Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 21, 2024

EASTSIDE DISTILLING, INC.

(Exact name of registrant as specified in its charter)

Nevada

001-38182

20-3937596

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

755 Main Street, Building 4, Suite 3

Monroe, CT 06468

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (484) 800-9154

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.0001 par value		EAST		The Nasdaq Stock Market LLC
(Title of Each Class)		(Trading Symbol)		(Name of Each Exchange on Which Registered)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (CFR §240.12b-2 of this chapter).

Emerging growth company ☐

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 13(a) of the Exchange Act. ☐

Item 8.01 Other Events

As previously disclosed on Eastside Distilling, Inc.’s (the “Company” or “Eastside”) Current Report on Form 8-K filed with the Securities and Exchange Commission on October 7, 2024, the Company entered into an Agreement and Plan of Merger and Reorganization under which the Company acquired Beeline Financial Holdings, Inc. (“Beeline”). The Company is filing this Current Report on Form 8-K to update the investing public with information concerning Beeline, its business, Beeline’s financial statements for the fiscal years ended December 31, 2023 and 2022 and Beeline’s financial statements for the six months ended June 30, 2024.

BUSINESS

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 3 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-qualified mortgage loans (“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 2024, Beeline 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 and Non-QM loans from a single platform allowing Beeline to better serve the 75 million Millennials and Gen Z quickly emerging as home buyers and currently representing approximately 40% of the home purchase market. During 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 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.

	●	Marketing and Sales: Beeline uses an AI chatbot to enable cost-effective communication with prospective borrowers to respond to inquiries and answer questions about our lending offerings, enhance borrower engagement and introduce new borrowers to our platform. This AI product is powered by MagicBlocks, Inc. (“MagicBlocks”), a company in which Beeline currently owns a 48% interest. For more information on MagicBlocks, see page 6 of this Report.
	●	Application and Pre-Qualification: When Borrowers are ready to apply, they are taken through a seven-to-ten-minute journey through a series of conversational-style questions, collecting the information required to complete a loan application.
	●	Document Collection and Verification: The system automatically asks for required documents, such as bank statements, tax returns, and employment information based on the loan type and purpose. Many platforms utilize a secure an application programming interface to link directly to borrowers’ financial accounts, making it easier to verify income, assets, and employment information without manual uploads.
	●	Approval and Closing: Once underwriting is completed, the borrower receives a conditional approval. Where legally permissible under state law, Beeline schedules online closings, further reducing the need for physical paper and cuts down on signing errors and time to post-close review a loan file. Where that is not possible, the loans close in-person.
	●	Post-Closing and Servicing: After closing, loans are sold to aggregators who handle all servicing.
	●	Beeline also offers title and closing services. Beeline’s mortgage services and title operations are tightly integrated, providing a seamless customer experience. Beeline acts as the agent in its title and closing services business, selling title insurance policies for some of the largest title underwriters, including First American National Title Insurance Company, Fidelity National Title Insurance Company and Westcor Land Insurance Company.

Sources of Revenue

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

	●	Net gain on sale of loans: Once Beeline closes on a loan, it then sells that loan to an aggregator at a predetermined price. The proceeds are recorded as a gain on sale of loans. This source accounted for 66% of revenue.
	●	Title fees: Fees associated with closing a mortgage for a lender, which averages approximately $1,700 per closed file. Currently Beeline Title handles the title and escrow services for 60% of the mortgages that Beeline originates while also offering its title and closing services to other lenders. This source accounted for 20% of revenue.
	●	Loan origination fees: This is a fee charged to a borrower to offset the costs of origination. This source accounted for 15% of revenue.

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 these 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. Its 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.

	●	Acquisition: As Beeline’s 2024 lead generation reflects, it relies heavily on Google and one other online source for leads. To further its growth, Beeline may need to reduce this dependency and seek other material lead sources. Acquisition efforts are focused on managing advertising budgets efficiently, allocating resources strategically, and meticulously tracking return on ad spending. This approach is designed to maximize returns across various campaigns, ensuring that investments in new customers yield measurable outcomes.
	●	Marketing data: Marketing data is the heart of Beeline’s decision-making process. Regular performance reviews provide insights into advertising effectiveness, while advanced reporting and analytic tools generate actionable insights that guide the team’s strategies. By applying sophisticated attribution models, Beeline fosters accurate tracking and analysis of the customer journey, which helps optimize budget allocation. Predictive forecasting models assist Beeline in anticipating long-term customer value, allowing it to invest more effectively. Additionally, Beeline gathers competitive intelligence to stay informed about industry trends, positioning it strategically in a dynamic market.

	●	Marketing communications: Beeline deploys automated, periodic emails, sometimes referred to as “drip” campaigns, to nurture potential leads and encourage conversions. It also leverages targeted auto-communications to increase engagement and conversion rates at key points in the customer lifecycle. Social media management allows Beeline to maintain a strong, visible presence across platforms, while AI-driven content generation supports scalable, relevant messaging. Each of these efforts contributes to building a compelling value proposition, strengthening Beeline’s brand identity, and establishing trust with current and potential customers. Additionally, special promotions and offers incentivize new customers and retain existing ones, making the brand more competitive.
	●	Product: This focuses on optimizing the customer experience through conversion rate improvements, user experience enhancements, and tailored landing pages that resonate with different customer segments. Beeline’s ongoing product testing ensures that updates are in line with customer needs, while AI-powered solutions are being developed to provide a more personalized experience. These efforts are designed to create a seamless, customer-centric product that adds value to each stage of the user’s journey, reinforcing Beeline’s commitment to customer satisfaction.

Intellectual property

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

	●	POS & Tracker: A sophisticated platform that captures, analyzes and retrieves information to process a mortgage transaction.
	●	Decision Engine: Data driven platform designed to issue approvals based on the data collected and information provided by the new customer.
	●	Resolution Engine: A tool that captures mortgage tasks and completes those tasks with data, documents or human involvement.
	●	BlinkQC: An in-house automated quality control (“QC”) solution that can perform a Fannie Mae/Freddie Mac required pre-close audit in approximately three minutes at a closing cost of less than $12.50 per file. By contrast, third party QC firms can take between an hour and 48 hours to complete and cost up to $175.00 per file.
	●	MagicBlocks: A platform that allows businesses to build their own custom AI tools through administrative protocols. Bob, the AI chatbot referred to below is powered by MagicBlocks. Beeline leverages its relationship with MagicBlocks to enhance its customers’ experience and drive engagement. Beeline is a founder of MagicBlocks and currently owns 48%; however, MagicBlocks is seeking investment funding and planning to grant equity to employees which will reduce Beeline’s ownership. Beeline currently uses this technology without any license or any agreement to pay royalties. If MagicBlocks were to sever its relationship with Beeline, it would have to locate another AI tool, which could be disruptive to Beeline’s business until it found a replacement and was able to integrate this new AI technology into Beeline’s operations. Beeline believes that other suitable sources exist, although the cost will reduce Beeline’s gross profit margins.
	●	“Bob”: is one of the first mortgage AI chatbots, handling incoming chat-based communication through its website on a 24/7 basis. Beeline recently upgraded Bob and since this upgrade 30 days ago, Bob converts conversations into applications at a rate six times more accurate than its human loan officers, who Beeline refers to as “Loan Guides”. Beeline plans for Bob to soon start voice campaigns for generating sales activities and enhancing customer service. By the end of the first quarter of 2025, Bob is expected to start processing files. It will then process some underwriting functions by the end of the third quarter of 2025. A certain level of human interaction and involvement is needed for the mortgage process, therefore Bob will always work in an environment that leverages AI abilities and humans when needed.
	●	License for software: Beeline licenses the loan origination software and customer relationship management platform from third party vendors.

Competition

Banks and other savings institutions dominate 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.

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:

	●	Rocket Mortgage: The largest digital mortgage lender in the U.S., known for its streamlined application process and fast approvals. Its online platform is user-friendly, and it offers competitive rates. Rocket Mortgage leverages AI to enhance customer experience and predict borrower needs.
	●	Better.com: Differentiates with its digital-first experience and AI-driven recommendations. It emphasizes transparency and customer support, with a streamlined, all-digital process.
	●	SoFi: Targets a younger demographic, particularly first-time homebuyers. SoFi combines mortgage products with personal finance management tools. It emphasizes low fees and offers a diverse array of financial services and non-mortgage loan products.
	●	LoanDepot: Strong presence in both direct-to-consumer and retail channels, with its proprietary technology called mello®. LoanDepot aims to combine human assistance with technology-driven processes to cater to diverse customer needs.
	●	Ally Home: Part of Ally Bank, Ally Home focuses on an all-digital mortgage process and targets consumers interested in a bundled experience with their banking services.

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

On the other hand, certain of Beeline’s competitors have greater resources and brand recognition than us, or otherwise pose a competitive threat to our business. See “Risk Factors” at page 23 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 get that 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

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

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 Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the Consumer Financial Protection Bureau (“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 “qualified mortgage” (“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 the Truth in Lending Act (“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 Federal Housing Authority (the “FHA”), the Federal Trade Commission (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:

	●	the Real Estate Settlement Procedures Act (“RESPA”) and Regulation X, which require certain disclosures to be made to the borrower at application, as to the lender’s good faith estimate of loan production costs, and at closing with respect to the actual real estate settlement statement costs (for most loans, such disclosures are in conjunction with those required under the TILA), prohibit kickbacks, referrals, and unearned fees in connection with settlement service business and impose requirements and limitations on affiliates and strategic partners, and certain loan servicing practices including with respect to escrow accounts, requests for information from borrowers, servicing transfers, lender-placed insurance, error resolution and loss mitigation;
	●	the TILA including the Home Ownership and Equity Protection Act (“HOEPA”) and Regulation Z, which regulate mortgage loan production and servicing activities, require certain disclosures be made to borrowers throughout the loan process regarding terms of mortgage financing (including those disclosures required under the TILA-RESPA Integrated Disclosure (the “TRID” rule), provide for a three-day right to rescind some transactions, regulate certain higher-priced and high-cost mortgages, require lenders to make a reasonable and good faith determination that consumers have the ability to repay the loan prior to consummation, mandate homeownership counseling for high-cost mortgage applicants, impose restrictions on loan production compensation, and apply to certain loan servicing practices;
	●	the Fair Credit Reporting Act and Regulation V, which regulate the use and reporting of information related to the credit history of consumers, require disclosures to consumers regarding the use of credit report information in certain credit decisions and require lenders to take measures to prevent or mitigate identity theft;
	●	the Equal Credit Opportunity Act and Regulation B, which prohibit discrimination on the basis of age, race and certain other characteristics in the extension of credit, require creditors to deliver copies of appraisals and other valuations, and require certain notifications to applicants for credit;
	●	the Homeowners Protection Act, which requires certain disclosures and the cancellation or termination of private mortgage insurance once certain equity levels are reached;
	●	the Home Mortgage Disclosure Act and Regulation C, which require reporting of mortgage loan application, origination and purchase data, including the number of mortgage loan applications originated, approved but not accepted, denied, purchased, closed for incompleteness and withdrawn;

	●	the Fair Housing Act, which prohibits discrimination in housing on the basis of race, sex, national origin and certain other characteristics;
	●	the Fair Debt Collection Practices Act, which regulates the timing and content of debt collection communications and debt collection practices;
	●	the Gramm-Leach-Bliley Act and Regulation P, which require initial and periodic communication with consumers on privacy matters, provide limitations on sharing nonpublic personal information, and the maintenance of privacy and security regarding certain consumer data in our possession;
	●	the Bank Secrecy Act, or BSA, and related regulations including the Office of Foreign Assets Control and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (“the USA PATRIOT Act”), which impose certain due diligence and recordkeeping requirements on lenders to detect and block money laundering that could support terrorist activities;
	●	the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act”), which imposes state licensing requirements on mortgage loan originators;
	●	the Electronic Signatures in Global and National Commerce Act and similar state laws, particularly the Uniform Electronic Transactions Act, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures and which require creditors and loan servicers to obtain a consumer’s consent to electronically receive disclosures required under federal and state laws and regulations;
	●	the Electronic Fund Transfer Act of 1978 (“EFTA”) and Regulation E, which protect consumers engaging in electronic fund transfers;
	●	the Servicemembers Civil Relief Act, which provides financial protections for eligible service members;
	●	the Federal Trade Commission Act, the FTC Credit Practices Rules and the FTC Telemarketing Sales Rule, which prohibit unfair or deceptive acts or practices and certain related practices;
	●	the Telephone Consumer Protection Act (“the TCPA”), which restricts telephone solicitations and automatic telephone equipment in connection with both origination and servicing of loans;
	●	the Mortgage Acts and Practices Advertising Rule (“Regulation N”), which prohibits certain unfair and deceptive acts and practices related to mortgage advertising and imposes recordkeeping requirements on advertisers;
	●	the CAN-SPAM Act, which makes it unlawful to send certain electronic mail messages that contain false or deceptive information and provide other protections for email users;
	●	the Consumer Financial Protection Act, enacted as part of the Dodd-Frank Act, which (among other things) created the CFPB, and gave it broad rulemaking authority over certain enumerated consumer financial laws and supervisory and enforcement jurisdiction over mortgage lenders and servicers, and prohibits any unfair, deceptive or abusive acts or practices in connection with any consumer financial product or service; and
	●	the Bankruptcy Code and bankruptcy injunctions and stays, which can restrict collection of debts.

