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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


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

For the quarterly period ended March 31, 2024


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

For the transition period from _______ to______

Commission file number 001-40016

Vintage Wine Estates, Inc.

(Exact name of registrant as specified in its charter)


Nevada				87-1005902
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

205 Concourse Boulevard

Santa Rosa, California 95403

(Address of principal executive offices) (Zip code)

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value per share	VWE	The Nasdaq Capital Market
Warrants to purchase common stock	VWEWW	The Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of May 10, 2024, 62,814,389 shares of the registrant’s common stock were outstanding.


Part I. Financial Information	1
Item 1. Financial Statements (Unaudited)	1
Condensed Consolidated Balance Sheets	1
Condensed Consolidated Statements of Operations and Comprehensive Income	2
Condensed Consolidated Statements of Stockholders' Equity	3
Condensed Consolidated Statements of Cash Flows	5
Notes to the Condensed Consolidated Financial Statements	7
Note 1: Basis of Presentation and Significant Accounting Policies	7
Note 2: Restructuring	10
Note 3: Inventory	10
Note 4: Assets Held For Sale	11
Note 5: Intangible Assets	12
Note 6: Fair Value Measurements	13
Note 7: Commitments and Contingencies	13
Note 8: Long-term and Other Short-Term Obligations	15
Note 9: Stockholders' Equity	17
Note 10: Income Taxes	18
Note 11: Related Party Transactions	19
Note 12: Segments	20
Note 13: Subsequent Events	21
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	30
Part II. Other Information	31
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	32
Item 5. Other Information	35
Item 6. Exhibits	36
Signatures	37

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Part I—Financial Information

Item 1. Financial Statements

VINTAGE WINE ESTATES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)


	March 31, 2024			June 30, 2023
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	24,106		$	18,233
Restricted cash		201			-
Accounts receivable, net		16,104			24,561
Other receivables		371			507
Inventories		132,887			201,363
Assets held for sale, net		56,565			511
Current interest rate swap asset		4,341			4,669
Prepaid expenses		13,830			14,895
Total current assets		248,405			264,739
Property, plant, and equipment, net		173,065			215,967
Operating lease right-of-use assets		29,058			32,945
Finance lease right-of-use-assets		513			630
Intangible assets, net		22,670			38,994
Interest rate swap asset		2,157			4,317
Other assets		2,765			3,562
Total assets	$	478,633		$	561,154
Liabilities, redeemable noncontrolling interest, and stockholders' equity
Current liabilities:
Line of credit	$	141,635		$	115,444
Accounts payable		15,094			20,413
Accrued liabilities and other payables		16,119			19,668
Accrued employee compensation		9,087			6,618
Current operating lease liabilities		6,358			6,243
Current finance lease liabilities		242			304
Current maturities of long-term debt		180,170			14,449
Total current liabilities		368,705			183,139
Other long-term liabilities		393			4,196
Long-term debt, less current maturities		-			173,409
Long-term operating lease liabilities		23,914			26,792
Long-term finance lease liabilities		279			334
Deferred tax liability		175			506
Total liabilities		393,466			388,376
Commitments and contingencies (Note 7)
Redeemable noncontrolling interest		246			262
Stockholders' equity:
Preferred stock, no par value, 2,000,000 shares authorized, and none issued and outstanding at March 31, 2024 and June 30, 2023.		-			-
Common stock, no par value, 200,000,000 shares authorized, 62,814,389 issued and 59,942,495 outstanding at March 31, 2024 and 62,234,028 issued and 59,362,134 outstanding at June 30, 2023.		-			-
Additional paid-in capital		384,745			381,689
Treasury stock, at cost: 2,871,894 shares held at March 31, 2024 and June 30, 2023.		(26,034	)		(26,034	)
Accumulated deficit		(272,871	)		(182,308	)
Total Vintage Wine Estates, Inc. stockholders' equity		85,840			173,347
Noncontrolling interests		(919	)		(831	)
Total stockholders' equity		84,921			172,516
Total liabilities, redeemable noncontrolling interest, and stockholders' equity	$	478,633		$	561,154

See notes to unaudited condensed consolidated financial statements.

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VINTAGE WINE ESTATES, INC.

