UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021 2022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to______
Commission file number 001-40016
VINTAGE WINE ESTATES, INC.
(Exact name of registrant as specified in its charter)
Nevada | 87-1005902 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
______________________________
937 Tahoe Boulevard, Suite 210
Incline Village, Nevada 89451
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (877) 289-9463
______________________________
Securities registered pursuant to Section 12(b) of the Act:
| Trading |
| ||
Common stock, no par value per share | VWE | The | ||
Warrants to purchase common stock | VWEWW | The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | Accelerated filer |
|
Non-accelerated filer |
| Smaller reporting company |
|
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.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes☐ No ☒
As of November 1, 2021,2022, 60,461,61161,691,054 shares of the registrant’s common stock were outstanding.
Part I—Financial Information
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
|
| September 30, 2021 |
|
| June 30, 2021 |
| ||
Assets |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash |
| $ | 118,275 |
|
| $ | 118,879 |
|
Restricted cash |
|
| 4,800 |
|
|
| 4,800 |
|
Accounts receivable, net |
|
| 13,791 |
|
|
| 14,639 |
|
Other receivables |
|
| 16,894 |
|
|
| 14,044 |
|
Inventories |
|
| 225,816 |
|
|
| 221,145 |
|
Prepaid expenses and other current assets |
|
| 7,654 |
|
|
| 8,538 |
|
Total current assets |
|
| 387,230 |
|
|
| 382,045 |
|
Property, plant, and equipment, net |
|
| 217,962 |
|
|
| 213,673 |
|
Goodwill |
|
| 109,895 |
|
|
| 109,895 |
|
Intangible assets, net |
|
| 35,548 |
|
|
| 36,079 |
|
Other assets |
|
| 1,596 |
|
|
| 1,806 |
|
Total assets |
| $ | 752,231 |
|
| $ | 743,498 |
|
Liabilities, redeemable noncontrolling interest, and stockholders' equity |
|
|
|
|
|
| ||
Current liabilities |
|
|
|
|
|
| ||
Line of credit |
| $ | 98,722 |
|
| $ | 87,351 |
|
Accounts payable |
|
| 14,617 |
|
|
| 17,301 |
|
Accrued liabilities and other payables |
|
| 26,488 |
|
|
| 25,078 |
|
Current maturities of long-term debt |
|
| 22,964 |
|
|
| 22,964 |
|
Total current liabilities |
|
| 162,791 |
|
|
| 152,694 |
|
Other long-term liabilities |
|
| 2,767 |
|
|
| 2,767 |
|
Long-term debt, less current maturities |
|
| 181,125 |
|
|
| 183,541 |
|
Interest rate swap liabilities |
|
| 12,414 |
|
|
| 13,807 |
|
Deferred tax liability |
|
| 16,752 |
|
|
| 16,752 |
|
Deferred gain |
|
| 11,666 |
|
|
| 12,000 |
|
Total liabilities |
|
| 387,515 |
|
|
| 381,561 |
|
Commitments and contingencies (Note 12) |
|
|
|
|
|
| ||
Redeemable noncontrolling interest |
|
| 1,685 |
|
|
| 1,682 |
|
Stockholders' equity |
|
|
|
|
|
| ||
Preferred stock, 0 par value, 2,000,000 shares authorized, and NaN issued and outstanding at September 30, 2021 and June 30, 2021. |
|
| 0 |
|
|
| 0 |
|
Common stock, 0 par value, 200,000,000 shares authorized, 60,461,611 and 60,461,611 issued and outstanding at September 30, 2021 and June 30, 2021. |
|
| 0 |
|
|
| 0 |
|
Additional paid-in capital |
|
| 360,732 |
|
|
| 360,732 |
|
Retained earnings |
|
| 2,804 |
|
|
| - |
|
Total Vintage Wine Estates, Inc. stockholders' equity |
|
| 363,536 |
|
|
| 360,732 |
|
Noncontrolling interests |
|
| (505 | ) |
|
| (477 | ) |
Total stockholders' equity |
|
| 363,031 |
|
|
| 360,255 |
|
Total liabilities, redeemable noncontrolling interest, and stockholders' equity |
| $ | 752,231 |
|
| $ | 743,498 |
|
|
| September 30, 2022 |
|
| June 30, 2022 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash |
| $ | 44,622 |
|
| $ | 45,492 |
|
Restricted cash |
|
| - |
|
|
| 4,800 |
|
Accounts receivable, net |
|
| 38,424 |
|
|
| 38,192 |
|
Other receivables |
|
| 3,071 |
|
|
| 3,866 |
|
Inventories |
|
| 201,940 |
|
|
| 192,102 |
|
Assets held for sale |
|
| 6,553 |
|
|
| - |
|
Current interest rate swap asset |
|
| 5,826 |
|
|
| 2,877 |
|
Prepaid expenses and other current assets |
|
| 9,478 |
|
|
| 13,394 |
|
Total current assets |
|
| 309,914 |
|
|
| 300,723 |
|
Property, plant, and equipment, net |
|
| 228,204 |
|
|
| 236,100 |
|
Operating lease right-of-use assets |
|
| 35,509 |
|
|
| - |
|
Finance lease right-of-use-assets |
|
| 689 |
|
|
| - |
|
Goodwill |
|
| 154,951 |
|
|
| 154,951 |
|
Intangible assets, net |
|
| 62,672 |
|
|
| 64,377 |
|
Interest rate swap asset |
|
| 12,555 |
|
|
| 6,280 |
|
Other assets |
|
| 5,187 |
|
|
| 3,464 |
|
Total assets |
| $ | 809,681 |
|
| $ | 765,895 |
|
Liabilities, redeemable noncontrolling interest, and stockholders' equity |
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
| ||
Line of credit |
| $ | 140,066 |
|
| $ | 144,215 |
|
Accounts payable |
|
| 20,076 |
|
|
| 13,947 |
|
Accrued liabilities and other payables |
|
| 27,867 |
|
|
| 24,204 |
|
Current operating lease liabilities |
|
| 5,197 |
|
|
| - |
|
Current finance lease liabilities |
|
| 263 |
|
|
| - |
|
Current maturities of long-term debt |
|
| 14,738 |
|
|
| 14,909 |
|
Total current liabilities |
|
| 208,207 |
|
|
| 197,275 |
|
Other long-term liabilities |
|
| 6,140 |
|
|
| 6,491 |
|
Long-term debt, less current maturities |
|
| 165,577 |
|
|
| 169,095 |
|
Long-term operating lease liabilities |
|
| 31,637 |
|
|
| - |
|
Long-term finance lease liabilities |
|
| 429 |
|
|
| - |
|
Deferred tax liability |
|
| 29,952 |
|
|
| 29,979 |
|
Deferred gain |
|
| 10,332 |
|
|
| 10,666 |
|
Total liabilities |
|
| 452,274 |
|
|
| 413,506 |
|
Commitments and contingencies (Note 13) |
|
|
|
|
|
| ||
Redeemable noncontrolling interest |
|
| 1,282 |
|
|
| 1,663 |
|
Stockholders' equity: |
|
|
|
|
|
| ||
Preferred stock, no par value, 2,000,000 shares authorized, and none issued and outstanding at September 30, 2022 and June 30, 2022. |
|
| - |
|
|
| - |
|
Common stock, no par value, 200,000,000 shares authorized, 61,691,054 issued and 58,819,160 outstanding at September 30, 2022 and 60,461,611 issued and outstanding at June 30, 2022. |
|
| - |
|
|
| - |
|
Additional paid-in capital |
|
| 382,347 |
|
|
| 377,897 |
|
Treasury stock, at cost: 2,871,894 shares held at September 30, 2022 and June 30, 2022, respectively. |
|
| (26,034 | ) |
|
| (26,034 | ) |
Retained earnings (accumulated deficit) |
|
| 406 |
|
|
| (571 | ) |
Total Vintage Wine Estates, Inc. stockholders' equity |
|
| 356,719 |
|
|
| 351,292 |
|
Noncontrolling interests |
|
| (594 | ) |
|
| (566 | ) |
Total stockholders' equity |
|
| 356,125 |
|
|
| 350,726 |
|
Total liabilities, redeemable noncontrolling interest, and stockholders' equity |
| $ | 809,681 |
|
| $ | 765,895 |
|
See notes to unaudited condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Unaudited)
(in thousands, except share and per share amounts)
|
| Three Months Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net revenues |
|
|
|
|
|
| ||
Wine and spirits |
| $ | 36,287 |
|
| $ | 42,763 |
|
Nonwine |
|
| 19,400 |
|
|
| 11,071 |
|
|
|
| 55,687 |
|
|
| 53,834 |
|
Cost of revenues |
|
|
|
|
|
| ||
Wine and spirits |
|
| 20,588 |
|
|
| 25,406 |
|
Nonwine |
|
| 11,662 |
|
|
| 5,900 |
|
|
|
| 32,250 |
|
|
| 31,306 |
|
Gross profit |
|
| 23,437 |
|
|
| 22,528 |
|
Selling, general, and administrative expenses |
|
| 17,634 |
|
|
| 14,321 |
|
(Gain) on sale of property, plant, and equipment |
|
| (340 | ) |
|
| (356 | ) |
Income from operations |
|
| 6,143 |
|
|
| 8,563 |
|
Other income (expense) |
|
|
|
|
|
| ||
Interest expense |
|
| (3,603 | ) |
|
| (3,382 | ) |
Net unrealized gain on interest rate swap agreements |
|
| 1,393 |
|
|
| 846 |
|
Other, net |
|
| 39 |
|
|
| 190 |
|
Total other income (expense), net |
|
| (2,171 | ) |
|
| (2,346 | ) |
Income before provision for income taxes |
|
| 3,972 |
|
|
| 6,217 |
|
Income tax provision |
|
| 1,193 |
|
|
| 856 |
|
Net income |
|
| 2,779 |
|
|
| 5,361 |
|
Net income (loss) attributable to the noncontrolling interests |
|
| 25 |
|
|
| (304 | ) |
Net income attributable to Vintage Wine Estates, Inc. |
|
| 2,804 |
|
|
| 5,057 |
|
Accretion on redeemable Series B stock |
|
| 0 |
|
|
| 1,835 |
|
Net income allocable to common stockholders |
| $ | 2,804 |
|
| $ | 3,222 |
|
|
|
|
|
|
|
| ||
Net earnings per share allocable to common stockholders |
|
|
|
|
|
| ||
Basic |
| $ | 0.05 |
|
| $ | 0.12 |
|
Diluted |
| $ | 0.05 |
|
| $ | 0.12 |
|
Weighted average shares used in the calculation of earnings per share allocable to common stockholders |
|
|
|
|
|
| ||
Basic |
|
| 60,461,611 |
|
|
| 21,920,583 |
|
Diluted |
|
| 60,461,611 |
|
|
| 25,099,864 |
|
|
| Three Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Net revenues |
|
|
|
|
|
| ||
Wine, spirits and cider |
| $ | 52,052 |
|
| $ | 36,287 |
|
Nonwine |
|
| 25,810 |
|
|
| 19,400 |
|
|
|
| 77,862 |
|
|
| 55,687 |
|
Cost of revenues |
|
|
|
|
|
| ||
Wine, spirits and cider |
|
| 34,522 |
|
|
| 20,588 |
|
Nonwine |
|
| 13,192 |
|
|
| 11,662 |
|
|
|
| 47,714 |
|
|
| 32,250 |
|
Gross profit |
|
| 30,148 |
|
|
| 23,437 |
|
Selling, general, and administrative expenses |
|
| 34,244 |
|
|
| 16,983 |
|
Amortization expense |
|
| 1,811 |
|
|
| 651 |
|
Gain on litigation proceeds |
|
| (530 | ) |
|
| - |
|
Gain on sale of property, plant, and equipment |
|
| (452 | ) |
|
| (340 | ) |
Income (loss) from operations |
|
| (4,925 | ) |
|
| 6,143 |
|
Other income (expense) |
|
|
|
|
|
| ||
Interest expense |
|
| (3,381 | ) |
|
| (3,603 | ) |
Net unrealized gain on interest rate swap agreements |
|
| 9,327 |
|
|
| 1,393 |
|
Other, net |
|
| 271 |
|
|
| 39 |
|
Total other income (expense), net |
|
| 6,217 |
|
|
| (2,171 | ) |
Income before provision for income taxes |
|
| 1,292 |
|
|
| 3,972 |
|
Income tax provision |
|
| 658 |
|
|
| 1,193 |
|
Net income |
|
| 634 |
|
|
| 2,779 |
|
Net loss attributable to the noncontrolling interests |
|
| (343 | ) |
|
| (25 | ) |
Net income attributable to Vintage Wine Estates, Inc. |
|
| 977 |
|
|
| 2,804 |
|
Accretion on redeemable Series B stock |
|
| - |
|
|
| - |
|
Net income allocable to common stockholders |
| $ | 977 |
|
| $ | 2,804 |
|
|
|
|
|
|
|
| ||
Net earnings per share allocable to common stockholders |
|
|
|
|
|
| ||
Basic |
| $ | 0.02 |
|
| $ | 0.05 |
|
Diluted |
| $ | 0.02 |
|
| $ | 0.05 |
|
Weighted average shares used in the calculation of earnings per share allocable to common stockholders |
|
|
|
|
|
| ||
Basic |
|
| 58,819,160 |
|
|
| 60,461,611 |
|
Diluted |
|
| 58,819,160 |
|
|
| 60,461,611 |
|
See notes to unaudited condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, except share amounts)
|
| Redeemable Non-Controlling |
|
| Common Stock |
|
| Treasury Stock |
|
| Additional |
|
| Retained |
|
| Non-Controlling |
|
| Total Stockholders' Equity |
| ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 |
| $ | 1,663 |
|
|
| 61,691,054 |
|
| $ | - |
|
|
| 2,871,894 |
|
| $ | (26,034 | ) |
| $ | 377,897 |
|
| $ | (571 | ) |
| $ | (566 | ) |
| $ | 350,726 |
| |||||||||||||||||||||||||||||
Stock-based compensation expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,622 |
|
|
| - |
|
|
| - |
|
|
| 4,622 |
| |||||||||||||||||||||||||||||
Repurchase of public warrants |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (172 | ) |
|
| - |
|
|
| - |
|
|
| (172 | ) | |||||||||||||||||||||||||||||
Shareholder distribution |
|
| (66 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| |||||||||||||||||||||||||||||
Net income (loss) |
|
| (315 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 977 |
|
|
| (28 | ) |
|
| 949 |
| |||||||||||||||||||||||||||||
Balance, September 30, 2022 |
| $ | 1,282 |
|
|
| 61,691,054 |
|
| $ | - |
|
|
| 2,871,894 |
|
| $ | (26,034 | ) |
| $ | 382,347 |
|
| $ | 406 |
|
| $ | (594 | ) |
| $ | 356,125 |
| |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
| Redeemable Non-Controlling |
|
| Common Stock |
|
| Additional |
|
| Retained |
|
| Non-Controlling |
|
| Total Stockholders' Equity |
|
| Redeemable Non-Controlling |
|
| Common Stock |
|
| Treasury Stock |
|
| Additional |
|
| Retained |
|
| Non-Controlling |
|
| Total Stockholders' Equity |
| ||||||||||||||||||||||||||
|
|
|
|
|
| Shares |
|
| Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Balance, June 30, 2021 |
| $ | 1,682 |
|
|
|
| 60,461,611 |
|
| $ | 0 |
|
| $ | 360,732 |
|
|
| 0 |
|
| $ | (477 | ) |
| $ | 360,255 |
|
|
| 1,682 |
|
|
| 60,461,611 |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 360,732 |
|
| $ | - |
|
| $ | (477 | ) |
| $ | 360,255 |
|
Net income (loss) |
|
| 3 |
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,804 |
|
|
| (28 | ) |
|
| 2,776 |
|
|
| 3 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
| 2,804 |
|
|
| (28 | ) |
|
| 2,776 |
| ||
Balance, September 30, 2021 |
| $ | 1,685 |
|
|
|
| 60,461,611 |
|
| $ | 0 |
|
| $ | 360,732 |
|
| $ | 2,804 |
|
| $ | (505 | ) |
| $ | 363,031 |
|
| $ | 1,685 |
|
|
| 60,461,611 |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 360,732 |
|
| $ | 2,804 |
|
| $ | (505 | ) |
| $ | 363,031 |
|
|
| Redeemable Non-Controlling |
|
|
| Common Stock |
|
| Additional |
|
| Retained |
|
| Non-Controlling |
|
| Total Stockholders' Equity |
| ||||||||||
(in thousands, except share amounts) |
|
|
|
|
| Shares |
|
| Amount |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance, June 30, 2020 |
| $ | 1,382 |
|
|
|
| 26,460,375 |
|
| $ | 0 |
|
| $ | 92,940 |
|
| $ | 15,191 |
|
| $ | (395 | ) |
| $ | 107,736 |
|
Accretion on redeemable stock |
|
| - |
|
|
|
| - |
|
|
| - |
|
|
| 5,880 |
|
|
| (5,880 | ) |
|
| - |
|
|
| - |
|
Stock-based compensation expense |
|
| - |
|
|
|
| - |
|
|
| - |
|
|
| 330 |
|
|
| - |
|
|
| - |
|
|
| 330 |
|
Net income |
|
| 278 |
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,058 |
|
|
| 26 |
|
|
| 5,084 |
|
Balance, September 30, 2020 |
| $ | 1,660 |
|
|
|
| 26,460,375 |
|
| $ | 0 |
|
| $ | 99,150 |
|
| $ | 14,369 |
|
| $ | (369 | ) |
| $ | 113,150 |
|
See notes to unaudited condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
|
| Three Months Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net income |
| $ | 2,779 |
|
| $ | 5,361 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 4,034 |
|
|
| 2,706 |
|
Amortization of deferred loan fees and line of credit fees |
|
| 99 |
|
|
| 119 |
|
Amortization of label design fees |
|
| 120 |
|
|
| 79 |
|
Stock-based compensation expense |
|
| - |
|
|
| 330 |
|
Provision for doubtful accounts |
|
| (15 | ) |
|
| 15 |
|
Net unrealized gain on interest rate swap agreements |
|
| (1,393 | ) |
|
| (846 | ) |
Gain on disposition of assets |
|
| (6 | ) |
|
| (22 | ) |
Deferred gain on sale leaseback |
|
| (334 | ) |
|
| (334 | ) |
Deferred rent |
|
| 128 |
|
|
| 125 |
|
Change in operating assets and liabilities (net of effect of business combinations): |
|
|
|
|
|
| ||
Accounts receivable |
|
| 863 |
|
|
| (730 | ) |
Related party receivables |
|
| - |
|
|
| (316 | ) |
Other receivables |
|
| (2,850 | ) |
|
| (2,066 | ) |
Inventories |
|
| (4,671 | ) |
|
| (4,714 | ) |
Prepaid expenses and other current assets |
|
| 884 |
|
|
| (3,347 | ) |
Other assets |
|
| 116 |
|
|
| 2,306 |
|
Accounts payable |
|
| (3,071 | ) |
|
| 4,058 |
|
Accrued liabilities and other payables |
|
| 1,356 |
|
|
| 6,387 |
|
Related party liabilities |
|
| - |
|
|
| (1,410 | ) |
Net cash (used in) provided by operating activities |
|
| (1,961 | ) |
|
| 7,701 |
|
|
|
|
|
|
|
| ||
Cash flows from investing activities |
|
|
|
|
|
| ||
Proceeds from disposition of assets |
|
| 6 |
|
|
| 22 |
|
Purchases of property, plant, and equipment |
|
| (7,792 | ) |
|
| (6,871 | ) |
Label design expenditures |
|
| (59 | ) |
|
| (69 | ) |
Net cash used in investing activities |
|
| (7,845 | ) |
|
| (6,918 | ) |
|
|
|
|
|
|
| ||
Cash flows from financing activities |
|
|
|
|
|
| ||
Principal payments on line of credit |
|
| (6,304 | ) |
|
| (4,200 | ) |
Proceeds from line of credit |
|
| 17,675 |
|
|
| 5,100 |
|
Outstanding checks in excess of cash |
|
| 387 |
|
|
| 69 |
|
Principal payments on long-term debt |
|
| (2,482 | ) |
|
| (3,416 | ) |
Proceeds from long-term debt |
|
| - |
|
|
| 4,152 |
|
Payments on acquisition payable |
|
| (74 | ) |
|
| (97 | ) |
Net cash provided by financing activities |
|
| 9,202 |
|
|
| 1,608 |
|
|
|
|
|
|
|
| ||
Net change in cash and restricted cash |
|
| (604 | ) |
|
| 2,391 |
|
Cash and restricted cash, beginning of period |
|
| 123,679 |
|
|
| 1,751 |
|
|
|
|
|
|
|
| ||
Cash and restricted cash, end of period |
| $ | 123,075 |
|
| $ | 4,142 |
|
|
|
|
|
|
|
| ||
Supplemental cash flow information |
|
|
|
|
|
| ||
Cash paid during the period for: |
|
|
|
|
|
| ||
Interest |
| $ | 2,603 |
|
| $ | 2,945 |
|
Income taxes |
| $ | - |
|
| $ | 4 |
|
Noncash investing and financing activities: |
|
|
|
|
|
| ||
Accretion of redemption value of Series B redeemable cumulative stock |
| $ | - |
|
| $ | 1,835 |
|
Accretion of redemption value of Series A redeemable stock |
| $ | - |
|
| $ | 4,045 |
|
|
| Three Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net income |
| $ | 634 |
|
| $ | 2,779 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
| ||
Depreciation |
|
| 3,215 |
|
|
| 3,503 |
|
Non-cash operating lease expense |
|
| 37 |
|
|
| - |
|
Amortization expense |
|
| 1,978 |
|
|
| 750 |
|
Stock-based compensation expense |
|
| 4,622 |
|
|
| - |
|
Provision for doubtful accounts |
|
| (280 | ) |
|
| (15 | ) |
Net unrealized gain on interest rate swap agreements |
|
| (9,327 | ) |
|
| (1,393 | ) |
(Benefit) provision for deferred income tax |
|
| (27 | ) |
|
| - |
|
(Gain) on disposition of assets |
|
| (118 | ) |
|
| (6 | ) |
Deferred gain on sale leaseback |
|
| (334 | ) |
|
| (334 | ) |
Deferred rent |
|
| (2,079 | ) |
|
| 128 |
|
Change in operating assets and liabilities (net of effect of business combinations): |
|
|
|
|
|
| ||
Accounts receivable |
|
| 48 |
|
|
| 863 |
|