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 California Consumer Privacy Act (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.

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.

Employees

As of November 1, 2024, the Beeline family of companies has 67 employees including 9 in management, 14 Loan Guides, 10 supporting its technology, 2 in marketing and 2 in compliance. 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

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 monthly rent of approximately $108,781 per annum dollar based on exchange rates as of October 31, 2024. In addition, Beeline leases small offices in executive suites at seven locations in Virginia, Texas, Louisiana, Massachusetts, and California. The total monthly cost for these facilities is $3,650.

Financing

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 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:

	●	Governance and Risk Management: Beeline maintains a dedicated consulting team responsible for cybersecurity governance, risk management, and compliance. This team manages its cybersecurity policies, which are regularly reviewed and updated to reflect technological advancements, regulatory changes, and evolving threats.
	●	Security Framework and Controls: Its security controls are aligned with recognized frameworks, such as the NIST Cybersecurity Framework, ISO/IEC 27001, and the CIS Controls. These controls encompass access management, encryption, network security, and system monitoring.
	●	Data Protection and Privacy: Beeline employs advanced encryption methods to protect sensitive data. Beeline’s systems are designed to ensure compliance with federal and state regulations.
	●	Identity and Access Management (“IAM”): Robust IAM solutions help ensure that only authorized users can access Beeline’s systems and data. This includes multi-factor authentication, role-based access control, and regular access reviews to enhance security.

	●	Disaster Recovery and Business Continuity: Beeline uses a comprehensive disaster recovery and business continuity plan to ensure operational resilience. This plan includes strategies for rapid data restoration, backup integrity, and failover capabilities, allowing it to minimize downtime and maintain business operations during disruptions.
	●	Incident Response and Recovery: In addition to disaster recovery, Beeline’s incident response program is designed to detect, respond to, and mitigate cybersecurity events. This program is closely integrated with our disaster recovery efforts to ensure seamless coordination during major incidents.
	●	Continuous Monitoring and Threat Intelligence: Beeline’s security operations center provides 24/7 monitoring of its infrastructure and systems. Beeline utilizes real-time threat intelligence to identify and address potential vulnerabilities and attacks, allowing proactive measures to mitigate risks.
	●	Employee Training and Awareness: Beeline conducts ongoing training to enhance security awareness among employees and contractors. These programs cover current threats, social engineering tactics, and best practices for cybersecurity and disaster recovery.

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.

OFFICERS

Nicholas R. Liuzza Jr., Chief Executive Officer. Mr. Liuzza co-founded Beeline in 2019 and serves as its Chief Executive Officer. 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 January of 2020.

Jessica N. Kennedy, President, Chief Operating Officer, and General Counsel. Ms. Kennedy co-founded Beeline with Mr. Liuzza and has held the positions of Chief Operating Officer since 2021, General Counsel since 2019 and President since 2022. In these positions, Ms. Kennedy oversees the day-to-day operations of the business, focusing on strategic planning, spearheads the development and management of various operational teams, and leads its legal, audit and risk teams at the Company. Ms. Kennedy has 14 years of real estate law experience and ten years of real estate services compliance experience.

Christopher R. Moe, Chief Financial Officer. Since June of 2023, Mr. Moe has served as the Chief Financial Officer of Beeline. Mr. Moe has been a director of RedCat Holdings, Inc. 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.

EXECUTIVE COMPENSATION

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.

Name/Title	Year		Salary
Nicholas R. Liuzza, Jr.		2023	$	30,000
Chief Executive Officer		2022	$	30,000
Jessica N. Kennedy		2023	$	135,000
Chief Operating Officer		2022	$	150,000
Christopher R. Moe		2023	$	180,000
Chief Financial Officer		2022		N/A

PRINCIPAL SHAREHOLDERS

The following Information relates to Eastside’s directors, executive officers and 5% shareholders which supplements and updates information contained in reports Eastside has filed with the Securities and Exchange Commission.

Name	Eastside Common Stock Beneficially Owned prior to Shareholder Approval (1)			Eastside Common Stock Percentage prior to Shareholder Approval (1)			Eastside Common Stock Beneficially Owned following Shareholder Approval (1) (2)			Eastside Common Stock Percentage following Shareholder Approval (1) (2)
Geoffrey Gwin, Chief Executive Officer and Director		635,751			12.7	%		635,751			*
Christopher R. Moe, Chief Financial Officer		—			—			—			—
Nicholas R. Liuzza, Jr., Chief Executive Officer of Beeline		135,543	(3)		2.6	%		18,324,715	(4)		24.5	%
Eric Finnsson, Director (5)		19,880			*			19,880			*
Stephanie Kilkenny, Director (6)		154,514			3.1	%		154,514			*
Robert Grammen, Director (7)		124,650			2.5	%		124,650			*
Joseph Freedman, Director		3,981	(8)		*			538,182	(9)		*
Joseph Caltabiano, Director		—			—			—			—
Totals		1,074,319			21.4	%		19,797,692			26.5	%

*Less than 1%.

(1) The table provides amounts and percentages of Eastside Common Stock beneficially owned each (i) prior to shareholder approval of the issuances of shares of Common Stock underlying the Series F Convertible Preferred Stock (the “Series F”) issued in the merger with Beeline, and (ii) after such shareholder approval, thereby giving effect to the convertibility of the Series F. While (ii) above assumes that the shareholder approval will have occurred within 60 days of the date of this Report, we do not expect that such shareholder approval will be obtained within that timeframe. Applicable percentages are based on 4,991,065 shares of Eastside Common Stock issued and outstanding October 30, 2024. Amounts set forth in Common Stock beneficially owned give effect to shares of Common Stock underlying derivative securities including vested stock options, warrants and convertible preferred stock.

(2) Assumes and gives effect to full conversions of all shares of Series F and Series F-1 Convertible Preferred Stock, for a total of 69,655,004 underlying shares of Common Stock, without regard to any beneficial ownership limitations.

(3) Includes underlying shares of Common Stock issuable upon conversion of Series F-1 Convertible Preferred Stock held by Mr. Liuzza and the Nicholas R. Liuzza Jr. Trust – 2020.

(4) Includes underlying shares of Common Stock issuable upon conversion of Series F Convertible Preferred Stock and Series F-1 Convertible Preferred Stock held by Mr. Liuzza and the Nicholas R. Liuzza Jr. Trust – 2020.

(5) Includes shares underlying vested stock options.

(6) Includes shares held in Ms. Kilkenny’s capacity as trustee of the Stephanie A. Kilkenny Trust, shares issuable upon exercise of warrants held by TQLA, LLC, which Ms. Kilkenny, together with her spouse, owns and controls; and warrants held directly by Patrick J. Kilkenny, Trustee of the Patrick J. Kilkenny Revocable Trust. Mr. Kilkenny is the spouse of the Reporting Person.

(7) Includes shares underlying vested stock options.

(8) Includes underlying shares of Common Stock issuable upon conversion of Series F-1 Convertible Preferred Stock.

(9) Includes underlying shares of Common Stock issuable upon conversion of Series F Convertible Preferred Stock and Series F-1 Convertible Preferred Stock.

RELATED PARTY TRANSACTIONS

The statements in this section describe the related party transactions specific to Beeline its officers, directors, or 10% shareholders since January 1, 2022.

Jessica Kennedy owns a 5% interest in Tower Title, which is a vendor to certain subsidiaries of Beeline.

Jay Stockwell (a Beeline co-founder and the MagicBlocks CEO) owns an equity interest in SpeedPPC Pty. Ltd., which provides marketing services to Beeline and certain of its subsidiaries.

Beeline Loans, Inc., a Beeline subsidiary is a member of The Mortgage Collaborative, which is an industry trade group founded by David Kittle. Beeline Loans, Inc. pays membership fees to The Mortgage Collaborative. Mr. Kittle was a member of the Beeline board until the merger with the Company.

Manta Reef Holdings, LLC holds a $142,600 note pursuant to a certain Loan Agreement with Beeline dated December 14, 2023. An additional $357,400 was advanced to Beeline with the balance secured by Nicholas R. Liuzza Jr.’s personal property.

Beeline issued a note to a private company in which Joseph Freedman, a Beeline and East director, has an ownership interest. This note is for approximately $87,000. Mr. Freedman is now a board member of the Company and was a board member of Beeline until the merger.

Forward-Looking Statements

This Report includes forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events about the company or our outlook and involve uncertainties that could significantly impact results.

You can identify forward-looking statements by the fact they do not relate to historical or current facts and by the use of words indicating anticipation or speculation such as “believe,” “expect,” “estimate,” “anticipate,” “will be,” “should,” “plan,” “project,” “intend,” “could” and similar words or expressions.

You should not place undue certainty on these forward-looking statements, which speak only as of the date made. Except as required by law, Beeline undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these forward-looking statements.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS AND CONDITION

The following discussion and analysis of Beeline Financial Holdings, Inc. (“Beeline”) Beeline’s financial condition and results of operations should be read together with Beeline’s consolidated financial statements as of and for the years ended December 31, 2023 and 2022, in each case, together with related notes thereto, included elsewhere in this Report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Beeline’s actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this Report. See “Cautionary Statement Regarding Forward-Looking Statements.” Additionally, historical results are not necessarily indicative of the results that may be expected for any period in the future.

Cautionary Statement Regarding Forward-Looking Statements

This section includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events about the Company or its outlook and involve uncertainties that could significantly impact results.

You should not place undue certainty on these forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these forward-looking statements, including those described under “Risk Factors” and elsewhere in this Report.

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.

Results of Operations

We generate 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:

	YearS Ended December 31,
	2023					2022
	Amounts		Percentages			Amounts		Percentages
Mortgage Loan Production, Net	$	3,205,591		85	%	$	2,244,173		77	%
Title		558,759		15	%		672,811		23	%
Data & Tech		2,747		-%			-		-	%
Total Net Revenues	$	3,767,097				$	2,916,987

As the table indicates, revenue from Beeline’s mortgage loan production increased by 43% in 2023 compared to 2022 while revenue from Beeline’s title operations decreased by 17% 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, mainly utilizing a warehouse line of credit. The repayments of Beeline’s borrowings come from the revenue generated by selling its loans to a network of purchasers, which includes government-sponsored enterprises (“GSEs”). Beeline had $5.0 million and $25.0 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

Our success in attracting new clients largely hinges on Beeline’s 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 has been 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

Our success in attracting new customers and expanding customer acquisitions largely hinges on Beeline’s commitment to delivering exceptional customer experiences and competitive pricing. 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.

Results of Operations

Revenue

Total net revenues were $3.80 million and $2.92 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 $13.76 million compared to $13.34 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.

Net Income (Loss)

Net loss was $10.27 million and $10.71 million for the years ended December 31, 2023 and 2022, respectively. Net losses were lower due to higher revenues compared to the prior year.

Liquidity and Capital Resources

Our primary capital requirements are for cash used in operating activities including the origination and warehousing of consumer mortgage loans and the repayment of debt. Funds for cash and liquidity needs have historically not been generated from operations but rather from the proceeds of loans and the sale of convertible debt and equity. Beeline has been dependent on raising capital from debt and equity financing to meet its operating needs.

As of December 31, 2023, Beeline had an accumulated deficit of $38.20 million, cash on hand of $0.19 million and negative working capital of $2.67 million.

During 2024, even as Beeline’s business improved, it continues to experience liquidity issues.

On November 14, 2024, Eastside sold $1,938,000 in aggregate principal amount of Senior Secured Notes (the “Notes”) and Pre-Funded Warrants to purchase a total of 363,602 shares of Common Stock (the “Warrants”) for total gross proceeds of $1,615,000 in connection with a private placement offering. 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. In connection with the offering, the Company also issued an additional $448,333.33 in principal of Notes to a purchaser of the Notes in exchange for the cancellation of shares of Series F having an equivalent stated value.

