Q3 2020 Eastside Distilling Inc Earnings Call
Good afternoon, and welcome to the Eastside Distilling reports second quarter fiscal year 2020 financial results Conference call.
All participants will be in a listen only mode.
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After todays presentation, there will be an opportunity to ask questions to ask a question you May press Star and then one to withdraw your question you May press star in two.
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At this time I'd like to turn the conference call over to Miss any Brossard Corporate Affairs Director Ma'am. Please go ahead.
Alright. Thank you so much good afternoon, everyone and thank you for joining us today to discuss Eastside filling financial results for the third quarter 2020.
And at September Thirtyth 2020, I mean, the first part of that is filling and I'll be your moderator for todays call earlier.
Earlier, you started issue third quarter 2020 financial results in a press release drug.
Joining us on today's call to discuss these results are Mr., Paul block, the company's chairman and Chief Executive Officer, and Mr. Jeff.
Frequent eastside Chief Financial Officer.
Following their remarks, we will open the call to your questions.
Let me begin with prepared remarks, we submit for the record the following statement.
Certain matters discussed on this conference call by the management of each side filling maybe forward looking statements within the meaning of section 27.
Of the Securities Act of 933 as amended.
Section 21 E of the Securities Exchange Act of 934 as amended and such forward looking statements are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.
The forward looking statements describe future.
Asian plans results or strategies and are generally preceded by words, such as may future planned or plan or planned will or should expected anticipates draft eventually or projected.
Listeners are cautioned that such statements are subject to a multitude of risks and uncertain.
So I guess that could cause future circumstances events or results to differ materially from those projected in the forward looking statements.
Such matters involve risks and uncertainties that may cause actual results to differ materially include but are not limited to the company's acceptance and the company's products in the market success in.
In obtaining new customers success in product development ability to execute the business model and strategic plan success in integrating acquired entities and assets ability to obtain capital ability to continue its going concern and all the risks and related information described from time to time in the Companys filings with.
Securities and Exchange Commission, including the financial statements and related information pertaining to the Companys annual report on form 10-K for the year ended December 31st 2019 filed with the Securities and Exchange Commission.
Now with that said I would like to turn the call over to Jeffrey Glanton Jefferies. Please proceed.
Thank you Amy.
I'm pleased to report we have made meaningful progress over the last quarter on multiple fronts first on October 27, we signed a non binding term sheet and our relationship Rudnick Riviera.
We will be entering into a termination agreement of a license as well as the sale of barrels stock raw materials and finished goods.
Hello, I caught.
Definitely total consideration of approximately $8 million that number will be subject subjected to certain adjustments upon closing, which we expect to take place in the third quarter I'm sorry in the current quarter.
They will use the proceeds to pay down debt and fund its growth plan, which Paul will discuss shortly now let's turn to the results.
For the quarter.
Gross sales for the third quarter increased to $4.8 million compared to 4.5 for the same period in 2019. These.
These numbers reflect an adjustment for discontinued operations as we close our Oregon tasting rooms earlier in the year Kraft Hanting had a strong quarter with revenues up offsetting.
The single digit decline in spirits.
<unk> results were positively impacted by strong volume, which extended well into October.
What we saw in initial improvement spirit volumes earlier in the quarter by September we had begun to lap last year's push a redneck rivieres value added packs for the holiday season.
And we have dropped dramatically de emphasize might loosen bops for 2020.
Gross profit for the quarter declined to 1.6 million down from the 1.7 million last year. The decline was due to mix in spirits marketing investment and reinvestment in craft to support growth.
Below the gross profit line, we did.
For a 27% year over year improvement and general and administrative expenses EBITDA improved again this quarter to a loss of 719000 as we stated on our last call. We expected continued sequential improvement in EBITDA and this quarter, we delivered that.
Net income per share was a.
A loss of 17 cents versus a loss of 38 cents last year.
However, we're not done with the restructuring of the income statement, we are making meaningful progress change in our business mix, eliminating nonproductive costs and concentrated investment to drive gross margins and growth.
As we begin to pick up our pace of.
Here, you will see the operating leverage in gross margins as our business shifts to higher margin products.
This transformation will be accelerated by the red neck bravura exit.
Now, let's turn to the balance sheet.
We ended the quarter with just under a 1 million in cash we had 6.4 million of debt outstanding I draw a LIFO credit facility.
And approximately 5.4 million the notes payable.
We are currently in discussions with intercept about the potential to adjust the deferred consideration brasilia.
We do have the ability to convert a large portion of this liability to a three year notes early next year. These discussions are active and we have limited information to share at this point.
But suffice it to say we are confident we can charge of course that is a win win for all parties.
Now that I've been in this role for about five months I'd like to take a moment and share some of my broader observations of the business where it is.
And what you should expect.
Yes, usually goes without saying that when you complete an acquisition of any.
Meaningful side, you expect some integration opportunities and these opportunities allow you to capture synergies and value beside me two significant acquisitions last year and never integrated them.
The focus at the time was simply revenue synergies and more recently those have been almost wholly interrupted by the.
Endemic.
We are integrating these companies now all three of them you saw a big portion of that work announced last quarter, but we are continuing to make improvements and are making progress there.
This work is being done across the income statement impacting nearly every category of expense.
Let me write offs.
Some of the some examples of this.
We have reduced our physical footprint by consolidating locations and exiting leases.
We are also in the process of reducing our footprint in many manufacturing as well as looking to lower overall production costs and sales expenses, we reduced our reliance on consoles and outside professionals and instead are redefining workflows.
Finance HR compliance and other key corporate functions into consolidated shared services across the entire company.
Once you concentrate responsibility you see results.
And thus we continue to identify more savings and assign responsibility.
We have.
In order to do in this in this in this area and we have more to do specifically in procurement and logistics.
Our investments in corporate areas like SDLP and FP in a already providing critical managerial tools to continue to make meaningful improvements in operating performance as we build our 2020 plan.
We will continue to report to you on the progress we're making in all these areas.
Before I hand, it over to Paul I would like to touch on one last topic do.
You will you will be hearing a speak about over the coming months and that is capital efficiency.
It's not lost on us that our current equity valuation discount the value of the company's assets.
In my experience when the company's management team. His question on that they pair back they often use sprays that goes something like this.
The patient the stock price will catch up with result with the results.
Well I believe that yes. The income statement will drive results I also believe we have another tool to unlock value for investors.
That tool is targeting and.
Leasing unproductive capital and invested in capital invested in assets.
Besides barrel inventory position is a great example of this capital inefficiency.
Well it may have made sense to overinvest in barrels stuck in the past and benefit from the ever increasing value of aged whiskey.
At this point.
And one dollar invested in spirits craft Canning could yield a much greater return than one sitting in a barrel in a warehouse.
We are methodically turning over every opportunity to deploy capital to redeploy capital.
The redneck disposable as one of the most obvious examples of us to date.
So with that I will turn it over to Paul.
Thank you Jeff we certainly appreciate you joining us today for the Q3 earnings report.
As Jeff previously mentioned, a redneck Riviera whiskey license termination will offer east side $8.1 million in value.
Yes.
The only change the balance sheet dynamics.
Company will have the opportunity to reduce absolute barrel inventory by 45%.
Reduced the barrel.
The value of that barrel inventory by 38%.
And retain approximately 50%.
$8.1 million in cash.
This event and the impact it will have on the balance sheet will better position the company for.
Further capital structure improvement.
Better support our goal of accelerating sustainable growth.
Now despite the substantial effort, we're allocating the redneck Rivera.
Closing.
Management continues to focus on five key objectives that we believe will change the underlying fundamentals of the company.
Our overall goal is growth acceleration for the company and rapid value creation for our shareholders and to this end the five key objectives are neutral.
Our ashburn.
Improved balance sheet as Jeff mentioned.
Adequate liquidity and growth capital access.
Accelerated spirits volume with profit and crap Canning expansion with the highest return.
So for the first objective neutral cash earn rate the company.
He has set a proxy for this scorecard measure as adjusted EBITDA plus interest expense.
Based on this measure the 2019 fiscal year cash burn rate was $9.040 million.
And the 2020 forecasted.
Burn rate.
Is 40.
45% less at 5 billion $11000.
As Jeff mentioned.
We will deliver sequential EBITDA improvement by quarter and this improvement is reflected in a consistent production in the 2024.
The cash burn rate.
So for example, Q1 the company recorded a cash burn rate of $2 million 169000, Q2 1.274 million.
Q3, 930000 in Q4 is forecasted.
<unk> to be less than 536000.
An average of 30% improvement for each quarter 2020.
In addition to the cash burn rate reduction management is very focused on improving the income statement ratios in.
In a manner that will drive the highest.
Return for each case sold for example.
Improving gross to net productivity by focusing on price volume mix.
We are improving cost by reducing material complexity.
We are optimizing brand promotional spend by focusing on purchase intent and finally.
Well holding DNA at current levels as gross profit increased.
All of these actions any anticipated improvements will be detailed in the forthcoming 2021 company budget.
Now turning to our second objective focusing on the balance sheet improvement I believe Jeff covered most.
Salient point, however, I can say management is very enthusiastic about the possibility to align the optimal balance sheet with an accelerated growth plan.
I did want to take a moment to comment further on the working capital and specifically inventories.
Once the red neck Riviera event.
Complete our.
Barrel inventory will be reduced from 8000.
800 barrels to 3900.
The plan is to use approximately one third of the remaining barrels for the Burnside Grant.
One third for our new East side.
Limited edition.
Hi, Brad.
And one third for sale or depleted through contract manufacturing.
Hi, converting most of the remaining 3900 barrel inventory into finished products the opportunity becomes very lucrative Theresa.
For example, one.
100 barrels can produce 4000 cases of finished goods that translate to $1 million in revenue and 500000 gross profit.
So rather than sell a barrel at wholesale we can achieve 10 x. return by selling finished goods.
This strategy is new to each site and can add significant top line and bottom line profit.
We are working diligently on branding.
Labeling compliance product development and pricing and we anticipate introducing additional premium products for both earned side and our.
Our new Eastside Limited edition line late Q1 2021.
Turning art.
Attention to the third objective adequate liquidity.
Management believes achieving this objective is critical to each site comprehensive success.
Once we limit our cash.
Cash burn rate, we can better manage our cash and.
Improve our liquidity.
At some point, we can even imagine taking advantage of the increasing opportunities in the marketplace with bolt on acquisitions.
Now while management continues to focus on organic growth.
Typically on a.
In particular and our other spirits brands.
The opportunity for accretive external expansion is available and Boston.
Whether internal organic growth or external bolt on acquisition.
Our overall objective continues to be accelerated growth then.
Minimal dilution.
Appropriate debt level.
Recently, we've secured short term liquidity from Patrick Kenny.
And then as we would like to take this opportunity. Thank you.
Making these funds available to the company.
Turning to our fourth objective spirits portfolio volume with profit.
We continue to concentrate on those tenants we've mentioned before.
Craft inspired premium unique high growth and strong pull oriented.
We are currently finalizing our 2021 plan are it's a.
A key spirits brands.
And our junior Tequila, our biggest opportunity in the east side portfolio, we're looking to capitalize on the ever growing tequila market.
We'll expand into new distribution from west to east and focused on as a new black the brand's premium flagship product.
In addition.
As the on premise business returns we will.
Focus on making a xenia to kill a drink of choice.
The Burnside urban we're focused on the relaunch of our premium and year end reserve.
Introducing new stockman barrels strength reserve, we're developing a new ultra premium luqman flat.
Black double barrel reserve.
Okay.
Flutter Burnside as expansion outside of Portland, Oregon.
And targeting urban urban aficionados in key markets throughout the country.
For Portland potato vodka, one of our fastest growing brands, we are highlighting the premium nature of the product with a new more premium 750 ml bottle.
Oh, and a new one liter version for on premise first.
Christine water from Mt Hood, four times distilled and the personality of Portland will reinforce this unique opt experience for all our consumer.
For the Eastside limited edition line of premium spirits will utilize the current barrel inventory and offer products like single.
So Marc Chery cast.
Paul back try 10 year run an age checking all the consumer price points, ranging from $80 to $400 per box.
Turning to our fifth objective Kras Canning and bottling expansion in high return, we'll continue to capitalize on the opportunity.
I need to extend the canning business in areas of the highest return.
While craft Craning is not our strategic priority. It is a growing high margin high return opportunities.
Hi, Garrett recently resigned as the CEO of the craft Canning Division and.
Been fortunate to replace it with a season manufacturing industry executive Michael Karstadt.
Michaels.
As Michael has extensive experience in gene's leadership nailing manufacturing rapid growth management and implementing ERP ESI team is.
Very enthusiastic about the change and excited about the new leadership.
Our immediate plan of action for Kraft is to announce a price increase for 2021 that will offset the rising cost of cans and further maintain margin.
It was a summary to my comments.
And the day I wanted to share madsen to objectives for the upcoming.
Q4.
First we want to achieve the cash burn rate below 532000, which we defined as EBITDA plus interest expense.
We want to have sequential gross profit improvement.
Over the Q3 results that we reported today.
We want to close the Redneck Riviera deal and secure the $8.1 million.
On a complete a detailed 2021 budget phase by month by brand by skew.
We want to recommend the capital structure that will drive.
Drive company growth and achieve the value and we anticipate.
We want to complete the new packaging and new products for launch in Q1 as I previously mentioned.
So despite the decoded pandemic.
We believe the tide continues to rise for spirits consumption.
And craft cans.
As we continue to bring leadership strategy and strong tactical execution to the site company.
We believe we can capture a disproportionate share of market and continued to accelerate topline growth.
I think you will agree this is a newly side and the new opera.
Importantly to create value for our shareholders and stakeholders.
As always we appreciate your continued support and your continued interest in east side.
Thank you all for joining and at this time, we will open it up to.
A question for all of our participants.
Correct.
Ladies and gentlemen, with that we will begin today's question and answer session Todd.
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And then one to ask a question.
Our first question today comes from David Bain from Roth Capital. Please go ahead with your question.
Great. Thanks, so much I guess first I didn't see the typical detail as it relates to some of the product line volume growth.
Is that something that could be in the queue or or Kuwait briefly go through you know Burnside as any other and redneck maybe.
Maybe threeq.
Thank you and the trends so far in Fourq you.
Hey, David its Jeff for here I can talk to that we yes, we didn't give out the numbers list this quarter for the volumes.
We're going to I could talk generally about the direction of.
<unk> of the storage business and then we can take it offline later something Okay force more numbers on but.
The redneck and.
Revenue both as we said in the second quarter were impacted by the.
The pandemic.
And coming into the third quarter, each month sequentially got better and though we had a strong finish to the quarter with both Virginia and redneck.
Having said that there were some marketing related expenses on redneck that.
Didn't benefit as much as we had hoped in September on the gross contribution basis.
Those two brands are doing well now we have to keep our eyes on the fourth quarter here as we head towards you know this continued increase in the pandemic, but we remain optimistic on on those two brands and as we finish our ARX.
Stewardship of Rednecks.
Our inside and and and quoted Avago brands are doing extremely well.
Instead of OCC is doing very well and it's been now launched in California.
Had a lotta initial success.
So we're having year over year gains in membrane.
And as well.
Is where we're seeing some slight gains in burn side. So we're pleased with the spirits, but clearly in this in this quarter. The crap game business was phenomenal they're up another 20% or so and I'm really driving the growth in cash flow for the company.
Got it okay, great and congratulations on kind of being unshackled as it relates to the balance sheet soon and margins as well after you.
Divest redneck.
Which gives you I guess the instant sales margin pick up I assume there is other.