Other receivables |
|
| 795 |
|
|
| (2,850 | ) |
Inventories |
|
| (8,138 | ) |
|
| (4,671 | ) |
Prepaid expenses and other current assets |
|
| 3,916 |
|
|
| 884 |
|
Other assets |
|
| (1,766 | ) |
|
| 116 |
|
Accounts payable |
|
| 2,087 |
|
|
| (3,071 | ) |
Accrued liabilities and other payables |
|
| 5,532 |
|
|
| 1,356 |
|
Net change in lease assets and liabilities |
|
| 1,288 |
|
|
| - |
|
Net cash provided by (used in) operating activities |
|
| 2,083 |
|
|
| (1,961 | ) |
Cash flows from investing activities |
|
|
|
|
|
| ||
Proceeds from disposition of assets |
|
| - |
|
|
| 6 |
|
Purchases of property, plant, and equipment |
|
| (3,454 | ) |
|
| (7,792 | ) |
Label design expenditures |
|
| (95 | ) |
|
| (59 | ) |
Net cash used in investing activities |
|
| (3,549 | ) |
|
| (7,845 | ) |
Cash flows from financing activities |
|
|
|
|
|
| ||
Principal payments on line of credit |
|
| (34,466 | ) |
|
| (6,304 | ) |
Proceeds from line of credit |
|
| 30,317 |
|
|
| 17,675 |
|
Outstanding checks in excess of cash |
|
| 4,042 |
|
|
| 387 |
|
Principal payments on long-term debt |
|
| (3,753 | ) |
|
| (2,482 | ) |
Principal payments on finance leases |
|
| (67 | ) |
|
| - |
|
Distributions to noncontrolling interest |
|
| (66 | ) |
|
| - |
|
Repurchase of public warrants |
|
| (172 | ) |
|
| - |
|
Payments on acquisition payable |
|
| (39 | ) |
|
| (74 | ) |
Net cash (used in) provided by financing activities |
|
| (4,204 | ) |
|
| 9,202 |
|
Net change in cash and restricted cash |
|
| (5,670 | ) |
|
| (604 | ) |
Cash and restricted cash, beginning of period |
|
| 50,292 |
|
|
| 123,679 |
|
Cash and restricted cash, end of period |
| $ | 44,622 |
|
| $ | 123,075 |
|
Supplemental cash flow information |
|
|
|
|
|
| ||
Cash paid during the period for: |
|
|
|
|
|
| ||
Interest |
| $ | 3,187 |
|
| $ | 2,603 |
|
Income taxes |
| $ | - |
|
| $ | - |
|
Noncash investing and financing activities: |
|
|
|
|
|
| ||
Increase in operating lease assets and liabilities upon adoption of ASC 842 |
| $ | 36,776 |
|
| $ | - |
|
Increase in finance lease assets and liabilities upon adoption of ASC 842 |
| $ | 759 |
|
| $ | - |
|
See notes to unaudited condensed consolidated financial statements.
4
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements include the accounts of all majority-owned or controlled subsidiaries, and all significant intercompany transactions and amounts have been eliminated. The results of businesses acquired or disposed of are included in the condensed consolidated financial statements from the date of the acquisition or up to the date of disposal, respectively.
References to "we"the "Company", "our""we," "our," "us," and similar pronouns in thethis Quarterly Report on Form 10-Q for the quarter ended September 30, 20212022 (this "Form 10-Q") refer to Vintage Wine Estates, Inc., a Nevada corporation, and its majority owned subsidiaries or controlled subsidiaries unless the context requires otherwise.
Our fiscal year ends on June 30. References to fiscal 20212023 and 20202022 in these condensed consolidated financial statements are to the fiscal years ending or ended June 30, 20212023 and June 30, 2020,2022, respectively.
Our unaudited condensed consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission ("SEC") instructions to Quarterly Reports on Form 10-Q and include the information and disclosures required by accounting principles generally accepted in the United States ("GAAP") for interim financial reporting.
The ongoing COVID-19 pandemic ("COVID-19") continues, inflation and supply chain constraints continue to affectdisrupt the U.S. and global economies. Restrictions imposed by federal, state,economies and local governments have disrupted and will continue to disrupt our business. While manythere remains uncertainty about the impact on the economy. We cannot estimate with any certainty the length or severity of the restrictions have expired, some are continuingeconomic uncertainties or the related financial consequences on our business and others are being reimplemented as COVID-19 continuesoperations, including whether and when historic economic and operating conditions will resume or the extent to spread. which the disruption may impact our business, financial position, results of operations or cash flows.
We expect the COVID-19 pandemiceconomic uncertainties to have a minimal impact on sales revenues as we believe we are well-positioned to take advantage of increased direct-to-consumer sales platforms in lieu of in-person transactions.
In the opinion of management, all adjustments necessary for a fair statementpresentation of the condensed consolidated financial statements have been included. Except as disclosed elsewhere in this Form 10-Q, all such adjustments are of a normal and recurring nature. In addition, financial results presented for this fiscal 20222023 interim period are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 20222023 or any other future interim or annual period. These condensed consolidated financial statements are unaudited and accordingly, should be read in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021,2022, filed with the SEC on OctoberSeptember 13, 2021.2022. The June 30, 20212022 condensed consolidated balance sheet was derived from the audited consolidated financial statements as of that date.
Merger and Reverse Recapitalization
We were formed in 2019 as Bespoke Capital Acquisition Corp. (“BCAC”), a special purpose acquisition company incorporated under the laws of the Province of British Columbia. BCAC was organized for the purpose of effecting an acquisition of one or more businesses or assets by way of a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or any other similar business combination involving BCAC.
On June 7, 2021, BCAC completed its business combination (the "Merger") with Legacy Vintage Wine Estates ("VWE") pursuant to a transaction agreement dated February 3, 2021 (as amended, the “Transaction Agreement”) by the merger of VWE Acquisition Sub Inc., a wholly owned subsidiary of BCAC (“merger sub”) with and into Legacy VWE, with Legacy VWE continuing as the surviving entity and as a wholly owned subsidiary of BCAC. In connection with the Merger, BCAC changed its jurisdiction of incorporation from the Province of British Columbia to the State of Nevada and BCAC changed its name to Vintage Wine Estates, Inc. Upon the consummation of the Merger, the Company received approximately $248.7 million, net of fees and expenses. See Note 2 for additional details regarding the transaction.
Significant Accounting Policies
A description of the Company’s significant accounting policies is included in the audited financial statements within its Annual Report on Form 10-K for the fiscal year ended June 30, 2021.2022. Except as noted below, there have been no material changes in the Company’s significant accounting policies during the three months ended September 30, 2021.2022.
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of assets and liabilities that are not readily apparent from other sources. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. Significant estimates include, but are not limited to depletion allowance, allowance for doubtful accounts, the net realizable value of inventory, expected future cash flows including
5
growth rates, discount rates, and other assumptions and estimates used to evaluate the recoverability of long-lived assets, estimated fair values of intangible assets in acquisitions, intangible assets and goodwill for impairment, amortization methods and periods, amortization period of label and package design costs, the estimated fair value of long-term debt, the valuation of interest rate swaps, contingent consideration, common stock, stock-based compensation, and accounting for income taxes.taxes and net assets held for sale. Actual results could differ materially from those estimates.
CashReclassifications
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Specifically, we reclassified $1.8 million of restricted cash from restricted cash to cash and cash equivalents and reclassified $0.7 million of amortization expense from selling, general and administrative expenses.
Cash consists5
Table of deposits held at financial institutions.Contents
Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet that sums to the total of the same such amounts as shown in the condensed consolidated statement of cash flows.flows:
(in thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
|
| June 30, 2021 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Cash and cash equivalents |
| $ | 118,275 |
|
| $ | 4,142 |
|
| $ | 118,879 |
|
Restricted cash |
|
| 4,800 |
|
| - |
|
|
| 4,800 |
| |
Total cash, cash equivalents and restricted cash as shown in the condensed consolidated statement of cash flows |
| $ | 123,075 |
|
| $ | 4,142 |
|
| $ | 123,679 |
|
(in thousands) |
| September 30, 2022 |
|
| June 30, 2022 |
| ||
Cash and cash equivalents |
| $ | 44,622 |
|
| $ | 45,492 |
|
Restricted cash |
|
| - |
|
|
| 4,800 |
|
Total cash, cash equivalents and restricted cash as shown in the consolidated statement of cash flows |
| $ | 44,622 |
|
| $ | 50,292 |
|
In connection with the amended and restated loan and security agreement (see Note 10), the Company entered into a Deposit Control Agreement which required $Restricted4.8 million of the total cash consists of cash that was depositedreceived to be placed into a restricted cash account as collateral for the credit facility and isaccount, subject to release upon the completion of certain construction costs. work and certificates of occupancy associated with the Ray's Station production facility. In July 2022, the Deposit Control Agreement was terminated upon certification that the conditions to Ray's Station's were satisfied.
Interest Rate Swap AgreementsAccounts Receivable and Allowance for Credit Losses
GAAP requires thatThe Company adopted Accounting Standards Update ("ASU") ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326):and its related amendments as of July 1, 2022, see “Recently Adopted Accounting Pronouncements” below.
Accounts receivable are recorded at the invoiced amount. We consider an entity recognize all derivatives (including interest rate swaps) as either assets or liabilitiesaccount past due on the consolidated balance sheetsfirst day following its due date. We monitor past due accounts periodically and measureestablish appropriate reserves to cover expected losses, and consider historical experience, the current economic environment, customer credit ratings or bankruptcies and reasonable and supportable forecasts to develop our allowance for expected credit losses. We review these instruments at fair value. The Company has entered into interest rate swap agreements as a means of managing its interest rate exposure on its debt obligations. These agreements mitigate our exposurefactors quarterly to interest rate fluctuations on our variable rate obligations. We havedetermine if any adjustments are needed to the allowance. Account balances are written-off against the established allowance when we feel it is probable the receivable will not designated these agreements as cash-flow hedges.be recovered.
Accordingly, changes inThe provision for doubtful accounts for the fair value of the interest rate swaps are included in the condensed consolidated statements of operations as a component of other income (expense).periods ended September 30, 2022 and June 30, 2022, was $400.0 thousand and $120.0 thousand, respectively. We do not enter into financial instrumentsaccrue interest on past-due amounts. Bad debt expense was insignificant for trading or speculative purposes.
Revenue Recognitionall reporting periods presented.
Point in Time —Revenue is recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for its arrangements, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract;Other receivables include insurance related receivables, income tax receivable and(v) recognize revenue when (or as) the entity satisfies a performance obligation.
We recognize revenue when obligations under the terms of a contract with our customer are satisfied. Generally, this occurs when the product is shipped and title passes to the customer, and when control of the promised product or service is transferred to the customer. Our standard terms are free on board (“FOB”) shipping point, with no customer acceptance provisions. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. other miscellaneous receivables.
We account for shipping and handling as activities to fulfill our promise to transfer the associated products. Accordingly, we record amounts billed for shipping and handling costs as a component of net sales and classify such costs as a component of costs of sales. Our products are generally not sold with a right of return unless the product is spoiled or damaged. Historically, returns have not been significant to the Company.
Over Time —Certain long-term contracts at our B2B segment are for custom wine making services and include services such as fermentation, barrel aging, procurement of dry goods, bottling and cased goods. Additionally, we provide storage services for wine inventory of various customers.
We recognize revenue over time as the contract specific performance obligations are met.
Disaggregation of Revenue
The following tablestable summarizes revenue by geographic region for the three months ended September 30, 2021 and 2020, respectively:region:
6
| Three Months Ended September 30, |
| ||||||||||||||
(in thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Geographic regions: |
|
|
|
|
|
|
|
|
|
| ||||||
United States |
| $ | 54,150 |
|
| $ | 52,182 |
|
| $ | 77,325 |
|
| $ | 54,150 |
|
Canada |
| 504 |
|
|
| 1,220 |
| |||||||||
Europe, Middle East, & Africa |
| 412 |
|
|
| 115 |
| |||||||||
Asia Pacific |
| 455 |
|
|
| 248 |
| |||||||||
Other |
| 166 |
|
|
| 69 |
| |||||||||
International |
|
| 537 |
|
|
| 1,537 |
| ||||||||
Total net revenue |
| $ | 55,687 |
|
| $ | 53,834 |
|
| $ | 77,862 |
|
| $ | 55,687 |
|
The following table provides a disaggregation of revenue based on the pattern of revenue recognition for the three months ended September 30, 2021 and 2020, respectively:recognition:
| Three Months Ended September 30, |
| ||||||||||||||
(in thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Point in time |
| $ | 46,822 |
|
| $ | 45,401 |
|
| $ | 66,213 |
|
| $ | 46,822 |
|
Over a period of time |
| 8,865 |
|
|
| 8,433 |
|
|
| 11,649 |
|
|
| 8,865 |
| |
Total net revenue |
| $ | 55,687 |
|
| $ | 53,834 |
|
| $ | 77,862 |
|
| $ | 55,687 |
|
Concentrations of Risk
Financial instruments that potentially expose us to significant concentrations of credit risk consist primarily of cash and trade accounts receivable. We maintain the majority of our cash balances at multiple financial institutions that management believes are of high-credit quality and financially stable. At times, we have cash deposited with major financial institutions in excess of the Federal Deposit Insurance Corporation (FDIC)("FDIC") insurance limits. At September 30, 20212022 and June 30, 2021,2022, we had $122.0$45.2 million and $121.6$49.0 million respectively, in one major financial institutioninstitutions in excess of FDIC insurance limits. We sell the majority of our wine through U.S. distributors and the direct-to-consumerDirect-to-Consumer channel. Receivables arising from these sales are not collateralized. We attempt to limit our credit risk by performing ongoing credit evaluations of our customers and maintaining adequate allowances for potential credit losses.The following table summarizes customer concentration for the three months ended:
6
|
| September 30, 2021 |
| September 30, 2020 |
Revenue as a percent of total revenue |
|
|
|
|
Customer A |
| 25.5% |
| 31.0% |
Customer B |
| 12.6% |
| 16.5% |
Customer C |
| * |
| 11.6% |
Customer D |
| * |
| * |
The following table summarizes customer concentration for the periods ended:of:
|
| September 30, 2021 |
| June 30, 2021 |
Receivables as a percent of total receivables |
|
|
|
|
Customer A |
| 32.8% |
| 35.0% |
Customer B |
| 17.5% |
| 21.0% |
Customer C |
| * |
| * |
Customer D |
| * |
| 10.4% |
|
| Three Months Ended September 30, | ||
|
| 2022 |
| 2021 |
Revenue as a percent of total revenue |
|
|
|
|
Customer A |
| 18.9% |
| 25.5% |
Customer B |
| * |
| 12.6% |
The following table summarizes customer concentration of:
|
| September 30, 2022 |
| June 30, 2022 |
Receivables as a percent of total receivables |
|
|
|
|
Customer A |
| 29.4% |
| 26.0% |
Customer B |
| * |
| * |
* Customer revenue or receivables did not exceed 10% in the respective periods.
RevenueRevenues for the sales from Customer A are included inwithin the Wholesale and Business-to-Business reporting segments and Customer B revenueare included within the Business-to-Business reporting segment, Customer C and Customer D within the Wholesale reporting segment.segment.
Inventories
Inventories of bulk and bottled wines, spirits, and spirits,ciders and inventories of non-wine products and bottling and packaging supplies are valued at the lower of cost using the FIFO method or net realizable value. Costs associated with winemaking, and other costs associated with the manufacturing of products for resale, are recorded as inventory. Net realizable value is the value of an asset that can be realized upon the sale of the asset, less a reasonable estimate of the costs associated with either the eventual sale or the disposal of the asset in question. Inventories are classified as current assets in accordance with recognized industry practice, although most wines and spirits are aged for periods longer than one year.
Business CombinationsLeases
Business combinationsThe Company adopted ASU 2016-02, Leases ("Topic 842") and its related amendments as of July 1, 2022, see “Recently Adopted Accounting Pronouncements” below. The Company has both operating leases and finance leases. The Company’s non-cancelable leases for winery facilities, vineyards, corporate and administrative offices, tasting rooms, and some equipment are accountedclassified as operating leases. The Company’s non-cancelable leases for under Accounting Standards Codificationcertain equipment that include a bargain purchase option at the end of the lease term are classified as finance leases.
The Company recognizes a right of use (“ASC”ROU”) 805—Business Combinations usingasset representing its right to use the acquisition method of accounting under which all acquired tangibleunderlying asset for the lease term on the condensed consolidated balance sheet and identifiable intangiblerelated lease liabilities representing its obligation to make lease payments arising from the lease. ROU assets and assumedlease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. The ROU asset also includes adjustments for lease incentives receivable, deferred rent and applicable noncontrollingprepaid rent when applicable. The Company’s lease terms may include options to extend the lease when it is reasonably certain that the Company will exercise that option. The Company has made an accounting policy election not to recognize ROU assets and lease obligations for its short-term leases, which are defined as leases with an initial term of 12 months or less. However, the Company will recognize these lease payments in the condensed consolidated statements of operations and comprehensive income/(loss)on a straight-line basis over the lease term and variable lease payments in the period in which the obligation is incurred.
Lease expense for operating leases is recognized on a straight-line basis over the lease term. For finance leases, the right-of-use asset is amortized to amortization expense and interest expense is recorded in connection with the lease liability. Payments under lease arrangements are primarily fixed, however, most lease agreements also contain some variable payments. Variable lease payments other than those that depend on an index or a rate are expensed as incurred and not included in the operating lease ROU assets and lease liabilities. These amounts primarily include payments for taxes, parking and common area expenses. See Note 9.
Assets Held for Sale
The Company classifies an asset group (‘asset’) as held for sale in the period that (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable and transfer of the asset is expected to qualify for recognition as a completed sale within one year (subject to certain events or circumstances), (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially and subsequently measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in selling, general and administrative expenses in the period in which the held for sale criteria are met. Conversely, gains are generally not recognized on the sale of a long-lived asset until the date of sale. Upon designation as an asset held for
7
interests are recognized atsale, the Company stops recording depreciation or amortization expense on the asset. The Company assesses the fair value as of assets held for sale less any costs to sell at each reporting period until the respective acquisition date, while the costs associated with the acquisition of a business are expensed as incurred.
The allocation of purchase consideration requires management to make significant estimates and assumptions, especially with respect to intangible assets. These estimates can include, but are not limited to, a market participant’s expectation of future cash flows from acquired customers, acquired trade names, useful lives of acquired assets, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from such estimates. During the measurement period, whichasset is generally no longer than one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are recognized in operations.classified as held for sale.
Segment Information
We operate in 3three reportable segments. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. The Company’s chief operating decision maker (“CODM”), our Chief Executive Officer, allocates resources and assesses performance based upon discrete financial information at the segment level.
Income Taxes
Deferred income taxes are determined using the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is recorded when the expected recognition of a deferred income tax asset is considered to be unlikely.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize interest and penalties related to income tax matters as a component of income tax expense.
Earnout Shares
The Legacy VWE shareholders are entitled to receive up to an additional 5,726,864 shares of the Company’s common stock (the “Earnout Shares”). The Earnout Shares will be released if the price of our commonstock meets certain thresholds in the 24 months following the closing of the Merger (see Note 2). The Earnout Shares meet the accounting definition of a derivative financial instrument, are considered to be indexed to the Company’s common stock and meet other conditions in ASC 815-40, Derivatives and Hedging: Contracts in Entity's Own Equity, to be classified as equity.
The Company’s obligation to issue the Earnout Shares is recorded as a dividend to the Legacy VWE shareholders at fair value as of the date of the Merger.
The fair value of the Earnout Shares was determined using a Monte Carlo valuation model, which requires significant estimates including the expected volatility of our common stock. The expected annual volatility of our common stock was estimated to be 55.0% as of the date of the Merger, based on the historical volatility of comparable publicly traded companies.
Redeemable Series A and Series B Stock
Prior to the Merger, Legacy VWE had Series A and B stock outstanding. All of the Series B stock and the majority of the Series A stock was classified as temporary equity due to the shares being redeemable at the option of the holder. The carrying value of the redeemable Series A stock and redeemable Series B stock was being accreted to their respective redemption values, using the effective interest method, from the date of issuance to the earliest date the holders can demand redemption. Accretion of redeemable Series B stock included the accretion of dividends and issuance costs. Increases to the carrying value of redeemable Series A stock and redeemable Series B stock were charged to retained earnings or, in its absence, to additional-paid-in-capital. Upon any repurchase of redeemable stock, the excess consideration paid over the carrying value at the time of repurchase is accounted for as a deemed dividend to the stockholders.
In conjunction with the closing of the Merger, a majority of the redeemable Series B stock was redeemed with the remaining redeemable Series B shares, along with all redeemable Series A shares, were converted into shares of the Company's common stock. All Series A and Series B shares which were converted into shares of the Company's common stock were retroactively adjusted using the exchange ratio and reclassified into permanent equity as a result of the Merger.
Earnings Per Share
Basic and diluted net income (loss) per share allocable to common stockholders is presented in conformity with the two-class method required for participating securities. We considered our Series B stock to be participating securities as, in the event a dividend is paid on Series A stock, the
8
holders of Series B stock would be entitled to receive dividends on a basis consistent with the Series A stockholders. The two-class method determines net income per share for each class of common and participating securities according to dividends declared or accumulated as well as participation rights in undistributed earnings. The two-class method requiresincome available to stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Legacy VWE’s redeemable Series B stock was considered to be a participating security. Under the two-class method, any net loss attributable to common stockholders is not allocated to the Series B stock as the holders of the Series B stock did not have a contractual obligation to share in losses.
Basic net income (loss) per share is calculated by dividing the net income (loss) allocable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. For purposes of the calculation of diluted net income (loss) per share, convertible debt (previously convertible into Legacy VWE Series A stock) and stock options and warrants to purchase common stock are considered potentially dilutive securities but are excluded from the calculation of diluted net income (loss) per share when their effect is antidilutive. As a result, in certain periods, diluted net loss per share is the same as the basic net loss per share for the periods presented.
The computation of net income (loss) available to Series A stockholders is computed by deducting theCompany does not pay dividends declared, if any, and cumulative dividends, whether or not declared, in the period on Series B stock (whether paid or not) from the reported net income (loss).
As the Merger has been accounted for as a reverse recapitalization, the consolidated financial statements of the merged entity reflect the continuation of Legacy VWE’s consolidated financial statements, with the Legacy VWE Equity, which has been retroactively adjusted to the earliest period presented to reflect the legal capital of the legal acquirer, BCAC. As a result, net income (loss) per share was also restated for periods ended prior to the Merger.have participating shares outstanding.
Emerging Growth Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
Recently Adopted Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from the London Interbank Offered Rate, and other interbank offered rates expected to be discontinued, to alternative reference rates. The guidance in this ASU was effective upon its issuance; if elected, it is to be applied prospectively through December 31, 2022. The impact this ASU will have on our condensed consolidated financial statements will not be known until we have a modification to our financial instruments converting from LIBOR to another interest rate.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (“Topic 842”),842, which supersedes the guidance in ASC 840, Leases. The new standard, as amended by subsequent ASUs on Topic 842 and recent extensions issued by the FASB in response to COVID-19, requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determinedetermines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of theirits classification. Leases with a term of 12 months or less will beare accounted for similar to existing guidance for operating leases tin the Company's consolidated statements of operations.oday.
The Company adopted Topic 842 will be effective for the Company for fiscal year ending June 30, 2023 and for interim periods in the year beginning July 1, 2024.
We have not yet determined the full effects of Topic 842 on its consolidated financial statements but do expect that it will result in a substantial increase in our long-term assets and liabilities and enhanced disclosures. Based on our initial assessment, we plan to be2022 using the modified retrospective approach, and electingwhereby we recognized a transition adjustment at the effective date of Topic 842, rather than at the beginning of the earliest comparative period presented. Prior period information was not restated. In addition, the Company applied the package of transition practical expedients, for expired orwhich allows the Company to carryforward its population of existing contracts, which retains prior conclusions reached onleases, the classification of each lease identification, classification, and the treatment of initial direct costs incurred. Leases withas of the period of adoption. The Company did not elect the practical expedient related to hindsight analysis which allows a lessee to use hindsight in determining the lease term and in assessing impairment of 12 months or less will be accountedthe entity’s ROU assets.
The Company identified the population of real estate and equipment leases to which the guidance applies and implemented changes in its systems, procedures and controls relating to how lease information is obtained, processed and analyzed. Upon adoption, the Company recognized $37.6 million in ROU assets that represent the Company's right to use the underlying assets for similarthe lease term and $39.2 million in lease obligations that represent the Company's obligation to existing guidance for operating leases today.make lease payments arising from the lease. The ROU assets recognized upon adoption of this guidance will at least result inTopic 842, included the recognitionreclassification of operating lease right-of-use assetsapproximately $2.1 million of deferred rent and operating lease liabilities in our vineyard leases with a weighted-average remaining lease term$0.4 million of less than 10 years upon the adoption on July 1, 2022.prepaid rent. See Note 9.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic(Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in moretimely recognition of credit losses.
The Company adopted ASU No. 2016-13, as amended effective July 1, 2022. We consider historical experience, the current economic environment, customer credit ratings or bankruptcies, and reasonable and supportable forecasts to develop our allowance for credit losses. We review these factors quarterly to determine if any adjustments are needed to the allowance. This guidance did not have a material impact on our condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
The recently issued accounting pronouncements did not have an impact on the Company.
8
2.Business Combinations
Vinesse
On October 4, 2021, the Company acquired 100% of the members' interest in Vinesse, LLC, a California limited liability company ("Vinesse"). Vinesse is a direct-to-consumer platform company that specializes in wine clubs with over 60,000 members. Founded in 1993, Vinesse has developed a long-time following by offering boutique wines to a broader audience and making wine accessible and easy to love. The operations of Vinesse align with those of the Company, which management believes provides for expanded synergies and growth through the acquisition.
The purchase price totaling $17.0 million was comprised of cash of $14.0 million, consulting fees of $0.2 million per year for three years totaling $0.6 million and a three-year earnout payable of up to $2.4 million. To fund the cash portion of the purchase consideration, we utilized the line of credit under the amended and restated loan and security agreement.
The preliminary allocation of the consideration for the net assets acquired from the acquisition of Vinesse were as follows:
(in thousands) |
|
|
| |
Sources of financing |
|
|
| |
Cash |
| $ | 14,000 |
|
Accrued other |
|
| 600 |
|
Contingent consideration |
|
| 2,400 |
|
Fair value of consideration |
|
| 17,000 |
|
|
|
|
| |
Assets acquired: |
|
|
| |
Fixed assets |
|
| 121 |
|
Inventory |
|
| 2,502 |
|
Trade Names and Trademarks |
|
| 1,200 |
|
Customer relationships |
|
| 3,700 |
|
Total identifiable assets acquired |
|
| 7,523 |
|
|
|
|
| |
Goodwill |
| $ | 9,477 |
|
The Company used the carrying value as of the acquisition date to value fixed assets, as we determined that they represented the fair value at the acquisition date.
Inventory was comprised of finished goods, bulk and raw materials. The fair value of finished goods inventory and bulk inventory was derived using projected cost of goods sold as a percentage of net revenues. Raw materials inventory was valued at its book value.
The trade names and trademarks fair value was derived using the Relief-From-Royalty Method (“RFR”). Key assumptions in valuing trade names and trademarks included (i) a royalty rate of 1.8% and (ii) discount rate of 17.5%.
Customer relationships fair value was derived using the Multiple-Period Excess Earnings Method (“MPEEM”), utilizing a discount rate of 18.0%, and Cost Approach. Customer relationships were weighted; 50.0% using the MPEEM model and 50.0% using the Cost Approach.
The results of operations of Vinesse are included in the accompanying condensed consolidated statements of operations from the October 4, 2021 acquisition date.
Transaction costs incurred in the acquisition were insignificant.
ACE Cider
On November 16, 2021, the Company acquired 100% of the capital stock of ACE Cider, the California Cider Company, Inc., a California corporation ("ACE Cider"). ACE Cider is a wholesale platform and specializes in hard cider, an alcoholic beverage fermented from apples. The operations of ACE Cider allow the Company to enter into the beer distribution category.
The purchase price totaling $47.4 million was comprised of a cash payment and contingent consideration.
9
timely recognitionThe preliminary allocation of credit losses. The guidance is effectivethe consideration for the net assets acquired from the acquisition of ACE Cider were as follows:
(in thousands) |
|
|
| |
Sources of financing |
|
|
| |
Cash |
| $ | 46,880 |
|
Accrued other |
|
| 60 |
|
Contingent consideration |
|
| 500 |
|
Fair value of consideration |
|
| 47,440 |
|
|
|
|
| |
Assets acquired: |
|
|
| |
Fixed assets |
|
| 4,205 |
|
Inventory |
|
| 1,350 |
|
Trademarks |
|
| 6,600 |
|
Customer relationships |
|
| 14,300 |
|
Deferred tax liability |
|
| (6,554 | ) |
Total identifiable assets acquired |
|
| 19,901 |
|
|
|
|
| |
Goodwill |
| $ | 27,539 |
|
The Company for fiscal year ending on June 30, 2024 and interim periods beginning forused the fiscal year commencing on July 1, 2023. Early adoption is permitted. We do not expectcarrying value as of the adoption of this standard will have a significant impact onAcquisition Date to value fixed assets, as we determined that they represented the consolidated financial statements given our historically low bad debt expense.fair value at the Acquisition Date.
In August 2018,Inventory was comprised of finished goods, bulk cider and raw materials. The fair value of finished goods inventory and bulk cider inventory was derived using projected cost of goods sold as a percentage of net revenues. Raw materials inventory was valued at its book value.
The trademarks fair value was derived using the FASB issued ASU No. 2018-15RFR. Key assumptions in valuing trademarks included (i) a royalty rate of 2.75% and (ii) discount rate of 12.5%.
Customer relationships fair value was derived using the MPEEM, utilizing a discount rate of 13.0%, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. Under existing GAAP, there is diversity in practice in accounting forCost Approach. Customer relationships were weighted; 90.0% using the costsMPEEM model and 10.0% using the Cost Approach.
The results of implementing cloud computing arrangements thatoperations of ACE Cider are service contracts. The amendments in ASU No. 2018-15 amend the definition of a hosting arrangement and requires a customer in a hosting arrangement that is a service contract to capitalize certain costs as if the arrangement were an internal-use software project. The guidance is effective for the Company for the fiscal years beginning June 30, 2022 and interim periods beginning for the fiscal year commencing July 1, 2022. Early adoption is permitted, included in any interim period. We are currently evaluating the impact and timingaccompanying condensed consolidated statements of adopting ASU No. 2018-15.
In December 2019,operations from the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The amendments in the updated guidance simplify the accounting for income taxes by removing certain exceptions and improving consistent application of other areas of the topic by clarifying the guidance. The amendments in this update are effective for the Company for fiscal year ending June 30, 2022 and for interim periods in the year beginning July 1, 2023. Early adoption is permitted. We are currently evaluating the impact and timing of adopting ASU 2019-12, however at this time, the adoption is not expected to have a significant impact on the consolidated financial statements.
2. Merger and Reverse Recapitalization
On June 7,November 16, 2021 Legacy VWE and BCAC consummated the Merger, with Legacy VWE surviving the Merger as a wholly owned subsidiary of BCAC, which was renamed Vintage Wine Estates, Inc. Immediately prior to the closing of the Merger, the Company purchased 2,889,507 shares of Series B stock from TGAM Agribusiness Fund Holdings LP for $32.0 million, including unpaid cumulative dividends and all remaining shares of outstanding Series B stock of Legacy VWE were converted into shares of Legacy VWE Series A common stock. Upon the consummation of the Merger, each share of Legacy VWE Series A and Series B common stock issued and outstanding was canceled and converted into the right to receive 2.85708834472042 shares (the “Exchange Ratio”) of common stock of the Company. For periods prior to the Merger, the reported share and per share amounts have been retroactively converted (“Retroactive Conversion”) by applying the Exchange Ratio. VWE Legacy shareholders were issued 26,828,256 shares of the Company’s common stock of which 1,000,002 shares were placed in escrow to cover potential adjustments to the purchase price.
To satisfy the requirements of full repayment of the Company’s Paycheck Protection Program loan (the “PPP Loan”) upon a change of control, we placed into escrow $6.6 million in advance of the pending merger and reverser recapitalization. Funds held in escrow were released back to the Company upon receiving notification of the full forgiveness of the PPP loan prior to June 30, 2021.acquisition date.
In September 2021, upon finalization ofTransaction costs incurred in the purchase price, all 1,000,002 shares of the shares in escrowacquisition were released to the VWE Legacy shareholders.insignificant.
UponMeier's
On January 18, 2022, the closingCompany acquired 100% of the Merger,capital stock in Meier's Wine Cellars, Inc., DBA Meier's Beverage Group, an Ohio company ("Meier's"). Meier's is a wholesale and business-to-business company that specializes in custom blending, contract storage, contract manufacturing, and private labeling for wine, beer, and spirits. Over the Company's certificateyears, Meier's continued extending their winemaking skills by producing table wines, sparkling wines, dessert wines, vermouths and carbonated grape juice.
The purchase price totaling $25.0 million was comprised of incorporation authorized cash of $200,000,00012.5 million and 1,229,443 shares of common stock 0 par value per share and 2,000,000 shares of preferred stock, 0 par value per share. As of June 7, 2021 (the "Closing Date"), there were 60,461,611 shares of the Company’s common stock issued and outstanding and warrants to purchase 26,000,000 shares of the Company’s common stock outstanding. There was 0 preferred stock outstanding as the Closing Date.
In connection with the Merger, BCAC entered into subscription agreements (each, a “Subscription Agreement”) with a two investors (each a “Subscriber”), pursuant to which the Subscribers agreed to purchase, and BCAC agreed to sell to the Subscribers, an aggregate of 10,000,000 shares of common stock (the “PIPE Shares”), for a purchase pricevalue of $1012.5 per share and an aggregate purchase price of $million.100.0 million, in a private placement pursuant to the subscription agreements (the “PIPE”). The PIPE investment closed just prior to the consummation of the Merger.
The Merger is accounted for as a reverse recapitalization in accordance with GAAP. Under this methodterms of accounting, BCAC was treated as the “acquired” company and Legacy VWE was treated as the acquirer company for financial reporting purposes. Accordingly, for accounting purposes, the Merger was treated as the equivalent of Legacy VWE issuing stockacquisition also provide for the net assetspossibility of BCAC, accompanied by a recapitalization. The net assetsadditional contingent consideration of BCAC are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Merger are those of Legacy VWE.
Earnout Shares
The VWE Legacy shareholders are entitled to receive up to an additional $5,726,86410.0 sharesmillion based on Meier's exceeding current EBITDA levels over each of the Company’s common stock (the “Earnout Shares”) if at any point during the Earnout Period, from June 7, 2021 to June 7, 2023, the Company's closing share price on the Nasdaq or TSX on 20 trading days out of 30 consecutive trading days:next three years.
10
The Earnout Shares will be adjusted to reflect any stock split, reverse stock split, stock dividend (including any dividend or distributionpreliminary allocation of securities convertible common shares), reorganization, recapitalization, reclassification, combination and, exchangethe consideration for the net assets acquired from the acquisition of Meier's were as follows:
(in thousands) |
|
|
| |
Sources of financing |
|
|
| |
Cash |
| $ | 12,500 |
|
Shares of common stock |
|
| 10,521 |
|
Contingent consideration |
|
| 4,900 |
|
Settlement of pre-existing relationship |
|
| (125 | ) |
Fair value of consideration |
|
| 27,796 |
|
|
|
|
| |
Assets acquired: |
|
|
| |
Accounts receivable |
|
| 3,669 |
|
Fixed assets |
|
| 12,859 |
|
Inventory |
|
| 4,280 |
|
Other assets |
|
| 356 |
|
Trademarks |
|
| 700 |
|
Customer relationships |
|
| 6,400 |
|
Accounts payable and accrued expenses |
|
| (2,682 | ) |
Deferred tax liability |
|
| (6,033 | ) |
Total identifiable assets acquired |
|
| 19,549 |
|
|
|
|
| |
Goodwill |
| $ | 8,247 |
|
The number of shares orof common stock were valued based on the Closing Date share price, resulting in a fair value of $12.0 million, less a discount of $1.5 million due to lack of marketability for shares of common stock, resulting in the shares of common stock valued at $10.5 million.
The contingent consideration was fair valued using the Monte Carlo simulation model, resulting in fair value earnout payments of $4.9 million.
The Company valued the fair value of accounts receivable, other like change. The Earnout Shares are indexed toassets, accounts payable and accrued expenses and fixed assets at the Company’s equityacquisition date.
Inventory was comprised of finished goods, work in process and meet the criteria for equity classification.raw materials. The fair value of the Earnout Shares, $32.4 million,finished goods inventory and work in process inventory was recordedderived using projected cost of goods sold as a dividend to additional paid in capital due to the absencepercentage of retained earnings.net revenues. Raw materials inventory was valued at its book value.
NaNThe trade names and trademarks fair value was derived using the RFR. Key assumptions in valuing trade names and trademarks included (i) a royalty rate of Earnout Shares1.1% and (ii) discount rate of 27.0%.
Customer relationships fair value was derived using the MPEEM, utilizing a discount rate of 28.0%. Customer relationships were issuedweighted 100.0% using the MPEEM model.
The results of operations of Meier's are included in the accompanying condensed consolidated statements of operations from the January 18, 2022 acquisition date.
Transaction costs incurred in the acquisition were insignificant.
The allocations of the fair value of the acquired businesses were based on preliminary valuations of the estimated net fair value of the assets acquired. The fair value estimates are subject to adjustment during the measurement period (up to one year from the acquisition date). The primary areas of accounting for the acquisitions that are not yet finalized relate to the fair value of certain intangible assets acquired and residual goodwill. Goodwill created in the acquisitions were structured as stock sales and therefore, is non tax deductible and non amortizable. The fair values of the net assets acquired are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While we believe that such preliminary estimates provide a reasonable basis for estimating the fair value of assets acquired, we will evaluate any necessary information prior to finalization of the fair value. During the measurement period, we will adjust preliminary valuations assigned to assets and liabilities if new information is obtained about facts and circumstances that existed as of September 30, 2021.the acquisition date, if any, that, if known, would have resulted in revised values for these items as of that date. The net working capital adjustments related to the acquisitions are estimated as of the closing date and will be adjusted based on that estimate. Net working capital adjustments, if any, will be recorded in other assets on the condensed consolidated balance sheet. The impact of all changes, if any, that do not qualify as measurement period adjustments are included in current period earnings.
Other Acquisitions
On February 14, 2022, the Company purchased certain intellectual property pertaining or related to a canned cannabis beverage brand. The Company purchased the intellectual property at a purchase price of $0.4 million. The value of the assets acquired were based on the estimated fair
11
value and are subject to adjustment during the measurement period (up to one year from the acquisition date). An executive officer of the Company has a related party relationship and serves as a member of the board of directors.
3. Inventory
A summaryInventory consists of inventory at September 30, 2021 and June 30, 2021 is as follows:the following:
(in thousands) |
| September 30, 2021 |
|
| June 30, 2021 |
| ||
Bulk wine and spirits |
| $ | 103,857 |
|
| $ | 119,333 |
|
Bottled wine and spirits |
|
| 106,482 |
|
|
| 90,083 |
|
Bottling and packaging supplies |
|
| 13,991 |
|
|
| 10,482 |
|
Nonwine inventory |
|
| 1,486 |
|
|
| 1,247 |
|
Total inventories |
| $ | 225,816 |
|
| $ | 221,145 |
|
(in thousands) |
| September 30, 2022 |
|
| June 30, 2022 |
| ||
Bulk wine, spirits and cider |
| $ | 94,924 |
|
| $ | 89,038 |
|
Bottled wine, spirits and cider |
|
| 87,393 |
|
|
| 85,905 |
|
Bottling and packaging supplies |
|
| 18,367 |
|
|
| 16,328 |
|
Nonwine inventory |
|
| 1,256 |
|
|
| 831 |
|
Total inventories |
| $ | 201,940 |
|
| $ | 192,102 |
|
For the three months ended September 30, 20212022 and 2020,2021, the Company did 0not recognize any impairment of inventory.
For the three months ended September 30, 2022 and fiscal year ended June 30, 2022, the Company's inventory balances are presented net of inventory reserves of zero and $5.1 million, respectively, for bulk wine, spirits and cider inventory, $1.5 million and $1.8 million, respectively, for bottled wine, spirits and cider inventory and $0.4 million and $0.4 million, respectively, for bottling and packaging supplies inventory.
4. Assets Held for Sale
During the period ended September 30, 2022, the Company had two asset groups classified as held for sale. The assets held for sale include certain real property related to Laetitia vineyards land and property, plant and equipment and assumption of a land lease related to the Tamarack Cellars production facility. These assets are being marketed for sale. The Company intends to complete the sales of the assets within twelve months.
The carrying amounts of assets held for sale consists of the following:
(in thousands) |
| September 30, 2022 |
| |
Laetitia vineyards land held for sale |
| $ | 5,890 |
|
Tamarack Cellars property, plant and equipment held for sale |
|
| 2,767 |
|
Less accumulated depreciation and amortization |
|
| (2,104 | ) |
Total assets held for sale |
| $ | 6,553 |
|
The cash flows related to held for sale assets have not been segregated, and remain included in the major classes of assets.
There were no assets classified as held for sale for the year ended June 30, 2022.
5.Property, Plant and Equipment
Property, plant and equipment consists of the following at September 30, 2021 and June 30, 2021:following:
(in thousands) |
| September 30, 2021 |
|
| June 30, 2021 |
| ||
Buildings and improvements |
| $ | 136,889 |
|
| $ | 129,288 |
|
Land |
|
| 33,735 |
|
|
| 33,734 |
|
Machinery and equipment |
|
| 60,489 |
|
|
| 58,227 |
|
Cooperage |
|
| 10,551 |
|
|
| 10,551 |
|
Vineyards |
|
| 21,364 |
|
|
| 21,364 |
|
Furniture and equipment |
|
| 1,394 |
|
|
| 1,343 |
|
|
|
| 264,422 |
|
|
| 254,507 |
|
Less accumulated depreciation and amortization |
|
| (56,294 | ) |
|
| (52,791 | ) |
|
|
| 208,128 |
|
|
| 201,716 |
|
Construction in progress |
|
| 9,834 |
|
|
| 11,957 |
|
|
| $ | 217,962 |
|
| $ | 213,673 |
|
(in thousands) |
| September 30, 2022 |
|
| June 30, 2022 |
| ||
Buildings and improvements |
| $ | 140,975 |
|
| $ | 141,324 |
|
Land |
|
| 30,325 |
|
|
| 36,215 |
|
Machinery and equipment |
|
| 77,935 |
|
|
| 76,916 |
|
Cooperage |
|
| 9,289 |
|
|
| 13,015 |
|
Vineyards |
|
| 21,204 |
|
|
| 21,177 |
|
Furniture and fixtures |
|
| 1,796 |
|
|
| 1,754 |
|
|
|
| 281,524 |
|
|
| 290,401 |
|
Less accumulated depreciation and amortization |
|
| (71,637 | ) |
|
| (71,697 | ) |
|
|
| 209,887 |
|
|
| 218,704 |
|
Construction in progress |
|
| 18,317 |
|
|
| 17,396 |
|
|
| $ | 228,204 |
|
| $ | 236,100 |
|
Depreciation and amortization expense related to property and equipment was $3.2 million and $3.5 million and $2.6 millionmillion for the three months ended September 30, 2022 and 2021, and 2020.respectively.
12
5.6. Goodwill and Intangible Assets
Goodwill
The following table summarizes theThere were no changes in the carrying amountamounts of goodwill by segment:from fiscal year ended June 30, 2022.
(in thousands) |
| Wholesale |
|
| Direct-to-Consumer |
|
| Business-to-Business |
|
| Total |
| ||||
Balance at June 30, 2021 |
| $ | 88,808 |
|
| $ | 20,342 |
|
| $ | 745 |
|
| $ | 109,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance at September 30, 2021 |
| $ | 88,808 |
|
| $ | 20,342 |
|
| $ | 745 |
|
| $ | 109,895 |
|
11
Intangible Assets
The following tables summarize other intangible assets by class:
|
| September 30, 2021 |
| September 30, 2022 | ||||||||||||||||||||||||
(in thousands) |
| Gross |
|
| Accumulated |
|
| Net |
|
| Weighted Average Remaining Amortization Period (in years) |
| Gross |
|
| Accumulated |
|
| Net Intangible |
|
| Weighted Average Remaining Amortization Period (in years) | ||||||
Indefinite-life intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Trademarks |
| $ | 23,229 |
|
| $ | - |
|
| $ | 23,229 |
|
| N/A | ||||||||||||||
Trade names and trademarks |
| $ | 30,203 |
|
| $ | - |
|
| $ | 30,203 |
|
| N/A | ||||||||||||||
Winery use permits |
|
| 6,750 |
|
|
| - |
|
|
| 6,750 |
|
| N/A |
|
| 6,750 |
|
|
| - |
|
|
| 6,750 |
|
| N/A |
Total Indefinite-life intangibles |
|
| 29,979 |
|
|
| - |
|
|
| 29,979 |
|
|
|
| 36,953 |
|
|
| - |
|
|
| 36,953 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Definite-life intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Customer and Sommelier relationships |
|
| 6,300 |
|
|
| (731 | ) |
|
| 5,569 |
|
| 3.9 |
|
| 30,700 |
|
|
| (6,524 | ) |
|
| 24,176 |
|
| 4.2 |
Trade names and trademarks |
|
| 1,900 |
|
|
| (357 | ) |
|
| 1,543 |
|
| 3.2 | ||||||||||||||
Total definite-life intangibles |
|
| 6,300 |
|
|
| (731 | ) |
|
| 5,569 |
|
|
|
|
| 32,600 |
|
|
| (6,881 | ) |
|
| 25,719 |
|
|
|
Total other intangible assets |
| $ | 36,279 |
|
| $ | (731 | ) |
| $ | 35,548 |
|
|
|
| $ | 69,553 |
|
| $ | (6,881 | ) |
| $ | 62,672 |
|
|
|
|
| June 30, 2021 |
| June 30, 2022 | ||||||||||||||||||||||||
(in thousands) |
| Gross |
|
| Accumulated |
|
| Net |
|
| Weighted Average Remaining Amortization Period (in years) |
| Gross |
|
| Accumulated |
|
| Net Intangible |
|
| Weighted Average Remaining Amortization Period (in years) | ||||||
Indefinite-life intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Trademarks |
| $ | 23,229 |
|
| $ | - |
|
| $ | 23,229 |
|
| N/A | ||||||||||||||
Trade names and trademarks |
| $ | 30,203 |
|
| $ | - |
|
| $ | 30,203 |
|
| N/A | ||||||||||||||
Winery use permits |
|
| 6,750 |
|
|
| - |
|
|
| 6,750 |
|
| N/A |
|
| 6,750 |
|
|
| - |
|
|
| 6,750 |
|
| N/A |
Total Indefinite-life intangibles |
|
| 29,979 |
|
|
| - |
|
|
| 29,979 |
|
|
|
|
| 36,953 |
|
|
| - |
|
|
| 36,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Definite-life intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Customer and Sommelier relationships |
|
| 6,300 |
|
|
| (200 | ) |
|
| 6,100 |
|
| 4.7 |
|
| 30,700 |
|
|
| (4,922 | ) |
|
| 25,778 |
|
| 4.4 |
Trade names and trademarks |
|
| 1,900 |
|
|
| (254 | ) |
|
| 1,646 |
|
| 3.5 | ||||||||||||||
Total definite-life intangibles |
|
| 6,300 |
|
|
| (200 | ) |
|
| 6,100 |
|
|
|
|
| 32,600 |
|
|
| (5,176 | ) |
|
| 27,424 |
|
|
|
Total other intangible assets |
| $ | 36,279 |
|
| $ | (200 | ) |
| $ | 36,079 |
|
|
|
| $ | 69,553 |
|
| $ | (5,176 | ) |
| $ | 64,377 |
|
|
|
Amortization expense of customer and Sommelier relationshipsdefinite-life intangibles was $5311.7 thousandmillion and $250.5 thousand million for the three months ended September 30, 2022 and 2021, and 2020, respectively.
As of September 30, 2021,2022, estimated future amortization expense for finite-liveddefinite-lived assets is as follows:
2022 remaining |
| $ | 1,133 |
| ||||||||
2023 |
|
|
| 1,510 |
| |||||||
(in thousands) |
|
|
| |||||||||
2023 remaining |
| $ | 5,116 |
| ||||||||
2024 |
|
| 1,499 |
|
|
| 6,811 |
| ||||
2025 |
|
| 905 |
|
|
| 5,291 |
| ||||
2026 |
|
| 522 |
|
|
| 4,527 |
| ||||
Thereafter |
|
| 3,974 |
| ||||||||
Total estimated amortization expense |
| $ | 5,569 |
|
| $ | 25,719 |
|
13
6. 7Accrued. Accrued Liabilities
The major classes of accrued liabilities at September 30, 2021 and June 30, 2021 are summarized as follows:
(in thousands) |
| September 30, 2021 |
|
| June 30, 2021 |
| ||
Accrued purchases |
| $ | 14,069 |
|
| $ | 10,790 |
|
Accrued employee compensation |
|
| 3,507 |
|
|
| 3,981 |
|
Other accrued expenses |
|
| 5,069 |
|
|
| 6,754 |
|
Non related party accrued interest expense |
|
| 1,012 |
|
|
| 112 |
|
Contingent consideration |
|
| 2,079 |
|
|
| 2,151 |
|
Unearned Income |
|
| 675 |
|
|
| 1,200 |
|
Accrued trade commissions |
|
| 77 |
|
|
| 90 |
|
Total Accrued liabilities and other payables |
| $ | 26,488 |
|
| $ | 25,078 |
|
12
(in thousands) |
| September 30, 2022 |
|
| June 30, 2022 |
| ||
Accrued purchases |
| $ | 13,573 |
|
| $ | 7,478 |
|
Accrued employee compensation |
|
| 4,551 |
|
|
| 5,886 |
|
Other accrued expenses |
|
| 5,265 |
|
|
| 7,115 |
|
Non related party accrued interest expense |
|
| 517 |
|
|
| 429 |
|
Contingent consideration |
|
| 2,605 |
|
|
| 2,204 |
|
Unearned Income |
|
| (60 | ) |
|
| (949 | ) |
Captive insurance liabilities |
|
| 1,416 |
|
|
| 2,041 |
|
Total Accrued liabilities and other payables |
| $ | 27,867 |
|
| $ | 24,204 |
|
7. Long-Term and Other Short-Term Obligations
The following table summarizes long-term and other short-term obligations as of September 30, 2021 and June 30, 2021:
(in thousands) |
| September 30, 2021 |
|
| June 30, 2021 |
| ||
Note to a bank with interest at LIBOR (0.083%) plus 1.75% at September 30, 2021; payable in quarterly installments of $1,065,807 principal with applicable interest; matures in September 2026; secured by specific assets of the Company. Loan amended April 2021. Quarterly payments of $1,065,807 reduced from $1,179,800 starting June 2021. Revised maturity date July 2026 |
| $ | 79,990 |
|
|
| 81,055 |
|
|
|
|
|
|
|
| ||
Capital expenditures borrowings payable at LIBOR plus 1.75% rolled into capital expenditures payable at Alternate Base Rate (ABR) (3.25% at June 30 2021) plus 0.75% with draw expiring July 2026 |
|
| 44,007 |
|
|
| 45,084 |
|
|
|
|
|
|
|
| ||
Note to a bank with interest fixed at 3.6%, payable in monthly installments of $60,333 principal with applicable interest; matures in April 2023 |
|
| 1,002 |
|
|
| 1,227 |
|
|
|
|
|
|
|
| ||
Note to a bank with interest fixed at 2.75%, payable in monthly installments of $60,825 principal with applicable interest; matures in March 2024 |
|
| 1,762 |
|
|
| 1,876 |
|
|
|
|
|
|
|
| ||
Delayed Draw Term Loan ("DDTL") with interest at LIBOR (0.86%) plus 1.84% at September 2021. Matures in July 2024. Interest only through draw period |
|
| 67,141 |
|
|
| 29,250 |
|
|
|
|
|
|
|
| ||
DDTL with ABR (4.00% at June 2021). Matures in July 2024. Interest only through draw period. No interest payments in fiscal year 2021. |
|
| - |
|
|
| 37,892 |
|
|
|
|
|
|
|
| ||
Short term unsecured promissory note; principal and interest payable upon maturity with interest at the prime rate plus 1.00%; matures in January 2022; |
|
| 2,917 |
|
|
| 2,917 |
|
|
|
|
|
|
|
| ||
Short term unsecured promissory note; principal and interest payable upon maturity with interest at the prime rate plus 1.00%; matures in January 2022; |
|
| 2,917 |
|
|
| 2,917 |
|
|
|
|
|
|
|
| ||
Short term unsecured promissory note; principal and interest payable upon maturity with interest at 1.06%; matures in December 31 2021; |
|
| 5,834 |
|
|
| 5,834 |
|
|
|
| 205,570 |
|
|
| 208,052 |
|
Less current maturities |
|
| (22,964 | ) |
|
| (22,964 | ) |
Less unamortized deferred financing costs |
|
| (1,481 | ) |
|
| (1,547 | ) |
|
| $ | 181,125 |
|
| $ | 183,541 |
|
Maturities of Long-Term and Other Short-Term Borrowings
As of September 30, 2021, maturities of long-term and other short-term borrowings for succeeding years are as follows:
(in thousands) |
|
|
| |
Remaining 2022 |
| $ | 20,482 |
|
2023 |
|
| 12,562 |
|
2024 |
|
| 11,695 |
|
2025 |
|
| 69,007 |
|
2026 |
|
| 91,824 |
|
|
| $ | 205,570 |
|
13
Line of Credit
We have a $480.0 million credit facility, consisting of an accounts receivable and inventory revolving facility up to $230.0 million, a term loan in a principal amount of up to $100.0 million, a capital expenditures facility in an aggregate principal of up to $50.0 million, and a delay draw term loan facility up to an aggregate of $100.0 million. The credit facility provided for borrowings, in total of up to $350 million under similar arrangements. The effective interest rate under the revolving facility was4.0% and 2.7% for the three months ended September 30, 2021 and 2020, respectively. As of September 30, 2021 and June 30, 2021, the Company had $102.0 million and $125.0million, respectively, available under the line of credit.