Additionally, the Company issued $3.0 million of Senior Secured Debentures on June 5, 2024 with a 10% original issue discount and 10% interest per annum. In January 2025, they will begin monthly amortization of $440,328 through September 2025.

As of November 15, 2024, the Company had cash on hand of $1,456,784.

Beeline’s ability to meet ongoing operating cash needs over the next 12 months depends on external financing activities and improving operating results. The availability of external financing will be largely dependent on improvement in performance, including lower interest rates driving higher loan origination, supported by technology investments effectively improving results, as well as the Company’s ability to increase its authorized capital with respect to any future equity offering it may pursue. See “Risk Factors.”

Operating Activities

Total cash used in operating activities was $8.55 million for the year ended December 31, 2023 compared to $8.44 million used during prior year primarily due to mortgage origination activity.

Investing Activities

Total cash used in investing activities was $0.86 million during the year ended December 31, 2023, which was lower than $1.91 million used in the prior year.

Financing Activities

Total cash provided by financing activities was $9.50 million during the year ended December 31, 2023 related to net proceeds from issuance of convertible notes and demand notes. Total cash provided by financing activities was $9.01 million during the year ended December 31, 2022 and primarily consisted of proceeds from the exercise of warrants and issuance of convertible notes.

Critical Accounting Policies

Discussion and analysis of Beeline’s financial condition and results of operations are based on Beeline’s financial statements which have been prepared in accordance with GAAP. The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

RISK FACTORS

The following discussion primarily focuses on the significant risk factors facing Beeline. Whenever it refers to having a material adverse effect on Beeline, you can assume it will have the same material adverse effect on the Company.

Beeline’s business is exposed to various risks and uncertainties that you should consider when evaluating investing in the Company. Should any of these risks or uncertainties materialize, they could have a significant, adverse impact on our business, prospects, financial condition, and operational results. The following list of risks is not exhaustive; additional unknown or currently perceived immaterial risks may also adversely affect Beeline. These risk factors should be reviewed alongside the other information provided in this Report, including Beeline’s consolidated financial statements and accompanying notes, as well as other documents the Company files with the SEC, including the Company’s risk factors prior to our acquiring Beeline.

Summary

Beeline’s business faces substantial risks due to its limited operating history, a business model highly dependent on new software development in a highly regulated industry, changes in local and national economic conditions impacting the U.S. real estate market, rapid operational growth, and constrained financial resources with salary costs far outpacing revenues. Some of these risks are summarized below and more thoroughly discussed after the summary:

Strategic risks

	●	failing to grow market share in the residential mortgage market as anticipated;
	●	failing to grow title businesses as anticipated;
	●	failing to have adoption of our SaaS model tech products as anticipated;
	●	changes in economic conditions resulting in fluctuations in demand for mortgages and mortgage services in the US;
	●	growth placing significant demands on our management and infrastructure;
	●	failing to maintain demand for our services or diversify our revenue base;
	●	operating in a competitive business environment;
	●	inability to successfully consummate or integrate acquisitions;
	●	negative publicity resulting in a decline in our growth;
	●	ineffective risk management efforts;
	●	increased costs and demands upon management associated with being a public company; and
	●	interest rate-related risks negatively impacting on our closing volumes.

Operational risks

	●	failing to adequately protect our technology infrastructure;
	●	material defects or errors in our technology infrastructure;
	●	system interruptions that impair access to our technology;
	●	the effort, time and expense associated with technology implementation;
	●	failing to adapt to technological changes;
	●	using ‘‘open source’’ software in some of our services and technologies;
	●	losing our corporate culture;
	●	failing to retain or hire additional key personnel; and
	●	the occurrence of pandemics, earthquakes, fires, floods and other natural catastrophic events or interruptions.

Legal and compliance risks

	●	regulatory risks applicable to us;
	●	risks associated with the potential reclassification of exempt employees and field professionals;

	●	field professional work product liability;
	●	current or future litigation;
	●	our confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets;
	●	potential infringement of our services on the proprietary rights of others;
	●	our insurance coverage reserves may not cover future claims;
	●	failing to adequately protect our intellectual property;
	●	potential tax law changes or adverse tax examinations;
	●	our by-laws potentially limiting a shareholder’s ability to obtain a favorable judicial forum for disputes with us;
	●	difficulty for shareholders to enforce judgments against non-resident directors within Canada; and
	●	claims for indemnification by our directors or officers.

Financial and reporting risks

	●	the forward-looking statements contained in this Report potentially proving to be incorrect;
	●	inaccurate accounting estimates and judgments;
	●	potential inability to raise additional capital in the future on favorable terms, or at all;
	●	potential deficiencies in our internal controls over financial reporting;
	●	changing accounting standards or interpretations;
	●	restrictive covenants contained in our credit facility;
	●	dependence on our subsidiaries for cash flows;
	●	exchange rate fluctuations;
	●	future offerings of debt and/or equity securities;
	●	future sales of our shares by existing shareholders may reduce the market price of the shares;
	●	dilution and future issuances of our shares;
	●	securities analysts’ research or reports potentially impacting our share price;
	●	future indebtedness and the potential failure to fund future endeavors;
	●	potential increases in our debt servicing costs;
	●	the market price of our shares potentially fluctuating significantly; and
	●	our current policy with respect to dividends.

Business-Specific Risks

Because Beeline operates on a going concern basis, it may not be successful and its ability to operate is in doubt unless we provide it with working capital.

Beeline has limited capital and had an accumulated deficit through June 30, 2024, of $49,486,885. Because Beeline did not, at December 31, 2023, have sufficient working capital and cash flows for continued operations for at least the next 12 months, its auditors issued an opinion with an explanatory paragraph regarding the risk of its inability to continue as a going concern. Beeline’s continued existence is dependent upon our obtaining the necessary capital to meet Beeline’s expenditures. Beeline cannot assure you that it will be able to raise adequate capital to meet Beeline’s future working capital needs.

Because Beeline has a history of operating losses since inception, if it fails to generate operating cash flow, you may lose all or most of your investment.

Beeline was organized in 2019, has a limited operating history and has generated substantial ongoing losses since inception. It recorded net losses of $10,272,496 and $10,709,332 for 2023 and 2022, respectively. For 2023, salaries expense was $6,422,175 on total revenues of $3,767,097. Interest expense was $569,069. For the six months ended June 30, 2024, Beeline incurred net losses of $10,863,755, including approximately $4.6 million of interest expense and salary expenses of $3,299,075 on revenues of $2,336,029. In June 2024, Beeline restructured its indebtedness, which accounted for the large interest charge. Beeline will continue to incur losses and experience negative cash flows from operations for the foreseeable future. If Beeline cannot achieve positive cash flow from operations or net income, Beeline will need to raise additional capital, which Beeline may not be able to do on favorable terms, if at all. Beeline’s limited operating history and ongoing losses raise substantial uncertainty about its future profitability and success.

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 a 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, the risk of another pandemic like COVID-19, a major war affecting the United States, the willingness of lenders to provide funding for and purchase home loans, 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 (“FHA”) or Veterans Administration (“VA”) 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 or Veterans Administration (“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-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 Operations 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 of visitors 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 Business Operations and Financial Results

Beeline has a history of operating losses and has not yet been able to maintain profitability in the current market conditions and it may not achieve or maintain profitability in the future.

Beeline was formed in 2019 and commenced operations in May 2020. It has experienced net losses and negative cashflow from operations during its operating history. This has been due to a number of factors, including poor interest rate environment, resulting in a negative impact on revenue and closed loan volumes; investments in our business, especially technology and the high cost to originate loans (increasing vendor costs, etc.).

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. 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.

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.

Because a majority of Beeline’s loans are Non-QM, its 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.

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 in order 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:

	●	credit standards for mortgage loans;
	●	its default and claims rates on recently produced FHA loans;
	●	its staffing levels and other servicing practices;
	●	the servicing and ancillary fees that it may charge;
	●	its modification standards and procedures;
	●	the amount of reimbursable and non-reimbursable advances that it may make; and
	●	the types of loan products that are eligible for sale or securitization.

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 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 expect 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.

Beeline’s debt obligations could materially and adversely impact it. For example, these obligations could:

	●	require Beeline to use a large portion of its cash to pay principal and interest on debt, which will reduce the amount of cash flow available to fund mortgage loan originations, working capital and other expenditures, and other business activities;
	●	result in certain of Beeline’s debt instruments being accelerated to be immediately due and payable or being deemed to be in default if certain terms of default are triggered, such as applicable cross-default and/or cross-acceleration provisions;
	●	limit Beeline’s future ability to raise funds for working capital, mortgage loans, strategic acquisitions or business opportunities, and other general corporate requirements;
	●	restrict Beeline’s ability to incur specified indebtedness, create or incur certain liens;
	●	increase Beeline’s vulnerability to adverse economic and industry conditions; and
	●	increase Beeline’s exposure to interest rate risk from variable rate indebtedness.

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.

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.

Beeline relies on warehouse lines of credit to fund its loans, which may become limited or not be available in the future, which would negatively impact its business and financial performance.

Beeline’s business depends on warehouse lines of credit to fund the loans it issues. It is possible that these lines of credit may become limited, temporarily unavailable, or terminated in the future. 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. Any of the foregoing will negatively impact Beeline’s business and your investment in the Company.

Borrowings under Beeline’s warehouse lines of credit expose it to interest rate risk because of variable rates of interest that could materially and adversely impact the financing of its business.

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.

Risks Related to Products, Technology, and Intellectual Property

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

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.

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. Ste 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.

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 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 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:

	●	loss of its licenses and approvals to engage in its lending, servicing and brokering businesses;
	●	damage to its reputation in the industry;
	●	governmental investigations and enforcement actions, which also could involve allegations that such compliance failures demonstrate weaknesses in Beeline’s compliance systems;
	●	administrative fines and penalties and litigation;
	●	civil and criminal liability, including class action lawsuits and defenses to foreclosure;
	●	diminished ability to sell loans that it originates or brokers, requirements to sell such loans at a discount compared to other loans or repurchase or address indemnification claims from purchasers of such loans, including the GSEs; and
	●	inability to execute on its business strategy, including its growth plans.

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.

As explained in a prior risk factor, 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.

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 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 Related to Merger with the Company

Because the Company received two non-compliance letters from the Nasdaq Stock Market, 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. For example, 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. Should the Company be unable to maintain its compliance with Nasdaq Listing Rules, the Company’s stock may be subject to delisting. If the Company’s stock is delisted it would negatively impact the Company’s ability to raise capital, and negatively impact its stockholders’ ability to trade its common stock. Further, we have not complied with Nasdaq’s minimum bid rule. While we are seeking approval of a reverse stock split of our annual stockholder’s meeting scheduled for late December, there can be no assurance our stockholders will approve this charter amendment or if they do, our stock price will not again fail to meet Nasdaq minimum bid requirement. Historically reverse splits depress an issuer’s stock price.

In order to raise capital as necessary to fund our ongoing operations and further our business objectives, and to maintain our listing on Nasdaq, we will need to amend our Articles of Incorporation to increase our authorized common stock, which will involve prolonged, complex and challenging processes and will present significant additional challenges in our capital raising efforts.

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 as necessary to enable us to conduct capital raising transactions. 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 and boards of directors of each of Beeline and us, principal stockholders, related party transactions for the prior two year period, 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 shareholder 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.

At that special meeting, we will seek stockholder approval to increase our authorized common stock and make the Series F and other equity we issued and may issue in the near future convertible and able to vote. Given both our present need for capital and the capital intensive nature of our business, the foregoing process and challenges will impose additional strains on us and our ability to raise capital in a timely manner, in amounts sufficient to meet our capital requirements, and/or on terms favorable to us or without subjecting us to excessive or onerous terms. Particularly during the period wherein we do not have sufficient authorized capital and the months following the recent merger, we may be forced to issue derivative securities which have highly dilutive features and/or limit our ability to operate our business or take action which would otherwise be advantageous to our business and stock holders. In addition, due to our recent non-compliance with Nasdaq’s shareholder equity requirement, we may be limited in our ability to raise capital through a debt financing, and as a result of these factors we may be unable to access the amount of capital needed in the timeframe needed or at all.

The above challenges and uncertainties present significant risks to us and our business, including our ability to continue as a going concern, particularly in the short term until we can successfully complete the process required to affect the necessary amendments. If we are unable to navigate this complex and challenging situation, or if we cannot obtain such approvals it could materially adversely affect our business, financial condition and operating results, and you could lose all or almost all of your investment.

Item 9.01 Financial Statements and Exhibits.