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,
	2024			2023			2024			2023
Net revenue
Wine, spirits and cider	$	32,303		$	41,276		$	131,804		$	147,252
Nonwine		13,362			23,375			55,124			73,880
Total revenue		45,665			64,651			186,928			221,132
Cost of revenue
Wine, spirits and cider		24,016			37,575			126,344			107,251
Nonwine		11,149			13,800			40,367			45,329
Total cost of revenue		35,165			51,375			166,711			152,580
Gross profit		10,500			13,276			20,217			68,552
Selling, general, and administrative expenses		24,158			26,506			78,168			90,094
Amortization expense		1,055			1,813			4,579			5,429
Goodwill impairment losses		-			-			-			125,285
Intangible impairment losses		360			-			5,102			12,643
Gain on remeasurement of contingent liability		(1,065	)		-			(6,273	)		(3,289	)
Restructuring expense		1,286			-			5,130			-
(Gain) loss on insurance and litigation		-			(884	)		148			(1,414	)
Loss (gain) on sale of assets and assets held for sale		5,241			(5,977	)		4,442			(1,546	)
Loss from operations		(20,535	)		(8,182	)		(71,079	)		(158,650	)
Other income (expense)
Interest expense		(6,108	)		(4,291	)		(17,152	)		(13,322	)
Net gain (loss) on interest rate swap agreements		357			(3,596	)		(2,464	)		4,892
Loss on extinguishment of debt		-			-			-			(479	)
Other, net		(129	)		(161	)		(155	)		326
Total other (expense) income, net		(5,880	)		(8,048	)		(19,771	)		(8,583	)
Loss before provision for income taxes		(26,415	)		(16,230	)		(90,850	)		(167,233	)
Income tax benefit		(228	)		(2,702	)		(183	)		(24,880	)
Net loss		(26,187	)		(13,528	)		(90,667	)		(142,353	)
Net loss attributable to the noncontrolling interests		(33	)		(14	)		(104	)		(1,235	)
Net loss attributable to common stockholders	$	(26,154	)	$	(13,514	)	$	(90,563	)	$	(141,118	)

Net earnings per share allocable to common stockholders
Basic	$	(0.44	)	$	(0.23	)	$	(1.52	)	$	(2.39	)
Diluted	$	(0.44	)	$	(0.23	)	$	(1.52	)	$	(2.39	)
Weighted average shares used in the calculation of earnings per share allocable to common stockholders
Basic		59,902,030			59,289,659			59,678,013			59,014,915
Diluted		59,902,030			59,289,659			59,678,013			59,014,915

See notes to unaudited condensed consolidated financial statements.

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VINTAGE WINE ESTATES, INC.

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, 2023	$	262			62,234,028		$	-		2,871,894	$	(26,034	)	$	381,689		$	(182,308	)	$	(831	)	$	172,516
Stock-based compensation expense		-			-			-		-		-			1,269			-			-			1,269
Vesting of restricted stock		-			233,311			-		-		-			129			-			-			129
Taxes paid related to net share settlement of equity awards		-			(29,655	)		-		-		-			(23	)		-			-			(23	)
Net loss		(7	)		-			-		-		-			-			(15,058	)		(33	)		(15,091	)
Balance, September 30, 2023	$	255			62,437,684		$	-		2,871,894	$	(26,034	)	$	383,064		$	(197,366	)	$	(864	)	$	158,800
Stock-based compensation expense		-			-			-		-		-			1,277			-			-			1,277
Vesting of restricted stock		-			413,522			-		-		-			-			-			-			-
Taxes paid related to net share settlement of equity awards		-			(89,422	)		-		-		-			(81	)		-			-			(81	)
Net loss		(3	)		-			-		-		-			-			(49,351	)		(29	)		(49,380	)
Balance, December 31, 2023	$	252			62,761,784		$	-		2,871,894	$	(26,034	)	$	384,260		$	(246,717	)	$	(893	)	$	110,616
Stock-based compensation expense		-			-			-		-		-			501			-			-			501
Vesting of restricted stock		-			82,260			-		-		-			-			-			-			-
Taxes paid related to net share settlement of equity awards		-			(29,655	)		-		-		-			(16	)		-			-			(16	)
Net loss		(7	)					-		-		-			-			(26,154	)		(26	)		(26,179	)
Balance, March 31, 2024	$	246			62,814,389		$	-		2,871,894	$	(26,034	)	$	384,745		$	(272,871	)	$	(919	)	$	84,921

