UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark ~~One)~~one)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the transition period ______ to ______~~

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~~(Zip code)

Registrant’s telephone number, including area code: (877) 289-9463

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value per share	VWE	The Nasdaq Stock Market LLC
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 ☐ ~~Yes~~No ☒ ~~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 ☐ ~~Yes~~No ☒ ~~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	☐
~~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 ~~May 2, 2022,~~April 30, 2023, ~~60,945,682~~59,339,163 shares of the registrant’s common stock were outstanding.


Explanatory Note	1
Part 1.I. Financial Information	3
Item 1. Financial Statements (Unaudited and as restated)	23
Condensed Consolidated Balance Sheets (as restated)	23
Condensed Consolidated Statements of Operations and Comprehensive Income (as restated)	34
Condensed Consolidated Statements of ~~Stockholders'~~Stockholders’ Equity (as restated)	45
Condensed Consolidated Statements of Cash Flows (as restated)	56
Notes to the Condensed Consolidated Financial Statements (as restated)	7
Note 1: Basis of Presentation and Significant Accounting Policies (as restated)	7
Note 2: Restatement of Previously Issued Consolidated Financial Statements	1211
Note 3: ~~Merger and Reverse Recapitalization~~Business Combinations	16
Note 4: ~~Acquisitions~~Inventory (as restated)	1719
Note 5: ~~Inventory~~Assets Held for Sale	2019
Note 6: Property, Plant and Equipment	2019
Note 7: Goodwill and Intangibles (as restated)	20
Note 8: Accrued Liabilities (as restated)	21
Note ~~8: Accrued Liabilities~~9: Fair Value Measurements (as restated)	21
Note 10: Leases (as restated)	22
Note 9:11: Long-Term and Other Short-Term Obligations	23
~~Note 10: Fair Value Measurements~~ (as restated)	24
Note ~~11: Redeemable Stock and Redeemable Noncontrolling Interest~~	25
~~Note~~ 12: ~~Stockholders'~~Stockholders’ Equity (as restated)	25
Note 13: Income Taxes	27
Note 14: Commitments and Contingencies	27
Note 15: ~~Segments~~Related Party Transactions (as restated)	28
Note 16: Segments (as restated)	28
Note 17: Earnings Per Share (as restated)	30
Note ~~17: Related Party Transactions~~18: Subsequent Events (as restated)	3130
Item 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations (as restated)	3231
Item 3. Quantitative and Qualitative Disclosures About Market Risk	3938
Item 4. Controls and Procedures (as restated)	3938
Part 2.II. Other Information	40
Item 1. Legal Proceedings	40
Item 1A. Risk Factors	40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (as restated)	4140
Item 3. Defaults Upon Senior Securities	4240
Item 4. Mine Safety Disclosures	4240
Item 5. Other Information	4240
Item 6. Exhibits	4241
Signatures	4342

Table of Contents

Explanatory Note

Overview of Restatement

In this Amendment No. 1 on Form 10-Q/A, Vintage Wine Estates, Inc. (“VWE”, “we”, “us”, ~~"our"~~“our” or “the Company”) is amending its Quarterly Report on Form 10-Q for the quarterly period ended ~~March 31,~~September 30, 2022 filed with the Securities and Exchange Commission (“SEC”) on ~~May 16,~~November 9, 2022 (the ~~"Original 10-Q"~~“Original 10-Q”). We are filing this amended Quarterly Report on Form 10-Q/A to restate our previously issued unaudited condensed consolidated financial statements and related financial information as of, and for, the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022 (the ~~"Subject Periods"~~“Subject Period”).In this Quarterly Report on Form 10-Q/A, the Company amends the Original 10-Q to:


	a.	restate its unaudited condensed consolidated financial statements and the notes thereto for the Subject ~~Periods;~~Period;
	b.	amend its ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations ("(“MD~~&A"~~&A”) for the Subject ~~Periods; and~~Period;
	c.	amend the disclosure under Part 1,I, Item 4. Controls and ~~Procedures.~~Procedures;

Background on Restatement

As previously disclosed in our Current Report on ~~September 12, 2022,~~Form 8-K filed with the SEC on February 8, 2023 (the “Form 8-K”), the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company, after discussion with management, determined that the Company’s previously issued financial statements for the Subject ~~Periods~~Period should no longer be relied upon and should be ~~restated due to the identification of an accounting error.~~restated.

The restatement ~~resulted from an~~relates to the misclassification and accounting ~~error~~for certain assets and also the timing of recording certain costs. These required adjustments were identified by the Company’s finance team in the ~~treatment~~process of ~~our interest rate swap agreements and materially impacted our condensed consolidated financial statements for~~closing the ~~three and nine months ended March 31, 2022.~~second quarter fiscal 2023.

The correction ~~of the accounting error~~ led to a net ~~reduction~~decrease in previously recognized ~~interest rate swap liabilities~~revenue of ~~$4.2~~$0.6 million, an increase in cost of goods sold of $1.9 million, a decrease in selling, general and administrative expenses of $0.5 million, a loss on remeasurement of contingent liability of $0.8 million, an increase in stock-based compensation expense of $29 thousand for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022, a decrease in current assets of $1.3 million, an increase in ~~interest rate swap assets~~current liabilities of ~~$5.1~~$0.2 million ~~for the three and nine months ended March 31, 2022, an increase in accrued liabilities and other payables of $2.7 million for the three and nine months ended March 31, 2022~~ and an increase in other long-term liabilities of $0.2 million as of, and for the period ended September 30, 2022. The net ~~unrealized gain on interest rate swap agreements~~income tax effect of ~~$6.7 million~~these corrections resulted in a reduction to our income tax provision of $1.5 million. After giving effect to these changes, diluted earnings per share allocable to common stockholders for the three ~~and nine~~ months ended ~~March 31, 2022, net of income taxes.~~

~~The error was discovered during the course of the preparation of the Company's Annual Report on Form 10-K for the fiscal year ended June~~September 30, 2022 ~~("fiscal 2022"), and the audit of the financial results for fiscal 2022. None of the errors implicate misconduct with respect~~as previously reported was reduced by $0.02 to ~~the Company or its management or employees.~~$0.00.

Effect of Restatement

The following table sets forth the effects of the restatement on affected items within our previously reported condensed consolidated statements of operations and comprehensive income (loss).


	Three Months Ended				Nine Months Ended				Three Months Ended
	March 31,				March 31,				September 30,
(in thousands, except per share amounts)	2022		2021		2022		2021		2022
Net income	$	6,703	$	-	$	6,703	$	-	$	(1,270	)
Basic and diluted earnings per share	$	0.10	$	-	$	0.11	$	-	$	(0.02	)

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Control Considerations

In connection with the restatement, management has reassessed its conclusions regarding the effectiveness of our internal control over financial reporting as of ~~March 31,~~September 30, 2022 and determined that athe restatement was caused by our existing material weakness in our internal control over financial reporting ~~existed~~and have further clarified our material weakness as of that date. As a result of the material weakness, our disclosure controls and procedures were not effective as of ~~March 31,~~September 30, 2022. Management ~~will be implementing changes~~continues to consider process improvements to strengthen our internal controls and remediate the material weakness.

In accordance with applicable SEC rules, this Quarterly Report on Form 10-Q/A includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 from our Chief Executive Officer (as Principal Executive Officer) and our Chief Financial Officer (as Principal Financial Officer) dated as of the filing date of this Quarterly Report on Form 10-Q/A.

Except as described above, this Quarterly Report on Form 10-Q/A does not amend, update or change any other items or disclosures in the Original 10-Q and this Quarterly Report on Form 10-Q/A does not purport to reflect any information or events subsequent to the filing date of the Original 10-Q. As such, this Quarterly Report on Form 10-Q/A speaks only as of the date the Original 10-Q was filed, and, except as described above and as otherwise set forth in Note 18 to the condensed consolidated financial statements, we have not undertaken herein to

~~Table of Contents~~

amend, supplement or update any information contained in the Original 10-Q to give effect to any subsequent events. Accordingly, this Quarterly Report on Form 10-Q/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original 10-Q. Among other things, forward-looking statements made in the Original 10-Q have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Original 10-Q, and such forward-looking statements should be read in their historical context.

Table of Contents

Part I—Financial Information

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

~~(Unaudited)~~

(in thousands, except share amounts)


							As Restated
	As Restated						September 30, 2022			June 30, 2022
	March 31, 2022			June 30, 2021			(Unaudited)
Assets
Current assets:
Cash	$	69,109		$	118,879		$	44,622		$	45,492
Restricted cash		6,600			4,800			-			4,800
Accounts receivable, net		39,649			21,193			38,424			38,192
Other receivables		13,668			7,490			3,874			3,866
Inventories		221,264			221,145			200,759			192,102
Interest rate swap assets		716			-
Assets held for sale								6,553			-
Current interest rate swap asset								5,826			2,877
Prepaid expenses and other current assets		10,968			8,538			9,478			13,394
Total current assets		361,974			382,045			309,536			300,723
Property, plant, and equipment, net		234,141			213,673			228,204			236,100
Operating lease right-of-use assets								35,509			-
Finance lease right-of-use-assets								689			-
Goodwill		158,185			109,895			154,951			154,951
Intangible assets, net		64,809			36,079			62,672			64,377
Interest rate swap assets, long-term		4,417			-
Interest rate swap asset								12,555			6,280
Other assets		7,635			1,806			5,187			3,464
Total assets	$	831,161		$	743,498		$	809,303		$	765,895
Liabilities, redeemable noncontrolling interest, and stockholders' equity
Current liabilities:
Line of credit	$	146,732		$	87,351		$	140,066		$	144,215
Accounts payable		14,777			17,301			20,352			13,947
Accrued liabilities and other payables		33,138			25,078			28,279			24,204
Interest rate swap liabilities		977			-
Current operating lease liabilities								5,197			-
Current finance lease liabilities								263			-
Current maturities of long-term debt		21,200			22,964			14,738			14,909
Total current liabilities		216,824			152,694			208,895			197,275
Other long-term liabilities		8,740			2,767			6,315			6,491
Long-term debt, less current maturities		172,324			183,541			165,577			169,095
Interest rate swap liabilities, noncurrent		-			13,807
Long-term operating lease liabilities								31,637			-
Long-term finance lease liabilities								429			-
Deferred tax liability		29,965			16,752			29,952			29,979
Deferred gain		10,999			12,000			10,332			10,666
Total liabilities		438,852			381,561			453,137			413,506
Commitments and contingencies (Note 13)
Redeemable noncontrolling interest		1,684			1,682			1,282			1,663
Stockholders' equity:
Preferred stock, no par value, 2,000,000 shares authorized, and none issued and outstanding at March 31, 2022 and June 30, 2021.		-			-
Common stock, no par value, 200,000,000 shares authorized, 61,691,054 issued and 61,377,515 outstanding at March 31, 2022 and 60,461,611 issued and outstanding at June 30, 2021.		-			-
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 June 30, 2022.								-			-
Additional paid-in capital		373,196			360,732			382,376			377,897
Treasury stock, at cost: 313,539 and zero shares held at March 31, 2022 and June 30, 2021, respectively		(2,833	)		-
Retained earnings		20,880			-
Treasury stock, at cost: 2,871,894 shares held at September 30, 2022 and June 30, 2022.								(26,034	)		(26,034	)
Accumulated deficit								(864	)		(571	)
Total Vintage Wine Estates, Inc. stockholders' equity		391,243			360,732			355,478			351,292
Noncontrolling interests		(618	)		(477	)		(594	)		(566	)
Total stockholders' equity		390,625			360,255			354,884			350,726
Total liabilities, redeemable noncontrolling interest, and stockholders' equity	$	831,161		$	743,498		$	809,303		$	765,895

See notes to unaudited condensed consolidated financial statements.

Table of Contents

~~See notes to condensed consolidated financial statements.~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended March 31,						Nine Months Ended March 31,						Three Months Ended September 30,
	2022			2021			2022			2021			2022			2021
	As Restated						As Restated						As Restated
Net revenues
Net revenue
Wine, spirits and cider	$	50,859		$	37,238		$	157,292		$	132,086		$	51,419		$	36,287
Nonwine		28,074			9,659			60,939			31,623			25,810			19,400
		78,933			46,897			218,231			163,709			77,229			55,687
Cost of revenues
Cost of revenue
Wine, spirits and cider		38,764			23,561			98,428			82,180			34,631			20,588
Nonwine		12,152			5,095			29,886			17,288			14,938			11,662
		50,916			28,656			128,314			99,468			49,569			32,250
Gross profit		28,017			18,241			89,917			64,241			27,660			23,437
Selling, general, and administrative expenses		27,035			18,378			70,662			50,932			33,707			16,983
Loss (gain) on sale of property, plant, and equipment		98			(322	)		(493	)		(1,999	)
Amortization expense														1,811			651
Loss on remeasurement of contingent liability														826			-
Gain on litigation proceeds		-			-			-			(4,750	)		(530	)		-
Income from operations		884			184			19,748			20,058
Gain on sale leaseback														(334	)		(334	)
Gain on sale of property, plant, and equipment														(118	)		(6	)
(Loss) income from operations														(7,702	)		6,143
Other income (expense)
Interest expense		(3,729	)		(3,842	)		(10,825	)		(9,173	)		(3,381	)		(3,603	)
Net unrealized gain on interest rate swap agreements		13,841			5,589			17,870			8,212			9,327			1,393
Other, net		1,957			327			1,945			684			271			39
Total other income (expense), net		12,069			2,075			8,990			(277	)		6,217			(2,171	)
Income before provision for income taxes		12,953			2,259			28,738			19,780
Income tax provision		3,543			1,633			7,997			4,517
Net income		9,410			626			20,741			15,263
Net income (loss) attributable to the noncontrolling interests		(74	)		53			(139	)		343
(Loss) income before provision for income taxes														(1,485	)		3,972
Income tax (benefit) provision														(849	)		1,193
Net (loss) income														(636	)		2,779
Net loss attributable to the noncontrolling interests														(343	)		(25	)
Net income attributable to Vintage Wine Estates, Inc.		9,484			573			20,880			14,920			(293	)		2,804
Accretion on redeemable Series B stock		-			1,446			-			4,760			-			-
Net income (loss) allocable to common stockholders	$	9,484		$	(873	)	$	20,880		$	10,160
Net income allocable to common stockholders													$	(293	)	$	2,804

Net earnings (loss) per share allocable to common stockholders
Net (loss) earnings per share allocable to common stockholders
Basic	$	0.15		$	(0.04	)	$	0.34		$	0.38		$	(0.00	)	$	0.05
Diluted	$	0.15		$	(0.04	)	$	0.34		$	0.35		$	(0.00	)	$	0.05
Weighted average shares used in the calculation of earnings per share allocable to common stockholders
Basic		61,410,403			21,920,583			60,773,258			21,920,583			58,819,160			60,461,611
Diluted		61,410,403			21,920,583			60,773,258			24,564,309			58,819,160			60,461,611