Amortization of deferred loan costs related to the line of credit was $33 thousand and $112 thousand for the three months ended September 30, 2021 and 2020, respectively.
The Company was in compliance with these covenants as of September 30, 2021.
8. Fair Value Measurements
The following tables present assets and liabilities measured at fair value on a recurring basis at:basis:
|
| September 30, 2021 |
|
| September 30, 2022 |
| ||||||||||||||||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Money market funds |
| $ | 116,530 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 116,530 |
|
| $ | 36,738 |
|
| $ | - |
|
| $ | - |
|
| $ | 36,738 |
|
Interest rate swaps (2) |
|
|
|
| 18,381 |
|
|
|
|
| 18,381 |
| ||||||||||||||||||||
Total |
| $ | 116,530 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 116,530 |
|
| $ | 36,738 |
|
| $ | 18,381 |
|
| $ | - |
|
| $ | 55,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Contingent consideration liabilities (1) |
| $ | 0 |
|
| $ | 0 |
|
| $ | 4,557 |
|
| $ | 4,557 |
|
| $ | - |
|
| $ | - |
|
| $ | 8,476 |
|
| $ | 8,476 |
|
Interest rate swaps (2) |
|
| 0 |
|
|
| 12,414 |
|
|
| 0 |
|
|
| 12,414 |
| ||||||||||||||||
Total |
| $ | 0 |
|
| $ | 12,414 |
|
| $ | 4,557 |
|
| $ | 16,971 |
|
| $ | - |
|
| $ | - |
|
| $ | 8,476 |
|
| $ | 8,476 |
|
|
| June 30, 2021 |
|
| June 30, 2022 |
| ||||||||||||||||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Money market funds |
| $ | 6,525 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 6,525 |
|
| $ | 36,616 |
|
| $ | - |
|
| $ | - |
|
| $ | 36,616 |
|
Interest rate swaps (2) |
|
|
| $ | 9,157 |
|
|
|
| $ | 9,157 |
| ||||||||||||||||||||
Total |
| $ | 6,525 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 6,525 |
|
| $ | 36,616 |
|
| $ | 9,157 |
|
| $ | - |
|
| $ | 45,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Contingent consideration liabilities (1) |
| $ | 0 |
|
| $ | 0 |
|
| $ | 4,631 |
|
| $ | 4,631 |
|
| $ | - |
|
| $ | - |
|
| $ | 8,515 |
|
| $ | 8,515 |
|
Interest rate swaps (2) |
|
| 0 |
|
|
| 13,807 |
|
|
| 0 |
|
|
| 13,807 |
| ||||||||||||||||
Total |
| $ | 0 |
|
| $ | 13,807 |
|
| $ | 4,631 |
|
| $ | 18,438 |
|
| $ | - |
|
| $ | - |
|
| $ | 8,515 |
|
| $ | 8,515 |
|
(1) We assess the fair value of contingent consideration to be settled in cash related to acquisitions using probability weighted models for the various contractual earn-outs. These are Level 3 measurements. Significant unobservable inputs used in the estimated fair values of these contingent consideration liabilities include probabilities of achieving customer related performance targets, specified sales milestones, consulting milestones, changes in unresolved claim,claims, projected revenue or changes in discount rates.
(2) The fair value of interest rate swaps is estimated using a discounted cash flow analysis that considers the expected future cash flows of each interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the remaining period to maturity, and uses market-corroborated Level 2 inputs, including forward interest rate curves and implied interest rate volatilities. The fair value of an interest rate swap is estimated by discounting future fixed cash payments against the discounted expected variable cash receipts. The variable cash receipts are estimated based on an expectation of future interest rates derived from forward interest rate curves. The fair value of an interest rate swap also incorporates credit valuation adjustments to reflect the non-performance risk of the Company and the respective counterparty.
14
The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
(in thousands) |
| Contingent |
| |
Balance at June 30, 2021 |
| $ | 4,631 |
|
Payments |
|
| (74 | ) |
Balance at September 30, 2021 |
|
| 4,557 |
|
Less: current portion |
|
| (2,079 | ) |
Long term portion |
| $ | 2,478 |
|
14
(in thousands) |
| Contingent |
| |
Balance at June 30, 2022 |
| $ | 8,515 |
|
Acquisitions |
|
| - |
|
Payments |
|
| (39 | ) |
Change in fair value |
|
| - |
|
Balance at September 30, 2022 |
|
| 8,476 |
|
Less: current portion |
|
| (2,605 | ) |
Long term portion |
| $ | 5,871 |
|
The current and long-term portion of contingent consideration is included within the accrued liabilities and other payables and other long-term liabilities, respectively, in the condensed consolidated balance sheets.
9. Redeemable Stock and Redeemable Noncontrolling InterestLeases
Series A Redeemable StockLeases Under ASC 842
We have lease agreements for certain winery facilities, vineyards, corporate and administrative offices, tasting rooms, and equipment under long-term non-cancelable leases. We determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from and have the ability to direct the use of the asset. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.
Beginning July 1, 2022, operating leases are included in operating lease right-of-use assets, current operating lease liabilities and long-term operating lease liabilities in our condensed consolidated balance sheet. Operating lease right-of-use assets and corresponding operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable.
Finance leases are included in finance lease right-of-use assets, current finance lease liabilities and long-term finance lease liabilities in our condensed consolidated balance sheet.
Our lease agreements include leases that contain lease components and non-lease components. For all asset classes, we have elected to account for both of these provisions as a single lease component.
January 2018 Tamarack Cellars Series A Redeemable StockWe also have elected to apply a practical expedient for short-term leases whereby we do not recognize a lease liability and right-of-use asset for leases with a term of 12 months or less. In addition, we elected the package of transition practical expedients permitted under the transition guidance, which allows the Company to carry forward our leases without reassessing, whether any contracts are leases or contain leases, lease classification and initial direct costs.
ForOur leases have remaining lease terms from two to 10 years. Our lease terms may include options to extend or terminate the three months ended September 30, 2020, the carrying amount of the lease when it is reasonably certain and there is significant economic incentive to exercise that option.
130,338 Series A shares was $2.6 million. For the same period, accretion was not material.Beginning fiscal 2022, we no longer had related party lease agreements.
April 2018 Series A Redeemable Stock
For the three months ended September 30, 2020, the amount accreted as deemed dividends for the Series A shares was $4.0 million.
July 2018 Issuance of Series A Redeemable Stock
For the three months ended September 30, 2020, the carrying amount of the 397,239 Series A shares was $8.3 million. For the same period, accretion was not material.
Series B Redeemable Stock
April 2018 Series B Redeemable Cumulative Series Stock
For the three months ended September 30, 2020, the amount accreted as deemed dividends for the Series B stock was $1.8 million.
The unpaid cumulative dividends on Series B stockfollowing table summarizes the components of lease expense:
|
| Three Months Ended |
| |
(in thousands) |
| September 30, 2022 |
| |
Operating lease expense |
| $ | 1,808 |
|
|
|
|
| |
Finance lease expense |
|
|
| |
Amortization of right-of-use assets |
|
| 70 |
|
Interest on lease liabilities |
|
| 9 |
|
Total finance lease expense |
|
| 79 |
|
Variable lease expense |
|
| 157 |
|
Short-term lease expense |
|
| 35 |
|
Total lease expense |
| $ | 2,079 |
|
15
The following table summarizes supplemental balance sheet related to leases:
(in thousands) |
| September 30, 2022 |
| |
Operating Leases |
|
|
| |
Operating lease right-of-use assets |
| $ | 35,509 |
|
|
|
|
| |
Current portion of operating lease liabilities |
|
| 5,197 |
|
Long-term operating lease liabilities |
|
| 31,637 |
|
Total operating lease liabilities |
|
| 36,834 |
|
|
|
|
| |
Finance Leases |
|
|
| |
Finance lease right-of-use assets |
|
| 689 |
|
|
|
|
| |
Current portion of finance lease liabilities |
|
| 263 |
|
Long-term finance lease liabilities |
|
| 429 |
|
Total finance lease liabilities |
| $ | 692 |
|
The following table summarizes the weighted-average remaining lease term and discount rate:
Weighted-average remaining lease term (in years) | ||||
Operating leases | 6.7 | |||
Finance leases | 2.8 | |||
Weighted-average discount rate | ||||
Operating leases | 5.0 | % | ||
Finance leases | 5.0 | % |
The minimum annual payments under our lease agreements as of September 30, 2020 approximate $2022 are as follows:
(in thousands) |
| Operating Leases |
|
| Finance Leases |
| ||
Remaining fiscal 2023 |
| $ | 4,795 |
|
| $ | 219 |
|
2024 |
|
| 6,849 |
|
|
| 285 |
|
2025 |
|
| 6,529 |
|
|
| 157 |
|
2026 |
|
| 6,521 |
|
|
| 79 |
|
2027 |
|
| 6,195 |
|
|
| - |
|
2028 and thereafter |
|
| 12,479 |
|
|
| - |
|
Total lease payments |
|
| 43,368 |
|
|
| 740 |
|
Less imputed interest |
|
| (6,534 | ) |
|
| (48 | ) |
Present value of lease liabilities |
|
| 36,834 |
|
|
| 692 |
|
Current portion of lease liabilities |
|
| (5,197 | ) |
|
| (263 | ) |
Total long term lease liabilities |
| $ | 31,637 |
|
| $ | 429 |
|
3.9* Table excludes obligations for leases with original terms of 12 months or less which have not been recognized as ROU assets or liabilities in our condensed consolidated balance sheets.
16
10. million.
10. Stockholders' Equity Long-Term and Other Short-Term Obligations
Common StockThe following table summarizes long-term and other short-term obligations:
(in thousands) |
| September 30, 2022 |
|
| June 30, 2022 |
| ||
Note to a bank with interest at LIBOR (1.76%) at September 30, 2022 plus 1.75%; payable in quarterly installments of $1,180 principal with applicable interest; matures in September 2026; secured by specific assets of the Company. Loan amended April 2021. Quarterly payments of $1,066 reduced from $1,180 starting June 2021. Revised maturity date July 2026. |
| $ | 75,726 |
|
| $ | 76,792 |
|
|
|
|
|
|
|
| ||
Capital expenditures borrowings payable at LIBOR (0.50%) at September 30, 2022 and June 30, 2022 plus 1.75%, payable in quarterly installments of $1,077 at September 30, 2022 and June 30, 2022 with draw expiring July, 2026. |
|
| 39,699 |
|
|
| 40,776 |
|
|
|
|
|
|
|
| ||
Note to a bank with interest fixed at 3.6%, payable in monthly installments of $60 principal with applicable interest; matures in April 2023. |
|
| 418 |
|
|
| 593 |
|
|
|
|
|
|
|
| ||
Note to a bank with interest fixed at 2.75%, payable in monthly installments of $61 principal with |
|
| 1,071 |
|
|
| 1,246 |
|
|
|
|
|
|
|
| ||
Delayed Draw Term Loan ("DDTL") with interest at LIBOR (2.32%) at September 2022 plus 1.75%, payable in quarterly installments of $1,260 starting March 2022. Matures in July 2024. |
|
| 64,622 |
|
|
| 65,882 |
|
|
|
| 181,536 |
|
|
| 185,289 |
|
Less current maturities |
|
| (14,738 | ) |
|
| (14,909 | ) |
Less unamortized deferred financing costs |
|
| (1,221 | ) |
|
| (1,285 | ) |
|
| $ | 165,577 |
|
| $ | 169,095 |
|
Maturities of Long-Term and Other Short-Term Borrowings
As of September 30, 2022, maturities of long-term and other short-term borrowings for succeeding years are as follows:
Remaining 2023 |
| $ | 11,156 |
|
2024 |
|
| 14,152 |
|
2025 |
|
| 64,372 |
|
2026 |
|
| 8,571 |
|
2027 |
|
| 83,285 |
|
|
| $ | 181,536 |
|
Line of Credit
The Company has a $480.0 million amended and restated loan and security agreement consisting of an accounts receivable and inventory revolving facility up to $230.0 million, a term loan in a principal amount of up to $100.0 million, a capital expenditures facility in an aggregate principal of up to $50.0 million, and a delay draw term loan facility up to an aggregate of $100.0 million which was limited to an aggregate of $55.0 million. Upon consummation of the merger transaction, the requirements of the delayed draw term loan were met. The effective interest rate under the revolving facility was 2.6% and 4.0% as of September 30, 2022 and 2021, respectively. The Company had $22.4 million and $22.0million available under the line of credit as of September 30, 2022 and June 30, 2021,2022, respectively.
On November 8, 2022, we amended the amended and restated loan and security agreement to to revise a definition used in a financial covenant under the agreement for the debt covenant calculation as of September 30, 2022 and subsequent periods.
11. Stockholders' Equity
Common Stock
We had reserved shares of stock, on an as-if converted basis, for issuance as follows:
|
| September 30, 2021 |
| June 30, 2021 |
| September 30, 2022 |
|
| June 30, 2022 |
| ||
Warrants |
| 26,000,000 |
| 26,000,000 |
|
| 25,646,453 |
|
|
| 25,818,247 |
|
Earnout shares |
| 5,726,864 |
| 5,726,864 |
|
| 5,726,864 |
|
|
| 5,726,864 |
|
Total |
| 31,726,864 |
| 31,726,864 |
|
| 31,373,317 |
|
|
| 31,545,111 |
|
17
Warrants
At September 30, 2022, there were 25,646,453 warrants outstanding to purchase shares of the Company's common stock at a price of $11.50 per whole share. The 25,646,453 warrants are made up of 18,000,000 Public Warrants (the "Public Warrants") and 8,000,000 Private Warrants (the "Private Warrants") less the 353,547 warrants that have been repurchased as part of our share repurchase plan.
The Public Warrants are exercisable commencing on August 11, 2021 and expire five years after the commencement date. The Company may accelerate the expiry date by providing 30 days’ prior written notice, if and only if, the closing price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period. The public warrant holder’s right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of acceleration of the expiry date.
At September 30, 2022, there were 8,000,000 purchased warrants at a price of $1.00 per Private Warrant, with each Private Warrant exercisable commencing on August 11, 2021 for one common share at an exercise price of $11.50, subject to anti-dilution adjustments. The private warrants expire five years after the commencement date.
Earnout Shares
The VWE Legacy shareholders are entitled to receive up to an additional 5,726,864 shares of the Company’s common stock (the “Earnout Shares”) if at any point during the Earnout Period, from June 7, 2021 to June 7, 2023, the Company's closing share price on the Nasdaq on 20 trading days out of 30 consecutive trading days;
The Earnout Shares will be adjusted to reflect any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible common shares), reorganization, recapitalization, reclassification, combination and, exchange of shares or other like change. The Earnout Shares are indexed to the Company’s equity and meet the criteria for equity classification. The fair value of the Earnout Shares, $32.4 million, was recorded as a dividend to additional paid in capital due to the absence of retained earnings.
No Earnout Shares were issued as of September 30, 2022.
2021 Stock Incentive Plan
Effective June 7, 2021, the Company adopted the 2021 Omnibus Incentive Plan (“(as amended, the 2021"2021 Plan”). The 2021 Plan provides for the issuance of stock options, stock appreciation rights, performance shares, performance units, stock, restricted stock, restricted stock units and cash incentive awards. Shares issued under share-based payment awards may either be authorized and unissued shares or shares held in treasury. The 2021 Plan terminateswas approved by shareholders at the Annual Meeting of Shareholders on June 7, 2031.February 2, 2022.
The following table provides total stock-based compensation expense by award type:
|
| Three Months Ended |
| |||||
(in thousands) |
| September 30, 2022 |
|
| September 30, 2021 |
| ||
Stock option awards |
| $ | 1,686 |
|
| $ | - |
|
Restricted stock units |
|
| 2,936 |
|
|
| - |
|
Total stock-based compensation |
| $ | 4,622 |
|
| $ | - |
|
Stock-based compensation expense is included as a component of selling, general and administrative expenses in the condensed consolidated statement of operations.
On June 7, 2021, weStock Options
Stock options granted options under the 2021 Plan are subject to purchase shares of common stock.market conditions. The exercise price of thesestock options was $10.50 per share and will expireare exercisable for 10ten years years after the grant date. The options will vest with respect to 25% on the date which is 18 months after the grant date and with respect to an additional 25% on each of the second, third and fourth anniversary dates of the grant date. However, the vested portion of the options will only become exercisable if the volume-weighted average price per share of our common stock is at least $12.50 over a 30-day consecutive trading period following the grant date. The fair value of the stock options was estimated using a Monte Carlo simulation valuation model. Stock option awards vest in four equal installments of 25%, with the first installment vesting 18 months after the vesting commencement date with respect to an additional 25% of the total stock-based award on each of the 2nd, 3rd and 4th anniversaries of the vesting commencement date, providing in each case the employee remains in continuous employment or service with the Company or an Affiliate. Compensation expense is recognized ratably over the requisite service period.
We evaluated the grants under ASC 718 - Compensation-Stock Compensation and determined a grant date and a service inception date for accounting purposes did not exist because all necessary approvals had not been obtained, which will not occur until the shareholders have approved the 2021 Plan. Until shareholder approval is obtained, the 2021 Plan and related options are not considered outstanding for accounting purposes, and no compensation expense associated with these grants will be recognized. Shareholder approval was not obtained for the periods ended September 30, 2021 and June 30, 2021.
In connection with the merger (see Note 2), the Company’s 2015 Stock Incentive Plan was terminated and each outstanding option to purchase shares of legacy VWE Shares A stock outstanding immediately prior to the close of the merger, whether vested or not, was canceled in exchange for cash payments payment equal to the excess, if any, of the deemed fair value per share of the Legacy VWE Series A stock as determined by the per share merger consideration over the exercise price of such option multiplied by the number of shares of Company stock subject to such option (without interest and subject to any required withholding tax). The cash settlement was treated as a settlement of the options and resulted in a
1518
reductionThe following table presents a summary of additional paidstock option activity under the 2021 Plan:
|
| Stock Options |
|
| Weighted-Average Exercise Price |
|
| Weighted-Average Remaining Contractual Life (Years) |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding at June 30, 2022 |
|
| 3,503,527 |
|
| $ | 10.50 |
|
|
| 3.22 |
|
| $ | - |
|
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited or cancelled |
|
| (1,250 | ) |
|
| 10.50 |
|
|
| - |
|
|
| - |
|
Outstanding at September 30, 2022 |
|
| 3,502,277 |
|
| $ | 10.50 |
|
|
| 2.99 |
|
|
| - |
|
Total unrecognized compensation expense related to the stock options was $6.4 million, which is expected to be recognized over a weighted-average period of 3.0 years. No stock options were vested and exercisable as of September 30, 2022.
