza are members of the Board of Red Cat Holdings, Inc. [Nasdaq: RCAT].

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee (“Nominating Committee”) evaluates the composition, size and governance of our Board and its committees, evaluates and recommends candidates for election to our Board, establishes a policy for considering stockholder nominees and reviewing our corporate governance principles and provides recommendations to the Board. Our Nominating Committee currently consists of Robert Grammen, who is the Chair of the Committee, Eric Finnsson and Joseph Caltabiano, each of whom has been determined by our Board to be independent in accordance with Nasdaq standards.

Code of Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers, and directors. We will provide to any person without charge, upon request, a copy of our Code of Business Conduct and Ethics. Requests may be directed to our principal executive offices at 755 Main Street, Monroe, Connecticut 06468. Also, a copy of our Code of Business Conduct and Ethics is available on our website. We will disclose, on our website, any amendment to, or a waiver from, a provision of our Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of the Code of Business Conduct and Ethics enumerated in applicable rules of the SEC.

Recent Auditor Change

On December 4, 2024 the Board dismissed M&K CPAS, PLLC from its position as the principal independent accountant for Eastside. The dismissal was approved by the Audit Committee of the Board.

The audit reports of M&K CPAS, PLLC on Eastside’s financial statements for the years ended December 31, 2023 and 2022 did not contain any adverse opinion or disclaimer of opinion or qualification, except that the audit report of M&K CPAS, PLLC on Eastside’s financial statements for the years ended December 31, 2023 and 2022 did contain a modification expressing substantial doubt about the ability of Eastside to continue as a going concern. M&K CPAS, PLLC did not, during the applicable period, advise Eastside of any of the enumerated items described in Item 304(a)(1)(iv) of Regulation S-K.

During the two most recent fiscal years and the subsequent interim period through December 4, 2024, there was no disagreement between Eastside and M&K CPAS, PLLC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to its satisfaction, would have caused M&K CPAS, PLLC to make reference to the subject matter of such disagreement in connection with its report. During the same period, there was no “reportable event,” as described in Item 304(a)(1)(v) of Regulation S-K, except that, in connection with its audit of the financial statements for the years ended December 31, 2023 and 2022, M&K CPAS, PLLC advised Eastside that there was a material weakness in the internal controls necessary for Eastside to develop reliable financial statements since management lacked a formal policy of inputs in testing for impairment.

Eastside requested M&K CPAS, PLLC to furnish a letter addressed to the Securities Exchange Commission stating whether or not M&K CPAS, PLLC agrees with the foregoing statements pertaining to M&K CPAS, PLLC. A copy of the letter is filed as Exhibit 16.1 to the Registration Statement of which this Prospectus forms a part.

On December 4, 2024, Eastside appointed Salberg & Company, P.A. as its independent registered public accounting firm for the year ending December 31, 2024. During Eastside’s two most recent fiscal years ended December 31, 2023 and 2022, and through December 4, 2024, neither Eastside nor anyone on behalf of Eastside consulted with Salberg & Company, P.A. regarding (a) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on Eastside’s financial statements as to which Eastside received a written report or oral advice that was an important factor in reaching a decision on any accounting, auditing or financial reporting issue, or (b) any matter that was the subject of a disagreement or a reportable event as defined in Item 304(a)(1)(iv) and (v), respectively, of Regulation S-K.

EXECUTIVE COMPENSATION

Eastside Summary Compensation Table

The following table sets forth the compensation awarded to, earned by or paid to our Chief Executive Officers (principal executive officer) for services rendered during the fiscal years ended December 31, 2023 and 2022. The term “Named Executive Officer” means each of the Company’s principal executive officer, the two most highly paid executive officers with compensation exceeding $100,000 during the fiscal years ended December 31, 2023, and two additional individuals for whom the foregoing would apply but for the fact that they were not executive officers of the Company as of December 31, 2023.

Beeline Summary Compensation Table

The following table sets forth the compensation awarded to, earned by Beeline’s executive officers for services rendered during the fiscal years ended December 31, 2023 and 2022. Each person is employed under oral agreements.

Outstanding Equity Awards at 2023 Fiscal Year-End

There were no equity awards made to any of the Named Executive Officers that were outstanding as of December 31, 2023.

Employment Agreements

Geoffrey Gwin. The Company has entered into a three-year Executive Employment Agreement with Geoffrey Gwin dated July 3, 2024, which was amended on October 7, 2024. The effective date of the Agreement, as amended, is as of January 1, 2024. Under the Agreement, as amended, Mr. Gwin serves as Chief Executive Officer of Eastside on a full-time basis. He also served as Eastside’s Chief Financial Officer until October 7, 2024.

The Agreement provides that the Company will pay Mr. Gwin a base salary of $300,000 per year increasing to $350,000 based on performance. In addition, Eastside will also pay Mr. Gwin a bonus of $90,000 for special services during 2024. As authorized by the Agreement, Mr. Gwin accepted 180,000 shares of the Company’s Common Stock during October 2024 in satisfaction of the Company’s special services payment obligation. In addition, the Company issued 400,000 shares of Common Stock to Mr. Gwin, which will vest on the earlier of March 31, 2025 or the date on which Mr. Gwin’s employment is terminated without cause. In the event that the conversion price of the Company’s Series F is reduced, the Company will issue to Mr. Gwin a number of common shares equal to one percent of the additional shares issued as a result of the adjustment.

Either the Company or Mr. Gwin may terminate Mr. Gwin’s employment at will. If Eastside terminates the employment without cause or Mr. Gwin terminates his employment with good reason, Eastside will continue to pay Mr. Gwin’s salary for the lesser of 12 months or the remaining term of employment. The Company also agreed to issue 100,000 shares of Common Stock to Mr. Gwin if he is terminated by the Company without cause.

Christopher R. Moe. Beeline employs Mr. Moe under an offer letter agreement which provides a monthly salary of $15,000. On June 5, 2024 Mr. Moe earned a $140,672 bonus, of which he has been paid $20,096. The bonus related to Beeline’s June 5, 2024 recapitalization which included issuance of the Debentures.

Nicholas R. Liuzza, Jr. Mr. Liuzza is employed by Beeline pursuant to an oral agreement under which he receives the compensation described in the table above.

2023 Director Compensation

The following table sets forth the compensation awarded to, earned by or paid to members of our Board for services rendered as a director during the fiscal year ended December 31, 2023.

Equity Compensation Plan Information

The following table provides information concerning compensation plans under which our equity securities are authorized for issuance as of December 31, 2023: