0001493152-26-023433
SEC filingQ1 2026 delivered deeper losses from gross margin inversion despite revenue holding near prior-year levels, as Two Trees capacity upgrades and new Whiskey-as-a-Service contracts position for future growth amid tightening liquidity.
Revenue of $434.1K marked a 15.5% decline from $513.9K in Q1 2025, primarily as RF Specialties neared milestone completion while Two Trees Distilling gained traction from bulk alcohol sales. This dynamic underscores the transition toward distilling-centric growth, bolstered by early 2026 completion of higher-capacity SRAS installation at the Two Trees facility to boost aging services and brand production capacity. In 2025, the company began aging tanker loads of distillate for an SRAS customer to meet urgent aged spirits demand, building operational momentum into this quarter.
Gross profit swung sharply to a -$136.3K loss from $132.5K profit, yielding a -31.4% margin as distilling input costs and freight escalated faster than revenue. This inversion reflects scaling challenges in Two Trees, where higher production volumes for aging services incurred upfront cost pressures before efficiency gains materialize. The company began building machines for new customers in Q1, targeting significant revenue and gross profit expansion from this Whiskey-as-a-Service stream going forward, with no customer cancellation rights post-shipment beyond standard returns.
Operating income deteriorated 35.6% to -$837.8K from -$617.8K (-193.0% margin), as the gross loss overwhelmed underlying cost controls. Management noted a decrease in operating expenses primarily from lower general and administrative outlays, enabling focus on production ramp despite the wider loss. Net income followed suit, reaching -$847.0K (-34.6% YoY change) with diluted EPS at $0.00, consistent with prior year.