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	Redeemable Non-Controlling Interest Amount			Common Stock					Treasury Stock					Additional Paid-In Capital			(Accumulated Deficit) Retained Earnings			Non-Controlling Interests			Total Stockholders' Equity
				Shares			Amount		Shares		Amount
Balance, June 30, 2022	$	1,494			61,691,054		$	-		2,871,894	$	(26,034	)	$	376,099		$	(1,092	)	$	(735	)	$	348,238
Adoption of ASC 842		-			-			-		-		-			-			7,752			-			7,752
Stock-based compensation expense		-			-			-		-		-			3,440			-			-			3,440
Repurchase of public warrants		-			-			-		-		-			(172	)		-			-			(172	)
Stockholder distribution		(66	)		-			-		-		-			-			-			-			-
Net income (loss)		(146	)		-			-		-		-			-			1,532			(28	)		1,504
Balance, September 30, 2022	$	1,282			61,691,054		$	-		2,871,894	$	(26,034	)	$	379,367		$	8,192		$	(763	)	$	360,762
Stock-based compensation expense		-			-			-		-		-			3,250			-			-			3,250
Vesting of restricted stock		-			755,880			-		-		-			-			-			-			-
Taxes paid related to net share settlement of equity awards		-			(285,381	)		-		-		-			(976	)		-			-			(976	)
Net income (loss)		(1,023	)		-			-		-		-			-			(129,135	)		(24	)		(129,159	)
Balance, December 31, 2022	$	259			62,161,553		$	-		2,871,894	$	(26,034	)	$	381,641		$	(120,943	)	$	(787	)	$	233,877
Stock-based compensation expense, net of forfeitures		-			-					-		-			(1,024	)		-			-			(1,024	)
Net income (loss)		2			-					-		-			-			(13,514	)		(16	)		(13,530	)
Balance, March 31, 2023	$	261			62,161,553		$	-		2,871,894	$	(26,034	)	$	380,617		$	(134,457	)	$	(803	)	$	219,323

See notes to unaudited condensed consolidated financial statements.

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VINTAGE WINE ESTATES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Nine Months Ended March 31,
	2024			2023
Cash flows from operating activities
Net loss	$	(90,667	)	$	(142,353	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation expense		11,932			11,799
Non-cash operating lease expense		4,229			4,024
Amortization expense		4,830			5,622
Amortization of deferred loan fees and line of credit fees		1,380			574
Goodwill and intangible assets impairment losses		5,102			137,929
Stock-based compensation expense		3,047			5,666
Provision for credit losses		2,045			405
Provision for inventory reserves		32,509			10,131
Deferred income tax benefit		(331	)		(24,927	)
Loss (gain) on disposition of assets and assets held for sale		4,442			(1,546	)
Loss on extinguishment of debt		-			479
Remeasurement of contingent consideration liabilities		(6,273	)		(3,289	)
Net loss (gain) on interest rate swap agreements		2,464			(4,892	)
Change in operating assets and liabilities:
Accounts receivable		3,687			742
Other receivables		136			3,144
Inventories		19,473			(16,637	)
Prepaid expenses and other current assets		1,055			(11,655	)
Other assets		(396	)		602
Accounts payable		573			10,250
Accrued liabilities and other payables		3,933			15,102
Net change in lease assets and liabilities		(3,112	)		(5,016	)
Net cash provided by (used in) operating activities		58			(3,846	)
Cash flows from investing activities
Proceeds from sale of assets		1,367			19,707
Purchases of property, plant and equipment		(7,228	)		(11,318	)
Net cash (used in) provided by investing activities		(5,861	)		8,389
Cash flows from financing activities
Principal payments on line of credit		(48,313	)		(136,358	)
Proceeds from line of credit		74,504			111,863
Payment of deferred financing costs		-			(1,975	)
Change in outstanding checks in excess of cash		(3,201	)		(1,523	)
Loan fees		(898	)		(377	)
Principal payments on long-term debt		(8,462	)		(73,195	)
Proceeds from long-term debt		818			74,640
Principal payments on finance leases		(244	)		(205	)
Payments of minimum tax withholdings on stock-based payment awards		(120	)		(976	)
Distributions to noncontrolling interest		-			(66	)
Repurchase of public warrants		-			(172	)
Payments on acquisition earnout		(2,207	)		(375	)
Net cash provided by (used in) financing activities		11,877			(28,719	)
Net change in cash, cash equivalents and restricted cash		6,074			(24,176	)
Cash, cash equivalents and restricted cash, beginning of period		18,233			49,558
Cash and cash equivalents, and restricted cash, end of period	$	24,307		$	25,382