See notes to unaudited condensed consolidated financial statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share amounts)


																							Redeemable Non-Controlling Interest Amount			Common Stock				Treasury Stock					Additional Paid-In Capital			Accumulated Deficit			Non-Controlling Interests			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																								-			-		-		-		-			4,651			-			-			4,651
Repurchase of public warrants																								-			-		-		-		-			(172	)		-			-			(172	)
Shareholder distribution																								(66	)		-		-		-		-			-			-			-			-
Net income (loss)																								(315	)		-		-		-		-			-			(293	)		(28	)		(321	)
Balance, September 30, 2022, As Restated																							$	1,282			61,691,054	$	-		2,871,894	$	(26,034	)	$	382,376		$	(864	)	$	(594	)	$	354,884


	Redeemable Non-Controlling Interest Amount			Common Stock				Treasury Stock					Additional Paid-In Capital		Retained Earnings		Non-Controlling Interests			Total Stockholders' Equity			Redeemable Non-Controlling Interest Amount			Common Stock				Treasury Stock					Additional Paid-In Capital			Retained Earnings			Non-Controlling Interests			Total Stockholders' Equity
				Shares		Amount		Shares		Amount																Shares		Amount		Shares		Amount
Balance, June 30, 2021	$	1,682			60,461,611	$	-						$	360,732	$	-	$	(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	$	-						$	360,732	$	2,804	$	(505	)	$	363,031		$	1,685			60,461,611	$	-		-	$	-		$	360,732		$	2,804		$	(505	)	$	363,031
Net income (loss)		5			-		-							-		8,592		(45	)		8,547
Balance, December 31, 2021	$	1,690			60,461,611	$	-						$	360,732	$	11,396	$	(550	)	$	371,578
Stock-based compensation									-		-			1,943		-		-			1,943
Issuance of common stock in business combination					1,229,443		-		-		-			10,521		-		-			10,521
Repurchase of common stock					-		-		313,539		(2,833	)		-		-		-			(2,833	)
Net income (loss)		(6	)		-		-		-		-			-		9,484		(68	)		9,416
Balance, March 31, 2022, As Restated	$	1,684			61,691,054	$	-		313,539	$	(2,833	)	$	373,196	$	20,880	$	(618	)	$	390,625

Redeemable Non-Controlling
Interest Amount

Common Stock

Treasury Stock

Additional
Paid-In Capital

Retained
Earnings

Non-Controlling
Interests

Total Stockholders' Equity

Shares

Amount

Shares

Amount

Balance, June 30, 2020

$
1,382

26,460,375

$
-

$
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

$
-

$
99,150

$
14,369

$
(369
)

$
113,150

Accretion on redeemable stock

-

-

-

5,376

(5,376
)

-

-

Stock-based compensation expense

-

-

-

128

-

-

128

Net income (loss)

2

-

-

-

9,289

(40
)

9,249

Balance, December 31, 2020

$
1,662

26,460,375

$
-

$
104,654

$
18,282

$
(409
)

$
122,527

Accretion on redeemable stock

-

-

-

9,969

(9,969
)

-

-

Stock-based compensation expense

-

-

-

143

-

-

143

Net income (loss)

(8
)

-

-

-

573

61

634

Balance, March 31, 2021

$
1,654

26,460,375

$
-

$
114,766

$
8,886

$
(348
)

$
123,304

See notes to unaudited condensed consolidated financial statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

Nine Months Ended March 31,

2022

2021

As Restated

Cash flows from operating activities

Net income

20,741

$
15,263

Adjustments to reconcile net income to net cash from operating activities:

Depreciation and amortization

17,365

7,732

Amortization of deferred loan fees and line of credit fees

296

357

Amortization of label design fees

668

251

Litigation proceeds

-

(4,750
)
Stock-based compensation expense

1,943

601

Provision for doubtful accounts

45

87

Impairment of inventory

-

3,302

Net unrealized gain on interest rate swap agreements

(17,870
)

(8,212
)
(Benefit) provision for deferred income tax

888

-

Loss (gain) on disposition of assets

508

(999
)
Deferred gain on sale leaseback

(1,000
)

(1,000
)
Deferred rent

285

376

Change in operating assets and liabilities (net of effect of business combinations):

Accounts receivable

(21,261
)

(1,001
)
Related party receivables

-

(2,038
)
Other receivables

376

(2,338
)
Litigation receivable

-

4,750

Inventories

4,244

(8,964
)
Prepaid expenses and other current assets

(2,232
)

(5,829
)
Other assets

(6,215
)

1,688

Accounts payable

(8,106
)

616

Accrued liabilities and other payables

5,421

16,073

Related party liabilities

-

3,698

Net cash (used in) provided by operating activities

(3,903
)

19,661

Cash flows from investing activities

Proceeds from disposition of assets

105

1,064

Purchases of property, plant, and equipment

(15,723
)

(30,688
)
Label design expenditures

(225
)

(375
)
Proceeds on related party notes receivable

-

756

Acquisition of businesses

(74,268
)

-

Net cash used in investing activities

(90,111
)

(29,243
)
Cash flows from financing activities

Repurchase of common stock

(2,833
)

-

Principal payments on line of credit

(67,210
)

(25,195
)
Proceeds from line of credit

126,591

32,281

Outstanding checks in excess of cash

2,900

9,277

Principal payments on long-term debt

(13,178
)

(15,234
)
Proceeds from long-term debt

-

8,902

Principal payments on related party note

-

(489
)
Deferred offering costs

-

(768
)
Payments on acquisition payable

(226
)

(486
)
Net cash provided by financing activities

46,044

8,287

Net change in cash and restricted cash

(47,970
)

(1,295
)
Cash and restricted cash, beginning of period

123,679

1,751

Cash and restricted cash, end of period

$
75,709

$
456

Supplemental cash flow information

Cash paid during the period for:

Interest

$
9,415

$
9,230

Income taxes

$
22

$
25

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Noncash investing and financing activities:

Contingent consideration in a business combination

$
8,460

$
-

Issuance of common stock in business combination

$
10,521

$
-

Accretion of redemption value of Series B redeemable cumulative stock

$
-

$
4,760

Accretion of redemption value of Series A redeemable stock

$
-

$
16,466

Offering costs

$
-

$
535


	Three Months Ended September 30,
	2022			2021
	As Restated
Cash flows from operating activities
Net (loss) income	$	(636	)	$	2,779
Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation		3,215			3,503
Non-cash operating lease expense		37			-
Amortization expense		1,978			750
Remeasurement of contingent consideration liabilities		826			-
Stock-based compensation expense		4,651			-
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		(8	)		(2,850	)
Inventories		(6,957	)		(4,671	)
Prepaid expenses and other current assets		3,916			884
Other assets		(1,861	)		57
Accounts payable		2,363			(3,071	)
Accrued liabilities and other payables		5,293			1,356
Net change in lease assets and liabilities		1,288			-
Net cash provided by (used in) operating activities		1,988			(2,020	)
Cash flows from investing activities
Proceeds from disposition of assets		-			6
Purchases of property, plant, and equipment		(3,454	)		(7,792	)
Net cash used in investing activities		(3,454	)		(7,786	)
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.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies(as restated)

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 the "Company", "we," "our," "us," and similar pronouns in this Quarterly Report on Form 10-Q/A for the quarter ended ~~March 31,~~September 30, 2022 (this "Form 10-Q/A") 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 ~~2022~~2023 and ~~2021~~2022 in these condensed consolidated financial statements are to the fiscal years ending or ended June 30, ~~2022~~2023 and June 30, ~~2021,~~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~~Inflation and supply chain constraints, as well as the ongoing COVID-19 pandemic ("COVID-19") ~~continues~~, continue to ~~affect~~disrupt the U.S. and global ~~economies. Restrictions imposed by federal, state,~~economies and ~~local governments have disrupted~~there remains uncertainty about the impact on the economy. We cannot estimate with any certainty the length or severity of the economic 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.

Management expects economic uncertainties including inflation and supply chain constrains to continue to ~~disrupt our business. While many~~impact several areas of the ~~restrictions have expired, some are continuing. We expect the COVID-19 pandemic to have a minimal impact on~~business including sales, ~~revenues, as we believe we are well-positioned to take advantage~~cost of ~~increased direct-to-consumer sales platforms in lieu of in-person transactions.~~goods, operating expenses and cash flows.

In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Except as disclosed elsewhere in this Form 10-Q/A, all such adjustments are of a normal and recurring nature. In addition, financial results presented for this fiscal ~~2022~~2023 interim period are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, ~~2022~~2023 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 ~~October~~September 13, ~~2021.~~2022. The June 30, ~~2021~~2022 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 Vintage Wine Estates, Inc., a California corporation ("Legacy 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 3 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 ~~nine~~three months ended ~~March 31,~~September 30, 2022.

Use of Estimates

The preparation of 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

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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 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.

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Reclassifications

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 ~~accrued trade commissions~~$1.8 million of restricted cash from restricted cash to cash and cash equivalents, $0.7 million of amortization expense from selling, general and administrative expenses on the condensed consolidated statement of operations and reclassified $0.1 million of label design fees from investing activities to other ~~accrued expenses and reclassified custom production and other receivables to Wholesale trade accounts receivables.~~

~~Cash~~assets within operating activities on the statement of cash flows.

~~Cash consists of deposits held at financial institutions.~~

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:


(in thousands)	March 31, 2022		June 30, 2021		September 30, 2022		June 30, 2022
Cash and cash equivalents	$	69,109	$	118,879	$	44,622	$	45,492
Restricted cash		6,600		4,800		-		4,800
Total cash, cash equivalents and restricted cash as shown in the condensed consolidated statement of cash flows	$	75,709	$	123,679
Total cash, cash equivalents and restricted cash as shown in the consolidated statement of cash flows					$	44,622	$	50,292

~~Restricted cash consists of~~In connection with the amended and restated loan and security agreement (see Note 11), the Company entered into a Deposit Control Agreement which required $4.8 million ~~that was deposited~~of the total cash received to be placed into a restricted cash ~~account as~~ collateral ~~for the credit facility,~~account, 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 were satisfied.

Accounts Receivable and Allowance for Credit Losses

The 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 account past due on the first day following its due date. We monitor past due accounts periodically and establish 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 factors quarterly to determine 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 be recovered.

The provision for doubtful accounts for the periods ended September 30, 2022 and June 30, 2022, was $0.4 million and $~~1.8~~0.1 million, ~~that was deposited into a restricted cash account as collateral for our captive insurance letter of credit.~~

I~~nterest Rate Swap Agreements~~

GAAP requires that an entity recognize all derivatives (including interest rate swaps) as either assets or liabilities on the consolidated balance sheets and measure 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 exposure to interest rate fluctuations on our variable rate obligations. We have not designated these agreements as cash-flow hedges.

~~Accordingly, changes in the fair value of the interest rate swaps are included in the condensed consolidated statements of operations as a component of other income (expense).~~respectively. We do not ~~enter into financial instruments~~accrue interest on past-due amounts. Bad debt expense was insignificant for ~~trading or speculative purposes.~~

~~Revenue Recognition~~all 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, 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 customers 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 in our Business-to-Business ("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.

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~~We recognize revenue over time as the contract specific performance obligations are met.~~

Disaggregation of Revenue

The following ~~tables~~table summarizes revenue by geographic region:


	Three Months Ended March 31,				Nine Months Ended March 31,				Three Months Ended September 30,
(in thousands)	2022		2021		2022		2021		2022		2021
									As Restated
Geographic regions:
United States	$	77,586	$	45,929	$	213,713	$	159,830	$	76,692	$	54,150
Canada		500		644		1,812		1,997
Europe, Middle East, & Africa		180		55		821		261
Asia Pacific		488		157		1,325		1,211
Other		179		112		560		410
International										537		1,537
Total net revenue	$	78,933	$	46,897	$	218,231	$	163,709	$	77,229	$	55,687

The following table provides a disaggregation of revenue based on the pattern of revenue recognition:


	Three Months Ended March 31,				Nine Months Ended March 31,				Three Months Ended September 30,
(in thousands)	2022		2021		2022		2021		2022		2021
									As Restated
Point in time	$	65,170	$	38,285	$	180,116	$	137,328	$	65,580	$	46,822
Over a period of time		13,763		8,612		38,115		26,381		11,649		8,865
Total net revenue	$	78,933	$	46,897	$	218,231	$	163,709	$	77,229	$	55,687

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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") insurance limits. At ~~March 31,~~September 30, 2022 and June 30, ~~2021,~~2022, we had $~~65.8~~45.2 million and $~~121.6~~49.0 million respectively, in ~~one~~ major financial ~~institution~~institutions in excess of FDIC insurance limits. We sell the majority of our wine through U.S. distributors and the Direct-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:~~concentration of:


	Three Months Ended March 31,		Nine Months Ended March 31,		Three Months Ended September 30,
	2022	2021	2022	2021	2022	2021
Revenue as a percent of total revenue
Customer A	15.6%	41.0%	18.3%	40.0%	18.7%	25.5%
Customer B	*	*	10.0%	12.0%	*	12.6%
Customer C	*	*	10.1%	*
Customer D	*	*	*	*

The following table summarizes customer ~~concentration:~~concentration of:


	March 31, 2022	June 30, 2021	September 30, 2022	June 30, 2022
Receivables as a percent of total receivables
Customer A	44.3%	35.0%	35.0%	26.0%
Customer B	*	21.0%	*	*
Customer C	*	*
Customer D	11.5%	10.4%

* Customer revenue or receivables did not exceed 10% in the respective periods.

~~Revenues~~Revenue for sales from Customer A are included within the Wholesale and Business-to-Business reporting segments and Customer B are included within the Business-to-Business reporting ~~segment and Customer C and Customer D are included within the Wholesale reporting~~ segment.

Inventories

Inventories of bulk and bottled wines, spirits, and 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

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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 Combinations~~Leases

~~Business combinations are accounted for under Accounting Standards Codification (“ASC”~~The Company adopted ASU 2016-02, Leases ("Topic 842") ~~805—Business Combinations,~~ ~~using the acquisition method of accounting under which all acquired tangible~~ and ~~identifiable intangible assets and assumed liabilities and applicable noncontrolling interests are recognized at fair value~~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 classified as operating leases. The Company’s non-cancelable leases for certain equipment that include a bargain purchase option at the ~~respective acquisition date, while~~end of the ~~costs associated with the acquisition of a business~~lease term are ~~expensed~~classified as ~~incurred.~~finance leases.

The ~~allocation~~Company recognizes a right of ~~purchase consideration requires management~~use (“ROU”) asset representing its right to use the underlying asset for the lease term on the condensed consolidated balance sheet and related lease liabilities representing its obligation to make ~~significant estimates~~lease payments arising from the lease. ROU assets and ~~assumptions, especially~~lease 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 prepaid 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 ~~respect~~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 ~~intangible assets.~~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 ~~estimates can~~amounts primarily include ~~but are not limited~~payments for taxes, parking and common area expenses. See Note 9.

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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 ~~market participant’s expectation~~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 ~~future cash flows from acquired customers, acquired trade names, useful lives~~the asset is probable and transfer of ~~acquired assets, and discount rates. Management’s estimates 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 ~~based upon assumptions believed~~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 sale, the Company stops recording depreciation or amortization expense on the asset. The Company assesses the fair value of assets held for sale less any costs to ~~be reasonable, but~~sell at each reporting period until the asset is no longer classified as held for sale.

Casualty Gains

We suffered smoke-tainted inventory damage resulting from the October 2017 Napa and Sonoma County wildfires. We filed an insurance claim for this damage, which ~~are inherently uncertain and unpredictable and, as a result, actual results may differ from such estimates.~~was settled in fiscal 2021 for approximately $3.8 million, net of legal costs. In fiscal 2022, we received an additional $2.7 million, net of legal costs, related to wildfire claims. During the ~~measurement period, which is generally no longer than one year~~three months ended September 30, 2022, we received an additional $0.5 million. The gain of litigation proceeds consists of payments we received 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.our insurer.

Segment Information

We operate in three 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.~~

~~Stock-Based Compensation~~

Stock-based compensation provided to employees is recognized in the consolidated statement of operations based on the grant date fair value of the awards. The fair value of restricted stock units is determined by the grant date market price of our common shares. The fair value of stock options is determined on the grant date using a Monte Carlo simulation model. The determination of the grant date fair value of stock option awards granted is affected by a number of variables, including the fair value of the Company's common stock, the expected common stock price volatility over the life of the awards, the expected term of the stock option, risk-free interest rates and the expected dividend yield of the Company's common stock. Due to the Company's limited trading history since becoming a public company on June 7, 2021, the Company derived its volatility from the average historical stock volatilities of several peer public companies over a period equivalent to the expected term of the awards.

The compensation expense recognized for stock-based awards is net of estimated forfeitures and is recognized ratably over the service period of the awards. All income tax effects of stock-based awards are recognized in the consolidated statements of operations as awards vest or are settled. We classify stock-based compensation expense in selling, general and administrative ("SG&A") expenses in the consolidated statement of operations.

~~Earnout Shares~~

~~The Legacy VWE shareholders may become entitled to receive up to an additional~~ ~~5,726,864~~ ~~shares of the Company’s common stock (the “Earnout Shares”) pursuant to the Transaction Agreement. The Earnout Shares will be released if the price of our common~~stock meets certain thresholds in the 24 months following the closing of the Merger (see Note 3). 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.~~

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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 its respective redemption values, using the effective interest method, from the date of issuance to the earliest date the holders could 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 and 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 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 the~~Company 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.

~~Self-Insurance~~

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 $~~10.0~~ million of claims, above which limit, Captive has secured insurance. The insurance policy protects us against a portion of our risk of loss related to earthquakes, flood and named wildfires and windstorms.

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~~

~~Table of Contents~~

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 determine~~determines 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 ~~their~~its classification. Leases with a term of 12 months or less ~~will be~~are accounted for ~~similar to existing guidance for operating leases today. 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, 2022.~~

~~We have not yet determined the full effects of Topic 842 on~~ the Company's 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 be~~of operations.

The Company adopted Topic 842 effective July 1, 2022 using the modified retrospective approach, ~~and electing~~whereby 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 or~~which allows the Company to carryforward its population of existing ~~contracts, which retains prior conclusions reached on~~leases, the classification of each lease ~~identification, classification,~~ and the treatment of initial direct costs ~~incurred. Leases with~~as 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 accounted~~the entity’s ROU assets.

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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 ~~similar~~the 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 in~~Topic 842, included the ~~recognition~~reclassification of ~~operating lease right-of-use assets~~approximately $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 more timely recognition of credit losses.

The ~~guidance is~~Company adopted ASU No. 2016-13, as amended effective ~~for the Company for fiscal year ending on June 30, 2024 and interim periods beginning for the fiscal year commencing on~~ July 1, ~~2023. Early adoption is permitted.~~2022. We doconsider 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 ~~expect the adoption of this standard will~~ have a ~~significant~~material impact on ~~the~~our condensed consolidated financial ~~statements given our historically low bad debt expense.~~statements.

~~In December 2019, the FASB~~Recently Issued Accounting Pronouncements

The recently 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~~pronouncements are ~~effective for the Company for fiscal year ending June 30, 2023 and interim periods within the fiscal years beginning after December 15, 2022.~~ ~~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~~an impact on the ~~consolidated financial statements.~~

~~In October 2021, the FASB issued ASU 2021-08,~~ Company.~~Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~. The amendments in the updated guidance require that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The amendments in this update are effective for the Company for fiscal years ending June 30, 2024 and for interim periods in the year beginning July 1, 2023. Early adoption is permitted including adoption at an interim period. We are currently evaluating the impact and timing of adopting ASU 2021-08, however at this time, the adoption is not expected to have a significant impact on the consolidated financial statements.

22.. Restatement of Previously Issued Condensed Consolidated Financial Statements

The Company has restated its condensed consolidated statements as of and for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022.

During the ~~audit for~~process of closing the ~~fiscal year ending June 30,~~second quarter ended December 31, 2022, ~~an accounting error was~~classification of certain assets and the classification and timing of recording certain costs were identified ~~in the treatment of~~by the Company's ~~accounting for interest rate swap liabilities~~finance team that materially impacted our condensed consolidated financial statements for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022.

The ~~Company had erroneously accounted~~correction led to a net decrease in previously recognized revenue of $0.6 million, an increase in cost of goods sold of $1.9 million, a decrease in selling, general and administrative expenses of $0.5 million, a loss on remeasurement of contingent liability of $0.8 million, an increase in stock-based compensation expense of $29 thousand for ~~these interest rate swaps as liabilities when~~ the ~~interest rate swaps should have been accounted for as assets. The error resulted~~three months ended September 30, 2022, a decrease in current assets of $1.3 million, an ~~overstatement of~~increase in current liabilities of $~~1.6~~0.2 million and an increase in other long-term liabilities of $0.2 million as of, and for the ~~nine months~~period ended ~~March 31, 2022, an understatement~~September 30, 2022. The net income tax effect of ~~assets~~these corrections resulted in a reduction to our income tax provision of $~~5.1~~1.5 ~~million~~million. After giving effect to these changes, diluted earnings per share allocable to common stockholders for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022 ~~and an understatement in unrecognized gain on interest rate swap agreements of~~as previously reported was reduced by $~~6.7~~0.02 ~~million for the three and nine months ended March 31, 2022, net of income taxes.~~to $0.00.

The following tables present the impact of the adjustments described above to our previously reported condensed consolidated balance sheets for the ~~nine~~three months ended ~~March 31,~~September 30, 2022, and the related condensed consolidated statements of operations, condensed consolidated statements of stockholders’ equity and condensed consolidated cash flows for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022.

1211

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CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share amounts)


										September 30, 2022
	March 31, 2022									As Previously Reported			Adjustments			As Restated
	As Previously Reported			Adjustments			As Restated
Assets
Current assets:
Cash	$	69,109					$	69,109		$	44,622		$	-		$	44,622
Restricted cash		6,600						6,600			-			-			-
Accounts receivable, net		39,649						39,649			38,424			-			38,424
Other receivables		13,668						13,668			3,071			803			3,874
Inventories		221,264						221,264			201,940			(1,181	)		200,759
Interest rate swap assets		-			716			716
Assets held for sale											6,553			-			6,553
Current interest rate swap asset											5,826			-			5,826
Prepaid expenses and other current assets		10,968						10,968			9,478			-			9,478
Total current assets		361,258			716			361,974			309,914			(378	)		309,536
Property, plant, and equipment, net		234,141						234,141			228,204			-			228,204
Operating lease right-of-use assets											35,509			-			35,509
Finance lease right-of-use-assets											689			-			689
Goodwill		158,185						158,185			154,951			-			154,951
Intangible assets, net		64,809						64,809			62,672			-			62,672
Interest rate swap assets, long-term		-			4,417			4,417
Interest rate swap asset											12,555			-			12,555
Other assets		7,635						7,635			5,187			-			5,187
Total assets	$	826,028		$	5,133			831,161		$	809,681		$	(378	)	$	809,303
Liabilities, redeemable noncontrolling interest, and stockholders' equity								-
Current liabilities:								-
Line of credit	$	146,732						146,732		$	140,066		$	-		$	140,066
Accounts payable		14,777						14,777			20,076			276			20,352
Accrued liabilities and other payables		30,460			2,678			33,138			27,867			412			28,279
Interest rate swap liabilities		-			977			977
Current operating lease liabilities											5,197			-			5,197
Current finance lease liabilities											263			-			263
Current maturities of long-term debt		21,200						21,200			14,738			-			14,738
Total current liabilities		213,169			3,655			216,824			208,207			688			208,895
Other long-term liabilities		8,740						8,740			6,140			175			6,315
Long-term debt, less current maturities		172,324						172,324			165,577			-			165,577
Interest rate swap liabilities, noncurrent		5,225			(5,225	)		-
Long-term operating lease liabilities											31,637			-			31,637
Long-term finance lease liabilities											429			-			429
Deferred tax liability		29,965						29,965			29,952			-			29,952
Deferred gain		10,999						10,999			10,332			-			10,332
Total liabilities		440,422			(1,570	)		438,852			452,274			863			453,137
Commitments and contingencies (Note 13)								-
Redeemable noncontrolling interest		1,684						1,684			1,282			-			1,282
Stockholders' equity:								-
Preferred stock, no par value, 2,000,000 shares authorized, and none issued and outstanding at March 31, 2022 and June 30, 2021.		-						-
Common stock, no par value, 200,000,000 shares authorized, 61,691,054 issued and 61,377,515 outstanding at March 31, 2022 and 60,461,611 issued and outstanding at June 30, 2021.		-						-
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 June 30, 2022.											-			-			-
Additional paid-in capital		373,196						373,196			382,347			29			382,376
Treasury stock, at cost: 313,539 and zero shares held at March 31, 2022 and June 30, 2021, respectively		(2,833	)					(2,833	)
Retained earnings		14,176			6,704			20,880
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			(1,270	)		(864	)
Total Vintage Wine Estates, Inc. stockholders' equity		384,539			6,704			391,243			356,719			(1,241	)		355,478
Noncontrolling interests		(617	)		(1	)		(618	)		(594	)		-			(594	)
Total stockholders' equity		383,922			6,703			390,625			356,125			(1,241	)		354,884
Total liabilities, redeemable noncontrolling interest, and stockholders' equity	$	826,028		$	5,133		$	831,161		$	809,681		$	(378	)	$	809,303

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(in thousands, except share amounts)


	Three Months Ended September 30,
	2022
	As Previously Reported			Adjustments			As Restated
Net revenue
Wine, spirits and cider	$	52,052		$	(633	)	$	51,419
Nonwine		25,810			-			25,810
		77,862			(633	)		77,229
Cost of revenue								-
Wine, spirits and cider		34,522			109			34,631
Nonwine		13,192			1,746			14,938
		47,714			1,855			49,569
Gross profit		30,148			(2,488	)		27,660
Selling, general, and administrative expenses		34,244			(537	)		33,707
Amortization expense		1,811			-			1,811
Loss on remeasurement of contingent liability		-			826			826
Gain on litigation proceeds		(530	)		-			(530	)
Gain on sale leaseback		(334	)					(334	)
Gain on sale of property, plant, and equipment		(118	)		-			(118	)
(Loss) from operations		(4,925	)		(2,777	)		(7,702	)
Other income (expense)								-
Interest expense		(3,381	)		-			(3,381	)
Net unrealized gain on interest rate swap agreements		9,327			-			9,327
Other, net		271			-			271
Total other income (expense), net		6,217			-			6,217
Income (loss) before provision for income taxes		1,292			(2,777	)		(1,485	)
Income tax provision		658			(1,507	)		(849	)
Net income (loss)		634			(1,270	)		(636	)
Net loss attributable to the noncontrolling interests		(343	)		-			(343	)
Net income (loss) attributable to Vintage Wine Estates, Inc.		977			(1,270	)		(293	)
Accretion on redeemable Series B stock		-			-			-
Net income (loss) allocable to common stockholders	$	977		$	(1,270	)	$	(293	)

Net earnings (loss) per share allocable to common stockholders
Basic	$	0.02		$	(0.02	)	$	(0.00	)
Diluted	$	0.02		$	(0.02	)	$	(0.00	)
Weighted average shares used in the calculation of earnings per share allocable to common stockholders
Basic		58,819,160						58,819,160
Diluted		58,819,160						58,819,160

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~

~~AND COMPREHENSIVE INCOME~~STOCKHOLDERS' EQUITY

(Unaudited)

(in thousands, except share ~~and per share~~ amounts)

Three Months Ended March 31,

Nine Months Ended March 31,

2022

2022

As Previously Reported

Adjustments

As Restated

As Previously Reported

Adjustments

As Restated

Net revenues

Wine, spirits and cider
$
50,859

$
50,859

$
157,292

$
157,292

Nonwine

28,074

28,074

60,939

60,939

78,933

78,933

218,231

218,231

Cost of revenues

Wine, spirits and cider

38,764

38,764

98,428

98,428

Nonwine

12,152

12,152

29,886

29,886

50,916

50,916

128,314

128,314

Gross profit

28,017

28,017

89,917

89,917

Selling, general, and administrative expenses

27,035

27,035

70,662

70,662

Loss (gain) on sale of property, plant, and equipment

98

98

(493
)

(493
)
Gain on litigation proceeds

-

-

-

-

Income from operations

884

884

19,748

19,748

Other income (expense)

Interest expense

(3,729
)

(3,729
)

(10,825
)

(10,825
)
Net unrealized gain on interest rate swap agreements

4,553

9,288

13,841

8,582

9,288

17,870

Other, net

1,957

1,957

1,945

1,945

Total other income (expense), net

2,781

9,288

12,069

(298
)

9,288

8,990

Income before provision for income taxes

3,665

9,288

12,953

19,450

9,288

28,738

Income tax provision

958

2,585

3,543

5,412

2,585

7,997

Net income

2,707

6,703

9,410

14,038

6,703

20,741

Net income (loss) attributable to the noncontrolling interests

(73
)

(1
)

(74
)

(138
)

(1
)

(139
)
Net income attributable to Vintage Wine Estates, Inc.