Exhibit		Description

99.1		Beeline Financial Statements for the Fiscal Years Ended December 31, 2023 and 2022
99.2		Beeline Financial Statements for the Six Months Ended June 30, 2024
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	EASTSIDE DISTILLING, INC.

	By:	/s/ Geoffrey Gwin
		Geoffrey Gwin
		Chief Executive Officer

Date: November 21, 2024

Exhibit 99.1

BEELINE FINANCIAL HOLDINGS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2023

Beeline Financial Holdings, Inc. Consolidated Financial Statements December 31, 2023

Table of Contents

Independent Auditors’ Report	3-4
Financial Statements
Consolidated Balance Sheet	5
Consolidated Statement of Operations	6
Consolidated Statement of Changes in Stockholders’ Equity	7
Consolidated Statement of Cash Flows	8
Notes to Consolidated Financial Statements	9-20

Independent Auditor’s Report

To the Board of Directors and Stockholders

Beeline Financial Holdings, Inc.

Providence, RI 02909-2468

Opinion

We have audited the accompanying consolidated financial statements of Beeline Financial Holdings, Inc., which comprise the balance sheet as of December 31, 2023, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements.

In our opinion, the financial statements present fairly, in all material respects, the financial position of Beeline Financial Holdings, Inc., as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Beeline Financial Holdings, Inc., and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Substantial Doubt About the Entity’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, has a net capital deficiency, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair

presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Beeline Financial Holdings, Inc.’s ability to continue as a going concern for one year after the date that the financial statements are issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

56 Rockford Road, Wilmington, DE 19806-1004 | Phone: 302-652-4783

ciroadamscpa.com

In performing an audit in accordance with GAAS, we:

	●	Exercise professional judgment and maintain professional skepticism throughout the audit.

	●	Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

	●	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Beeline Financial Holdings, Inc.’s internal control. Accordingly, no such opinion is expressed.

	●	Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as, evaluate the overall presentation of the financial statements.

	●	Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Beeline Financial Holdings, Inc.’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.

Wilmington, DE 19806-1004

April 24, 2024

BEELINE FINANCIAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 2023

Assets

Current Assets
Cash and cash equivalents	$	190,357
Accounts receivable, net		57,970
Mortgage loans held for sale, at fair value		2,243,043
Prepaid expenses and other current assets		82,137
Total Current Assets		2,573,507

Property and equipment, net		308,693
Software development costs, net		4,863,090
Right of use assets		1,643,433
Security deposit		58,181
Total Assets	$	9,446,903

Liabilities & Stockholders’ Equity

Current Liabilities
Accounts payable	$	1,384,275
Warehouse lines of credit		2,158,099
Lease liability, current portion		323,959
Loan payable		91,999
Loan payable, related party		973,173
Accrued payroll		300,132
Escrows held for others		4,906
Accrued expenses and other current liabilities		9,404
Total Current Liabilities		5,245,946

Long Term Liabilities
Debt, convertible notes		9,469,018
Debt, convertible notes - related party		9,440,428
Lease liability, net of current portion		1,526,825
Promissory note		291,846
Total Long Term Liabilities		20,728,117

Total Liabilities		25,974,063

Stockholders’ Equity

Common stock, $0.01 par value, 250,000 shares authorized, 164,404 shares issued and outstanding		1,644
Series A preferred stock, $0.01 par value, 10,000 shares authorized, 24,796 shares issued and outstanding		248
Additional paid in capital		21,772,516
Accumulated other comprehensive income		(95,728	)
Accumulated deficit		(38,205,841	)
Total Stockholders’ Equity		(16,527,161	)

Total Liabilities & Stockholders’ Equity	$	9,446,903

See notes to consolidated financial statements

BEELINE FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2023

Revenues		2023
Gain on sale of loans, net	$	2,948,791
Interest Income, net		(47,588	)
Loan origination fees		304,388
Title fees		558,759
Data and tech services		2,748
REVENUES, NET		3,767,097

Operating Expenses
Selling, general and administrative		496,393
Salaries and benefits		6,422,175
Payroll taxes		31,468
Professional fees		920,656
Marketing and advertising		1,883,622
Loan originating expenses		675,053
Depreciation and amortization		1,591,511
Rent and utilities		369,785
Computer and software		668,733
Title operation expense		199,202
Travel and entertainment		71,976
Insurance expense		212,546
Other expenses		215,240
Total Operating Expenses		13,758,360

Other Income/Expenses
Other (income)/expense		(295,946	)
Interest expense		569,069
Other taxes		8,110
Total Other Income/Expenses		281,233
TOTAL EXPENSES	$	14,039,594

NET INCOME (LOSS)	$	(10,272,496	)

See notes to consolidated financial statements

BEELINE FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

DECEMBER 31, 2023

	Common Stock				Preferred Stock						Additional Paid in			Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Shares			Amount			Capital			Deficit			Loss			Equity
Balance, January 1, 2023		164,404	$	1,644		47,291		$	269		$	27,866,976		$	(27,933,345	)	$	(79,836	)	$	(144,292	)

Change in estimate used in valuation of warrants												(762,668	)								(762,668	)

Preferred stock exchanged for convertible notes						(22,495	)		(21	)		(5,706,538	)								(5,706,559	)

Stock-based compensation expense												374,746									374,746

Foreign currency translation adjustments																		(15,892	)		(15,892	)

Net loss															(10,272,496	)					(10,272,496	)

Balance, December 31, 2023		164,404	$	1,644.00		24,796		$	248		$	21,772,516		$	(38,205,841	)	$	(95,728	)	$	(16,527,161	)

See notes to consolidated financial statements

BEELINE FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2023

CASH FLOWS PROVIDED BY OPEATING ACTIVITIES

Net Loss	$	(10,272,496	)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization		1,591,511
Allowance for change in fair market value		24,552
Stock-based compensation		374,746

Changes in operating assets and liabilities:
Accounts receivable		(28,375	)
Loans held for sale		725,779
Prepaid expenses and other current assets		10,706
Deposits		250
Accounts payable		147,317
Accrued payroll		(112,259	)
Right of use asset		304,371
Escrows held		(17,289	)
Warehouse lines of credit, net		(902,824	)
Lease liability		(309,170	)
Promissory note		(112,500	)
Accrued expenses and other liabilities		3,640
Net Cash Used in Operating Activities		(8,572,041	)

CASH FLOWS USED IN INVESTING ACTIVITIES

Purchase of property and equipment		-
Software development costs		(851,028	)
Net Cash Used in Investing Activities		(851,028	)

CASH FLOWS FROM FINANCING ACTIVITIES

Payments from BDCRI loan		(71,505	)
Convertible notes issued		3,940,403
Convertible notes issued - related party		4,662,026
Stock-based compensation
Demand notes		153,454
Demand notes - related party		811,718
Net Cash Provided by Financing Activities		9,496,096

Foreign currency translation adjustments		(15,892	)

Net increase (decrease) in cash		57,134

Cash and cash equivalents - beginning of period		133,223
Cash and cash equivalents - end of period	$	190,357

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES

Preferred stock exchanged for convertible notes	$	4,506,526
Preferred stock exchanged for convertible notes - related party	$	1,200,021

See notes to consolidated financial statements

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

NOTE 1 - NATURE OF BUSINESS

Beeline Financial Holdings, Inc. (the “Company,” and together with its consolidated subsidiaries, “Beeline,” “we”, “us”, “our”) was incorporated in Delaware on July 1, 2020, via a merger with Beeline Financial Holdings, Inc, a Rhode Island corporation founded on September 20, 2018. Beeline is a full service Direct-to-Consumer lender specializing in conventional conforming and non-conforming residential first-lien mortgages.

The consolidated financial statements include the consolidated accounts of Beeline Financial Holdings, Inc. and its wholly-owned subsidiaries, Beeline Title Holdings, Inc. (“Beeline Title Holdings”), Beeline Mortgage Holdings, Inc. (“Beeline Mortgage Holdings”), Beeline Loans Pty Ltd. (“Australian Subsidiary”) and Nimble Title Holdings, LLC FKA Cambridge Title Holdings, LLC (“Nimble Title Holdings”). Beeline Title Holdings has five subsidiaries, Beeline Title, LLC (“Beeline Title”), Beeline Texas Title, LLC (“Beeline Texas Title”), Beeline Settlement Services, LLC (“Beeline Settlement Services”), Beeline Title Company of California, LLC (“Beeline California”) and Beeline Title Agency, LLC (“Beeline Title Agency”). Beeline Mortgage Holdings has one subsidiary, Beeline Loans, Inc. (“Beeline Loans”). Nimble Title Holdings has four subsidiaries, Nimble Title, LLC (“Nimble Title”), Nimble Title Agency, LLC (“Nimble Title Agency”), Nimble Settlement Services, LLC (“Nimble Settlement Services”), and Cambridge Title Company of California (“Cambridge California”).

Beeline is a fintech mortgage lender that launched its lending platform in May 2020. Beeline continues to develop proprietary software in the form of major enhancements and new developments in its lending platform, introducing its Chat API “Bob” in July 2023. Beeline continues to hire key personnel to be able to scale into the future.

Beeline is subject to a number of risks common to emerging companies stemming from, among other things, a limited operating history, rapid technological change, uncertainty of market acceptance and products, uncertainty of regulatory approval, competition from substitute products and larger companies, the need to obtain additional financing, compliance with government regulation, protection of proprietary technology, interest rate fluctuations, product liability, and the dependence on key individuals.

NOTE 2 – GOING CONCERN, LIQUIDITY, AND MANAGEMENT’S PLANS

These consolidated financial statements have been prepared on a basis that assumes Beeline will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Beeline has incurred recurring losses from operations since its inception and is dependent on debt and equity financing. These factors raise substantial doubt about Beeline’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if Beeline were unable to continue as a going concern.

Management believes that its available funds and cash flow from operations may not be sufficient to meet our working capital requirements for the twelve months subsequent to the issuance of our financial statements. In order to accomplish its business plan objectives, Beeline will need to either increase revenues or raise capital by the issuance of debt and/or equity and stock or sell Beeline to a strategic acquirer.

Management believes that it will be successful in obtaining additional financing based on its limited history of raising funds; however, there can be no assurances that our business plans and actions will be successful, that we will generate anticipated revenues, or that unforeseen circumstances will not require additional funding sources in the future or effectuate plans to conserve liquidity. Future efforts to raise additional funds may not be successful or they may not be available on acceptable terms, if at all. Please see Note 8 – Debt as to current capital raise information.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING

These consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Beeline Financial Holdings, Inc., and its subsidiaries. Intercompany transactions and balances have been eliminated.

USE OF ESTIMATES

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Examples of estimates and assumptions include: for revenue recognition, estimating the gain on sale of loans originated; and for equity instruments such as options, estimating the fair value of options granted and expensed. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Beeline considers highly liquid investments purchased with a remaining maturity of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents include money market accounts that are readily convertible into cash.

MORTGAGE LOANS HELD FOR SALE

Beeline has elected the fair value option for accounting for mortgage loans held for sale.

Included in mortgage loans held for sale are loans originated as held for sale that are expected to be sold to investors and loans that have been previously sold and repurchased from investors that management intends to resell to other investors. Refer to Note 4 - Mortgage Loans Held for Sale for further information.

DERIVATIVE FINANCIAL INSTRUMENTS

Beeline enters into interest rate lock commitments, forward commitments to sell mortgage loans and forward commitments to purchase loans, which are considered derivative financial instruments. These items are accounted for as free-standing derivatives and are included in the Balance Sheet at fair value. Beeline treats all of its derivative instruments as economic hedges; therefore, none of its derivative instruments are designated as accounting hedges. Changes in the fair value of the IRLCs and forward commitments to sell and purchase mortgage loans are recorded in current period earnings and are included in gain on sale of loans, net in the Statement of Operations. Forward commitments to purchase mortgage loans are recognized in current period earnings and are included in gain on sale of loans, net in the Statement of Operations.

The Company enters into IRLCs to fund residential mortgage loans with its potential borrowers. These commitments are binding agreements to lend funds to these potential borrowers at specified interest rates within specified periods of time.

The fair value of IRLCs is derived from the fair value of similar mortgage loans or bonds, which is based on observable market data. Changes to the fair value of IRLCs are recognized based on changes in interest rates, changes in the probability that the commitment will be exercised, and the passage of time.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

DERIVATIVE FINANCIAL INSTRUMENTS (continued)

IRLCs and uncommitted mortgage loans held for sale expose Beeline to the risk that the value of the mortgage loans held and mortgage loans underlying the commitments may decline due to increases in mortgage interest rates during the life of the commitments.