Restricted Stock Units
Restricted stock units are subject only to service conditions and vest ratably over four years.
The following table presents a summary of restricted stock units activity for the periods presented:
|
| Restricted Stock Units |
|
| Weighted-Average Grant Date Fair Value |
| ||
Outstanding at June 30, 2022 |
|
| 1,902,068 |
|
| $ | 8.14 |
|
Granted |
|
| - |
|
|
| - |
|
Issued |
|
| - |
|
|
| - |
|
Forfeited or cancelled |
|
| - |
|
|
| - |
|
Outstanding at September 30, 2022 |
|
| 1,902,068 |
|
| $ | 8.14 |
|
Total unrecognized compensation expense related to the restricted stock units was $7.3 million, which is expected to be recognized over a weighted-average period of 2.6 years. No restricted stock units vested as of September 30, 2022.
Stock and Warrant Repurchase Plan
On March 8, 2022, the Company's board of directors approved a repurchase plan authorizing the Company to purchase up to $30.0 million in capitalaggregate value of our common stock and/or warrants through September 8, 2022. Purchases under the repurchase program may be made on the open market, in privately negotiated transactions or in other manners as permitted by the federal securities laws and other legal and contractual requirements and are expected to comply with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The timing and amount of any repurchases will depend on a number of factors, including price, trading volume, general market conditions and legal requirements, among others. The repurchase program does not require the Company to acquire a specific number of shares or warrants. The cost of the shares and warrants that are repurchased will be funded from available working capital.
For accounting purposes, common stock and/or warrants repurchased under our repurchase plan are recorded based upon the settlement date of the applicable trade. Such repurchased shares are presented using the cost method. During the quarter ended September 30, 2022, the Company repurchased 171,994 warrants at an average price of $5.31.00 million equal to the fair valueper warrant. The total cost of the options settledshares and/or warrants repurchased was $0.2 million.
The table below summarizes the changes in repurchases of common stock and the recognition of incremental compensation cost of $warrants:2.6
(in thousands) | September 30, 2022 | |||
Balance at June 30, 2022 | 3,053,447 | |||
Repurchases of common stock | - | |||
Repurchases of warrants | 171,994 | |||
Balance at September 30, 2022 | 3,225,441 |
The Stock and Warrant Repurchase Plan expired on September 9, 2022.
12. million representing the excess of purchase price over the fair value of the cancelled options at the time of settlement.Income Taxes
Stock-based compensation expenseThe increase in our effective tax rate for the three months ended September 30, 20212022 was primarily due to changes in pre-tax income and 2020 was 0and $0.3 million, respectively. Thepermanent items, which primarily consist of non-deductible officer compensation expense, foras compared to the three months ended September 30, 2020 recognized under the 2015 Stock Incentive Plan has been included as a component2021.
19
11. Income Taxes
For the three months ended September 30, 2021, the effective tax rate differs from the federal statutory rate of 21% primarily due to state taxes. For the three months ended September 30, 2020, the2022, our effective tax rate differs from the federal statutory rate of 21% primarily due to permanent items, which primarily relate to non-deductible officer compensation, and state taxes. For the three months ended September 30, 2021, our effective tax rate differs from the federal statutory rate of 21% due to permanent items, which primarily consist of the ResearchR&D Tax Credit.
The provisional measurements of fair value for income taxes payable and Development ("R&D") Tax Credits.deferred taxes for the acquisitions of Vinesse, ACE Cider and Meier may be subject to changes as additional information is received and certain tax returns are finalized. The Company expects to finalize the fair value measurements as soon as practicable, but not later than one year from the date of acquisition.
12. 13. Commitments and Contingencies
We are subject to a variety of claims and lawsuits that arise from time to time in the ordinary course of business. Although management believes that any pending claims and lawsuits will not have a significant impact on the Company’s consolidated financial position or results of operations, the adjudication of such matters are subject to inherent uncertainties and management’s assessment may change depending on future events.
Indemnification Agreements
In the ordinary course of business, we may provide indemnification of varying scope and terms to vendors, lessors, customers and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. These indemnities include indemnities to our directors and officers to the maximum extent permitted under applicable state laws. The maximum potential amount of future payments we could be required to make under these indemnification agreements is, in many cases, unlimited. Historically, we have not incurred any significant costs as a result of such indemnifications and are not currently aware of any indemnification claims.
Other Commitments
Contracts exist with various growers and certain wineries to supply a significant portion of our future grape and wine requirements. Contract amounts are subject to change based upon actual vineyard yields, grape quality and changes in grape prices. Estimated future minimum grape and bulk wine purchase commitments are as follows:
(in thousands) |
| Total |
| |
Remaining 2023 |
| $ | 40,524 |
|
2024 |
|
| 20,706 |
|
2025 |
|
| 18,158 |
|
|
| $ | 79,388 |
|
Grape and bulk wine purchases under contracts totaled $15.8 million and $10.3 million for the three months ended September 30, 2022 and 2021, respectively. The Company expects to fulfill all of these purchase commitments.
Immediate Family Member and Other Business Arrangements
We provide at will employment to several family members of officers or directors who provide various sales, marketing and administrative services to us. Payroll and other expenses to these related parties was $125.0 thousand and $71.0 thousand for the three months ended September 30, 2022 and 2021, respectively.
We pay for sponsorship and marketing services and point of sale marketing materials to unincorporated businesses that are managed by immediate family members of a Company executive officer. For the three months ended September 30, 2022 and 2021, payments related to sponsorship and marketing services totaled $87.0 thousand and $75.0 thousand, respectively.
Financial Advisory Agreement
In April 2022, the Company entered into an arrangement with Global Leisure Partners LLC ("GLP") to act as a financial advisor to the Company in connection with its exploration of acquisitions, mergers, investments and other strategic matters. A director of the Company having the authority to establish policies and make decisions is an executive of GLP. Although members of the board of directors are typically independent from management, members of the board of directors would be considered management based on the definition of management in ASC 850, Related Party Disclosures. During the three months ended September 30, 2022 and 2021, payments in respect of capital markets and mergers and acquisitions matters totaled $50.5 thousand and zero, respectively.
20
15.Segments
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”),CODM, or decision-making group, in deciding how to allocate resources and in assessing performance. When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics. Our operations are principally managed on a sales distribution basis and are comprised of three reportable segments: Wholesale; Direct-to-Consumer; and Business-to-Business. The factors for determining the reportable segments include the manner in which management evaluates performance for purposes for allocating resources and assessing performance.
We report our segments as follows:
Wholesale Segment—We sell our wine, spirits and cider to wholesale distributors under purchase orders. Wholesale operations generate revenue from product sold to distributors, who then sell them off to off-premise retail locations such as grocery stores, wine clubs, specialty and multi-national retail chains, as well as on-premise locations such as restaurants and bars.
Direct-to-Consumer Segment—We sell our wine and other merchandise directly to consumers through wine club memberships, at wineries’ tasting rooms, at Sommelier wine tasting events, and through the Internet. Winery estates hold various public and private events for customers and our wine club members. The certified Sommeliers provide guided tasting experiences customized for each audience through virtual and in-person events internationally. .globally.
Business-to-Business Segment—Our Business-to-Business sales channel generates revenue primarily from the sale of private label wines and spirits, and custom winemaking services. Annually, we work with our national retail partners to develop private label wines incremental to their wholesale channel businesses. Additionally, we provide custom winemaking services.
Corporate and Other Segment—
The following tables present net revenues and income from operations directly attributable to the Company's segments for the three months ended September 30, 2021 and 2020. Our Corporate and Other segment generates revenues formfrom grape and bulk sales and storage services. Other, non-allocable expenses include corporate expenses, non-direct selling expenses and other expenses not specificspecifically allocated to an identified reporting segment.
|
| Three Months Ended September 30, 2021 |
| |||||||||||||||||
(in thousands) |
| Wholesale |
|
| Direct-to-Consumer |
|
| Business-to-Business |
|
| Corporate and Other |
|
| Total |
| |||||
Segment Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net revenues |
| $ | 16,203 |
|
| $ | 14,915 |
|
| $ | 24,467 |
|
| $ | 102 |
|
| $ | 55,687 |
|
Income from operations |
| $ | 4,188 |
|
| $ | 2,539 |
|
| $ | 7,514 |
|
| $ | (8,098 | ) |
| $ | 6,143 |
|
The following tables present net revenues and income from operations directly attributable to the Company's segments:
|
| Three Months Ended September 30, 2022 |
| |||||||||||||||||
(in thousands) |
| Wholesale |
|
| Direct-to-Consumer |
|
| Business-to-Business |
|
| Corporate and Other |
|
| Total |
| |||||
Segment Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net revenues |
| $ | 23,381 |
|
| $ | 20,497 |
|
| $ | 34,084 |
|
| $ | (100 | ) |
| $ | 77,862 |
|
Income (loss) from operations |
| $ | 1,828 |
|
| $ | 2,355 |
|
| $ | 12,761 |
|
| $ | (21,869 | ) |
| $ | (4,925 | ) |
16
|
| Three Months Ended September 30, 2020 |
|
| Three Months Ended September 30, 2021 |
| ||||||||||||||||||||||||||||||||||
(in thousands) |
| Wholesale |
| Direct-to-Consumer |
| Business-to-Business |
| Corporate and Other |
| Total |
|
| Wholesale |
|
| Direct-to-Consumer |
|
| Business-to-Business |
|
| Corporate and Other |
|
| Total |
| ||||||||||||||
Segment Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net revenues |
| $ | 15,044 |
|
| $ | 10,896 |
|
| $ | 25,816 |
|
| $ | 2,078 |
|
| $ | 53,834 |
|
| $ | 16,203 |
|
| $ | 14,915 |
|
| $ | 24,467 |
|
| $ | 102 |
|
| $ | 55,687 |
|
Income from operations |
| $ | 2,988 |
|
| $ | 1,118 |
|
| $ | 8,784 |
|
| $ | (4,327 | ) |
| $ | 8,563 |
| ||||||||||||||||||||
Income (loss) from operations |
| $ | 4,188 |
|
| $ | 2,539 |
|
| $ | 7,514 |
|
| $ | (8,098 | ) |
| $ | 6,143 |
|
There was no inter-segment activity for any of the given reporting periods presented.
Depreciation expense recognized by operating segment is summarized below:
(in thousands) |
|
| Wholesale |
|
| Direct-to-Consumer |
|
| Business-to-Business |
|
| Corporate and Other |
|
| Total |
| ||||||
For the periods ended September 30: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| 2022 |
|
| $ | 38 |
|
| $ | 291 |
|
| $ | (477 | ) |
| $ | 455 |
|
| $ | 307 |
|
| 2021 |
|
| $ | - |
|
|
| 300 |
|
| $ | - |
|
| $ | - |
|
| $ | 300 |
|
Amortization expense recognized by operating segment is summarized below:
(in thousands) |
|
| Wholesale |
|
| Direct-to-Consumer |
|
| Business-to-Business |
|
| Corporate and Other |
|
| Total |
| ||||||
For the periods ended September 30: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| 2022 |
|
| $ | 596 |
|
| $ | 745 |
|
| $ | 364 |
|
| $ | - |
|
| $ | 1,705 |
|
| 2021 |
|
| $ | - |
|
|
| 500 |
|
| $ | - |
|
| $ | - |
|
|
| 500 |
|
21
Excluding long-termthe property, plant, and equipment for winespecific to assets located at our tasting facilities, and Customerthe customer Sommelier relationships and Sommelier relationships allocated specificallyintangible assets specific to the Direct-to-Consumer reporting segment,Sommelier acquisition, given the nature of our business, revenue generating assets are utilized across segments, therefore, discrete financial information related to segment assets and other balance sheet data is not available and the Company does not allocate assetsinformation continues to its reportable segments, as they are not included in the review performed by the CODM for purposes of assessing segment performance and allocating resources.
Depreciation expense recognized for assets included in the Direct-to-Consumer reporting segment was $0.3 million and $0.2 million for the three months ended September 30, 2021 and 2020, respectively. Amortization expense included in the Direct-to-Consumer reporting segment was $531 thousand and $25 thousand for the three months ended September 30, 2021 and 2020, respectively. All of the Company’s long-lived assets are located within the United States.be aggregated.
14.16. Earnings Per Share
The following table reconciles the number of common shares used to compute basic and diluted earnings per share attributable to Vintage Wine Estates, Inc., shareholders:
|
| Three Months Ended |
| |||||
|
| September 30, |
| |||||
(in thousands, except for per share amounts) |
| 2021 |
|
| 2020 |
| ||
Net income |
| $ | 2,779 |
|
| $ | 5,361 |
|
Less: Series B dividends and accretions |
|
| - |
|
|
| 1,835 |
|
Less: income (loss) allocable to noncontrolling interest |
|
| 25 |
|
|
| (304 | ) |
Net income allocable to common shareholders |
| $ | 2,804 |
|
| $ | 3,222 |
|
|
|
|
|
|
|
| ||
Numerator – Basic EPS |
|
|
|
|
|
| ||
Net income allocable to common shareholders |
| $ | 2,804 |
|
| $ | 3,222 |
|
Less: net income allocated to participating securities (Series B) |
|
| - |
|
|
| 553 |
|
Net income allocated to common shareholders |
| $ | 2,804 |
|
| $ | 2,669 |
|
|
|
|
|
|
|
| ||
Numerator – Diluted EPS |
|
|
|
|
|
| ||
Net income allocated to common shareholders |
| $ | 2,804 |
|
| $ | 2,669 |
|
Add: net income attributable to convertible debt |
|
| - |
|
|
| 188 |
|
Reallocation of income under the two-class method |
|
| 0 |
|
|
| 30 |
|
Net income allocated to common shareholders |
| $ | 2,804 |
|
| $ | 2,887 |
|
|
|
|
|
|
|
| ||
Denominator – Basic Common Shares |
|
|
|
|
|
| ||
Weighted average common shares outstanding - Basic |
|
| 60,462 |
|
|
| 21,921 |
|
Denominator – Diluted Common Shares |
|
|
|
|
|
| ||
Effect of dilutive securities: |
|
|
|
|
|
| ||
Stock options |
|
| - |
|
|
| 297 |
|
Convertible debt |
|
| - |
|
|
| 2,882 |
|
Weighted average common shares - Diluted |
|
| 60,462 |
|
|
| 25,100 |
|
|
|
|
|
|
|
| ||
Net income per share – basic: |
|
|
|
|
|
| ||
Common Shares |
| $ | 0.05 |
|
| $ | 0.12 |
|
Net income per share – diluted: |
|
|
|
|
|
| ||
Common Shares |
| $ | 0.05 |
|
| $ | 0.12 |
|
17
|
| Three Months Ended September 30, |
| |||||
(in thousands, except for per share amounts) |
| 2022 |
|
| 2021 |
| ||
Net income |
| $ | 634 |
|
| $ | 2,779 |
|
Less: income (loss) allocable to noncontrolling interest |
|
| (343 | ) |
|
| 25 |
|
Net income allocable to common shareholders |
| $ | 977 |
|
| $ | 2,804 |
|
|
|
|
|
|
|
| ||
Numerator – Basic EPS |
|
|
|
|
|
| ||
Net income allocable to common shareholders |
| $ | 977 |
|
| $ | 2,804 |
|
Net income allocated to common shareholders |
| $ | 977 |
|
| $ | 2,804 |
|
|
|
|
|
|
|
| ||
Numerator – Diluted EPS |
|
|
|
|
|
| ||
Net income allocated to common shareholders |
| $ | 977 |
|
| $ | 2,804 |
|
Net income allocated to common shareholders |
| $ | 977 |
|
| $ | 2,804 |
|
|
|
|
|
|
|
| ||
Denominator – Basic Common Shares |
|
|
|
|
|
| ||
Weighted average common shares outstanding - Basic |
|
| 58,819,160 |
|
|
| 60,461,611 |
|
|
|
|
|
|
|
| ||
Denominator – Diluted Common Shares |
|
|
|
|
|
| ||
Weighted average common shares - Diluted |
|
| 58,819,160 |
|
|
| 60,461,611 |
|
|
|
|
|
|
|
| ||
Net income per share – basic: |
|
|
|
|
|
| ||
Common Shares |
| $ | 0.02 |
|
| $ | 0.05 |
|
Net income per share – diluted: |
|
|
|
|
|
| ||
Common Shares |
| $ | 0.02 |
|
| $ | 0.05 |
|
The following securities have been excluded from the calculations of diluted earnings per share attributable to common shareholders because including them would have been antidilutive:
|
| Three Months Ended |
| |||||||||||||
|
| September 30, |
|
| Three Months Ended September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Shares subject to warrants to purchase common stock |
|
| 26,000,000 |
|
|
| - |
|
|
| 25,646,453 |
|
|
| 26,000,000 |
|
Shares subject to option to purchase common stock |
|
| - |
|
|
| 1,466,252 |
| ||||||||
Shares subject to options to purchase common stock |
|
| 3,502,277 |
|
|
| - |
| ||||||||
Total |
|
| 26,000,000 |
|
|
| 1,466,252 |
|
|
| 29,148,730 |
|
|
| 26,000,000 |
|
The Company did not have any related party receivables or related party liabilities as of September 30, 2021 and June 30, 2021.
The components of related party revenues and expenses are as follows:
|
| Three Months Ended |
| |||||
(in thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
| ||
Revenues: |
|
|
|
|
|
| ||
Warehousing and fulfillment services |
| $ | 0 |
|
| $ | 213 |
|
Storage and bottling of alcoholic beverages |
|
| 0 |
|
|
| 15 |
|
Management fees |
|
| 0 |
|
|
| 115 |
|
|
|
|
|
|
| - |
| |
Expenses: |
|
|
|
|
|
| ||
Concourse Warehouse lease |
|
| 0 |
|
|
| 206 |
|
Swanson lease |
|
| 0 |
|
|
| 163 |
|
Z.R. Waverly lease |
|
| 0 |
|
|
| 28 |
|
Warehouse and Fulfillment Services— Revenues from related parties for warehousing and fulfillment services for the three months ended September 30, 2021 and 2020 were 0and $213 thousand, respectively. We did 0t have any accounts receivable from revenues with related parties for warehousing and fulfillment services at September 30, 2021 and June 30, 2021.
Storage and Bottling of Alcoholic Beverages— We have entered into a number of transactions with a related party covering services related to the storage and bottling of alcoholic beverages. We made payments of 0 and $15 thousand to the related party for the three months ended September 30, 2021 and 2020, respectively.
Management Fees— Prior to July 1, 2021, we provided management, billing and collection services to a related party under a management fee arrangement. For the three months ended September 30, 2021 and 2020, we charged this related party management fees of 0 and $115thousand, respectively, for these services. We did 0t owe the related party for amounts collected on the related party's behalf at September 30, 2021 and June 30, 2021
The Company is engaged in various operating lease arrangements with related parties.
Concourse Warehouse Lease — We lease 15,000 square feet (“sq. ft.”) of office space and80,000 sq. ft. of warehouse space. We account for this lease as an operating lease. We recognized rent expense paid to Concourse of $206 thousand for the three months ended September 30, 2020 related to this lease agreement. Prior to September 2020, the facility was owned by and leased from Concourse LLC, a related party real estate leasing entity that was wholly owned by a shareholder. We have no ownership in Concourse. In September 2020, an independent party purchased the facility from Concourse, LLC and assumed the lease.