2,780

6,704

9,484

14,176

6,704

20,880

Accretion on redeemable Series B stock

-

-

-

-

Net income (loss) allocable to common stockholders
$
2,780

$
6,704

$
9,484

$
14,176

$
6,704

$
20,880

Net earnings (loss) per share allocable to common stockholders

Basic
$
0.05

$
0.10

$
0.15

$
0.23

$
0.11

$
0.34

Diluted
$
0.05

$
0.10

$
0.15

$
0.23

$
0.11

$
0.34

Weighted average shares used in the calculation of earnings per share allocable to common stockholders

Basic

61,410,403

61,410,403

60,773,258

60,773,258

Diluted

61,410,403

61,410,403

60,773,258

60,773,258


	Redeemable Non-Controlling Interest Amount			Common Stock				Treasury Stock					Additional Paid-In Capital			Accumulated Deficit			Non-Controlling Interests			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
Adjustments														29			(1,270	)					(1,241	)
Balance, September 30, 2022, As Restated	$	1,282			61,691,054	$	-		2,871,894	$	(26,034	)	$	382,376		$	(864	)	$	(594	)	$	354,884

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~CASH FLOWS

(Unaudited)

(in thousands, except share amounts)

Redeemable Non-Controlling
Interest Amount

Common Stock

Treasury Stock

Additional
Paid-In Capital

Retained
Earnings

Non-Controlling
Interests

Total Stockholders' Equity

Shares

Amount

Shares

Amount

Balance, June 30, 2021

$
1,682

60,461,611

$
-

$
360,732

$
-

$
(477
)

$
360,255

Net income (loss)

3

-

-

-

2,804

(28
)

2,776

Balance, September 30, 2021

$
1,685

60,461,611

$
-

$
360,732

$
2,804

$
(505
)

$
363,031

Net income (loss)

5

-

-

-

8,592

(45
)

8,547

Balance, December 31, 2021

$
1,690

60,461,611

$
-

$
360,732

$
11,396

$
(550
)

$
371,578

Stock-based compensation

-

-

1,943

-

-

1,943

Issuance of common stock in business combination

1,229,443

-

-

-

10,521

-

-

10,521

Repurchase of common stock

-

-

313,539

(2,833
)

-

-

-

(2,833
)
Net income (loss)

(6
)

-

-

-

-

-

2,780

(68
)

2,712

Adjustments

6,704

6,704

Balance, March 31, 2022, As Restated

$
1,684

61,691,054

$
-

313,539

$
(2,833
)

$
373,196

$
20,880

$
(618
)

$
390,625


	Three Months Ended September 30,
	2022
	As Previously Reported			Adjustments			As Restated
Cash flows from operating activities
Net income (loss)	$	634		$	(1,270	)	$	(636	)
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		3,215			-			3,215
Non-cash operating lease expense		37			-			37
Amortization expense		1,978			-			1,978
Remeasurement of contingent consideration liabilities		-			826			826
Stock-based compensation expense		4,622			29			4,651
Provision for doubtful accounts		(280	)		-			(280	)
Net unrealized gain on interest rate swap agreements		(9,327	)		-			(9,327	)
(Benefit) provision for deferred income tax		(27	)		-			(27	)
(Gain) on disposition of assets		(118	)		-			(118	)
Deferred gain on sale leaseback		(334	)		-			(334	)
Deferred rent		(2,079	)		-			(2,079	)
Change in operating assets and liabilities (net of effect of business combinations):					-			-
Accounts receivable		48			-			48
Other receivables		795			(803	)		(8	)
Inventories		(8,138	)		1,181			(6,957	)
Prepaid expenses and other current assets		3,916			-			3,916
Other assets		(1,766	)		(95	)		(1,861	)
Accounts payable		2,087			276			2,363
Accrued liabilities and other payables		5,532			(239	)		5,293
Net change in lease assets and liabilities		1,288			-			1,288
Net cash provided by (used in) operating activities		2,083			(95	)		1,988
Cash flows from investing activities
Proceeds from disposition of assets		-			-			-
Purchases of property, plant, and equipment		(3,454	)		-			(3,454	)
Label design expenditures		(95	)		95			-
Net cash used in investing activities		(3,549	)		95			(3,454	)
Cash flows from financing activities
Principal payments on line of credit		(34,466	)		-			(34,466	)
Proceeds from line of credit		30,317			-			30,317
Outstanding checks in excess of cash		4,042			-			4,042
Principal payments on long-term debt		(3,753	)		-			(3,753	)
Principal payments on finance leases		(67	)		-			(67	)
Distributions to noncontrolling interest		(66	)		-			(66	)
Repurchase of public warrants		(172	)		-			(172	)
Payments on acquisition payable		(39	)		-			(39	)
Net cash (used in) provided by financing activities		(4,204	)		-			(4,204	)
Net change in cash and restricted cash		(5,670	)		-			(5,670	)
Cash and restricted cash, beginning of period		50,292			-			50,292
Cash and restricted cash, end of period	$	44,622		$	-		$	44,622
Supplemental cash flow information
Cash paid during the period for:
Interest	$	3,187		$	-		$	3,187
Income taxes	$	-		$	-		$	-
Noncash investing and financing activities:					-
Increase in operating lease assets and liabilities upon adoption of ASC 842	$	36,776		$	-		$	36,776
Increase in finance lease assets and liabilities upon adoption of ASC 842	$	759		$	-		$	759

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

~~(in thousands)~~

Nine Months Ended March 31,

2022

As Previously Reported

Adjustments

As Restated

Cash flows from operating activities

Net income
$
14,038

6,703

$
20,741

Adjustments to reconcile net income to net cash from operating activities:

Depreciation and amortization

17,365

17,365

Amortization of deferred loan fees and line of credit fees

296

296

Amortization of label design fees

668

668

Litigation proceeds

-

-

Stock-based compensation expense

1,943

1,943

Provision for doubtful accounts

45

45

Impairment of inventory

-

-

Net unrealized gain on interest rate swap agreements

(8,582
)

(9,288
)

(17,870
)
(Benefit) provision for deferred income tax

888

888

Loss (gain) on disposition of assets

508

508

Deferred gain on sale leaseback

(1,000
)

(1,000
)
Deferred rent

285

285

Change in operating assets and liabilities (net of effect of business combinations):

Accounts receivable

(21,261
)

(21,261
)
Related party receivables

-

-

Other receivables

376

376

Litigation receivable

-

-

Inventories

4,244

4,244

Prepaid expenses and other current assets

(2,232
)

(2,232
)
Other assets

(6,215
)

(6,215
)
Accounts payable

(8,106
)

(8,106
)
Accrued liabilities and other payables

2,836

2,585

5,421

Related party liabilities

-

-

Net cash (used in) provided by operating activities

(3,903
)

-

(3,903
)

Table of Contents

Cash flows from investing activities

-

-

Proceeds from disposition of assets

105

105

Purchases of property, plant, and equipment

(15,723
)

(15,723
)
Label design expenditures

(225
)

(225
)
Proceeds on related party notes receivable

-

-

Acquisition of businesses

(74,268
)

(74,268
)
Net cash used in investing activities

(90,111
)

(90,111
)
Cash flows from financing activities

-

-

Repurchase of common stock

(2,833
)

(2,833
)
Principal payments on line of credit

(67,210
)

(67,210
)
Proceeds from line of credit

126,591

126,591

Outstanding checks in excess of cash

2,900

2,900

Principal payments on long-term debt

(13,178
)

(13,178
)
Proceeds from long-term debt

-

-

Principal payments on related party note

-

-

Deferred offering costs

-

-

Payments on acquisition payable

(226
)

(226
)
Net cash provided by financing activities

46,044

46,044

Net change in cash and restricted cash

(47,970
)

(47,970
)
Cash and restricted cash, beginning of period

123,679

123,679

Cash and restricted cash, end of period
$
75,709

$
75,709

Supplemental cash flow information

Cash paid during the period for:

Interest
$
9,508

$
9,415

Income taxes
$
22

$
22

Noncash investing and financing activities:

-

$
-

Contingent consideration in a business combination
$
8,460

$
8,460

Issuance of common stock in business combination
$
10,521

$
10,521

Accretion of redemption value of Series B redeemable cumulative stock
$
-

$
-

Accretion of redemption value of Series A redeemable stock
$
-

$
-

Offering costs
$
-

$
-

3.~~Merger and Reverse Recapitalization~~

On June 7, 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 reverse 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.

~~In September 2021, upon finalization of the purchase price, all~~ ~~1,000,002~~ ~~shares of the shares in escrow were released to the VWE Legacy shareholders.~~

~~Upon the closing of the Merger, the Company's certificate of incorporation authorized~~ ~~200,000,000~~ ~~shares of common stock,~~ no ~~par value per share and~~ ~~2,000,000~~ ~~shares of preferred stock,~~ no ~~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~~ no ~~preferred stock outstanding as the Closing Date.~~

In connection with the Merger, BCAC entered into subscription agreements (each, a “Subscription Agreement”) with 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 price of $~~10 ~~per share and an aggregate purchase price of $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.~~

~~Table of Contents~~

The Merger is accounted for as a reverse recapitalization in accordance with GAAP. Under this method 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 stock for the net assets of BCAC, accompanied by a recapitalization. The net assets 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~~ ~~5,726,864~~ 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:

~~is at or above $15 (but below $20), 50% of the Earnout Shares will be issued; and~~

is at or above $20 (i) to the extent no Earnout Shares have previously been issued, 100% of the Earnout Shares or (ii) to the extent the event Earnout Shares were previously issued, 50% of the Earnout Shares will be issued.

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 March 31, 2022.~~

4. ~~Acquisitions~~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		$	14,000
Accrued other		600			600
Contingent consideration		2,400			2,400
Fair value of consideration		17,000			17,000

Assets acquired:
Fixed assets		121			121
Inventory		2,502			2,502
Trade Names and Trademarks		1,200			1,200
Customer relationships		3,700			3,700
Deferred tax liability		(1,323	)
Total identifiable assets acquired		6,200			7,523

Goodwill	$	10,800		$	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.~~revenue. Raw materials inventory was valued at its book value.

~~Table of Contents~~

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%~~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.

Table of Contents

The preliminary allocation of the consideration for the net assets acquired from the acquisition of ACE Cider were as follows:


(in thousands)
Sources of financing
Cash	$	46,880		$	46,880
Accrued other		60			60
Contingent consideration		500			500
Fair value of consideration		47,440			47,440

Assets acquired:
Fixed assets		4,205			4,205
Inventory		1,350			1,350
Trademarks		6,600			6,600
Customer relationships		14,300			14,300
Deferred tax liability		(6,531	)		(6,554	)
Total identifiable assets acquired		19,924			19,901

Goodwill	$	27,516		$	27,539

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 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.~~revenue. Raw materials inventory was valued at its book value.

The trademarks fair value was derived using the RFR. Key assumptions in valuing trademarks included (i) a royalty rate of ~~3.0~~2.75% and (ii) discount rate of ~~13.0~~12.5%.

Customer relationships fair value was derived using the MPEEM, utilizing a discount rate of ~~13.5~~13.0%, and Cost Approach. Customer relationships were weighted; 90.0% using the MPEEM model and 10.0% using the Cost Approach.

The results of operations of ACE Cider are included in the accompanying condensed consolidated statements of operations from the November 16, 2021 acquisition date.

Transaction costs incurred in the acquisition were insignificant.

Meier's

On January 18, 2022,, the Company acquired 100% of the 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 years, 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 cash of $12.5 million and 1,229,443 shares of common stock with a value of $12.5 million.

The terms of the acquisition also provide for the possibility of additional contingent consideration of up to $10.0 million based on Meier's exceeding current EBITDA levels over each of the next three years.

Table of Contents

The preliminary allocation of the consideration for the net assets acquired from the acquisition of Meier's were as follows:

~~Table of Contents~~


(in thousands)
Sources of financing
Cash	$	12,500		$	12,500
Shares of common stock		10,521			10,521
Contingent consideration		4,900			4,900
Settlement of pre-existing relationship		(125	)		(125	)
Fair value of consideration		27,796			27,796

Assets acquired:
Accounts receivable		3,669			3,669
Fixed assets		11,358			12,859
Inventory		4,280			4,280
Other assets		356			356
Trademarks		600			700
Customer relationships		5,600			6,400
Accounts payable and accrued expenses		(2,682	)		(2,682	)
Deferred tax liability		(5,359	)		(6,033	)
Total identifiable assets acquired		17,822			19,549

Goodwill	$	9,974		$	8,247

The number of shares of 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 assets, accounts payable and accrued expenses and fixed assets at the acquisition date.

Inventory was comprised of finished goods, work in process and raw materials. The fair value of finished goods inventory and work in process inventory was derived using projected cost of goods sold as a percentage of net ~~revenues.~~revenue. Raw materials inventory was valued at its book value.

The 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 1.1% and (ii) discount rate of ~~26.0~~27.0%.

Customer relationships fair value was derived using the MPEEM, utilizing a discount rate of ~~27.0~~28.0%. Customer relationships were weighted 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 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, ~~of $5.3~~ ~~million are~~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 ~~will be~~are included in current period earnings.

~~Pro-forma Consolidated Financial Information (Unaudited)~~

The results of operations for the acquisitions and the estimated fair values of the assets acquired have been included in the Company’s consolidated financial statements since its respective date of acquisition. For the period ended March 31, 2022, and since the date of its acquisition, the acquisitions contributed approximately $~~18.4~~ ~~million to the Company’s revenues and increased net income by approximately $0.7~~ ~~million.~~

The unaudited pro forma financial information in the table below summarizes the combined results of the Company’s operations and those of Vinesse, ACE Cider and Meier's for the periods shown as if the acquisitions had occurred on July 1, 2020. The pro forma financial information includes the business combination accounting effects of the acquisitions, including amortization charges from acquired intangible assets. ~~The pro~~

1918

Table of Contents

~~forma financial information presented below is for informational purposes only, and is subject to a number of estimates, assumptions and other uncertainties.~~

Three Months Ended

Nine Months Ended

(in thousands)

2022

2021

2022

2021

Total pro forma revenues

$
78,933

$
59,057

$
241,381

$
204,102

Pro forma net income (loss)

$
9,410

$
2,303

$
21,619

$
21,174

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 $~~0.3~~0.4 million. The value of the assets acquired were based on the estimated fair 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.

5.4. Inventory(as restated)

Inventory consists of the following:


(in thousands)	March 31, 2022		June 30, 2021		September 30, 2022		June 30, 2022
					As Restated
Bulk wine, spirits and cider	$	109,408	$	119,333	$	93,743	$	89,038
Bottled wine, spirits and cider		89,808		90,083		87,393		85,905
Bottling and packaging supplies		20,526		10,482		18,367		16,328
Nonwine inventory		1,522		1,247		1,256		831
Total inventories	$	221,264	$	221,145	$	200,759	$	192,102

For the three months ended ~~March 31,~~September 30, 2022 and 2021, ~~respectively,~~ the Company ~~recognized~~did not recognize any impairment of inventory.

For the ~~nine~~three months ended ~~March 31,~~September 30, 2022 and ~~2021, respectively,~~fiscal year ended June 30, 2022, the ~~Company recognized impairment~~Company's inventory balances are presented net of inventory reserves of zero and $~~3.3~~5.1 ~~million.~~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.

5.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.