Our gene augmentation opportunities.
That that.
Come in as well if we if we extract a redneck costs and look at the new revenue mix do we need a significant amount of growth from here to be EBITDA positive I am speaking.
Did you bid on that not necessarily the.
The cash burn that you were speaking to.
You know I'll I'll start with that Paul maybe you can jump in on the numbers of Paul's referring to on in his section of the script adds back interest expense right specific so just to make you aware.
That when I say EBITDA I'm not obviously include interest expense, but yes, I have to tell you I think from what I've, what I've seen.
Two things.
But where we sit back for a second just say generally speaking one of the challenges that each has had.
Because they have premium crops products and they take the price.
They are down.
Right, then we move down.
Retail again Pauls.
Much better at explaining this than I am indicates a redneck.
That whole market that whole business.
Went down down market for us So I think our goal here with a junior and Burns.
Side and also important to go back and you know again refer you back to some of Paul's comments and the changes made there you're going to see us be able to capture more margin on those products and you know that's going to go a long way to improving the.
Cash flow operating performance of the company in the income statement.
Having said that there's also a mix shifts going on we've never really been able to capture the block opportunity in the zinnia pursuant still selling a lot of La Blanca you know the the lowest margin product we have.
And the reason why we haven't captured it is because the minute we got our act together at the end of the year you know all the on premise locations with.
Dark.
Hard to get people a.
Focused on block that's changing for the holiday period.
Or getting that out finally.
And that will have a margin change, but Paul also alluded to something else in his script that I'd point people to is some new products that are going to be a really high margin.
Alex on the company's sits on some aged whiskey that it's incredible and has an opportunity to take some products out to market that I think we want to be having a big impact on the company and they are going to.
It's going to be reflected in growth and profitability.
Paul do you want to add to that.
Yeah, what I'd like to do is just give a specific example.
And I'll take Portland potato vodka.
Yeah, we're looking at simultaneously, creating less complexity in production.
And bringing products to market that are more craft more premium of more quality you've heard us continually talk.
I thought that the other thing we've talked about it's not just pushing it in but ensuring that we pull it through.
So we have just taken.
The Portland potato vodka and similarly, as you know created a markup in the Burnside bottle, which is a call to forte bottle.
Presented it to consumers.
And.
Our top box purchase intent, we went out and get a quantitative study.
Which is I don't think he side is done at all or any of its products and we've measured purchase intent.
And like I said, we're going to look more how consumers pull it through.
Okay, and just jam it in an open it moves there.
And the top box purchase intent on the new pp thought.
The bottle went from 15 to 25, so those would be people 15th.
15% said I'm extremely likely to buy it.
What we showed in the new bottle and went up.
The 25%.
And on the top three box, which is extremely very and somewhat likely to purchase it went from 79 to 86.
Now, we'll also have a corresponding price increase and try and bring the price back up again, because we've been pushing that.
Price down so.
We'll we'll take some of the iconic graffy from the bottling the label and what's very attractive to consumers and driving purchase intent.
And we'll put it into point of sale and into merchandising. So that's one specific example, also.
I don't want to for you to death, but.
We're looking at attributes and derived attribute.
And I promised our shareholders would be more quantitative we focus on more Paul will give you examples of how we're going to grow these brands and the potato baucus scored higher on premium quality craft and new and different and those.
They're all attribute ratings combined together, it's called derived attribute ratings and those specifically drive to purchase intent. So we know when we put this bottle in the market. We can go out to distributors and we can show them. The research we can show retailers. The research we can explain why we should take our.
It's up and we get a higher margin.
And we can tell them, how we're going to drive more velocity at the point of purchase.
And just one more thing not to take too much time, but the east side brand.
The east side brand.
In scored through the roof, we've just tested.
Frank just one market.
And the top three box score I'm talking purchase intent.
It was 96%.
I mean, 96% of the target that we interviewed.
They were extremely.
You know likely or.
[music].
The very or somewhat likely to purchase so we're out there measuring the impact of the.