Swanson Lease — We leased a property with production space and a tasting room under an operating lease with an entity that is wholly owned by a shareholder. We recognized rent expense of approximately $163 thousand for the three months ended September 30, 2020, related to this lease agreement.
On May 5, 2021, the Swanson production space and a tasting room leased by us from a related party under an operating lease was sold to an independent third party. The Company elected to terminate the lease in accordance with the terms of the lease. There was 0 termination fee and we received cash consideration from the related party landlord in the amount of $500 thousand to assist with the removal and relocation of our winery equipment. We vacated the facility on May 14, 2021.
ZR Waverly Lease — We leased tasting room space under an operating lease with an entity that is wholly owned by a shareholder. We recognized rent expense of approximately $28thousand for the three months ended September 30, 2020, related to this lease agreement. In December 2020, we purchased the ZR Waverly leased facility in California from the shareholder for $1.5 million.
1822
We have lease agreements for certain winery facilities, vineyards, corporate and administrative offices, tasting rooms, and equipment under long-term non-cancelable operating leases. The lease agreements have initial terms of two to 15 years, with two leases having multiple five-year or 10-year renewal terms and other leases having no or up to five-year renewal terms. The lease agreements expire ranging from December 31, 2021 through November 2031.
The minimum annual payments under our lease agreements are as follows:
(in thousands) |
| Total |
| |
Remaining 2022 |
| $ | 4,292 |
|
2023 |
|
| 5,197 |
|
2024 |
|
| 5,240 |
|
2025 |
|
| 4,936 |
|
2026 |
|
| 5,049 |
|
2027 and thereafter |
|
| 17,046 |
|
|
| $ | 41,759 |
|
Total rent expense, including amounts to related parties, was $1.6 million and $1.9 million for the three months ended September 30, 2021 and 2020, respectively.
Immediate Family Member and Other Business Arrangements — We provide at will employment to several family members of officers or directors who provide various sales, marketing and administrative services to us. Payroll and other expenses to these related parties was approximately $71 thousand and $75 thousand for the three months ended September 30, 2021 and 2020.
We pay for sponsorship and marketing services and point of sale marketing materials to unincorporated businesses that are managed by immediate family members of a Company executive officer. For the three months ended September 30, 2021and 2020, payments related to sponsorship and marketing services totaled approximately $75 thousand and $119 thousand, respectively.
16. Subsequent Events
On October 4, 2021, the Company acquired 100% of the members interest in Vinesse, LLC, a California limited liability company. Vinesse, LLC ("Vinesse") is a direct-to-consumer platform company that specializes in wine clubs with over 60,000 members. Founded in 1993, Vinesse has developed a long-time following by offering boutique wines to a broader audience and making wine accessible and easy to love. The operations of Vinesse align with those of the Company, which management believes provides for expanded synergies and growth through the acquisition.
The purchase totaling $17.1 million was comprised of cash of $14.0 million, consulting fees of $0.2 million per year for three years totaling $0.6 million and a three-year earnout payable of up to $2.5 million. To fund the cash portion of the purchase consideration, we utilized the line of credit under the amended and restated loan and security agreement.
The acquisition of Vinesse closed near the date the Company's condensed consolidated financial statements were available for issuance. Thus, the initial accounting for the business combination and required disclosures specific to the transaction are impracticable for us to provide. Specifically, the following accounting and disclosures could not be made:
The goodwill balance and operational results from the Vinesse acquisition are expected to impact the Direct-to-Consumer reporting segment.
On September 9, 2021, the Company formed VWE Captive, LLC, a wholly-owned captive insurance company ("Captive"), which became operational on October 1, 2021. The Company formed Captive to self-insure the first $10 million of claims, above which limit, Captive has secured insurance.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented. The following discussion and analysis should be read in conjunction with our Annual Report on
19
Form 10-K for the fiscal year ended June 30, 20212022 (our "Annual Report") and the unaudited condensed consolidated financial statements and the accompanying notes thereto included herein. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our” and “the Company” are intended to mean the business and operations of Vintage Wine Estates, Inc. ("VWE"), a Nevada corporation and its consolidated subsidiaries.
Business Overview
Vintage Wine Estates, Inc., is a leading vintner in the United States ("U.S."), offering a collection of wines produced by award-winning, heritage wineries, popular lifestyle wines, innovative new wine brands, packaging concepts, as well as craft spirits. Our name brands include Layer Cake, Cameron Hughes, Clos Pegase, B.R. Cohn, Firesteed, Bar Dog, Kunde, Cherry Pie and many others. Since our founding over 20 years ago, we have grown organically through wine brand creation and through acquisitions to become the 15th14th largest wine producer based on cases of wine shipped in California. We sell nearly 2 million cases annually.
Growth Strategy
Our strategy is to continue to grow organically and through acquisitions with a view towards making two to three acquisitions per year over the next five years. These acquisitions have allowed us to diversify our wine sourcing into regions outside of California, expand our portfolio of brands, increase our vineyard assets and provide our Direct-to-Consumerdirect-to-consumer and retail customers with a range of wines to choose from.
Trends and Other Factors Affecting Our Business
Various trends and other factors affect or have affected our operating results, including:
COVID-19 PandemicEconomic Uncertainties
The ongoing COVID-19 pandemic ("COVID-19") continues, inflation and supply chain constraints continue to disrupt the U.S. and global economies. While many measures implemented by governments in an effort to sloweconomies and there remains uncertainty about the spread of COVID-19 have been lifted or eased, some are continuing and others are being reimplemented as COVID-19 continues to spread.impact on the economy. We cannot estimate with any certainty the length or severity of the COVID-19 pandemiceconomic uncertainties or the related financial consequences on our business and operations, including whether and when historic economic and operating conditions will resume or the extent to which the disruption may impact our business, financial position, results of operations or cash flows.
Industry and Economic ConditionsWe expect the economic uncertainties to have a minimal impact on sales revenues
Invasion of Ukraine
Russia's invasion of Ukraine has not had a direct impact on the Company. The Company does not have assets, operations or human capital resources located in Russia or Ukraine, does not invest or hold securities that trade in those areas and does not rely on goods or services sourced in Russia or Ukraine. However, the Company receives its capsules for wine industry is recession resistant, with sustained growth overbottles from a supplier in Italy, who has plants located in Ukraine, Italy and Poland. While the past 25 years despite downturns in economic conditions from time to time. Consumers are increasingly purchasing higher priced winesCompany has not been impacted directly by supply chain disruptions as a result of the invasion, including potential cybersecurity risks and other alcoholic beverages, whichindirect operational or supply chain challenges, the competition to secure wine bottle capsules has accelerated throughout the COVID-19 pandemic. Consumption increases are largely in the $10.00 or more retail price per bottle premium and luxury wine categories. We benefitincreased from this trend by focusing on the premium wine segment. Approximately 80% of our wine sales are in the $10.00 to $20.00 per bottle range.
U.S. Wildfires
Significant wildfires in California, Oregon and Washington states, have recently engulfed the affected regions in smoke and flames. The long-term trend is that wildfires are increasing resulting from drought conditions. Drought conditionssuppliers due to global climate change have increased the severityclosing of destructive wildfires which have affected the U.S. grape harvest. When vineyards and grapes are exposed to smoke, it can resultplant in an ashy, burnt, or smoky aroma, described as "smoke tainted”. Industry grape suppliers have also experienced smoke and fire damage from the wildfires. Damage to our grape harvest and vineyards caused from the wildfires has impacted our revenues, costs of revenues and winery overhead for the periods presented.
Seasonality
There is a degree of seasonality in the growing cycles, procurement and transportation of grapes. The wine industry in general tends to experience seasonal fluctuations in revenues and net income. Typically, we have lower sales and net income during our third fiscal quarter (January through March) and higher sales and net income during or second fiscal quarter (October through December) due to usual timing of seasonal holiday buying, as well as wine club shipments. We expect these trends to continue.Ukraine.
Weather Conditions
Our ability to fulfill the demand for wine is restricted by the availability of grapes. Climate change, agricultural and other factors, such as wildfires, disease, pests, extreme weather conditions, water scarcity, biodiversity loss and competing land use, impact the quality and quantity of grapes available to us for the production of wine from year to year. Our vineyards and properties, as well as other sources from which we purchase grapes, are affected by these factors. For example, the effects of abnormally high rainfall or drought in a given year may impact production of grapes, which can impact both our revenues and costs from year to year.
20
In addition, extreme weather events, such as wildfires can result in potentially significant expenses to repair or replace a vineyard or facility as well as impact the ability of grape suppliers to fulfill their obligations to us.
Seasonality
There is a degree of seasonality in the growing cycles, procurement and transportation of grapes. The wine industry in general tends to experience seasonal fluctuations in revenues and net income. Typically, we have lower sales and net income during our third fiscal quarter (January through
23
March) and higher sales and net income during our second fiscal quarter (October through December) due to usual timing of seasonal holiday buying, as well as wine club shipments. We expect these trends to continue.
Key Measures to Assess the Performance of our Business
We consider a variety of financial and operating measures in assessing the performance of our business, formulating goals and objectives and making strategic decisions. The key GAAP measures we consider are net revenues; gross profit; selling, general and administrative expenses; and income from operations. The key non-GAAP measure we consider is Adjusted EBITDA. We also monitor our case volume sold and depletions from our distributors to retailers to help us forecast and identify trends affecting our growth.
Net Revenues
We generate revenue from our segments: Wholesale, B2B, DTCDirect-to-Consumer ("DTC") and Corporate and Other. We recognize revenue from wine sales when obligations under the terms of a contract with our customer are satisfied. Generally, this occurs when the product is shipped, and title passes to the customer, and when control of the promised product or service is transferred to the customer. Our standard terms are free on board, or FOB, shipping point, with no customer acceptance provisions. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. We recognize revenue net of any taxes collected from customers, which are subsequently remitted to governmental authorities. We account for shipping and handling as activities to fulfill our promise to transfer the associated products. Accordingly, we record amounts billed for shipping and handling costs as a component of net sales and classify such costs as a component of costs of sales. Our products are generally not sold with a right of return unless the product is spoiled or damaged. Historically, returns have not been significant to us.
Gross Profit
Gross profit is equal to net revenues less cost of sales. Cost of sales includes the direct cost of manufacturing, including direct materials, labor and related overhead, and physical inventory adjustments, as well as inbound and outbound freight and import duties.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include expenses arising from activities in selling, marketing, warehousing, and administrative expenses. Other than variable compensation, selling, general and administrative expenses are generally not directly proportional to net revenues, but are expected to increase over time to support the needs of the Company.
Income from Operations
Income from operations is gross profit less selling, general and administrative expenses; acquisition and restructuring related expense or income and amortization of intangible assets. Income from operations excludes interest expense, income tax expense, and other expenses, net. We use income from operations as well as other indicators as a measure of the profitability of our business.
Case VolumeVolumes
In addition to acquisitions, the primary drivers of net revenue growth in any period are attributable to changes in case volumevolumes and changes in product mix and sales price. Case volumevolumes represents the number of 9-liter equivalent cases of wine that we sell during a particular period. Case volume isvolumes are an important indicator of what is driving gross margin. This metric also allows us to develop our supply and production targets for future periods.
|
| VWE 9L Equivalent Case Sales by Segment |
|
|
|
|
|
|
| |||||||
|
| Three Months Ended September 30, |
|
|
|
|
|
|
| |||||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| Unit Change |
|
| % Change |
| ||||
Wholesale |
|
| 209 |
|
|
| 202 |
|
|
| 7 |
|
|
| 3.5 | % |
B2B |
|
| 127 |
|
|
| 211 |
|
| -84 |
|
|
| -39.8 | % | |
DTC |
|
| 60 |
|
|
| 53 |
|
| 7 |
|
|
| 13.2 | % | |
Total case volume |
|
| 396 |
|
|
| 466 |
|
|
| -70 |
|
|
| -15.0 | % |
Case volume was down 15.0% for three months ended September 30, 2021, driven by reduced volume in the B2B and DTC segments. B2B volumes decreased 39.8% for the three months ended September 30, 2021 related primarily to the timing of shipments to a core private label customer. DTC volume increased 13.2% for the three months ended September 30, 2021 driven by increased tasting room activity and special programming through a large e-commerce company. Wholesale volumes increased 3.5% for the three months ended September 30, 2021 due to the inclusion of Kunde, partially offset by the discontinuation of certain brands.
Depletions
Within our three tier distribution structure, depletion measures the sale of our inventory from the distributor to the retailer. Depletions are an important indicator of customer satisfaction, which management uses for evaluating performance of our brands and for forecasting.
21
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we use EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies. These metrics are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.
Adjusted EBITDA is defined as earnings (loss) before interest, income taxes, depreciation and amortization, stock-based compensation expense, casualty losses or gains, impairment losses, changes in the fair value of derivatives, restructuring related income or expenses, acquisition and integration costs, and certain non-cash, non-recurring, or other items included in net income (loss) that we do not consider indicative of our ongoing operating performance, including COVID-related adjustments. COVID related adjustments relate to the delayed GAZE brand launch and nonrecurring costs of implementing safety protocols for production facilities, warehouse, tasting rooms and offices.performance. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net revenues.
| Three Months Ended |
| |||||
| September 30, 2021 |
|
| September 30, 2020 |
| ||
Net income | $ | 2,779 |
|
| $ | 5,361 |
|
Interest expense |
| 3,603 |
|
|
| 3,382 |
|
Income tax provision |
| 1,193 |
|
|
| 856 |
|
Depreciation and amortization |
| 4,154 |
|
|
| 2,785 |
|
Stock-based compensation expense |
| - |
|
|
| 330 |
|
Net unrealized/(gain) loss on interest rate swap agreements |
| (1,393 | ) |
|
| (846 | ) |
(Gain)/loss on disposition of assets |
| (340 | ) |
|
| (356 | ) |
Deferred rent adjustment |
| 128 |
|
|
| 125 |
|
Incremental public company costs |
| 1,212 |
|
|
| - |
|
Inventory acquisition basis adjustment |
| 437 |
|
|
| 55 |
|
Adjusted EBITDA | $ | 11,773 |
|
| $ | 11,692 |
|
Revenue | $ | 55,687 |
|
| $ | 53,834 |
|
Adjusted EBITDA Margin |
| 21.1 | % |
|
| 21.7 | % |
Adjusted EBITDA and Adjusted EBITDA Margin are not recognized measures24
Management uses these non-GAAP measures to understand and compare operating results across reporting periods for various purposes including internal budgeting and forecasting, short and long-term operating planning, employee incentive compensation, and debt compliance. These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP. Use of the terms Adjusted EBITDA and Adjusted EBITDA Margin are not calculated in the same manner by all companies, and accordingly, are not necessarily comparable to similarly titled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as indicators of our operating performance in isolation from, or as a substitute for, net income (loss), which is prepared in accordance with GAAP. We have presented Adjusted EBITDA and Adjusted EBITDA Margin solely as supplemental disclosure because we believe it allows for a more complete analysis of our results of operations. In the future, we may incur expenses such as those added back to calculate Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items.
Results of Operations
Our financial performance is classified into the following segments: Wholesale, Business -to-Business ("B2B"), Direct-to-Consumer ("DTC")B2B, DTC and Corporate and Other. Our corporate operations, including centralized selling, general and administrative expenses and other factors, such as the remeasurementsre-measurements of contingent consideration and impairment of intangible assets and goodwill are not allocated to the segments, as management does not believe such items directly reflect our core operations. Other than our long-term property, plant and equipment for wine tasting facilities, and the customer listlists, trademarks and trademark intangible assetstrade names specific to the Sommelier acquisition,acquired companies, our revenue generating assets are utilized across segments. Accordingly, the foregoing items are not allocated to the segments and are not discussed separately as any results that had a significant impact on operating results are included in the consolidated results discussion above.
We evaluate the performance of our segments on income from operations, which management believes is indicative of operational performance and ongoing profitability. Management monitors income from operations to evaluate past performance and identify actions required to improve profitability. Income from operations assists management in comparing the segment performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect the core operations and, therefore, are not included in measuring segment performance. We define income from operations as gross margin less operating expenses that are directly attributable to the segment. Selling expenses that can be directly attributable to the segment are allocated accordingly.
22Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021
Wholesale Segment Results
The following table presents summary financial data for our Wholesale segment:
| Three Months Ended September 30, |
|
| Dollar |
|
| Percent | |||||||||||||||||||||
(in thousands, except %) |
| Three Months Ended September 30, |
|
| Dollar |
|
| Percent |
| 2022 |
|
| 2021 |
|
| Change |
|
| Change | |||||||||
Wholesale Segment Results |
| 2021 |
|
| 2020 |
|
| Change |
|
| Change | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net revenues |
| $ | 16,203 |
|
| $ | 15,044 |
|
| $ | 1,159 |
|
| 7.7% |
| $ | 23,381 |
|
| $ | 16,203 |
|
| $ | 7,178 |
|
| 44.3% |
Income from operations |
| $ | 4,188 |
|
| $ | 2,988 |
|
| $ | 1,200 |
|
| 40.2% |
| $ | 1,828 |
|
| $ | 4,188 |
|
| $ | (2,360 | ) |
| -56.4% |
ForWholesale net revenues for the three months ended September 30, 2021, Wholesale net revenues2022 increased $1.2$7.2 million, or 7.7%44.3%, from the three months ended September 30, 2020.2021. The increase was attributable to an increase in sales of $0.5$6.9 million related to acquisitions, an increase inacquisition case volumes in the international markets and favorable product mix, partially offset by the discontinuation of three brands..
ForWholesale income from operations for the three months ended September 30, 2021, Wholesale income from operations increa2022 decreasedsed $1.2 $2.4 million, or 40.2%56.4%, from thethe three months ended September 30, 2020.2021. The increasedecrease was attributable to an increase in operating income of $0.1 million related to acquisitions, higher costs due to inflation and supply chain challenges as well as favorable product mix$2.7 million in overhead burden, partially offset by $0.7 million related to increased sales of higher margin brands.acquisitions.
B2B Segment Results
The following table presents summary financial data for our B2B segment:
| Three Months Ended September 30, |
|
| Dollar |
|
| Percent | |||||||||||||||||||||
(in thousands, except %) |
| Three Months Ended September 30, |
|
| Dollar |
|
| Percent |
| 2022 |
|
| 2021 |
|
| Change |
|
| Change | |||||||||
B2B Segment Results |
| 2021 |
|
| 2020 |
|
| Change |
|
| Change | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net revenues |
| $ | 24,467 |
|
| $ | 25,816 |
|
| $ | (1,349 | ) |
| -5.2% |
| $ | 34,084 |
|
| $ | 24,467 |
|
| $ | 9,617 |
|
| 39.3% |
Income from operations |
| $ | 7,514 |
|
| $ | 8,784 |
|
| $ | (1,270 | ) |
| -14.5% |
| $ | 12,761 |
|
| $ | 7,514 |
|
| $ | 5,247 |
|
| 69.8% |
ForB2B net revenues for the three months ended September 30, 2021, B2B net revenues decreased $1.32022 increased $9.6 million, or 5.2%39.3%, from the three months ended September 30, 2020.2021. The decreaseincrease was primarily attributable to supply chain delays and constraints combined with the timingincreased custom production as well as an increase of shipments for one core customer.$4.9 million related to acquisitions.