6. Property, Plant and Equipment

Property, plant and equipment consists of the following:


(in thousands)	March 31, 2022			June 30, 2021			September 30, 2022			June 30, 2022
Buildings and improvements	$	140,241		$	129,288		$	140,975		$	141,324
Land		36,215			33,734			30,325			36,215
Machinery and equipment		74,677			58,227			77,935			76,916
Cooperage		11,804			10,551			9,289			13,015
Vineyards		21,174			21,364			21,204			21,177
Furniture and fixtures		1,581			1,343			1,796			1,754
		285,692			254,507			281,524			290,401
Less accumulated depreciation and amortization		(64,591	)		(52,791	)		(71,637	)		(71,697	)
		221,101			201,716			209,887			218,704
Construction in progress		13,040			11,957			18,317			17,396
	$	234,141		$	213,673		$	228,204		$	236,100

Table of Contents

Depreciation and amortization expense related to property and equipment was $~~6.0~~3.2 million and $~~2.7~~3.5 million for the three months ended ~~March 31, 2022 and 2021, respectively and~~ $~~14.1~~ ~~millio~~n ~~and $8.1~~ ~~million for the nine months ended March 31,~~September 30, 2022 and 2021, respectively.

~~Table of Contents~~

7. Goodwill and Intangible Assets(as restated)

Goodwill

~~The following table summarizes the~~There were no changes in the carrying ~~amount~~amounts 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

Goodwill acquired in Vinesse business combination

$
10,800

$
10,800

Goodwill acquired in ACE Cider business acquisition

27,516

-

27,516

Goodwill acquired in Meier's business acquisition

9,974

9,974

Balance at March 31, 2022

$
116,324

$
31,142

$
10,719

$
158,185

Intangible Assets

The following tables summarize other intangible assets by class:


	March 31, 2022								September 30, 2022
(in thousands)	Gross Intangible		Accumulated Amortization			Net Intangible		Weighted Average Remaining Amortization Period (in years)	Gross Intangible		Accumulated Amortization			Net Intangible		Weighted Average Remaining Amortization Period (in years)
Indefinite-life intangibles																As Restated
Trade names and trademarks	$	29,829	$	-		$	29,829	N/A	$	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		36,579		-			36,579			36,953		-			36,953

Definite-life intangibles
Customer and Sommelier relationships		29,900		(3,320	)		26,580	4.7		30,700		(6,524	)		24,176	4.2
Trade names and trademarks		1,800		(150	)		1,650	3.8		1,900		(357	)		1,543	3.7
Total definite-life intangibles		31,700		(3,470	)		28,230			32,600		(6,881	)		25,719
Total other intangible assets	$	68,279	$	(3,470	)	$	64,809		$	69,553	$	(6,881	)	$	62,672

June 30, 2021
(in thousands)

Gross
Intangible

Accumulated
Amortization

Net Intangible

Weighted Average Remaining Amortization Period (in years)
Indefinite-life intangibles

Trade names and trademarks

$
23,229

$
-

$
23,229

N/A
Winery use permits

6,750

-

6,750

N/A
Total Indefinite-life intangibles

29,979

-

29,979

Definite-life intangibles

Customer and Sommelier relationships

6,300

(200
)

6,100

4.7
Total definite-life intangibles

6,300

(200
)

6,100

Total other intangible assets

$
36,279

$
(200
)

$
36,079

~~Table of Contents~~


	June 30, 2022
(in thousands)	Gross Intangible		Accumulated Amortization			Net Intangible		Weighted Average Remaining Amortization Period (in years)
Indefinite-life intangibles
Trade names and trademarks	$	30,203	$	-		$	30,203	N/A
Winery use permits		6,750		-			6,750	N/A
Total Indefinite-life intangibles		36,953		-			36,953

Definite-life intangibles
Customer and Sommelier relationships		30,700		(4,922	)		25,778	4.4
Trade names and trademarks		1,900		(254	)		1,646	3.5
Total definite-life intangibles		32,600		(5,176	)		27,424
Total other intangible assets	$	69,553	$	(5,176	)	$	64,377

Amortization expense of definite-life intangibles was $1.7 million and $~~25.0~~0.5 ~~thousand~~million for the three months ended ~~March 31, 2022 and 2021, respectively and~~ $~~3.3~~ ~~million and $75.0~~ ~~thousand~~ ~~for the nine months ended March 31,~~September 30, 2022 and 2021, respectively.

As of ~~March 31,~~September 30, 2022, estimated future amortization expense for definite-lived assets is as follows:


2022 remaining	$	1,659
2023		6,637
(in thousands)
2023 remaining			$	5,116
2024		6,626		6,811
2025		5,106		5,291
2026				4,527
Thereafter		8,202		3,974
Total estimated amortization expense	$	28,230	$	25,719

Table of Contents

8. Accrued Liabilities
(as restated)

The major classes of accrued liabilities are summarized as follows:


	September 30, 2022		June 30, 2022
(in thousands)	As Restated
Accrued purchases	$	13,574	$	7,478
Accrued employee compensation		4,551		5,886
Other accrued expenses		4,669		7,115
Non related party accrued interest expense		517		429
Contingent consideration		3,256		2,204
Unearned Income		296		(949	)
Captive insurance liabilities		1,416		2,041
Total Accrued liabilities and other payables	$	28,279	$	24,204

March 31, 2022

June 30, 2021

(in thousands)

As Restated

Accrued purchases

$
11,616

$
10,790

Accrued employee compensation

3,921

3,981

Other accrued expenses

9,857

6,754

Accrued interest expense

1,225

202

Contingent consideration

4,471

2,151

Unearned Income

418

1,200

Captive insurance liabilities

1,630

-

Total Accrued liabilities and other payables

$
33,138

$
25,078

~~Table of Contents~~

9.~~Long-Term and Other Short-Term Obligations~~

~~The following table summarizes long-term and other short-term obligations:~~

(in thousands)

March 31, 2022

June 30, 2021

Note to a bank with interest at LIBOR (1.76%) at Mach 31, 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.

77,858

81,055

Capital expenditures borrowings payable at LIBOR plus 1.75%, payable in quarterly installments of $1,077, rolled into capital expenditures payable at Alternate Base Rate (ABR) (3.25% at June 30, 2021) plus 0.75%. At July 26,2021 Bank of the West converted capital expenditures payable back to Libor (0.50%) plus 1.75% to align with Company Swaps with draw expiring July, 2026.

41,853

45,084

Note to a bank with interest fixed at 3.6%, payable in monthly installments of $60 principal with applicable interest; matures in April 2023.

768

1,227

Note to a bank with interest fixed at 2.75%, payable in monthly installments of $61 principal with
applicable interest; matures in March 2024.

1,419

1,876

Delayed Draw Term Loan ("DDTL") with interest at LIBOR (2.32%) at March 2022 plus 1.75%, payable in quarterly installments of $1,260. Matures in July 2024.

67,142

29,250

DDTL with ABR (4.00% at December 2021). Matures in July 2024. Interest only through draw period. Repaid in fiscal 2022.

-

37,892

Short term unsecured promissory note; principal and interest payable upon maturity with interest at the prime rate plus 1.00%; matured and paid April 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%; matured and paid April 2022.

2,917

2,917

Short term unsecured promissory note; principal and interest payable upon maturity with interest at 1.06%; matured December 31, 2021 and paid January 3, 2022.

-

5,834

194,874

208,052

Less current maturities

(21,200
)

(22,964
)
Less unamortized deferred financing costs

(1,350
)

(1,547
)

$
172,324

$
183,541

~~Maturities of Long-Term and Other Short-Term Borrowings~~

~~As of March 31, 2022, maturities of long-term and other short-term borrowings for succeeding years are as follows:~~

(in thousands)

Remaining 2022

$
9,585

2023

14,909

2024

14,152

2025

64,372

2026

8,571

2027

83,285

$
194,874

~~Line of Credit~~

~~In April 2021, we entered into an amended and restated loan and security agreement to increase the credit facility from an aggregate $350.0~~ ~~million to $480.0~~ ~~million 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 $50.0~~ ~~million. The effective interest rate under the revolving facility w~~as ~~3.1% and~~ ~~2.7% as of~~

~~Table of Contents~~

~~March 31, 2022 and 2021, respectively. The Company had $77.1~~ ~~million and $125.0million available under the line of credit as of March 31, 2022 and June 30, 2021, respectively.~~

~~Amortization of deferred loan costs related to the line of credit was $33.0~~ ~~thousand and $111.8~~ ~~thousand for the three months ended March 31, 2022 and 2021, respectively and $99.0~~ ~~thousand and $335.7~~ ~~thousand for the nine months ended March 31, 2022 and 2021, respectively.~~

~~The Company was in compliance with its line of credit covenants as of March 31, 2022.~~

~~10.~~ Fair Value Measurements ~~(restated)~~(as restated)

The following tables present assets and liabilities measured at fair value on a recurring basis:


	March 31, 2022, As Restated								September 30, 2022
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	51,576	$	-	$	-	$	51,576	$	36,738	$	-	$	-	$	36,738
Interest rate swaps ~~(2)~~(1)				5,133				5,133				18,381				18,381
Total	$	51,576	$	5,133	$	-	$	56,709	$	36,738	$	18,381	$	-	$	55,119

Liabilities:
Contingent consideration liabilities ~~(1)~~(2)	$	-	$	-	$	12,205	$	12,205	$	-	$	-	$	9,302	$	9,302
Interest rate swaps (2)				977				977
Total	$	-	$	977	$	12,205	$	13,182	$	-	$	-	$	9,302	$	9,302

June 30, 2021

(in thousands)

Level 1

Level 2

Level 3

Total

Assets:

Money market funds

$
6,525

$
-

$
-

$
6,525

Total

$
6,525

$
-

$
-

$
6,525

Liabilities:

Contingent consideration liabilities (1)

$
-

$
-

$
4,631

$
4,631

Interest rate swaps (2)

-

13,807

-

13,807

Total

$
-

$
13,807

$
4,631

$
18,438


	June 30, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	36,616	$	-	$	-	$	36,616
Interest rate swaps (1)				9,157				9,157
Total	$	36,616	$	9,157	$	-	$	45,773

Liabilities:
Contingent consideration liabilities (2)	$	-	$	-	$	8,515	$	8,515
Total	$	-	$	-	$	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 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.

(2) 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 claims, projected revenue or changes in discount rates.

Table of Contents

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 Consideration			Contingent Consideration (As Restated)
Balance at June 30, 2021	$	4,631
Balance at June 30, 2022				$	8,515
Acquisitions		7,800			-
Payments		(226	)		(39	)
Balance at March 31, 2022		12,205
Change in fair value					826
Balance at September 30, 2022					9,302
Less: current portion		(4,471	)		(3,256	)
Long term portion	$	7,734		$	6,046

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.

10. Leases (as restated)

Leases 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.

We 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.

Our leases have remaining lease terms from less than one year to 10 years. Our lease terms may include options to extend or terminate the lease when it is reasonably certain and there is significant economic incentive to exercise that option.

Beginning fiscal 2022, we no longer had related party lease agreements.

Table of Contents

The following 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

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, 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

* 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.

Table of Contents

11.Long-Term and Other Short-Term Obligations (as restated)

The 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 applicable interest; matures in March 2024.		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:


	For the years ended June 30,
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, 2022, respectively.

On November 8, 2022, we amended the amended and restated loan and security agreement 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.

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~~11.~~ ~~Redeemable Stock and Redeemable Noncontrolling Interest~~

~~Series A Redeemable Stock~~

~~The Company did not have Series A Redeemable stock for the three months ended and nine months ended March 31, 2022.~~

~~January 2018 Tamarack Cellars Series A Redeemable Stock~~

~~The amount accreted as deemed dividends for the Series A shares were $1.2~~ ~~million for the three and nine months ended March 31, 2021.~~

~~April 2018 Series A Redeemable Stock~~

~~The amounts accreted as deemed dividends for the Series A shares were $3.9~~ ~~million and $2.0~~ ~~million for the three and nine months ended March 31, 2021, respectively.~~

~~July 2018 Issuance of Series A Redeemable Stock~~

~~The amounts accreted as deemed dividends for the Series A shares were $3.3~~ ~~million for the three and nine months ended March 31, 2021.~~

~~Series B Redeemable Stock~~

~~The Company did not have Series B Redeemable stock for the three months ended and nine months ended March 31, 2022.~~

~~April 2018 Series B Redeemable Cumulative Series Stock~~

~~The amounts accreted as deemed dividends for the Series B stock were $1.4~~ ~~million and $4.8~~ ~~million for the three and nine months ended March 31, 2021, respectively.~~

~~The redemption amount of the Series B redeemable stock was $47.5~~ ~~million at March 31, 2021.~~

~~Total unpaid cumulative dividends on the Series B redeemable stock as of March 31, 2021 approximated $5.0~~ ~~million.~~

12. Stockholders' Equity(as restated)

Common Stock

We had reserved shares of stock, on an as-if converted basis, for issuance as follows:


	March 31, 2022		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

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

In connection with the closing of the business combination between Bespoke Capital Acquisition Corp. and Vintage Wine Estates, Inc., a California corporation (“VWE Legacy”) pursuant to a transaction agreement dated February 3, 2021, as amended, certain shareholders of shareholders of VWE Legacy 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;

is at or above $15 (but below $20), 50% of the Earnout Shares will be issued; and

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~~the "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. The 2021 Plan was approved by shareholders at the Annual Meeting of Shareholders on February 2, 2022.

The following table provides total ~~share-based~~stock-based compensation expense by award type:


	Three Months Ended
	September 30, 2022		September 30, 2021
(in thousands)	As Restated
Stock option awards	$	1,700	$	-
Restricted stock units		2,951		-
Total stock-based compensation	$	4,651	$	-

Three Months Ended

Nine Months Ended

(in thousands)

March 31, 2022

March 31, 2021

March 31, 2022

March 31, 2021

Stock option awards

$
828

$
-

$
828

$
-

Restricted stock units

1,115

-

1,115

-

Total share-based compensation

$
1,943

$
-

$
1,943

$
-

Table of Contents

Stock-based compensation expense is included as a component of selling, general and administrative expenses in the condensed consolidated statement of operations.

Stock Options

~~Table of Contents~~

Stock options granted under the 2021 Plan are subject to market conditions. The stock options are exercisable forten years and 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.

The following table presents a summary of stock option activity under the 2021 Plan:

Stock Options

Weighted-Average Exercise Price

Aggregate Intrinsic Value

Outstanding at June 30, 2021

-

-

-

Granted

2,675,651

10.50

-

Exercised

-

-

-

Canceled and forfeited

(25,600
)

10.50

-

Outstanding at March 31, 2022

2,650,051

10.50

-


As Restated	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		173,364			6.01		3.90		-
Exercised		-			-		-		-
Forfeited or cancelled		(1,250	)		10.50		-		-
Outstanding at September 30, 2022		3,675,641		$	10.30		3.03		-

Total unrecognized compensation expense related to the stock options was $~~7.1~~6.7 million, which is expected to be recognized over a weighted-average period of ~~3.3~~3.0 years. No stock options were vested and exercisable as of ~~March 31,~~September 30, 2022.