Packaging and we're also measuring the underlying attributes fundamentals that move us to more premium more craft and higher quality, which allows us to charge more in the.
So we're really excited about all this we're ready to get out and start it in action and some of the markets and to support it with some.
Promotion and some online sport.
Oh, that's that's helpful color.
And I promise last one I know if my third but.
Hi, Joe.
Don craft.
A lot of beverage companies, even one today have noted that they can supply timing.
They've been speaking, though also to supply relief kind of at the at the end of <unk>.
Next year after some factory build outs and I'm, just wondering how that impacts.
Pac sort of the the longer term for crafters crap like the mobile does that what does that fill a different type of a niche or void.
That general supply.
Factories cancer, and also would that be flexible enough to sort.
Sort of ramped down as a business over time is spirits.
How much you know print out much more pronounced than.
Maybe supply does creep back into the market or how should we look at this as a longer term opportunity for free side.
I can speak to that strategically.
I think to answer your one question is it different.
Because fixed operations as a mobile canning operation and the answer is yes.
It's very different because we're actually putting.
There are four components on a truck along with the bright cans are going right.
To the point of production.
And so different production facilities.
They may have certain changeovers may have some downtime they may have optimize their capacity utilization so they need something that is.
Fast is incremental one is on site and thats very different because when you produce in a fixed operation and.
You're either producing a liquid onsite of your trucking. It in so you should think of it as a very unique.
Opportunity offered to the marketplace.
And.
One that I think is sustainable in terms of the cans and.
The overall interest in the can market.
As a consumer.
Demand.
Hi, Yes, you could you could envision there being a little bit less intensity after cove it.
No as on premise comes back as a draft beer comes back.
But I don't think cancer going away as.
As a as a preferred package or the consumer consumption set.
I think it.
Seeing a lot of.
Beverage.
Trends fads over the years and this one looks fairly consistent I'm not saying it won't back off.
And then on the last point on the actual camp supply.
There is a lot of pressure on can supply.
But I've been very impressed with the capability of our purchasing team.
And.
They're innovate native ways to get.
Out into the market and find a canned availability and to even find summit at pretty good cost. So it is a challenge.
It something thats on our mind, but from what I've seen the team has been managing it well and we haven't really run out of stock to date.
All right very helpful color. Thank you.
Once again, if you would like to ask a question. Please press Star then one.
Our next question comes from Peter Marco from Matt. Please go ahead with your question.
Thanks for taking my call a couple.
A couple quick questions hopefully the inventory aspect I'm not the whiskey when you're talking about new products is that just a burning through that inventory or are you.
Are these potentially permanent new products.
Well the.
Thanks for that question I think the primary the primary impetus.
Of developing the Eastside brand.
There's other reasons, but primarily is.
To really burned through these barrels.
Now if we find something that's on fire.
And that people love, we could even turn into a permanent product offering it's possible or it could be a repetitive limited offering during different times of the year. So.
Primarily we're looking to work through the barrels secondarily, we're always open to opportunity as it emerges in the market.
Okay and could you give an update on how the way way ROM rollout is going and then my final question is are you seeing any good traction on the as Xena.
On premise when it comes to your trend I think last time, we talked to we were talking about creating.
Creating partnerships with signature drinks.
At the restaurants and on premise and that's that's if that's occurring.
Yes, so in terms of way way way way its a.
I mean, it's doing maybe a 100000 cases this year.
And it's a very limited usage occasion.
I mean I used to work on.
Hello, coffee luckier and way way as a coffee rum and it's a very finite and a very small usage occasion.
So we're really going after where we see the the fastest growth in the best return given that we're a small company.
A bit cash constrained, we want to use our resources judiciously.
I would have to say the biggest opportunity the team sees on way way is in a ready to drink.
And were now developing different prototypes for away our TD and we're also thinking about the fact that way way it could be more than just a coffee wrong, maybe its a coffee vodka.
So way way it could just be this great coffee infused spirit.
That.
You have in a ready to drink offerings.