There were no open forward contracts at December 31, 2023.

DEPOSITS

Deposits include security deposits for leased office spaces, which are refundable to Beeline upon expiration of the lease agreements.

PROPERTY AND EQUIPMENT, NET

Property and equipment, including leasehold improvements, are recorded at cost, and are depreciated or amortized using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years. Repair and maintenance costs are expensed as incurred. Leasehold improvements are amortized over the shorter of the lease term or the improvement’s estimated useful life. Improvements, which increase the productive value of assets, are capitalized, and depreciated over the remaining useful life of the related asset.

SOFTWARE DEVELOPMENT COSTS, NET

Beeline capitalizes certain qualifying costs incurred during the application development stage in connection with the development of internal-use software. Costs related to preliminary project activities are expensed as incurred and post-implementation activities will be expensed as incurred. Capitalized software costs are amortized over the useful life of the software, which is five years.

IMPAIRMENT OF LONG-LIVED ASSETS

Beeline continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets, including internal-use software, may warrant revision or that the carrying value of these assets may be impaired. Beeline does not believe that any events have occurred that would indicate its long-lived assets are impaired on December 31, 2023.

FAIR VALUE MEASUREMENTS

Fair value is the price that would be received if an asset were sold or the price that would be paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. Required disclosures include classification of fair value measurements within a three-level hierarchy (Level 1, Level 2, and Level 3). Classification of a fair value measurement within the hierarchy is dependent on the classification and significance of the inputs used to determine the fair value measurement. Observable inputs are those that are observed, implied from, or corroborated with externally available market information. Unobservable inputs represent the Beeline’s estimates of market participants’ assumptions.

Fair value measurements are classified in the following manner:

Level 1—Valuation is based on quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Valuation is based on either observable prices for identical assets or liabilities in inactive markets, observable prices for similar assets or liabilities, or other inputs that are derived directly from, or through correlation to, observable market data at the measurement date.

Level 3—Valuation is based on the Beeline’s internal models using assumptions at the measurement date that a market participant would use.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

FAIR VALUE MEASUREMENTS (continued)

In determining fair value measurement, Beeline uses observable inputs whenever possible. The level of a fair value measurement within the hierarchy is dependent on the lowest level of input that has a significant impact on the measurement as a whole. If quoted market prices are available at the measurement date or are available for similar instruments, such prices are used in the measurements. If observable market data is not available at the measurement date, judgment is required to measure fair value.

The following is a description of measurement techniques for items recorded at fair value on a recurring basis. There were no material items recorded at fair value on a nonrecurring basis as of December 31, 2023.

Mortgage loans held for sale: Loans held for sale that are valued using Level 2 measurements derived from observable market data, including market prices of securities backed by similar mortgage loans adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk. Loans held for sale for which there is little to no observable trading activity of similar instruments are valued using Level 3 measurements based upon dealer price quotes and internal models.

IRLCs: The fair value of IRLCs is based on current market prices of securities backed by similar mortgage loans (as determined above under mortgage loans held for sale), net of costs to close the loans, subject to the estimated loan funding probability, or “pull-through factor.” Given the significant and unobservable nature of the pull-through factor, IRLCs are classified as Level 3.

Forward commitments: Beeline’s forward commitments are valued based on quoted prices for similar assets in an active market with inputs that are observable and are classified within Level 2 of the valuation hierarchy. There were no open forward contracts at December 31, 2023.

DEBT ISSUANCE COSTS

Beeline’s notes payable agreements are recorded net of issuance costs (debt discount). The resulting debt discount is being amortized over the term of the term loan using the straight-line method, which approximates the effective interest method, and the amortization of debt discount is included in the statement of operations.

REVENUE RECOGNITION

Gain on Sale of Loans, net

Includes all components related to the sale of mortgage loans, including net gain on sale of loans, which represents the premium we receive in excess of the loan principal amount and certain fees charged by investors upon the sale of loans. An estimate of the gain on sale of loans, net, is recognized at the time of the loan origination. When the mortgage loan is sold to an investor, any difference between the proceeds received and the current fair value of the loan is recognized in the current period earnings in Gain on sale of loans, net.

Loan Origination Fees

Are fees, points, and certain costs, charged to originate loans. These fees are recognized when the loans are committed.

Interest Income, net

Includes interest earned on mortgage loans held for sale net of the interest expense paid on our loan funding facilities. Interest income is recorded as earned and interest expense is recorded as incurred.

Title Fees

Commissions earned at loan settlement on insurance premiums paid to title insurance companies.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

REVENUE RECOGNITION (continued)

Data and Tech

Fees received from a marketing partner who is embedded in our point-of-sale journey for investment property customers. The partner pays Beeline for leads they receive from a customer opting in to use their insurance company for landlord insurance during the application process.

MARKETING AND ADVERTISING COSTS

Marketing and advertising costs are expensed as incurred.

For the year ended December 31, 2023, marketing and advertising expenses were $1,883,622.

STOCK-BASED COMPENSATION EXPENSE

Beeline measures and recognizes compensation expense for restricted stock awards and options granted to employees based on the fair value of the award on the grant date and recognized as expense over the related service or performance period. Beeline elected to account for forfeitures as they occur.

Stock-based compensation expense totaled $374,746 for the year ended December 31, 2023.

INCOME TAXES

Deferred tax assets and liabilities are recorded for the difference between the financial statement carrying amounts and the tax basis of existing assets and liabilities using tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. At December 31, 2023, the amount of the deferred tax assets of approximately $38 million arising principally from the net operating loss carryforward was reduced to $0 by a valuation allowance of the same amount.

NOTE 4 – MORTGAGE LOANS HELD FOR SALE

Beeline sells substantially all of its originated mortgage loans to investors. At December 31, 2023, Beeline recognized an allowance for estimated fair value on the eventual sales of loans.

Mortgage loans held for sale	$	2,267,595
Less: allowance for change in fair value		(24,552	)
Mortgage loans held for sale, at fair value	$	2,243,043

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2023, consisted of the following:

Leasehold improvements	$	696,894
Furniture and fixtures		129,936
Computers and hardware		81,779
		908,609
Less: accumulated depreciation		(599,941
Property and equipment, net		308,693

Depreciation expense totaled $151,376 for the year ended December 31, 2023.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

Note 6 - Capitalized Software Development Costs

Beeline released its proprietary software “Hexagon” in May 2020. Through December 31, 2023, Beeline has capitalized a total of $8,079,821 in software development. As of December 31, 2023, Beeline has accumulated amortization expense of $3,216,731 of these costs for a net total of $4,863,090 in software development costs.

Beeline continues to use the “Hexagon” software for processing mortgages of commercial and residential properties and intends on licensing this software to other mortgage loan originators in the future.

In January 2023, Beeline’s internal developers began the initial development of a new proprietary software, “Hive”. The new software is an entirely new platform and code built by Beeline. The most notable feature of the new software is the integration of Beeline’s Chat API “Bob.” The official launch of Hive was January 2024 and Beeline is currently implementing the new software in its residential mortgage origination process. Through December 31, 2023, Beeline has expensed $778,972 in the development of this new software.

NOTE 7 - WAREHOUSE LINES OF CREDIT

At December 31, 2023, Beeline engaged with one bank for a line of credit to fund originated loans in the normal course of business. The agreement contains specific financial covenants and requirements that Beeline must analyze on a quarterly basis in order to be compliant with the agreement. The aggregate potential borrowing capacity under the warehouse line of credit is $10,000,000 at December 31, 2023.

FIRSTFUNDING, INC.

On October 1, 2022, Beeline entered into an agreement with FirstFunding, Inc. for a $10,000,000 line. The line automatically renews for successive one-year terms, unless terminated by Beeline or FirstFunding, Inc. The interest rate is the greater of 1.) interest on the underlying loan or 2.) 4.25% - 5.50%, depending on how many loans Beeline closes per month. Beeline is required to provide FirstFunding, Inc. with annual audited financial statements and monthly interim unaudited financial statements. Beeline is also subject to non-financial covenants.

The below is a summary of warehouse lines outstanding as of December 31, 2023:

Warehouse Lender		Line Amount		Outstanding		Remaining Unused
FirstFunding, Inc.		10,000,000		2,158,099		7,841,901

FLAGSTAR BANK

As of July 25, 2023, Beeline requested the closure of the Flagstar Bank warehouse line. The Company plans to re-engage with Flagstar before the end of 2024, once the conventional loan market improves. The Company’s focus has been on non-QM loans as the market has fluctuated and First Funding permits both non-QM and conventional loans.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

NOTE 8 - DEBT

BDCRI LOAN

On April 29, 2021, Beeline and Beeline Loans entered into a term loan agreement with Business Development Company of Rhode Island (the “BDCRI Loan”) for $450,000. The BDCRI Loan matures on April 29, 2026. As of December 31, 2023, the balance due is $291,846. In October 2023, Beeline began making interest-only payments in the near term until market conditions improved. The interest rate is 6%. Beeline recorded debt issuance costs of $17,182, which are being amortized over the term of the BDCRI Loan. The BDCRI Loan contains default covenants and prepayment terms and is collateralized and guaranteed by two of the shareholders of Beeline.

LOANS PAYABLE

In 2022, Beeline received $100,000 from Capital Markets Group in the form of a loan payable. This loan is currently past due. Default interest is accruing at 24% per annum. As of December 31, 2023, the balance due is $60,244.

In March 2023, Beeline received $30,000 from an individual in the form of a loan payable. Interest accrues at 7% per annum. At December 31, 2023, the balance due is $31,755.

LOANS PAYABLE – RELATED PARTY

In July 2023, Beeline received $75,000 from Fluid Capital in the form of a loan payable. Interest accrues at 12.25%. per annum. This note is due April 2024. At December 31, 2023 the balance due is $78,826.

In September 2023, Beeline received $310,000 and in December 2023, Beeline received $130,500 Manta Reef (Gulp Data), in the form of loans payable. Interest accrues at 18% per annum. Interest-only payments are made monthly. These loans are due December 2024. At December 31, 2023, the balance due on these loans is $511,502.

In November 2023, Beeline received $157,500 from American Heritage Lending in the form of a loan payable. Interest accrues at 12% per annum. This loan was paid in March 2024. At December 31, 2023, the balance due is $161,280.

An officer, director, and shareholder lends money to Beeline throughout the year in the form of loans payable. Interest accrues at 7% per annum. At December 31, 2023, the balance due is $221,565.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

NOTE 8 – DEBT (CONTINUED)

2022 SUBORDINATED CONVERTIBLE PROMISSORY NOTES ISSUED

In June 2022, the Board of Directors authorized the issuance of three-year, 7%, 2022 Subordinated Convertible Promissory Notes (the “Convertible Notes”) and related Preferred Stock Warrants, up to a total of $20,000,000, to investors through March 31, 2024

Beeline raised total proceeds of $12,239,216 with 2022 Convertible Notes. Please see Note 10- Stockholders’ Equity as to no estimate of the portion of the proceeds from the issuance of the convertible promissory notes attributable to such warrants can be determined.

In 2023, three investors who made an investment of at least $500,000 in the 2022 Convertible Notes were entitled to exchange, for no additional consideration, Beeline securities held by the investor for 2022 Convertible Notes having the same value as the investor’s existing investment. These three investors exchanged 22,495 shares of preferred stock for a 2022 Convertible Notes having principal amounts totaling $5,706,559.

All 2022 Convertible Notes are three-year notes of: $4,451,000 maturing in 2025 and $13,494,754 maturing in 2026. As of December 31, 2023, interest of $963,692 has accrued on all these notes. At December 31, 2023, the balance due on these notes is $18,909,446.

During 2024, Beeline has raised an additional $2,830,097 with the issuance of these 2022 Convertible Notes.

NOTE 9 - RELATED PARTY TRANSACTIONS

Beeline engaged an affiliated business through its title operations with Beeline Title, Beeline Settlement Services, LLC, and Beeline Texas Title. The affiliated business is owned by shareholders of Beeline. Cash paid to the affiliate totaled $527,174 at December 31, 2023. Amounts owed to the affiliated business were $322,527 at December 31, 2023.

Beeline has received, as noted in Note 8 - Loans Payable, funds from Fluid Capital, Manta Reef (Gulp Data), and American Heritage Lending in the form of loans payable during 2023. All are considered related parties.

EF Corporate Holdings, LLC, the parent company of American Heritage Lending, and an affiliate of Beeline, has purchased $1,000,021 of convertible notes in 2023.

Fluid Capital has purchased $50,000 of convertible notes in 2022 and 2023.