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	Nine Months Ended March 31,
	2024		2023
Supplemental cash flow information
Noncash investing and financing activities:
Increase in operating lease assets and liabilities upon adoption of ASC 842	$	-	$	37,759
Increase in finance lease assets and liabilities upon adoption of ASC 842	$	-	$	67
Operating lease assets obtained in exchange for operating lease liabilities	$	1,829	$	-
Finance lease assets obtained in exchange for finance lease obligations	$	53	$	-
Issuance of shares in lieu of payment to consultant	$	129	$	-
Accrued interest on term loan and line-of credit refinanced to principal	$	-	$	1,726
Line of credit refinanced as term debt	$	-	$	9,646
Term debt refinanced with line of credit proceeds	$	-	$	3,823
Financing costs deducted from long-term debt proceeds	$	-	$	474
Financing costs deducted from line of credit proceeds	$	-	$	532

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

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 for the three and nine months ended March 31, 2024 (this "Form 10-Q") refer to Vintage Wine Estates, Inc., a Nevada corporation, and its majority owned subsidiaries or controlled subsidiaries unless the context requires otherwise.

Our fiscal year ends on June 30. References to fiscal 2024 and fiscal 2023 in these condensed consolidated financial statements are to the fiscal year ending June 30, 2024 and June 30, 2023, 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.

In the opinion of management, all adjustments necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included in this Form 10-Q. Except as disclosed elsewhere in this Form 10-Q, all such adjustments are of a normal and recurring nature. In addition, financial results presented for this fiscal 2024 interim period are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2024 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, 2023, filed with the SEC on October 13, 2023.

Going Concern

The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company did not meet certain financial debt covenants as required per our Second Amended and Restated Loan and Security Agreement as amended, restated, supplemented or otherwise modified (the "Second A&R Loan and Security Agreement") beginning with the quarter ended December 31, 2023 and through the date of this filing, which constitutes an event of default. If the event of default is not cured or waived, the payment of the Company’s outstanding debt under the Second A&R Loan and Security Agreement may be accelerated.

On February 28, 2024, the Company entered into a forbearance agreement (the "Forbearance Agreement") with respect to the Second A&R Loan and Security Agreement under which the Agent and Lenders (each as defined in Note 8) agreed to forbear from enforcing their respective rights and remedies in respect to certain events of default under the Second A&R Loan and Security Agreement, subject to the terms and conditions set forth in the Forbearance Agreement, through March 31, 2024. On April 2, 2024, the Company, the Borrowers, the Lenders and the Agent amended and restated the Forbearance Agreement (the "A&R Forbearance Agreement") with an effective date of March 31, 2024. See Note 8 for additional information.

On May 6, 2024, the Company, the Borrowers, the Consenting Lenders and the Agent entered into Amendment Number One to the A&R Forbearance Agreement (the “Amendment”). The Amendment, effective as of May 6, 2024, amends the A&R Forbearance Agreement, to, among other things, (a) extend the period during which the Agent and the Lenders have agreed to forbear from enforcing their respective rights and remedies in respect of certain events of default under the Second A&R Loan and Security Agreement, subject to the terms and conditions therein, to June 4, 2024 (the "Forbearance Period"), (b) extend the deadline by which the Borrowers shall make a $10 million mandatory prepayment of the term loan to June 17, 2024 and (c) amend the interest rate for swingline borrowings to be equal to one-month Adjusted Term SOFR plus 0.8% plus the Applicable Margin for Adjusted Base Rate Revolver Loans (each as defined in the Second A&R Loan and Security Agreement). If the Company does not meet the terms of the Amendment or if the events of default continue past the term of the Amendment, and if the Agent and Lenders accelerate the maturity of the debt thereunder, the Company does not have sufficient cash to repay the outstanding debt under the Second A&R Loan and Security Agreement. See Note 8 for additional information.