So we're not backing off away, we aren't going to optimize the packaging its spots of fortune right now so we're going to improve that.
And.
We will move forward Opportunistically, but I would say in 2021.
It's not going to be our biggest push it will be.
The zune yet.
Inside Portland, potato vodka and that will offer the limited edition side and of course, we'll make way way available but.
We only have so much dollars to go around.
Just to clarify it's under a thousand cases this year.
A boy way.
[laughter] now by once again good xiniya.
I see okay.
Rick.
Yeah, I can tell you know I don't mean, yeah. Okay. We have made weve had some success.
With the placing a zoo yet.
In on premise and trying to think there's oh.
Oh, well known chain I don't think Weve made it public kept Paul and Mike I'm not sure about that.
No no. We're in we're on the menu we're on the menu cafe lots of.
Okay, Yeah, and so any.
I think they're going to have other opportunities there.
And yes, I'm doing your.
Lends itself well for this kinda placement remember, though.
A bottle black is that retail over $100 right. So on premise then you're in a a much higher dollar price.
Price point, but this is a situation where where you start to go through the the expressions of the Vista Kiera.
You kind of end up wanting to go after them.
Black and have an opportunity to try to do extraordinary tequila and so we.
We are making progress there and.
The sale consensus so in the past quarter, we should see more of that in the next quarter into next year.
Okay. Thanks.
Thanks, I'll hop back in.
Once again, if you would like to ask a question. Please press star and then one to withdraw yourself from the question.
You May press star into.
And we do have a question from Matt Campbell from <unk> capital. Please go ahead with your question.
Yes, good afternoon, gentlemen, and nice is in progress.
Company, Jeff you made a comment about the debts.
Live Oak in your notes payable.
I was wondering if you could expand upon that because you said you felt confident being able to push that out yeah.
Yeah, Yeah, I'm happy to I.
Thanks, Matt for the question. So yeah, we're we're in and process with two banks actually.
Live Oak is the is the thing that.
They will use to finance a barrel inventories and the real first Interstate.
He's been extremely supportive with craft and growing craft and we would just have learned that we renewed the first Interstate line for and of the year in fact, it could be going up and.
In size and again shortly about that to help finance the growth and live Oak is also told us that they are a big you know excited to continue the relationship and so we're in the process of having that roll over for another year and we're in discussions with them about how much.
Much cash will capture.
Obviously as we close the redneck deal and how much will have left on the balance sheet. The rest of the of the debt is our notes payable.
You know, it's around 2 million and change and those are old friends and family noted some of them are convertible busted by converts in the sense that they're low coupons and they.
Her over the next.
Into the spring late spring and we've talked to people about helping to take care of that if we decide not to use our cash and so we've got some interest there and then the last time that I call out just because.
Fair.
The the earn out as I mentioned.
So thats moved into a current liability because we havent coming up here in the first quarter, but a portion of that has already been crystallized in and what we what we paid in stock and we can issue more stock issue cash we issue the rest of the note. The notes at three year note with a 6% coupon.
Pardon.
Suffice it to say right now we will look at all our opportunities and as Paul said to kill counties have been extremely supportive of this company over the last year and and they want to see the company be successful not just the xiniya product they brought to the family, but the entire clap.
And so.
So we're in discussions with them about how we can create a win win for them extend the earn out.
And give the company a clean balance sheet for next year plenty liquidity grow.
That's helpful and I I'm traveling so forgive me I haven't been able to see the press release, but.
And the PPP money was that forgiven or what's what's the status of that.
Yes, yes, we are applying for a full forgiveness. The application is in process and we've known 60 days or so that's about 1.4 million.
Great great.
Thank you.
And ladies and gentlemen, showing no additional questions I'd like to pass the floor back to management for any closing remarks.
Yeah, well, we'd just like to thank everybody for their participation and continued support really appreciate it and.
We look forward to any a one on one conversations they have like Africa Tonight, If you would like some more detail.
Other than that thank you very much and have a nice.
Evening.
And ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending you may now.
Now disconnect your lines.