~~For the period ended March 31, 2022, the weighted-average grant date fair value was $3.27. The fair value of the options was estimated at the grant date using the Monte Carlo Simulation model with the following assumptions: weighted average risk free rate~~ ~~1.8%; weighted average expected term 5.5 years; weighted average expected volatility~~ 40~~%; and no expected dividend yield.~~

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, 2021

-

-

Granted

1,398,526

8.22

Issued

-

-

Canceled and forfeited

-

-

Outstanding at March 31, 2022

1,398,526

8.22


As Restated	Restricted Stock Units		Weighted-Average Grant Date Fair Value
Outstanding at June 30, 2022		1,902,068	$	8.14
Granted		88,587		5.66
Issued		-		-
Forfeited or cancelled		-		-
Outstanding at September 30, 2022		1,990,655	$	8.03

Total unrecognized compensation expense related to the restricted stock units was $~~9.4~~7.8 million, which is expected to be recognized over a weighted-average period of ~~3.3~~2.7 years. No restricted stock units vested as of ~~March 31,~~September 30, 2022.

Table of Contents

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 aggregate 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 ~~stock~~ repurchase plan isare recorded based upon the settlement date of the applicable trade. Such repurchased shares are ~~held in treasury and are~~ presented using the cost method. During the ~~three months~~quarter ended ~~March 31,~~September 30, 2022, the Company repurchased ~~313,539~~171,994 ~~shares~~warrants at an average price of ~~common stock that are held in treasury. These shares are considered issued but not outstanding.~~$1.02 per warrant. The total cost of the shares and/or warrants repurchased was $~~2.8~~0.2 million.

The table below summarizes the changes in ~~treasury stock:~~repurchases of common stock and warrants:

~~Table of Contents~~

Three Months Ended

Nine Months Ended

March 31, 2022

March 31, 2021

Treasury stock:

Balance at December 31, 2021

-

-

Repurchases of common stock

313,539

313,539

Balance at March 31, 2022

313,539

313,539


(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.

13. ~~Inco~~ Income Taxes~~me Taxes~~

The increase in our effective tax rate for the nine months ended March 31, 2022 was primarily due to changes in permanent items, which primarily consist of the Research and Development ("R&D") Tax Credits, as compared to the nine months ended March 31, 2021.

~~The decrease in our effective tax rate for the~~ three months ended ~~March 31,~~September 30, 2022 was primarily due to changes in pre-tax income and permanent items, which primarily consist of ~~the Research and Development ("R&D") Tax Credits,~~non-deductible officer compensation expense, as compared to the three months ended ~~March 31,~~September 30, 2021.

For the ~~nine months and~~ three months ended ~~March 31,~~September 30, 2022, ~~our effective tax rate differs from the federal statutory rate of~~ 21~~% primarily due to state taxes. For the nine months and three months ended March 31, 2021,~~ 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 R&D Tax Credit.

The provisional measurements of fair value for income taxes payable and deferred taxes for the acquisitions of Vinesse, ACE Cider and Meier may be subject to ~~change~~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.

14. 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.

~~Lease Agreements~~

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~~ ~~March 31, 2022~~ ~~through~~ ~~November 2031. Beginning fiscal 2022, we no longer have related party lease agreements.~~

~~The minimum annual payments under our lease agreements are as follows:~~

(in thousands)

Total

Remaining 2022

$
1,978

2023

6,453

2024

6,551

2025

6,252

2026

5,834

2027 and thereafter

17,610

$
44,678

~~Total rent expense, including amounts to related parties,~~ ~~was $2.9~~ ~~million and $2.2~~ ~~million for the three months ended March 31, 2022 and 2021, respectively and $1.3~~ ~~million~~ ~~and $5.7~~ ~~million for the nine months ended March 31, 2022 and 2021, respectively.~~

~~Other Commitments~~

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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		Total
Remaining 2022	$	21,015
2023		13,594
Remaining 2023			$	40,524
2024		6,301		20,706
2025		3,553		18,158
2026		353
	$	44,816	$	79,388

Grape and bulk wine purchases under contracts totaled $~~9.2~~15.8 million and $~~11.5~~ ~~million and $30.4~~ ~~and $30.4~~10.3 million for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2022 and 2021, respectively. The Company expects to fulfill all of these purchase commitments.

15. ~~Segments~~Related Party Transactions (as restated)

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 $50.0 thousand and zero, respectively.

16.Segments (as restated)

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 itthem 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 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.~~

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Corporate and Other Segment—Our Corporate and Other segment generates ~~revenues~~revenue from grape and bulk sales and storage services. Other, non-allocable expenses include corporate expenses, non-direct selling expenses and other expenses not ~~specific~~specifically allocated to an identified reporting segment.

The following tables present net ~~revenues~~revenue and income from operations directly attributable to the Company's segments:


												Three Months Ended September 30, 2022
	Three Months Ended March 31, 2022											As Restated
(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	$	24,549	$	19,595	$	33,657	$	1,132		$	78,933
Net revenue												$	23,366		$	19,863	$	34,081	$	(81	)	$	77,229
Income (loss) from operations	$	3,270	$	916	$	10,457	$	(13,759	)	$	884	$	(100	)	$	1,977	$	12,180	$	(21,759	)	$	(7,702	)

Three Months Ended March 31, 2021

(in thousands)

Wholesale

Direct-to-Consumer

Business-to-Business

Corporate and Other

Total

Segment Results

Net revenues

$
21,092

$
14,675

$
11,026

$
104

$
46,897

Income (loss) from operations

$
6,138

$
1,986

$
3,391

$
(11,331
)

$
184

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Nine Months Ended March 31, 2022

(in thousands)

Wholesale

Direct-to-Consumer

Business-to-Business

Corporate and Other

Total

Segment Results

Net revenues

$
62,923

$
69,316

$
83,349

$
2,643

$
218,231

Income (loss) from operations

$
12,654

$
14,834

$
26,274

$
(34,014
)

$
19,748


	Nine Months Ended March 31, 2021											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	$	55,399	$	48,650	$	57,704	$	1,956		$	163,709
Net revenue												$	16,203	$	14,915	$	24,467	$	102		$	55,687
Income (loss) from operations	$	14,760	$	9,997	$	18,052	$	(22,751	)	$	20,058	$	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	$	10	$	613	$	3	$	25	$	651

Excluding ~~long-term~~the property, plant, and equipment ~~for wine~~specific to assets located at our tasting facilities, and the customer Sommelier relationships and ~~Sommelier relationships allocated specifically~~intangible 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 assets~~information 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.~~be aggregated.

~~Depreciation expense recognized for assets included in the Direct-to-Consumer reporting segment was $0.3~~ ~~million and $0.4~~ ~~million for the three months ended March 31, 2022 and 2021, respectively and~~ $~~0.8~~ ~~million and $1.1~~ ~~million for the nine~~ ~~months ended March 31, 2022 and 2021, respectively.Amortization expense included in the Direct-to-Consumer reporting segment was $0.6~~ ~~million and $25.0~~ ~~thousand for the three months ended March 31, 2022 and 2021 respectively and $2.0~~ ~~million and $75.0~~ ~~thousand for the nine months ended March 31, 2022 and 2021, respectively. All of the Company’s long-lived assets are located within the United States.~~

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~~16.~~17. Earnings Per Share ~~(restated)~~(as restated)

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 March 31,

Nine Months Ended March 31,

2022

2021

2022

2021

(in thousands, except for per share amounts)

As Restated

As Restated

Net income

$
9,410

$
626

$
20,741

$
15,263

Less: Series B dividends and accretion

-

1,446

-

4,760

Less: (loss) income allocable to noncontrolling interest

(74
)

53

(139
)

343

Net income (loss) allocable to common shareholders

$
9,484

$
(873
)

$
20,880

$
10,160

Numerator – Basic EPS

Net income (loss) allocable to common shareholders

$
9,484

$
(873
)

$
20,880

$
10,160

Less: net income allocated to participating securities (Series B)

-

-

-

1,752

Net income (loss) allocated to common shareholders

$
9,484

$
(873
)

$
20,880

$
8,408

Numerator – Diluted EPS

Net income (loss) allocated to common shareholders

$
9,484

$
(873
)

$
20,880

$
8,408

Add: net income attributable to convertible debt

-

-

-

147

Reallocation of income under the two-class method

-

-

-

44

Net income (loss) allocated to common shareholders

$
9,484

$
(873
)

$
20,880

$
8,599

Denominator – Basic Common Shares

Weighted average common shares outstanding - Basic

61,410

21,921

60,773

21,921

Denominator – Diluted Common Shares

Effect of dilutive securities:

Stock options

-

-

-

406

Convertible debt

-

-

-

2,237

Weighted average common shares - Diluted

61,410

21,921

60,773

24,564

Net income (loss) per share – basic:

Common Shares

$
0.15

$
(0.04
)

$
0.34

$
0.38

Net income (loss) per share – diluted:

Common Shares

$
0.15

$
(0.04
)

$
0.34

$
0.35


	Three Months Ended September 30,
	2022			2021
(in thousands, except for per share amounts)	As Restated
Net (loss) income	$	(636	)	$	2,779
Less: (loss) income allocable to noncontrolling interest		(343	)		25
Net income allocable to common shareholders	$	(293	)	$	2,804

Numerator – Basic EPS
Net income allocable to common shareholders	$	(293	)	$	2,804
Net income allocated to common shareholders	$	(293	)	$	2,804

Numerator – Diluted EPS
Net income allocated to common shareholders	$	(293	)	$	2,804
Net income allocated to common shareholders	$	(293	)	$	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 (loss) income per share – basic:
Common Shares	$	(0.00	)	$	0.05
Net (loss) income per share – diluted:
Common Shares	$	(0.00	)	$	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 March 31,				Nine Months Ended March 31,				Three Months Ended September 30,
	2022		2021		2022		2021		2022		2021
Shares subject to warrants to purchase common stock		26,000,000		-		26,000,000		-		25,646,453		26,000,000
Shares subject to options to purchase common stock		2,650,051		816,868		2,650,051		277,700		3,675,641		-
Total		28,650,051		816,868		28,650,051		277,700		29,322,094		26,000,000

18. Subsequent Events(as restated)

During the three months ended December 31, 2022, the Company identified a number of goodwill and intangible asset impairment indicators that led us to conclude that an impairment test was required. After performing fair value determinations, we recorded a goodwill impairment of $125.3 million and intangible assets impairments of $13.8 million for the three months ended December 31, 2022.

While the Company was in compliance with its debt covenants as of March 31, 2023, absent a waiver or an amendment to its loan agreement, the Company anticipates that we will not meet certain financial debt covenants in the next 12 months, as required per our Second A&R Loan and Security Agreement, which would constitute an event of default, which if not waived, can result in the potential acceleration of outstanding debt thereunder. If an event of default occurs under the Second A&R Loan and Security Agreement and the lender accelerates the maturity of the debt thereunder, the Company may not have sufficient cash to repay the outstanding debt. In response to these conditions, management has begun to actively engage in conversations with the lender of the Second A&R Loan and Security Agreement regarding amendments and waivers to the related financial covenants, however, whether an amendment or waiver is obtained is not within the Company's control, and therefore cannot be deemed probable. As a result of these uncertainties, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements were issued. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might result from the outcome of this uncertainty.

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~~17.Related Party Transactions~~

~~The Company did not have any related party receivables or related party liabilities as of March 31, 2022 and June 30, 2021.~~

~~The components of related party revenues and expenses are as follows:~~

Three Months Ended

Nine Months Ended

(in thousands)

March 31, 2022

March 31, 2021

March 31, 2022

March 31, 2021

Revenues:

Warehousing and fulfillment services

$
-

$
166

$
-

$
715

Storage and bottling of alcoholic beverages

-

29

-

50

Management fees

-

115

-

388

Marketing and distribution

-

1,625

-

1,625

Expenses:

Concourse Warehouse lease

-

-

-

241

Swanson lease

-

163

-

516

Z.R. Waverly lease

-

-

-

66

~~Warehousing and Fulfillment Services~~— ~~Revenues from related parties for warehousing and fulfillment services for the three months ended March 31, 2022 and 2021 were~~ ~~zeroand $166.3~~ ~~thousand, respectively. Revenues from related parties for warehousing and fulfillment services for the nine months ended March 31, 2022 and 2021 were~~ ~~zeroand $715.4~~ ~~thousand, respectively. We did~~ no~~t have any accounts receivable from revenues with related parties for warehousing and fulfillment services at March 31, 2022 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~~ ~~zero~~ ~~and $28.9~~ ~~thousand for the three months ended March 31, 2022 and 2021, respectively and payments of~~ ~~zero~~ ~~and $49.6~~ th~~ousand for the nine months ended March 31, 2022 and 2021, respectively, to the related party.~~

~~Management Fees— Prior to July 1, 2021, w~~e provided management, billing and collection services to a related party under a management fee arrangement. For the three months ended March 31, 2022 and 2021, we charged this related party management fees of ~~zero~~ ~~and $114.5thousand, respectively, for these services. For the nine months ended March 31, 2022 and 2021, we charged this related party management fees of~~ ~~zero~~ ~~and $388.1thousand, respectively, for these services. We did~~ no~~t owe the related party for amounts collected on the related party's behalf at March 31, 2022 and June 30, 2021.~~

~~Marketing and Distribution~~— On December 31, 2020, the Company entered into a marketing and distribution arrangement with a related party, Kunde. Under the agreement, the related party paid the Company a commission for certain distribution sales. The Company recognized ~~zero~~ ~~and $1.6~~ ~~million in revenue from the arrangement in the three and nine months ended March 31, 2021 and 2020, respectively.~~

~~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 ofzero~~ ~~for the three months ended March 31, 2021 and $241.3~~ thousand for the nine months ended March 31, 2021 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 $163.6~~ ~~thousand for the three months ended March 31, 2021 and $516.6~~ ~~thousand for the nine months ended March 31, 2021, related to this lease agreement.~~

~~Z.R. 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~~ ~~zero~~ ~~for the three months ended March 31, 2021 and $65.8thousand for the nine months ended March 31, 2021, related to this lease agreement. In December 2020, we purchased the Z.R. Waverly leased facility in California from the shareholder for $1.5~~ ~~million.~~

~~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 $~~90.1~~ ~~thousand and $69.1~~ ~~thousand for the three months ended March 31, 2022 and 2021, respectively and $286.5~~ ~~thousand and $249.9~~ ~~thousand for the nine months ended March 31, 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 March 31, 2022 and 2021, payments related to sponsorship and

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~~marketing services totaled $87.0~~ ~~thousand and $87.5~~ ~~thousand, respectively. For the nine months ended March 31, 2022 and 2021, payments related to sponsorship and marketing services totaled $279.0~~ ~~thousand and $225.0~~ ~~thousand, respectively.~~

~~Gem + Jane Asset Acquisition~~ — On February 14, 2022, the Company purchased certain intellectual property pertaining or related to a canned cannabis beverage brand from CannaCraft, Inc. The asset acquisition was a related party transaction. Terry Wheatley, President of VWE, is a member of the board of directors of CannaCraft, Inc., having the authority to establish policies and make decisions. 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~~.