The Beeline director, who owns Fluid Capital, purchased $50,000 of convertible notes in 2022 and 2023.

An officer, director, and shareholder lends money to Beeline throughout the year in the form of loans payable. Interest accrues at 7% per annum. At December 31, 2023, the balance due is $221,565.

In addition, another officer, director, and shareholder, purchased $4,360,472 of convertible notes in 2023. This individual now owns $7,886,472 of convertible notes at December 31, 2023.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

NOTE 10 - STOCKHOLDERS’ EQUITY

At December 31, 2023, Beeline was authorized to issue up to 500,000 shares of common stock, $0.01 par value per share, and 53,822 shares of preferred stock, $0.01 par value per share. As of December 31, 2023, 164,404 and 24,796 shares of common stock and preferred stock are issued and outstanding. Beeline will need to authorize additional shares of common stock to convert the 2022 Convertible Notes issued and additional shares to cover future investment rounds. Beeline is in the process of increasing the number of authorized shares to cover the additional shares to be issued.

The rights and privileges of Beeline’s Common and Preferred Stock are as follows:

COMMON STOCK

The holders of common stock are entitled to one vote for each share held. The voting, dividend, and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers, and preferences of the holders of the Preferred Stock described below.

No common shares were issued in 2023.

PREFERRED STOCK

During 2023, three investors exchanged 22,495 shares of preferred stock for a 2022 Convertible Notes having principal amounts totaling $5,706,559. Please see Note 8 – Debt as to the 2022 Convertible Notes.

At December 31, 2023, and after the exchange, there are 24,796 preferred stock shares outstanding.

Dividends

Beeline shall not declare, pay, or set aside any dividends on shares of any other class or series of capital stock of Beeline (other than dividends on shares of Common Stock payable in shares of Common Stock) unless the holders of the Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Preferred Stock.

As of December 31, 2023, no dividends have been declared or accrued on any class of Company stock.

Liquidation Rights

In the event of any voluntary or involuntary liquidation, dissolution or winding up of Beeline, the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of Beeline available for distribution to its stockholders.

Optional Conversion

Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the original issue price by the conversion price in effect at the time of conversion.

Mandatory Conversion

Upon any of (a) the closing of the sale of shares of Common Stock to the public in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended; (b) the closing of a Going-Public Transaction; or (c) the time and date, or the occurrence of an event, specified by vote or written consent of at least 65% of the issued and outstanding shares of Preferred Stock.

COMMON STOCK WARRANTS

At December 31, 2023, Beeline has 5,868 outstanding common stock warrants with an exercise price of $231.17 and a remaining contractual life of 2.75 years.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

NOTE 10 - STOCKHOLDERS’ EQUITY (CONTINUED)

CHANGE IN ESTIMATE USED IN VALUATION OF WARRANTS

Warrants to possibly purchase shares of the company’s capital stock worth approximately $17.945 million in the aggregate were issued and outstanding as of December 31, 2023. This equaled 100% of the aggregate principal borrowed by the company under all convertible promissory notes then issued by the company and outstanding (excluding interest thereon) as of such date. However, as of December 31, 2023, (1) the right to exercise any such warrant, (2) the exercise price of any such warrant, and (3) the type and number of shares of capital stock for which any such warrant might eventually be exercisable, all remained contingent upon various and alternative equity financing events yet to have occurred. As such, no estimate of the portion of the proceeds from the issuance of the convertible promissory notes attributable to such warrants can be determined.

Beeline considered the amount recognized attributable to such warrants in 2022 as a change in estimate used in valuation of warrants and reduced additional paid-in capital by $762,668 in 2023.

EQUITY INCENTIVE PLANS

Beeline Financial Holdings, Inc.’s Amended Equity Incentive Plan provides employees, consultants, and directors of Beeline and its affiliates awards, including incentive stock options, non-qualified stock options, and restricted stock. As approved by the Boards of Directors on December 21, 2023, the Plan was amended to increase the number of shares of Common Stock which could be made available for Award under the Plan by seventy-one thousand seven hundred and sixteen (71,716) for a total of one hundred thousand (100,000) shares of Common Stock. As of December 31, 2023, Beeline granted a total of 79,281 awards. As of December 31, 2023, 20,719 shares of Common Stock remain available for grants of awards pursuant to this Plan.

Restricted Stock Awards

In 2020, Beeline granted 12,350 Restricted Common Stock shares with an estimated fair value of $597,864 to four employees. All restricted shares issued under the Plan are now fully vested and unrestricted.

Options Awards

During 2023, Beeline granted a total of 60,909 options to employees as incentive stock options (ISOs) for Common Stock Shares. 4,509 of these options were forfeited by year end. For 2023, Beeline recognized $374,746 as compensation expense for the costs of these options. The fair value of these options was determined using a Black-Scholes Pricing Model with the following factors: exercise price - $25.00, expected term – 5 yrs., expected volatility – 63%, dividend yield of 0%, and risk-free interest rate of 3.9%.

At December 31, 2023, there are 79,281 options outstanding valued at $386,084.

Phantom Stock Awards

In 2018, Beeline adopted the Phantom Equity Plan (the “Phantom Plan”), which authorizes up to 10,000 shares (“Phantom Shares”) to be granted to participating employees. The Phantom Shares are a hypothetical equity interest in Beeline and vest over a four-year period. Each award will only vest and become payable upon certain events, such as a change in ownership of Beeline or a liquidation event, as defined in the Phantom Plan agreement. At December 31, 2023, the value per share is $0.01. No additional Phantom Shares were granted in 2023. There are 1,613 fully vested Phantom Shares.

401(k) Employee Benefit Plan

Beeline has established a retirement benefit plan under Section 401(k) of the Internal Revenue Code. Under this plan, eligible employees are permitted to contribute a percentage of compensation into the retirement plan up to a maximum determined by the Internal Revenue Code. The plan also allows for discretionary employer matching contributions and profit-sharing contributions to the plan; however, no such contributions were elected for the 2023 year ended.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

NOTE 11 - COMMITMENTS AND CONTINGENCIES

LEASE OBLIGATIONS

Beeline leases office space under various operating lease agreements, including an office for its headquarters, for branch location and licensing purposes under non-cancelable lease arrangements that provide for payments on a graduated basis with various expiration dates.

Components of Operating and Finance Lease Cost Table for the year ended	December 31, 2023:
Operating lease cost	$	335,353
Finance lease cost:		-
Amortization of right-of-use assets		-
Interest on lease liabilities		-
Total finance lease cost	$	0-
Sublease income	$	0-

Maturities of lease liabilities as of December 31, 2023:	Operating Leases
Weighted average remaining lease term	4 Years
Weighted average discount rate	1.32	%

Supplemental cash flow information related to leases for the year ended		December 31, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	340,149
Operating cash flows from finance leases		-
Finance cash flows from finance leases		-
		-

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2023

NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

LEASE OBLIGATIONS (continued)

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	3,716,897
Finance leases		-
Right-of-use assets and lease liabilities as of December 31, 2023:
Assets
Operating lease right-of-use assets	$	1,643,433
Finance lease right-of-use assets		-
Total right-of-use assets	$	1,643,433
Liabilities
Current
Operating	$	323,959
Finance		-
Non-current
Operating	$	1,526,825
Finance		-
Total Lease Liabilities	$	1,850,784
Maturities of lease liabilities as of December 31, 2023:		Operating Leases
2024	$	350,316
2025	$	360,793
2026	$	282,758
2027	$	227,669
2028	$	234,499
Thereafter	$	490,314
Total future minimum rental commitments	$	1,946,349
Less Imputed Interest		95,565
Total Lease Liability	$	1,850,784

NOTE 12 - CONCENTRATIONS OF CREDIT RISK

Beeline maintains cash balances with several regional banks. The deposits are insured by the Federal Deposit Insurance Corporation up to $250,000 per depositor per bank. At various times throughout the year, cash balances held within these accounts may exceed the maximum insured amounts.

NOTE 13 - SUBSEQUENT EVENTS

2022 CONVERTIBLE NOTES ISSUED

During 2024, Beeline raised an additional $2,830,097 with the issuance of these 2022 Convertible Notes. Please see Note 8 – Debt as to the 2022 Convertible Notes.

End of Financial Statements

BEELINE FINANCIAL HOLDINGS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2022

Beeline Financial Holdings, Inc.

Consolidated Financial Statements

December 31, 2022

Table of Contents

Independent Auditors’ Report	23-24

Financial Statements
Consolidated Balance Sheet	25
Consolidated Statement of Operations	26
Consolidated Statement of Changes in Stockholders’ Equity	27
Consolidated Statement of Cash Flows	28

Notes to Consolidated Financial Statements	29-40

Independent Auditor’s Report

To the Board of Directors and Stockholders

Beeline Financial Holdings, Inc.

Providence, RI 02909-2468

Opinion

We have audited the accompanying consolidated financial statements of Beeline Financial Holdings, Inc., which comprise the balance sheet as of December 31, 2022, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements.

In our opinion, the financial statements present fairly, in all material respects, the financial position of Beeline Financial Holdings, Inc., as of December 31,2022, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

Substantial Doubt About the Entity’s Ability to Continue as a Going Concern

Responsibilities of Management for the Financial Statements

presentation of financial statements that are free from material misstatement, whether due to fraud or error.

56 Rockford Road, Wilmington, DE 19806-1004 | Phone: 302-652-4783

ciroadamscpa.com

Auditor’s Responsibilities for the Audit of the Financial Statements

In performing an audit in accordance with GAAS, we:

	●	Exercise professional judgment and maintain professional skepticism throughout the audit.

	●	Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

	●	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Beeline Financial Holdings, Inc.’s internal control. Accordingly, no such opinion is expressed.

	●	Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as, evaluate the overall presentation of the financial statements.

	●	Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Beeline Financial Holdings, Inc.’s ability to continue as a going concern for a reasonable period of time.

Wilmington, DE 19806-1004

September 5, 2023

Beeline Financial Holdings, Inc.

Consolidated Balance Sheet

December 31, 2022

Assets
Current Assets
Cash, cash equivalents		133,223
Accounts receivable		29,595
Mortgage loans held for sale, at fair value		2,993,374
Loans sale commitment derivative receivable, at fair value		-
Prepaid expenses and other current assets		92,843
Total Current Assets		3,249,035
Property and equipment, net		460,069
Software development cost, net		5,452,197
Right of use assets		1,947,804
Security deposit		58,430
Total Assets	$	11,167,536
Liabilities & Stockholders’ Equity
Current Liabilities
Accounts payable		1,236,957
Warehouse lines of credit		3,060,923
Lease liability, current portion		309,167
Promissory note		112,500
Loan payable		100,000
Debt, current portion		-
Accrued payroll		412,391
Escrows held for others		22,195
Accrued expenses and other current liabilities		5,767
Total Current Liabilities		5,259,901
Long Term Liabilities
Debt, 2022 convertible notes		852,643
Debt, 2022 convertible notes - related party		2,985,148
Lease liability, net of current portion		1,850,784
Promissory note		363,351
Total Long Term Liabilities		6,051,927
Total Liabilities		11,311,828
Stockholders’ Equity
Common stock, $0.01 par value, 250,000 shares authorized, 164,404 shares issued and outstanding		1,644
Series A preferred stock, $0.01 par value, 10,000 shares authorized, 47,291 shares issued and outstanding		269
Additional paid in capital		27,866,976
Accumulated other comprehensive income		(79,836	)
Accumulated deficit		(27,933,345	)
Total Stockholder’s Equity		(144,292	)
Total Liabilities & Stockholders’ Equity	$	11,167,536

See Notes to the Consolidated Financial Statements

Beeline Financial Holdings, Inc.

Consolidated Statement of Operations

December 31, 2022

Revenues
Gain on sale of loans, net	$	1,854,910
Interest income, net		(23,946	)
Loan origination fees		413,209
Title fees		672,813
Revenues, net		2,916,987
Operational Expenses
Salaries and benefits		5,812,860
Payroll taxes		405,065
Professional fees		920,578
Marketing and advertising		1,776,042
loan originating expenses		1,047,241
Depreciation and amortization		1,161,094
Rent and utilities		620,779
Computer and software		922,527
Title operational expenses		140,951
Travel and entertainment		71,655
Insurance expense		202,649
Other G&A expenses		260,991
Total Operating Expenses		13,342,430
Other Income/Expense
Interest expense		283,187
Other tax		701
Total Other Income/Expense		283,888
Net Income (Loss)	$	(10,709,332	)

See Notes to the Consolidated Financial Statements

Beeline Financial Holdings, Inc.