ForB2B income from operations for the three months ended September 30, 2021, B2B income from operations decreased2022 increased $1.3$5.2 million, or 14.5%69.8%, from the three months ended September 30, 2020.2021. The decreaseincrease was attributable to supply chain delays and increased labor constraints comparedmargin on bulk distilled alcohol sales partially offset by a loss from operations of $0.7 million related to the comparable prior year three month period.acquisitions.
DTC Segment Results
The following table presents summary financial data for our DTC segment:
| Three Months Ended September 30, |
|
| Dollar |
|
| Percent | |||||||||||||||||||||
(in thousands, except %) |
| Three Months Ended September 30, |
|
| Dollar |
|
| Percent |
| 2022 |
|
| 2021 |
|
| Change |
|
| Change | |||||||||
DTC Segment Results |
| 2021 |
|
| 2020 |
|
| Change |
|
| Change | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net revenues |
| $ | 14,915 |
|
| $ | 10,896 |
|
| $ | 4,019 |
|
| 36.9% |
| $ | 20,497 |
|
| $ | 14,915 |
|
| $ | 5,582 |
|
| 37.4% |
Income from operations |
| $ | 2,539 |
|
| $ | 1,118 |
|
| $ | 1,421 |
|
| 127.1% |
| $ | 2,355 |
|
| $ | 2,539 |
|
| $ | (184 | ) |
| -7.2% |
For
25
DTC net revenues for the three months ended September 30, 2021, DTC net revenue2022s increased $4.0$5.6 million, or 36.9%37.4%, from the three months ended September 30, 2020.2021. The increase was primarily attributable to increasedto e-commerce and wine club revenues as well as an increase in sales of $2.1$3.1 million related to acquisitions, increased case volume from tasting rooms and wine clubs, and revenues earned from events as restrictions related to COVID-19 have been lifted. acquisitions.
ForDTC income from operations for the three months ended September 30, 2021, DTC income from operati2022 remained flatons increased $1.4 million, or 127.1%, from the three months ended September 30, 2020. The increase was due to an increase in operating income of $0.6 million related to acquisitions, as well as margin contribution from net revenues partially offset by improved traffic in tasting rooms and events compared to the prior year three month period.2021.
Corporate and Other Segment Results
The following table presents summary financial data for our Corporate and Other segment:
|
| Three Months Ended September 30, |
|
| Dollar |
|
| Percent | ||||||
(in thousands, except %) |
| 2022 |
|
| 2021 |
|
| Change |
|
| Change | |||
Net revenues |
| $ | (100 | ) |
| $ | 102 |
|
| $ | (202 | ) |
| 198.0% |
Income (loss) from operations |
| $ | (21,869 | ) |
| $ | (8,098 | ) |
| $ | (13,771 | ) |
| -170.1% |
23Corporate and Other net revenues f
(in thousands, except %) |
| Three Months Ended September 30, |
|
| Dollar |
|
| Percent | ||||||
Corporate and Other Segment Results |
| 2021 |
|
| 2020 |
|
| Change |
|
| Change | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Net revenues |
| $ | 102 |
|
| $ | 2,078 |
|
| $ | (1,976 | ) |
| -95.1% |
Income (loss) from operations |
| $ | (8,098 | ) |
| $ | (4,327 | ) |
| $ | (3,771 | ) |
| -87.2% |
Foror the three months ended September 30, 20212022 remained relatively flat, Other net revenues decreased $2.0down $0.2 million or 95.1%, from the three months ended September 30 2020. The decrease was primarily attributable to fewer bulk wine sales due to lower bulk inventory levels in the year compared to the comparable prior year three month period., 2021.
LossCorporate and Other loss from operations increased by $3.8 million, or 87.2%, fromfor the three months ended September 30, 2020.2022 increased $13.7 million, or 170.1%, from the three months September 30, 2021. The increase in losses was due to $4.6 million of share-based compensation expense, continued increased costs of labor of $1.2, increased costs of freight of $1.0 million, depreciation expense of $0.5 million as well as theincreased infrastructure costs related to infrastructure required to be a public company of $1.8 million, and the continued increased costs of labor, warehousing freight and insurance comparedinsurance.
Case Volumes
The following tables summarize 9-liter equivalent cases by segment:
|
| Three Months Ended September 30, |
|
|
|
|
|
|
| |||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| Unit Change |
|
| % Change |
| ||||
Wholesale |
|
| 539 |
|
|
| 209 |
|
|
| 330 |
|
|
| 157.9 | % |
B2B |
| * |
|
| * |
|
| * |
|
| * |
| ||||
DTC |
|
| 99 |
|
|
| 60 |
|
| 39 |
|
|
| 65.0 | % | |
Total case volume |
|
| 638 |
|
|
| 269 |
|
|
| 369 |
|
|
| 137.2 | % |
*B2B segment sales are primarily not related to case volumes, therefore the Company has elected to not report case volumes for this segment as it would not be indicative of the underlying performance of the business.
The increase in case volumes was primarily due to wholesale which was driven by the ACE Cider acquisition that ships higher case volumes of lower priced product. Increased DTC volumes were driven by QVC and Wine Clubs.
Non-GAAP Financial Measures
The following is a reconciliation of net income to Adjusted EBITDA for the periods presented:
| Three Months Ended September 30 |
| |||||||
| 2022 |
|
|
| 2021 |
| |||
Net income (loss) | $ | 634 |
|
|
| $ | 2,779 |
| |
Interest expense |
| 3,381 |
|
| - |
|
| 3,603 |
|
Income tax provision |
| 658 |
|
|
|
| 1,193 |
| |
Depreciation |
| 3,215 |
|
|
|
| 3,623 |
| |
Amortization |
| 1,811 |
|
|
|
| 531 |
| |
Stock-based compensation expense |
| 4,622 |
|
|
|
| - |
| |
Net unrealized gain on interest rate swap agreements |
| (9,327 | ) |
|
|
| (1,393 | ) | |
Gain on disposition of assets |
| (118 | ) |
|
|
| (340 | ) | |
Deferred rent adjustment |
| - |
|
|
|
| 128 |
| |
Acquisition integration costs |
| 391 |
|
|
|
| - |
| |
Deferred gain on sale leaseback |
| (334 | ) |
|
|
| - |
| |
Gain on litigation proceeds |
| (530 | ) |
|
|
| - |
| |
Inventory acquisition basis adjustment |
| 663 |
|
|
|
| 437 |
| |
Adjusted EBITDA | $ | 5,066 |
|
|
| $ | 10,561 |
| |
Revenue | $ | 77,862 |
|
|
| $ | 55,687 |
| |
Adjusted EBITDA margin |
| 6.5 | % |
|
|
| 19.0 | % |
26
Adjusted EBITDA and Adjusted EBITDA Margin are not recognized measures of financial performance under GAAP. We believe these non-GAAP measures provide analysts, investors and other interested parties with additional insight into the underlying trends of our business and assists these parties in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, which allows for a better comparison against historical results and expectations for future performance.
Management uses these non-GAAP measures to understand and compare operating results across reporting periods for various purposes including internal budgeting and forecasting, short and long-term operating planning, employee incentive compensation, and debt compliance. These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP. Use of the terms Adjusted EBITDA and Adjusted EBITDA Margin are not calculated in the same manner by all companies, and accordingly, are not necessarily comparable prior year three month period.to similarly titled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as an indicator of our operating performance in isolation from, or as a substitute for, net income (loss), which is prepared in accordance with GAAP. We have presented Adjusted EBITDA and Adjusted EBITDA Margin solely as supplemental disclosure because we believe it allows for a more complete analysis of our results of operations. In the future, we may incur expenses such as those added back to calculate Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items.
Liquidity and Capital Resources
We currently believe that, based on available capital resources and projected operating cash flow,flows, we have adequate capital resources to fund our currently anticipated working capital needs; capital expenditures, business acquisitions, debt obligations, and tax payments.payments over the next 12 months and beyond.
Cash and Cash Equivalents
Our cash and cash equivalents balance was $118.3$44.6 million at September 30, 20212022 compared to $118.9$50.3 million at June 30, 2021.2022, exclusive of restricted cash. At September 30, 2021,2022, our cash and cash equivalents were held in cash depository accounts with major banks.
Cash Flows
The table below presents a summary of our sources and uses of cash:
|
| For the Three Months Ended |
|
|
|
| ||||||||||||||||||
|
| September 30, |
|
|
|
|
| Three Months Ended September 30, |
|
|
|
| ||||||||||||
(in thousands) |
| 2021 |
| 2020 |
|
| Change |
|
| 2022 |
|
| 2021 |
|
| Change |
| |||||||
Operating activities |
| $ | (1,961 | ) |
| $ | 7,701 |
|
| $ | (9,662 | ) |
| $ | 2,083 |
|
| $ | (1,961 | ) |
| $ | 4,044 |
|
Investing activities |
| $ | (7,845 | ) |
| $ | (6,918 | ) |
| $ | (927 | ) |
| $ | (3,549 | ) |
| $ | (7,845 | ) |
| $ | 4,296 |
|
Financing activities |
| $ | 9,202 |
|
| $ | 1,608 |
|
| $ | 7,594 |
|
| $ | (4,204 | ) |
| $ | 9,202 |
|
| $ | (13,406 | ) |
The cash flows related to held for sale assets have not been segregated, and remain included in the major classes of assets.
Cash Flows provided by (used in) Operating Activities
Net cash provided by operating activities was $2.1 million for the three months ended September 30, 2022 compared to net cash used in operating activities was of $2.0 million for the three months ended September 30, 2021, compared torepresenting an increase in net cash provided by operating activities of $7.7 million for the three months ended September 30, 2020, representing a decrease of net cash of $9.7$4.0 million. The decreaseincrease in net cash usedprovided was primarily attributable to the decrease in net income of $2.6$2.1 million, net changes in certain non-cash adjustments of $2.64.8 million to reconcile net income to operating cash flow and net changes in other operating assets and liabilities of $11.0 million as detailed on the condensed consolidated statement of cashflows. Additionally, net cash used in the current quarter included grape purchases, whereas we did not purchase a comparable amount of grapes in the prior year comparable period due to taint caused by the wildfires.flows.
Cash Flows provided by (used in) Investing Activities
Net cash used in investing activities was $7.9$3.5 million for the three months ended September 30, 2022, compared to net cash used in investing activities of $7.8 million for the three months ended September 30, 2021, compared to net cash used in investing activities of $6.9 million for the three months ended September 30, 2020, representing an increasedecrease in net cash used of $0.9$4.3 million. Cash flows from
27
investing activities are utilized primarily to fund acquisitions, capital expenditures for improvements to existing assets and other corporate assets. The increasedecrease in net cash used was primarily attributable to the purchasereduced purchases of property, plant property and equipment of $7.8$4.3 million.
Cash Flows provided by (used in) Financing Activities
24
Net cash provided byused in financing activities was $4.2 million for the three months ended September 30, 2022 compared to net cash provided by of $9.2 million for the three months ended September 30, 2021, compared to net cash provided of $1.6 million for the three months ended September 30, 2020, representing an increase ofin net cash providedused of $7.6$13.4 million. The increase in net cash providedused consisted primarily of $8.9$16.8 million of proceedspayments from our line of credit, net of payments on our line of credit and long-term debt.debt, net of proceeds on our line of credit.
Contractual Obligations
There have been no material changes to our contractual obligations from what was previously disclosed in our Annual Report on Form 10-K filed with the SEC.
Off-Balance Sheet Arrangements
As of September 30, 2021,2022, the Company had no off-balance sheet arrangements.
Significant Accounting Policies
ThereOur condensed consolidated financial statements have been no material changesprepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the significantreported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. For a description of our critical accounting policies, from what was previously disclosedrefer to “Critical Accounting Policies” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K filed with10-K. As a result of adopting ASC 842 as of July 1, 2022, there have been material changes to our lease accounting policies during the SEC.three months ended September 30, 2022, that are described in Note 1 to our condensed consolidated financial statements included in Part I, Item I of this Form 10-Q.
Recent Accounting Pronouncements
For information regarding new accounting pronouncements, see Note 1, Basis of Presentation and Significant Accounting Policies in the notes to our unaudited condensed consolidated financial statements.
Cautionary Statement Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Investors are cautioned that statements that are not strictly historical statements of fact constitute forward-looking statements, including, without limitation, statements under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” and are often identified by words like “believe,” “expect,” “may,” “will,” “should,” “seek,” “anticipate,” or “could” and similar expressions.
Forward-looking statements are not assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those expressed or implied by forward-looking statements include those discussed under the “Risk Factors” section of our Annual Report on Form 10-K and in futuresubsequent Quarterly Reports on Form 10-Q or other reports filed with the Securities and Exchange Commission ("SEC").SEC.
Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date of this report. We undertake no obligation to publicly revise or update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
28
Item 3. Quantitative and Qualitative Disclosure About Market Risk
There have been no material changes to our quantitative and qualitative disclosures about market risk from what was previously disclosed in our Annual Report on Form 10-K filed with the SEC.
Inflation
We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs, particularly if inflationary pressures continue during an economic downturn. These matters could harm our business, results of operations or financial condition.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
25
objectives, as ours are designed to do, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as a result of a material weakness in our internal control over financial reporting as previously disclosed in our Annual Report on Form 10-K for the year ended June 30, 2021,and discussed below, our disclosure controls and procedures were not effective as of September 30, 2021.2022. Management's conclusion was based on discoveries and observations made during the fiscal 20212022 audit.
Material Weakness in Internal Control Over Financial Reporting
AsThe Company's material weakness first identified during the audit of our fiscal 2021 consolidated financial statements, as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, during the audit of our fiscal 2021 consolidated financial statements, management identified a material weakness in our internal control over financial reporting relating2022, related to business processes and controls to perform reconciliations of certain account balances related to inventory and the received not invoiced and cellar accruals, on a regular basis.basis, has not been fully remediated, and, as a result, our internal control over financial reporting was not effective as of September 30, 2022.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis.
Management's Plan to Remediate the Material Weakness
Control Activity—The Company did not have effective business processes and controls to perform reconciliations of balance sheet accounts timely.
In the course of our financial close process for the fiscal years ended June 30, 2022 and 2021, we identified a material weakness in our internal control over financial reporting. The material weakness identified relates to our process and controls over financial reporting related to balance sheet account reconciliations, which includes the prior year identification of certain inventory-related account balances and the current year identification of interest rate swap derivatives account balances. Management concluded that this material weakness arose because we did not have effective business processes and controls to perform timely reconciliations of balance sheet account balances.
The Company has developed a comprehensive strategy and is actively pursuing resources necessary to remediate this deficiency in an effort to remediate this material weakness. We are recruiting additional finance staff with expertise in inventory costing and management; engaged a consulting firm to assist the Company in the continued development of improved business processes and control activities;activities and we have engaged a separate consultant to focus specifically on inventory system processes improvements.
During fiscal 2022, we also conducted an assessment of long-term staffing needs to support the Company's organic growthneeds. Since this assessment, we have hired a Director of Inventory and acquisition strategy. During the first quarter of fiscal 2022, we hired twoCosting, a Controller and additional permanent and engaged temporary finance team members, each with relevant wine industry and accounting process experience. Additionally, on March 7, 2022, the Company appointed Kristina L. Johnston as Chief Financial Officer of the Company. The Company believes Ms. Johnston's experience with public company internal controls and accounting processes, as well as her significant leadership experience will further enhance our internal control environment.
Additionally, the Company has started to design and implement additional controls and procedures designed to mitigate the risk of material misstatement including the standardization of our monthly close checklists and account reconciliation templates. The Company will need to assess its staffing needs on an ongoing basis in order to implement processes to ensure the completeness and the timely preparation and review of all balance sheet accounts and the establishment of defined segregation of duties between preparation and review.
29
The Company acknowledges it will take time and resources to fully integrate these new controls and processes described above and confirm them to be effective and sustainable. As the Company continues to refine and improve our financial reporting process, additional controls and procedures may also be required over time.
Changes in Internal Control over Financial Reporting
Other than changes intended to remediate the material weakness noted above, there have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II—Other Information
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There have been no material changes from theImportant risk factors previously disclosedthat could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in "Part I, Item 1A — Risk Factors" of our Annual Report on Form 10-K filed withfor the SEC.fiscal year ended June 30, 2022.
26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Sale of Unregistered Securities
None.
Issuer Purchases of Equity Securities
The following table provides information about repurchases of our common stock and warrants during the quarter ended September 30, 2022:
Repurchases |
| Total number of shares purchased |
|
| Average price paid per share |
|
| Total number of warrants purchased |
|
| Average price paid per warrant |
|
| Total number of shares and warrants purchased as part of publicly announced plans or programs (1) |
|
| Approximate dollar value of shares and warrants that may yet be purchased under the plans or programs |
| ||||||
July 1, 2022 - July 31, 2022 |
|
| - |
|
| $ | - |
|
|
| 9,495 |
|
| $ | 1.34 |
|
|
| 9,495 |
|
| $ | 3,787,832 |
|
August 1, 2022 - August 31, 2022 |
|
| - |
|
|
| - |
|
|
| 113,099 |
|
|
| 0.99 |
|
|
| 113,099 |
|
|
| 3,675,864 |
|
September 1, 2022 - September 30, 2022 |
|
| - |
|
|
| - |
|
|
| 49,400 |
|
|
| 0.96 |
|
|
| 49,400 |
|
|
| 3,628,440 |
|
Total |
|
| - |
|
| $ | - |
|
|
| 171,994 |
|
| $ | 1.00 |
|
|
| 171,994 |
|
|
|
|
(1) on March 8, 2022, the Company announced that our board of directors approved a repurchase plan authorizing us to purchase up to $30.0 in aggregate value of our common stock and/or warrants through September 8, 2022. The repurchase program expired on September 9, 2022 and is more fully disclosed in Note 11, Stockholders' Equity, of the Notes to the Condensed Consolidated Financial Statements. As of September 30, 2022, we repurchased an aggregate 2,871,894 shares of our common stock in the open market and 353,547 warrants pursuant to our repurchase program.
30
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.On November 8, 2022, we entered into an amendment to the Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with Bank of the West as administrative and collateral agent for the lenders that are parties to the Loan Agreement (the “Amendment”) to amend the definition of Adjusted EBITDA by adding an additional adjustment to the definition of Adjusted EBITDA. Adjusted EBITDA is used in the calculation of the fixed charge coverage ratio covenant under the Loan Agreement. A copy of the Amendment will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending December 31, 2022.
Item 6. Exhibits
Exhibit Number | Description of Exhibit | |
3.1 | ||
3.2 | ||
10.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
◆ | Indicates management compensatory plan, contract or arrangement. |
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Signatures
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Vintage Wine Estates, Inc. | |||
Date: November | By: | /s/ PATRICK RONEY | |
Name: | Patrick Roney | ||
Title: | Chief Executive Officer & Director | ||
Date: November | By: | /s/ | |
Name: |
| ||
Title: | Chief Financial Officer |
2832