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 Form 10-K for the fiscal year ended June 30, ~~2021~~2022 (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., a Nevada corporation and its consolidated subsidiaries.

~~Restatement of Previously Issued Condensed Consolidated Financial Statements~~

The Company has restated its previously issued condensed consolidated financial statements contained in the Quarterly Report on Form 10-Q/A. Refer to the “Explanatory Note” preceding Part I – Financial Information, for the background on the restatement, periods impacted, control considerations and other information. In addition, we have restated certain previously reported financial information for the three and nine months ended March 31, 2022 in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to, information within the Liquidity and Capital Resources sections. See Note 2, Restatement of Previously Issued Condensed Consolidated Financial Statements, in Item 1, Financial Statement Schedules and Footnotes, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our condensed consolidated financial statements.

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 ~~15th~~14th largest wine producer based on cases of wine shipped in California. ~~We sell nearly two 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-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 Pandemic~~Economic 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 slow~~economies and there remains uncertainty about the ~~spread of COVID-19 have been lifted or eased, some are continuing.~~impact on the economy. We cannot estimate with any certainty the length or severity of the ~~COVID-19 pandemic~~economic 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.

We expect economic uncertainties including inflation and supply chain constraints to continue to impact several areas of the business including sales, cost of goods, operating expenses and cash flows.

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 bottles from a supplier in Italy, who has plants located in Ukraine, Italy and Poland. While the Company has not been impacted directly by supply chain disruptions as a result of the invasion, including potential cybersecurity risks and other indirect operational or supply chain challenges, the competition to secure wine bottle capsules has increased from suppliers due to the closing of the plant in Ukraine.

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~~Industry and Economic Conditions~~

The wine industry is recession resistant, with sustained growth over the past 25 years despite downturns in economic conditions from time to time. Consumers are increasingly purchasing higher priced wines and other alcoholic beverages, which 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 benefit 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 state, have engulfed the affected regions in smoke and flames. The long-term trend is that wildfires are increasing resulting from drought conditions. Drought conditions due to global climate change have increased the severity of destructive wildfires which have affected the U.S. grape harvest. When vineyards and grapes are exposed to smoke, it can result 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 wildfires have 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 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.

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~~revenue and costs from year to year.

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.

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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 revenue 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 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;~~revenue; 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~~Revenue

We generate revenue from our segments: Wholesale, ~~Business-to-Business ("B2B"),~~B2B, Direct-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~~revenue 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,~~revenue, but are expected to increase over time to support the needs of the Company.

~~Table of Contents~~

Income from Operations

Income from operations is gross profit less selling, general and administrative expenses; acquisition and restructuring related ~~expenses~~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 Volumes

In addition to acquisitions, the primary drivers of net revenue growth in any period are attributable to changes in case volumes and changes in product mix and sales price. Case volumes ~~represent~~represents the number of 9-liter equivalent cases of wine that we sell during a particular period. Case volumes 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.

~~The following tables summarize 9-liter equivalent cases by segment:~~

Three Months Ended March 31,

(in thousands)

2022

2021

Unit Change

% Change

Wholesale

357

318

39

12.3
%
B2B

113

85

28

32.9
%
DTC

87

52

35

67.3
%
Total case volume

557

455

102

22.4
%

Case volumes were up 22.4% for the three months ended March 31, 2022, driven by increased shipments in all segments, from the three months ended March 31, 2021. Wholesale increased 12.3% due to increased volumes associated with the acquisition of ACE Cider, partially offset by reduced off premise shipments from our core brands. B2B volumes increased 32.9% related primarily to increased customer projects. DTC volumes increased 67.3% due to increased wine club and tasting room transactions coupled with shipments related to the acquisition of Vinesse.

Case Volume

Nine Months Ended March 31,

(in thousands)

2022

2021

Unit Change

% Change

Wholesale

1,072

782

290

37.1
%
B2B

452

437

15

3.4
%
DTC

307

240

67

27.9
%
Total case volume

1,831

1,459

372

25.5
%

Case volumes were up 25.5% for the nine months ended March 31, 2022, driven by increased volumes in the Wholesale and DTC segments from the nine months ended March 31, 2021. Wholesale volumes increased 37.1% due to shipments of high volume core brands as well as the acquisition of ACE Cider partially offset by the discontinuation of certain brands. B2B volumes remained stable with an increase of 3.4% for the nine months ended March 31, 2022. DTC volumes increased 27.9% for the nine months ended March 31, 2022 driven by increased tasting room and wine club activity, special programming through a large e-commerce company and the acquisition of Vinesse.

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.

Non-GAAP Financial Measures~~(as restated)~~

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.

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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.~~revenue.

Results of Operations (as restated)

Our financial performance is classified into the following segments: Wholesale, B2B, DTC and Corporate and Other. Our corporate operations, including centralized selling, general and administrative expenses and other factors, such as the re-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 customer lists, trademarks and trade names specific to 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.

Three 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 %)	2022			2021		Change			Change
Net revenue	$	23,366		$	16,203	$	7,163		44.2%
Income from operations	$	(100	)	$	4,188	$	(4,288	)	-102.4%

Wholesale net revenue for the three months ended September 30, 2022 increased $7.2 million, or 44.2%, from the three months ended September 30, 2021. The increase was attributable to an increase in sales of $6.9 million related to acquisition case volumes.

Wholesale income from operations for the three months ended September 30, 2022 decreased $4.3 million, or 102.4%, from the three months ended September 30, 2021. The decrease was attributable to higher costs due to inflation and supply chain challenges as well as $2.7 million in overhead burden and a loss on remeasurement of contingent liability of $0.8 million, partially offset by $0.8 million related to acquisitions.

B2B Segment Results

The following table presents summary financial data for our B2B segment:


	Three Months Ended September 30,
	2022		2021		Dollar		Percent
(in thousands, except %)	As Restated				Change		Change
Net revenue	$	34,081	$	24,467	$	9,614	39.3%
Income from operations	$	12,180	$	7,514	$	4,666	62.1%

B2B net revenue for the three months ended September 30, 2022 increased $9.6 million, or 39.3%, from the three months ended September 30, 2021. The increase was primarily attributable to increased custom production as well as an increase of $4.9 million related to acquisitions.

B2B income from operations for the three months ended September 30, 2022 increased $4.7million, or 62.1%, from the three months ended September 30, 2021. The increase was attributable to increased margin on bulk distilled alcohol sales partially offset by a loss from operations of $0.7 million related to acquisitions.

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DTC Segment Results

The following table presents summary financial data for our DTC segment:


	Three Months Ended September 30,
	2022		2021		Dollar			Percent
(in thousands, except %)	As Restated				Change			Change
Net revenue	$	19,863	$	14,915	$	4,948		33.2%
Income from operations	$	1,977	$	2,539	$	(562	)	-22.1%

DTC net revenue for the three months ended September 30, 2022 increased $4.9 million, or 33.2%, from the three months ended September 30, 2021. The increase was primarily attributable to increased e-commerce and wine club revenue as well as an increase of $3.1 million related to acquisitions.

DTC income from operations for the three months ended September 30, 2022 decreased $0.6 million, or 22.1% from the three months ended September 30, 2021. The decrease was primarily due to $0.6 million in overhead burden.

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 revenue	$	(81	)	$	102		$	(183	)	179.4%
Income (loss) from operations	$	(21,759	)	$	(8,098	)	$	(13,661	)	-168.7%

Corporate and Other net revenue for the three months ended September 30, 2022 was down $0.2 million from the three months ended September 30, 2021.

Corporate and Other loss from operations for the three months ended September 30, 2022 increased $13.7 million, or 168.7%, from the three months September 30, 2021. The increase in losses was due to $4.7 million of share-based compensation expense, continued increased costs of labor of $1.2 million, increased costs of freight of $1.0 million, depreciation expense of $0.5 million as well as increased infrastructure costs required to be a public company and the continued increased costs of warehousing and insurance.

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 ~~following is a reconciliation~~increase in case volumes was primarily due to wholesale which was driven by the ACE Cider acquisition that ships higher case volumes of ~~net income to Adjusted EBITDA for the periods presented:~~lower priced product. Increased DTC volumes were driven by televised sales and Wine Clubs.

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Three Months Ended

Nine Months Ended

March 31, 2022

March 31, 2021

March 31, 2022

March 31, 2021

(in thousands)
As Restated

As Restated

Net income
$
9,410

$
626

$
20,741

$
15,263

Interest expense

3,729

3,842

10,825

9,173

Income tax provision

3,543

1,633

7,997

4,517

Depreciation and amortization

8,122

2,439

18,033

7,982

Stock-based compensation expense

1,943

143

1,943

601

Net unrealized/(gain) loss on interest rate swap agreements

(13,841
)

(5,589
)

(17,870
)

(8,212
)
(Gain)/loss on disposition of assets

1,099

678

508

(999
)
Gain on litigation proceeds

(3,000
)

905

(3,000
)

(3,845
)
Deferred rent adjustment

47

126

285

376

Incremental public company costs

912

-

3,060

-

Acquisition integration costs

243

-

643

-

Deferred gain on sale leaseback

(1,000
)

(1,000
)

(1,000
)

(1,000
)
Inventory adjustment for casualty losses

-

3,302

-

3,302

Transaction expenses

-

3,015

-

3,015

COVID related adjustments

-

-

-

100

Inventory acquisition basis adjustment

2,789

8

3,848

97

Adjusted EBITDA
$
13,996

$
10,128

$
46,013

$
30,370

Revenue
$
78,933

$
46,897

$
218,231

$
163,709

Adjusted EBITDA margin

17.7
%

21.6
%

21.1
%

18.6
%

Non-GAAP Financial Measures (as restated)

The following is a reconciliation of net (loss) income to Adjusted EBITDA for the periods presented:


	Three Months Ended September 30
	2022				2021
	As Restated
Net (loss) income	$	(636	)		$	2,779
Interest expense		3,381		-		3,603
Income tax provision		(849	)			1,193
Depreciation		3,215				3,623
Amortization		1,811				531
Stock-based compensation expense		4,651				-
Net unrealized gain on interest rate swap agreements		(9,327	)			(1,393	)
Gain on disposition of assets		(118	)			(340	)
Deferred rent adjustment		-				128
Gain on litigation proceeds		(530	)			-
Adjusted EBITDA	$	1,598			$	10,124
Revenue	$	77,229			$	55,687
Adjusted EBITDA margin		2.1	%			18.2	%

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 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.

~~Results of Operations~~

Our financial performance is classified into the following segments: Wholesale, B2B, DTC and Corporate and Other. Our corporate operations, including centralized selling, general and administrative expenses and other factors, such as the remeasurements 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 list and trademark intangible assets specific to the Sommelier, Vinesse, ACE Cider and Meier's acquisitions, 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.

~~Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021~~

~~Wholesale Segment Results~~

~~The following table presents summary financial data for our Wholesale segment:~~

~~Table of Contents~~

Three Months Ended March 31,

Dollar

Percent
(in thousands, except %)

2022

2021

Change

Change
Net revenues

$
24,549

$
21,092

$
3,457

16.4%
Income from operations

$
3,270

$
6,138

$
(2,868
)

-46.7%

~~For the three months ended March 31, 2022, Wholesale net revenues increased $3.5 million, or 16.4%, from the three months ended March 31, 2021. The increase was attributable to an increase in sales of $5.0 million related to acquisition case volumes~~ ~~partially offset by reduced off premise sales from our core brands.~~

~~For the three months ended March 31, 2022, Wholesale income from operations decreased~~ ~~$2.9 million, or 46.7%, from the three months ended March 31, 2021. The decrease was attributable~~ ~~amortization of acquired customer relationships, higher costs due to inflation and supply chain challenges not yet offset from pricing actions going into effect in coming quarters.~~

~~B2B Segment Results~~

~~The following table presents summary financial data for our B2B segment:~~

Three Months Ended March 31,

Dollar

Percent
(in thousands, except %)

2022

2021

Change

Change
Net revenues

$
33,657

$
11,026

$
22,631

205.3%
Income from operations

$
10,457

$
3,391

$
7,066

208.4%

~~For the three months ende~~d March 31, 2022, B2B net revenues increased $22.6 million, or 205.3%, from the three months ended March 31, 2021. The increase was primarily attributable to increased custom production as well as an increase of $3.1 million related to acquisitions.

~~For the three months ended March 31, 2022, B2B income from operations increased~~ ~~$7.1million, or 208.4%, from the three months ended March 31, 2021. The increase was attributable to increased custom production as well as an increase of $ 0.5 million related to acquisitions.~~

~~DTC Segment Results~~

~~The following table presents summary financial data for our DTC segment:~~

Three Months Ended March 31,

Dollar

Percent
(in thousands, except %)

2022

2021

Change

Change
Net revenues

$
19,595

$
14,675

$
4,920

33.5%
Income from operations

$
916

$
1,986

$
(1,070
)

-53.9%

~~For the three months ended March 31, 2022, DTC net revenues increased $4.9 million, or 33.5%, from~~ ~~the three months ended March 31, 2021. The increase was primarily attributable to increased~~ ~~tasting rooms traffic as restrictions related to COVID-19 have been lifted and an increase of $3.3 million related to acquisitions.~~

~~For the three months ended March 31, 2022, DTC income from operations decreased $1.1 million, or 53.9%, from~~ ~~the three months ended March 31, 2021. The decrease was primarily due to increased amortization~~ ~~of acquired intangible assets of $0.7 million as well as incremental SG&A costs which do not yet represent expected synergies.~~

~~Corporate and Other Segment Results~~

~~The following table presents summary financial data for our Corporate and Other segment:~~

Three Months Ended March 31,

Dollar

Percent
(in thousands, except %)

2022

2021

Change

Change
Net revenues

$
1,132

$
104

$
1,028

*
Income (loss) from operations

$
(13,759
)

$
(11,331
)

$
(2,428
)

-21.4%

*Not meaningful

~~For the three months ended March 31, 2022, Corporate and other net revenues increased $1.0 million from the three months ended March~~ ~~31,~~ ~~2021. The increase was primarily attributable to an increase in bulk wine sales when compared to the prior year three month period.~~

~~Loss from operations increased $2.4 million, or 21.4%, from the three months March~~ 31~~, 2022. The increase in losses was due to~~ ~~the increased infrastructure costs required to be a public company, and the continued increased costs of labor, warehousing, freight and insurance.~~

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~~Nine Months Ended March 31, 2022 Compared to Nine Months Ended March 31, 2022~~

~~Wholesale Segment Results~~

~~The following table presents summary financial data for our Wholesale segment:~~

Nine Months Ended March 31,

Dollar

Percent
(in thousands, except %)

2022

2021

Change

Change
Net revenues

$
62,923

$
55,399

$
7,524

13.6%
Income from operations

$
12,654

$
14,760

$
(2,106
)

-14.3%

~~For the nine months ended March 31, 2022, Wholesale net revenues increased $7.5 million, or 13.6%, from the nine~~ ~~months ended March 31, 2021. The increase was attributable to an increase in sales of $7.6 million related to an acquisition, partially offset by discontinued brands.~~

~~For the nine months ended March 31, 2022, Wholesale income from operations decreased $2.1 million, or 14.3%, from the nine months ended March 31, 2021. The decrease was attributable~~ ~~amortization of acquired customer relationships, higher costs due to inflation and supply chain challenges not yet offset from pricing actions going into effect in coming quarters.~~

~~B2B Segment Results~~

~~The following table presents summary financial data for our B2B segment:~~

Nine Months Ended March 31,

Dollar

Percent
(in thousands, except %)

2022

2021

Change

Change
Net revenues

$
83,349

$
57,704

$
25,645

44.4%
Income from operations

$
26,274

$
18,052

$
8,222

45.5%

~~For the nine months ende~~d March 31, 2022, B2B net revenues increased $25.6 million, or 44.4%, from the nine months ended March 31, 2021. The increase was primarily attributable to increased custom projects and timing of private label sales as well as an increase of $3.1 million related to acquisitions.