Consolidated Statement of Stockholders’ Equity

Year ended December 31, 2022

	Common Stock				Preferred Stock				Additional Paid In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Equity
Balance, January 1, 2022		164,384	$	1,644		26,910	$	269	$	22,028,641	$	(17,224,013	)	$	(9,538	)	$	4,797,003
Shares compensation		20								364,191							$	364,191
Series A warrants exercised						20,381				4,711,476							$	4,711,476
2022 warrants issued										762,668							$	762,668
Foreign currency translation															(70,298	)	$	(70,298	)
Net Loss												(10,709,332	)				$	(10,709,332	)
Balance, December 31, 2022		164,404	$	1,644		47,291	$	269	$	27,866,976	$	(27,933,345	)	$	(79,836	)	$	(144,292	)

See Notes to the Consolidated Financial Statements

Beeline Financial Holdings, Inc.

Consolidated Statement of Cash Flows

Year ended December 31, 2022

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(10,709,332	)
Adjustments to reconcile net loss to net cash used in operating activities:
Allowance for gain/loss on loan-held for sale		111,216
Depreciation and amortization		1,161,094
Share compensation		364,191

Changes in operating assets and liabilities:
Account receivable		200,452
Loans held for sale		8,294,039
Prepaid expenses and other current assets		266,443
Security deposit		254,276
Account payable		330,123
Accrued payroll		(96,159	)
Warehouse line of credit, net		(8,237,999	)
Right of use assets		(1,947,804	)
Escrows held		(30,524	)
Accrued expenses and other liabilities		(60,908	)
Deferred Rent		(641,627	)
Lease liabilities		2,159.951
Other changes		145,691
Net Cash Used In Operating Activities		(8,436,878	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(26	)
Software development costs		(1,914,772	)
Net Cash Used In Investing Activities		(1,914,798	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of BDCRI loan		(71,575	)
Promissory note		225,000
Repayment of promissory note		(112,500	)
Series A warrants exercised		4,711,476
2022 convertible notes issued		852,642
2022 convertible notes issued - related party		2,985,148
Amortization of debt discount		254,223
2022 warrants issued		169,442
2022 warrants issued - related party		593,226
Demand note - related party		(700,000	)
Corporation loan		100,000
Net Cash Provided By Financing Activities		9,007,082
Foreign currency translation		70,298
Net increase (decrease) in cash		(1,274,297	)
Cash - beginning of period		1,407,520
Cash - end of period	$	(133,223	)

See Notes to the Consolidated Financial Statements

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 1 - Nature of Business

Beeline Financial Holdings, Inc. (the “Company”, and together with its consolidated subsidiaries, “Beeline”, “we”, “us”, “our”) was incorporated in Delaware on July 1, 2020 via a merger with Beeline Financial Holdings, Inc, a Rhode Island corporation founded on September 20, 2018. Beeline is a full service Direct-to-Consumer lender specializing in conventional conforming and non-conforming residential first-lien mortgages.

Note 2 – GOING CONCERN, Liquidity and Management’s Plans

Management believes that it will be successful in obtaining additional financing based on its limited history of raising funds; however, there can be no assurances that our business plans and actions will be successful, that we will generate anticipated revenues, or that unforeseen circumstances will not require additional funding sources in the future or effectuate plans to conserve liquidity. Future efforts to raise additional funds may not be successful or they may not be available on acceptable terms, if at all. Refer to Note 8 – Debt for current capital raise information.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 3 - Summary of Significant Accounting Policies

Basis of Accounting

These consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation

The consolidated financial statements include the accounts of Beeline Financial Holdings, Inc. and its subsidiaries. Intercompany transactions and balances have been eliminated.

Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Examples of estimates and assumptions include: for revenue recognition, estimating the gain on sale of loans originated; and for equity instruments such as warrants, RSAs, and options, estimating the fair value of the equity transaction. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties.

Cash, Cash Equivalents, and Restricted cash

Beeline also has an agreement with Flagstar Bank for a $10,000,000 warehouse line which requires 1% of the total line amount to be restricted, which amounted to $100,000 at December 31, 2022, and is classified as long-term. The Centier Bank warehouse line agreement requires $5,500 to be restricted, which is classified as long-term. These funds are held within the respective operating accounts at each bank where the funds are restricted.

MORTGAGE LOANS HELD FOR SALE

Beeline has elected the fair value option for accounting for mortgage loans held for sale.

DERIVATIVE FINANCIAL INSTRUMENTS

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 3 - Summary of Significant Accounting Policies (Continued)

DERIVATIVE FINANCIAL INSTRUMENTS (continued)

There were no open forward contracts at December 31, 2022.

Deposits

Deposits include security deposits for leased office spaces, which are refundable to Beeline upon expiration of the lease agreements.

Property and Equipment, NET

Property and equipment, including leasehold improvements, are recorded at cost and are depreciated or amortized using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years. Repair and maintenance costs are expensed as incurred. Leasehold improvements are amortized over the shorter of the lease term or the improvement’s estimated useful life. Improvements, which increase the productive value of assets, are capitalized, and depreciated over the remaining useful life of the related asset.

Software Development Costs, NET

Impairment of Long-Lived Assets

Fair Value measurements

Fair value measurements are classified in the following manner:

Level 1—Valuation is based on quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 3—Valuation is based on the Beeline’s internal models using assumptions at the measurement date that a market participant would use.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 3 - Summary of Significant Accounting Policies (Continued)

Fair Value measurements (continued)

IRLCs: The fair value of IRLCs is based on current market prices of securities backed by similar mortgage loans (as determined above under mortgage loans held for sale), net of costs to close the loans, subject to the estimated loan funding probability, or “pull-through factor”. Given the significant and unobservable nature of the pull-through factor, IRLCs are classified as Level 3.

Debt Issuance Costs

Beeline’s notes payable agreements are recorded net of issuance costs (debt discount). The resulting debt discount is being amortized over the term of the term loan using the straight- line method, which approximates the effective interest method, and the amortization of debt discount is included in the statement of operations.

Revenue Recognition

Gain on Sale of Loans, net

Includes all components related to the sale of mortgage loans, including net gain on sale of loans, which represents the premium we receive in excess of the loan principal amount and certain fees charged by investors upon the sale of loans. An estimate of the gain on sale of loans, net, is recognized at the time of the loan origination. When the mortgage loan is sold to an investor, any difference between the proceeds received and the current fair value of the loan is recognized in current period earnings in Gain on sale of loans, net.

Loan Origination Fees

Are fees, points, and certain costs, charged to originate loans. These fees are recognized when the loans are committed.

Interest Income, net

Title Fees

Are commissions earned at loan settlement on insurance premiums paid to title insurance companies.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 3 - Summary of Significant Accounting Policies (Continued)

MARKETING AND ADVERTISING COSTS

Marketing and advertising costs are expensed as incurred.

Share-Based Compensation Expense

Warrants

Beeline records at fair value its equity-classified warrants using a Black-Scholes Pricing Model. The warrants were issued as part of the Series A and 2022 debt financing transactions. Refer to Note 8 - Debt for further information.

Income Taxes

Deferred tax assets and liabilities are recorded for the difference between the financial statement carrying amounts and the tax basis of existing assets and liabilities using tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. At December 31, 2022, the amount of the deferred tax assets of approximately $25,000,000 arising principally from the net operating loss carryforward was reduced to $0 by a valuation allowance of the same amount.

Note 4 – Mortgage Loans Held for Sale

Beeline sells substantially all of its originated mortgage loans to investors. At December 31, 2022, Beeline recognized an allowance for estimated fair value on the eventual sales of loans.

Mortgage loans held for sale, at fair value	$	3,104,590
Less: allowance for change in fair value		(111,216	)
Mortgage loans held for sale, at fair value	$	2,993,374

Note 5 - Property and Equipment

Property and equipment as of December 31, 2022, consisted of the following:

Leasehold improvements	$	696,894
Furniture and fixtures		129,936
Computers and hardware		81,779
		908,609
Less: accumulated depreciation		(448,565	)
Property and equipment, net	$	460,444

Depreciation expense totaled $151,376 for the year ended December 31, 2022.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 6 - Capitalized Software Development Costs

As of December 31, 2022, Beeline capitalized $7,228,793 of software development costs. Beeline released version 1 of the proprietary software “Hexagon” in May 2020.

A major upgrade to the system “Version 2” was immediately started after the initial launch of the system and went into use starting November 2020. This upgrade gave the consumer access to a user portal and the ability to process some conditions on their own through uploading documents and accessing key information of their loan.

Additional functionality was added to the system in “Version 3”. This version will allow proprietary technologies to process underwriting conditions and automating major functions of the business. The basics of Beeline’s “Automation Condition Resolution Engine” was substantially completed in this Version.

“Version 4” was released in May 2022. It significantly changed the loan options user interface and experience for customers. It also introduced a dedicated flow for new loan types and channels. Other changes in Version 4 included additional build out of the Automation Condition Resolution Engine. Version 4 was completed by December 31, 2022, with development starting on Version 5 in early 2023. At December 31, 2022, capitalized software development costs consisted of the following:

Software Development Version 1	$	1,725,250
Software Development Version 2		821,983
Software Development Version 3		3,335,136
Software Development Version 4		1,346,423
		7,228,793
Less: Accumulated Depreciation		(1,776,597	)
Software Development, net	$	5,452,196

Amortization expense totaled $1,009,718 for the year ended December 31, 2022.

Note 7 - Warehouse Lines of Credit

At December 31, 2022, Beeline engaged with three banks for lines of credit to funds originated loans in the normal course of business. Each agreement contains specific financial covenants and requirements that Beeline must analyze on a quarterly basis in order to be compliant with these agreements. The aggregate potential borrowing capacity under the warehouse lines of credit is $25,000,000 at December 31, 2022.

Flagstar Bank

As of November 28, 2022, Company renewed their warehouse agreement, which is due on demand, for a $10,000,000 line of credit. With LIBOR phasing out, our agreement was changed to SOFR. The most recently amended and restated agreement states the Applicable Margin means, for any advance made, 2.25%; Benchmark means initially 1 Month Term SOFR, provided that if 1 Month Term SOFR or then-current Benchmark is unavailable pursuant to clause (b), then Benchmark means the applicable Benchmark that has replaced such prior benchmark rate pursuant to clause (c) of the agreement. The Interest Rate Floor means for any advance made 3.50%. A draw fee is associated to each transaction and unused fees if the quarterly usage is less than 50%, and are recorded in loan origination expenses. Financial covenants include minimum net worth, leverage ratios, annual net income and minimum liquidity requirements. This agreement also requires Beeline to pledge 1% of the principal amount to be restricted as collateral as well as personal guarantees of two members of Beeline’s management team. In 2022, Beeline was in default on its annual net income requirement.

As of July 25, 2023, Beeline requested the closure of the Flagstar Bank warehouse line. Company plans to re-engage with Flagstar before the end of 2023, once the conventional loan market improves. Company’s focus has been on Non-QM loans as the market has fluctuated and First Funding permits both Non-QM and conventional loans.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 7 - Warehouse Lines of Credit (Continued)

Centier Bank

On September 10, 2021, Beeline entered into an agreement with Centier Bank for a $5,000,000 line of credit. The interest rate is either 1.) the collateralized note rate for the first 60 days after the initial advance, or 2.) the collateralized note rate plus 4% for loans advanced over 60 days following the initial date. However, the interest rate should not be less than 3.50%. Beeline is required to maintain a total of $5,500 with Centier Bank in operating and disbursement accounts, which are recorded as restricted cash. Financial covenants include minimum adjusted tangible net worth, debt to adjusted tangible net worth and annual net income requirements. This agreement also requires personal guarantees of two members of Beeline’s management team.

As of November 9, 2022, Beeline received a non-renewal letter from Centier with an effective date of January 9, 2023.

FirstFunding, Inc.

On September 21, 2021, Beeline entered into an agreement with FirstFunding, Inc. for a $10,000,000 line, which expires on September 30, 2022. The line automatically renews for successive one-year terms, unless terminated by Beeline or FirstFunding, Inc. The interest rate is the greater of 1.) interest on the underlying loan or 2.) 4.25% - 5.50%, depending on how many loans Beeline closes per month. Beeline is required to provide FirstFunding, Inc. with annual audited financial statements and monthly interim unaudited financial statements. Beeline is also subject to non-financial covenants.

The below is a summary of warehouse lines outstanding as of December 31, 2022:

Warehouse Lender	Line Amount		Outstanding		Remaining Unused
Flagstar Bank	$	10,000,000	$	2,937,644	$	7,062,356
FirstFunding, Inc.		10,000,000		—		10,000,000
Centier Bank		5,000,000		—		5,000,000
Total Available	$	25,000,000	$	2,937,644	$	22,062,356
Additional Unfunded Loans Committed				117,823
Accrued Interest on Outstanding Loans				5,456
Total Loans Held on Warehouse			$	3,060,923

Note 8 - Debt

BDCRI LOAN

On April 29, 2021, Beeline and Beeline Loans entered into a term loan agreement with Business Development Company of Rhode Island (the “BDCRI Loan”) for $450,000. The BDCRI Loan matures on April 29, 2026. Principal payments of $9,375 are due monthly, beginning on April 29, 2022. The interest rate is 6%. Beeline recorded debt issuance costs of $17,182, which are being amortized over the term of the BDCRI Loan. The BDCRI Loan contains default covenants and prepayment terms, and is collateralized and guaranteed by two of the owners of Beeline.

Loan payable

In 2022, Beeline received $100,000 from Capital Markets Group in the form of a demand note. This Demand Note is due as follows: $103,500 if paid by January 16, 2023, $107,500 if paid by February 20, 2023, and $112,500 if paid by March 2023. The amount due includes an amortized closing/administrative fee of $2,500. Default interest is accruing at 24% per annum.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 8 – Debt (Continued)

2022 CONVERTIBLE NOTES ISSUED

In June 2022, the Board of Directors authorized the issuance of three-year, 7%, 2022 Convertible Notes and related Common Stock Warrants, up to a total of $17,000,000, to investors through August 15, 2023.

During 2022, Beeline issued a total of $4,276,000 of these notes and warrants. Note proceeds from this offering were $3,513,332 and the 49,171 warrants proceeds were $762,668. The fair value of the warrants was determined using a Black-Scholes Pricing Model with the following factors: exercise price - $40.77, expected term – 3 yrs., expected volatility – 50%, dividend yield of 0%, and risk-free interest rate of 4.5%. The value assigned to the warrants is considered a debt discount of $762,668 which is recognized as interest expense over the three-year life of the notes at an interest charge of $254,223 per year. 49,171 warrants are outstanding at December 31, 2022.

During 2023, Beeline raised an additional $5,024,100 in notes and warrants.

Beeline raised a total amount of $9,300,100 with 2022 Convertible Notes and Warrants. These three-year notes mature: $4,276,000 in 2025 and $5,024,100 in 2026.

Note 9 - Related Party Transactions

Beeline also engaged an affiliated business through its title operations with Beeline Title, Beeline Settlement Services, LLC and Beeline Texas Title. The affiliated business is owned by shareholders of Beeline. Revenue generated from the affiliated business was $117,698 during the year ended December 31, 2022. Cash paid to the affiliate totaled $24,617 at December 31, 2022. Amounts owed to the affiliated business was $2,706 at December 31, 2022.

A former officer, director, and shareholder exercised a warrant for 1,514 preferred shares for $350,000. The same former officer, director, and shareholder exercised a warrant indirectly for 1,081 preferred shares for $250,000.

An officer, director, and shareholder exercised a warrant for 1,514 preferred shares for $350,000. This same officer, director, and shareholder purchased 2022 Convertible Notes for $3,326,000. Interest accrued during the year on these notes is $54,632. This same officer, director, and shareholder was paid $700,000 to pay off certain demand notes of Beeline purchased by this officer, director, and shareholder in previous years.

Note 10 - Stockholders’ Equity

At December 31, 2022, Beeline was authorized to issue up to 500,000 shares of common stock, $0.01 par value per share, and 53,822 shares of Preferred Stock, $0.01 par value per share. As of December 31, 2022, 164,684 and 26,910 shares of common stock and preferred stock are issued and outstanding. Beeline will need to authorize additional shares of common stock to convert the 2022 Convertible Notes issued and additional shares to cover future investment rounds. Beeline is in the process of increasing the number of authorized shares to cover the additional shares to be issued.

The rights and privileges of Beeline’s Common and Preferred Stock are as follows:

Common Stock

The holders of common stock are entitled to one vote for each share held. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock described below.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 10 - Stockholders’ Equity (Continued)

Preferred Stock

Dividends

As of December 31, 2022, there have not been any dividends declared or accrued on any class of Company stock.

Liquidation Rights

Optional Conversion

Mandatory Conversion

COMMON STOCK WARRANTS AND PREFERRED STOCK WARRANTS

On October 1, 2021, Series A Convertible Note investors received common stock warrants as part of their purchase of the Series A Convertible Notes. Holders of the Common Stock Warrants were entitled to purchase up to 35% of the aggregate number of Series A Preferred Stock purchased on October 1, 2021 at an exercise price of $231.17 per share. The Common Stock Warrants expire on October 1, 2026.

During 2022, investors exercised preferred stock warrants for 20,381 preferred shares paying Beeline $4,711,476.

At December 31, 2022, Beeline has 9,426 outstanding common stock warrants with an exercise price of $231.17 and a remaining contractual life of 3.75 years.

Equity Incentive Plans

Beeline Financial Holdings, Inc.’s Amended Equity Incentive Plan provides employees, consultants and directors of Beeline and its affiliates awards, including incentive stock options, non-qualified stock options, and restricted stock. As amended, a total number of 28,284 shares of Common Stock were authorized and remain available for grants of awards pursuant to this Plan. As of December 31, 2022, Beeline granted a total of 31,722 awards. Beeline is in the process of increasing the number of authorized shares available to cover previous and future grants of awards by the Company.

Restricted Stock Awards

In 2020, Beeline granted 12,350 Restricted Common Stock shares with an estimated fair value of $597,864 to four employees. Beeline recognized the remaining compensation expense of $286,974 during 2022. All restricted shares issued under the Plan are now fully vested and unrestricted.

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 10 - Stockholders’ Equity (Continued)

Equity Incentive Plans (continued)

Options Awards

In 2022, Beeline granted 22,881 5 yr., Options to employees as incentive stock options (ISOs) for common stock shares. 3,509 of these options were forfeited by year end. The outstanding 19,372 options at year end were valued at $386,084. The fair value of these options was determined using a Black-Scholes Pricing Model with the following factors: exercise price - $40.77, expected term – 5 yrs., expected volatility – 50%, dividend yield of 0%, and risk-free interest rate of 4.5%. Beeline recognized $77,217 as compensation expense for the costs of these options in 2022.

Phantom Stock Awards

In 2018, Beeline adopted the Phantom Equity Plan (the “Phantom Plan”), which authorizes up to 10,000 shares (“Phantom Shares”) to be granted to participating employees. The Phantom Shares are a hypothetical equity interest in Beeline and vest over a four-year period. Each award will only vest and become payable upon certain events, such as a change in ownership of Beeline or liquidation event, as defined in the Phantom Plan agreement. At December 31, 2022, the value per share is $0.01. No additional Phantom Shares were granted in 2022. There are 1,613 fully vested Phantom Share.

401(k) Employee Benefit Plan

Beeline has established a retirement benefit plan under Section 401(k) of the Internal Revenue Code. Under this plan, eligible employees are permitted to contribute a percentage of compensation into the retirement plan up to a maximum determined by the Internal Revenue Code. The plan also allows for discretionary employer matching contributions and profit sharing contributions to the plan, however, no such contributions were elected for the 2022 year ended.

Note 11 - Commitments and Contingencies

Lease OBLIGATIONS

Components of Operating and Finance Lease Cost Table for the year ended	December 31, 2022:
Operating lease cost	$	482,363
Finance lease cost:		-
Amortization of right-of-use assets		-
Interest on lease liabilities		-
Total finance lease cost	$	-
Sublease income	$	-

Maturities of lease liabilities as of December 31, 2022:	Operating Leases
Weighted average remaining lease term		5 Years
Weighted average discount rate		1.41	%

Supplemental cash flow information related to leases for the year ended	December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	451,199
Operating cash flows from finance leases		-
Finance cash flows from finance leases		-
Right-of-use assets obtained in exchange for lease obligations:		-
Operating leases	$	3,716,897
Finance leases		-

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 11 - Commitments and Contingencies (Continued)

Lease OBLIGATIONS (continued)

Right-of-use assets and lease liabilities as of December 31, 2022:
Assets
Operating lease right-of-use assets	$	1,940,554
Finance lease right-of-use assets		-
Total right-of-use assets	$	1,940,554
Liabilities
Current
Operating	$	309,167
Finance		-
Non-current
Operating	$	1,850,784
Finance		-
Total Lease Liabilities	$	2,159,951

Maturities of lease liabilities as of December 31, 2022:	Operating Leases
2023	$	340,149
2024	$	350,316
2025	$	360,793
2026	$	282,758
2027	$	227,669
Thereafter	$	724,813
Total future minimum rental commitments	$	2,286,498
Less Imputed Interest		126,548
Total Lease Liability	$	2,159,951

Note 12 - Concentrations of Credit Risk

Note 13 - Subsequent Events

2022 CONVERTIBLE NOTES ISSUED

Beeline Financial Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

Note 13 - Subsequent Events (Continued)

INVESTOR’S EXCHANGE AGREEMENT

In January 2023, one investor who made an investment of at least $500,000 in the 2022 Convertible Notes and 2022 Common Stock Warrants issued was entitled to exchange, for no additional consideration, Beeline securities held by the investor for 2022 Convertible Notes and 2022 Common Stock Warrants having the same value as the investor’s existing investment. This investor exchanged 17,304 shares of preferred stock for a 2022 Convertible Note having a principal amount of $4,000,165. A 2022 Common Stock Warrant was also issued to the investor as part of this exchange.

The resulting effect to Beeline’s Equity of this Exchange is:

Beeline’s Stockholders’ Equity at December 31, 2022:	$	(144,292	)
Less: Value of Preferred Shares Exchanged:		(4,000,165	)
Beeline’s Stockholders’ Equity at January 26, 2023:	$	(4,144,457	)

End of Financial Statements

Exhibit 99.2

Beeline Financial Holdings, Inc.

Consolidated Balance Sheet

June 30, 2024

ASSETS
Current Assets
Cash, cash equivalents		336,475
Accounts Receivable		91,380
Mortgage loans held for sale		2,146,465
Prepaid expenses and other current assets		473,791
Total Current Assets		3,048,111

Property and equipment, net		233,005
Software Development cost, net		4,333,354
Right of use asset		1,489,527
Security deposit		58,054
Investment in equities		306,772
Total ASSETS	$	9,468,823

Liabilities & Stockholders’ Equity

Current Liabilities
Accounts Payable		1,314,222
Warehouse lines of credit		2,280,922
Accrued payroll		675,495
Escrows held for others		19,390
Accrued expenses and other current liabilities		844,070
Total Current Liabilities		5,134,099

Long Term Liabilities
Senior debenture		3,300,000
Discount & Issuance costs		(3,025,000	)
Lease liability		1,690,336
BDCRI loan payable		293,593
Total Long Term Liabilities		2,258,929

Stockholders’ Equity
Common stock, $0.01 par value		1,717
Series A preferred stock, $0.01 par value		248
Series B preferred stock, $0.001 par value		24
Additional paid in capital		51,412,908
Accumulated other comprehensive loss		(106,146	)
Retained earnings		(38,369,200	)
Net Income		(10,863,756	)
Total Stockholders’ Equity		2,075,795
Total Liabilities & Stockholders’ Equity	$	9,468,823

Beeline Financial Holdings, Inc.

Consolidated Statement of Operations

For the Six Months Ended June 30, 2024

Revenues
Gain on sale of loans, net	$	1,528,705
Interest income, net		(29,220	)
Loan origination fees		302,212
Title fees		509,786
Data and Tech		24,546
Total Revenues, net		2,336,029

Operational Expenses
Salaries and benefits		3,299,075
Payroll taxes		272,501
Professional fees		1,125,185
Marketing and advertising		1,139,852
Loan originating expenses		627,866
Depreciation		883,670
Rent and utilities		208,440
Computer and software		389,438
Title operational expense		131,263
Insurance expense		96,927
Other G&A Expense		123,825
Total Operating Expenses		8,298,042

Other Income/Expense
Tax expense		3,277
Other Income/Expense		4,898,465
Total Other Income/Expense		4,901,742

Net Loss	$	(10,863,755	)

Cover	Nov. 21, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 21, 2024
Entity File Number	001-38182
Entity Registrant Name	EASTSIDE DISTILLING, INC.
Entity Central Index Key	0001534708
Entity Tax Identification Number	20-3937596
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	755 Main Street
Entity Address, Address Line Two	Building 4
Entity Address, Address Line Three	Suite 3
Entity Address, City or Town	Monroe
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06468
City Area Code	(484)
Local Phone Number	800-9154
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false

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