~~For the nine months ended March 31, 2022, B2B income from operations increased~~ ~~$8.2million, or 45.5%, from the nine~~ ~~months ended March 31, 2021. The increase was attributable to increases in~~ ~~custom production as well as an increase of $0.5 million related to acquisitions.~~

~~DTC Segment Results~~

~~The following table presents summary financial data for our DTC segment:~~

Nine Months Ended March 31,

Dollar

Percent
(in thousands, except %)

2022

2021

Change

Change
Net revenues

$
69,316

$
48,650

$
20,666

42.5%
Income from operations

$
14,834

$
9,997

$
4,837

48.4%

~~For the nine months ended March 31, 2022, DTC net revenues increased $20.7 million, or 42.5%, from~~ ~~the nine months ended March 31, 2021. The increase was primarily attributable~~ to increased case volumes from tasting rooms and wine clubs, and revenues earned from events as restrictions related to COVID-19 have been lifted and an increase in sales of $7.6 million related to an acquisition.

~~For the nine months ended March 31, 2022, DTC income from operations increased $4.8 million, or 48.4%, from~~ ~~the nine months ended March 31, 2021. The increase was due to increased margin contribution from~~ ~~improved traffic in tasting rooms, wine club shipments and events, partially offset by a loss of $0.3 million from an acquisition, net of amortization of acquired customer lists.~~

~~Corporate and Other Segment Results~~

~~The following table presents summary financial data for our Corporate and Other segment:~~

Nine Months Ended March 31,

Dollar

Percent
(in thousands, except %)

2022

2021

Change

Change
Net revenues

$
2,643

$
1,956

$
687

35.1%
Income (loss) from operations

$
(34,014
)

$
(22,751
)

$
(11,263
)

-49.5%

~~For the nine months ended March 31, 2022, Corporate and Other net revenues increased $0.7 million, or 35.1%, from the nine months ended March 31, 2021. The increase was primarily attributable to an increase in bulk wine sales~~

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~~Loss from operations decreased $11.3 million, or 49.5%, from the nine months ended March 31, 2021. The increase was due to~~ ~~the costs related to increased infrastructure cost required to be a public company and the continued increased costs of labor, warehousing, freight and insurance.~~

Liquidity and Capital Resources

We currently believe that, based on available capital resources and projected operating cash flows, we have adequate capital resources to fund our currently anticipated working capital needs; capital expenditures, business acquisitions, debt obligations, and tax payments over the next 12 months and beyond.

Cash and Cash Equivalents

Our cash and cash equivalents balance was ~~$75.7~~$44.6 million at ~~March 31,~~September 30, 2022 compared to ~~$118.9~~$50.3 million at June 30, ~~2021.~~2022, exclusive of restricted cash. At ~~March 31,~~September 30, 2022, our cash and cash equivalents were held in cash depository accounts with major banks.

Cash Flows (as restated)

The table below presents a summary of our sources and uses of cash:


	For the Nine Months Ended
	March 31,									Three Months Ended September 30,
(in thousands)	2022			2021			Change			2022			2021			Change
Operating activities	$	(3,903	)	$	19,661		$	(23,564	)	$	1,988		$	(2,020	)	$	4,008
Investing activities	$	(90,111	)	$	(29,243	)	$	(60,868	)	$	(3,454	)	$	(7,786	)	$	4,332
Financing activities	$	46,044		$	8,287		$	37,756		$	(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.

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Cash Flows provided by (used in) Operating Activities

Net cash ~~used in~~provided by operating activities was ~~$3.9~~$2.0 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2022 compared to net cash ~~provided by~~used in operating activities of ~~$19.7~~$2.0 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2021, representing an increase in net cash ~~used~~provided of ~~$23.6~~$4.0 million. The increase in net cash ~~used~~provided was primarily attributable to the decrease in net income of ~~$1.2~~$3.4 million, net changes in certain non-cash adjustments of ~~$14.7~~$4.1 million to reconcile net income to operating cash flow and net changes in other operating assets and liabilities of ~~$37.0~~$11.5 million as detailed on the condensed consolidated statement of cash flows.

Cash Flows provided by (used in) Investing Activities

Net cash used in investing activities was ~~$90.1~~$3.5 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2022, compared to net cash used in investing activities of ~~$29.2~~$7.8 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2021, representing an ~~increase~~decrease in net cash used of ~~$60.8~~$4.3 million. Cash flows from investing activities are utilized primarily to fund acquisitions, capital expenditures for improvements to existing assets and other corporate assets. The ~~increase~~decrease in net cash used was primarily attributable to ~~acquisitions of businesses of $74.3 million, partially offset by~~ reduced purchases of property, plant and equipment of ~~$11.3~~$4.3 million.

Cash Flows provided by (used in) Financing Activities

Net cash ~~provided by~~used in financing activities was ~~$46.0~~$4.2 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2022 compared to net cash ~~used~~provided by of ~~$8.3~~$9.2 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2021, representing an increase in net cash ~~provided~~used of ~~$37.8~~$13.4 million. The increase in net cash ~~provided~~used consisted primarily of ~~$46.2~~$16.8 million of ~~proceeds~~payments 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 ~~March 31,~~September 30, 2022, the Company had no off-balance sheet arrangements.

Significant Accounting Policies

~~There~~Our condensed consolidated financial statements have been ~~no material changes~~prepared 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 ~~significant~~reported 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 disclosed~~refer 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 with~~10-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/A.

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.

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Cautionary Statement Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q/A 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 subsequent Quarterly Reports on Form 10-Q or other reports filed with the 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.

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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

Inflationary pressures have caused and may continue to cause many of our material and labor costs to increase, which can adversely affect our profitability and cash flows. 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 ~~as defined in Rules~~pursuant to Rule 13a-15(e) and ~~15d-15(e)~~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 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 ~~described~~and discussed below, our disclosure controls and procedures were not effective as of September 30, 2022. Management's conclusion was based on discoveries and observations made during the fiscal 2022 ~~audit.~~audit as well as during the process of closing the first quarter of fiscal 2023.

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 relating~~2022, 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. ~~Through remediation efforts~~This existing material weakness resulted in additional reclassifications of certain assets and the classification and timing of recording certain costs first identified during the process of closing the second quarter of fiscal 2022, we established processes and controls around our balance sheet account reconciliations, however, the processes and controls were not operating effectively throughout fiscal 2022, and as a result, accounting errors in the treatment of our interest rate swap agreements were identified resulting in the restatement of our unaudited condensed consolidated financial statements. As of June 30, 2022, the2023. This material weakness has not been ~~fully remediated.~~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 for the Company and acquired companies.

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. In addition to the necessary reclassifications of certain assets and the classification and timing of recording certain costs for second quarter of fiscal year 2023, we noted for interim periods that due to ineffective business process and controls for balance sheet reconciliations that lacked adequate precision, we had not properly accounted for and misclassified certain charges related to revenue and expenses. 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 in an effort to remediate this material weakness. We engaged a consulting firm to assist the Company in the continued development of improved business processes and control activities and we have engaged a separate consultant to focus specifically on inventory system processes improvements.

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During fiscal 2022, we also conducted an assessment of staffing needs. Since this assessment, we have hired a Director of Inventory and Costing, a Controller and additional permanent and engaged temporary finance team members, each with relevant wine industry and accounting process

~~Table of Contents~~

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.

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~~weaknesses 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.

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Part II—Other Information

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Important risk factors that 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 for the fiscal year ended June 30, ~~2021, as supplemented by the information set forth below.~~2022.

We cannot guarantee that we will repurchase our common stock or warrants pursuant to our repurchase program or that our repurchase program will enhance long-term stockholder value. Share and warrant repurchases could also increase the volatility of the price of our common stock and warrants and could diminish our cash reserves.

On March 8, 2022, our Board authorized a share repurchase program (the "Repurchase Program"), pursuant to which we may repurchase up to $30.0 million in aggregate value of shares of our common stock and/or warrants through September 8, 2022. The timing and amount of any repurchases will depend upon a number of factors, including price, trading volume, general market conditions and legal requirements, among others. The Company is not obligated to repurchase any specific number or amount of shares of common stock or warrants pursuant to the Repurchase Program, and it may modify, suspend or discontinue the Repurchase Program at any time. Repurchases pursuant to the Repurchase Program could affect our common stock price and warrant price and increase their volatility. The existence of the Repurchase Program could cause our common stock price and warrant price to be higher than they would be in the absence of such a program and, if securities are repurchased in the Repurchase Program, it will reduce the market liquidity for such securities. Additionally, the Repurchase Program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities. There can be no assurance that any repurchases will enhance long-term stockholder value and the market price of our common stock or warrants may decline below the levels at which we repurchased any such securities.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds(as restated)

Sale of Unregistered Securities

On January 18, 2022, the Company issued 1,229,443 shares of the Company's common stock in connection with our acquisition of Meier's Wine Cellars, Inc., an Ohio corporation ("Meier's") pursuant to a merger agreement dated as of such date. The shares were issued in a transaction not involving a public offering and are exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933.None.

Issuer Purchases of Equity Securities

The following table provides information about repurchases of our common stock and warrants during the quarter ended ~~March 31,~~September 30, 2022:

Period

Total number of shares purchased

Average price paid per share

Total number of shares purchased as part of publicly announced plans or programs (1)

Approximate dollar value of shares and/or warrants that may yet be purchased under the plans or programs (1)

January 1, 2022 - January 31, 2022

-

$
-

-

$
30,000,000

February 1, 2022 - February 28, 2022

-

-

-

30,000,000

March 1, 2022 - March 31, 2022

313,539

8.96

313,539

27,190,691

Total

313,539

$
8.96

313,539


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		1.02		113,099		3,672,471
September 1, 2022 - September 30, 2022		-		-		49,400		0.96		49,400		3,625,047
Total		-	$	-		171,994	$	1.02		171,994

(1) Onon March 8, 2022, the Company announced that our board of directors approved a repurchase plan authorizing us to purchase up to $30.0 million 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 ~~March 31,~~September 30, 2022, we repurchased an aggregate ~~313,539~~2,871,894 shares of our common stock in the open market ~~pursuant to our repurchase program. As of March 31, 2022, we have not repurchased any~~and 353,547 warrants pursuant to our repurchase program.

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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.

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Item 6. Exhibits


Exhibit Number		Description of Exhibit

3.1		Articles of Incorporation of Vintage Wine Estates, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed with the SEC on June 11, 2021).

3.2		Bylaws of Vintage Wine Estates, Inc., a Nevada corporation (incorporated by reference to Annex C to the Prospectus forming part of the Company's Registration Statement on Form S-4/A (Registration No. 333-254260), filed with the SEC on May 3, 2021)

10.1		Employment Agreement between Vintage Wine Estates, Inc. ~~2021 Omnibus Incentive Plan,~~, a Nevada Corporation, and Kristina Johnston, effective as ~~amended~~of March 7, 2022.◆ (incorporated by reference to Exhibit 10.1 to the ~~Company's Form 8-K filed with the SEC on February 8, 2022).~~

~~10.2~~		~~Separation Agreement and General Release dated February 28, 2022, between the Company and Russell Joy (incorporated by reference to Exhibit 10.1 to the Company's~~Compnay's Form 8-K filed with the SEC on March 4, 2022).

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.
*	Filed herewith.

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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: ~~September 13, 2022~~May 10, 2023	By:	/s/ ~~PATRICK RONEY~~JON MORAMARCO
	Name:	~~Patrick Roney~~Jon Moramarco
	Title:	Interim Chief Executive Officer & Director

Date: ~~September 13, 2022~~May 10, 2023	By:	/s/ KRISTINA JOHNSTON
	Name:	Kristina Johnston
	Title:	Chief Financial Officer

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Noncash investing and financing activities:
Contingent consideration in a business combination	$	8,460	$	-
Issuance of common stock in business combination	$	10,521	$	-
Accretion of redemption value of Series B redeemable cumulative stock	$	-	$	4,760
Accretion of redemption value of Series A redeemable stock	$	-	$	16,466
Offering costs	$	-	$	535


(in thousands)
Remaining 2022	$	9,585
2023		14,909
2024		14,152
2025		64,372
2026		8,571
2027		83,285
	$	194,874


	Restricted Stock Units		Weighted-Average Grant Date Fair Value
Outstanding at June 30, 2021		-		-
Granted		1,398,526		8.22
Issued		-		-
Canceled and forfeited		-		-
Outstanding at March 31, 2022		1,398,526		8.22


	Three Months Ended March 31, 2021
(in thousands)	Wholesale		Direct-to-Consumer		Business-to-Business		Corporate and Other			Total
Segment Results
Net revenues	$	21,092	$	14,675	$	11,026	$	104		$	46,897
Income (loss) from operations	$	6,138	$	1,986	$	3,391	$	(11,331	)	$	184


	Nine Months Ended March 31, 2022
(in thousands)	Wholesale		Direct-to-Consumer		Business-to-Business		Corporate and Other			Total
Segment Results
Net revenues	$	62,923	$	69,316	$	83,349	$	2,643		$	218,231
Income (loss) from operations	$	12,654	$	14,834	$	26,274	$	(34,014	)	$	19,748


Case Volume	Nine Months Ended March 31,
(in thousands)	2022		2021		Unit Change		% Change
Wholesale		1,072		782		290		37.1	%
B2B		452		437	15			3.4	%
DTC		307		240	67			27.9	%
Total case volume		1,831		1,459		372		25.5	%


Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (1)		Approximate dollar value of shares and/or warrants that may yet be purchased under the plans or programs (1)
January 1, 2022 - January 31, 2022		-	$	-		-	$	30,000,000
February 1, 2022 - February 28, 2022		-		-		-		30,000,000
March 1, 2022 - March 31, 2022		313,539		8.96		313,539		27,190,691
Total		313,539	$	8.96		313,539