The Company has seen its cash usage to fund operations increase. In the past the Company has been able to fund operating cash flow needs by using its line of credit. Due to the events of the default described below the Company's ability to access its line of credit is currently limited. If the Company is unable to cure the events of default or receive additional capital from its Lenders or third parties, the Company may not be able to fund its operations and will be forced to seek bankruptcy protection.

Whether additional amendments or waivers to the Second A&R Loan and Security Agreement or extensions of the Forbearance Period are obtained is not within the Company's control, and there can be no assurances that our Lenders and Agent will not accelerate the maturity of the debt. If

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acceleration occurs, the Company does not have sufficient cash to repay the outstanding debt and would likely be forced to seek bankruptcy protection.

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 as of the date these financial statements are 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.

Restatement of Previously Issued Condensed Consolidated Financial Statements

The Company restated its unaudited quarterly financial data, on October 13, 2023, for the periods ended September 30, 2022, December 31, 2022 and March 31, 2023. All amounts in this quarterly report on Form 10-Q affected by the restatement, including but not limited to the three and nine months ended March 31, 2023, reflect such restated amounts.

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, 2023. There have been no material changes in the Company’s significant accounting policies during the nine months ended March 31, 2024.

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 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, the net realizable value of inventory, intangible assets for impairment, credit losses, amortization methods and periods, contingent consideration, stock-based compensation, accounting for income taxes, loss contingencies and net assets held for sale, as applicable. Actual results could differ materially from those estimates.

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 $6.6 million of accrued employee compensation from accrued liabilities and other payables to accrued employee compensation on the Company's condensed consolidated balance sheet as of June 30, 2023.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the amounts shown in the condensed consolidated statements of cash flows:


(in thousands)	March 31, 2024		June 30, 2023
Cash and cash equivalents	$	24,106	$	18,233
Restricted cash		201		-
Total cash, cash equivalents and restricted cash as shown in the consolidated statement of cash flows	$	24,307	$	18,233

Allowance for Credit Losses

The provision for credit losses as of March 31, 2024 and June 30, 2023, was immaterial. We do not accrue interest on past-due amounts. Bad debt expense was $1.6 million and $2.0 million for the three and nine months ended March 31, 2024. It was immaterial for the three and nine months ended March 31, 2023.

Disaggregation of Revenue

The following table summarizes revenue by geographic region:


	Three Months Ended March 31,				Nine Months Ended March 31,
(in thousands)	2024		2023		2024		2023
United States	$	44,961	$	64,287	$	184,972	$	219,474
International		704		364		1,956		1,658
Total net revenue	$	45,665	$	64,651	$	186,928	$	221,132

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

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	March 31,				March 31,
(in thousands)	2024		2023		2024		2023
Point in time	$	37,603	$	53,178	$	154,929	$	187,381
Over time		8,062		11,473		31,999		33,751
Total net revenue	$	45,665	$	64,651	$	186,928	$	221,132

Casualty Gains

In relation to various weather and wildfire events, the Company received insurance and litigation proceeds of $0.9 million and $1.4 million during the three and nine months ended March 31, 2023. There were no insurance or litigation proceeds received in the three and nine months ended March 31, 2024.

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.

Earnings Per Share

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, stock options, warrants to purchase common stock and restricted stock units 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 income (loss) per share is the same as the basic net income (loss) per share.

The Company does not pay dividends or have participating shares outstanding.

Emerging Growth Company Status

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

Recently Issued Accounting Pronouncements

In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-06: Disclosure Improvements. The new guidance clarifies disclosure and presentation requirements on a variety of topics in the codification. The amendments will align the requirements in the FASB Accounting Standard codification with the SEC's regulations. The amendments are effective prospectively on the date each individual amendment is effectively removed from Regulation S-X or Regulation S-K. The Company is in the process of evaluating the impact the adoption of this ASU will have on the financial statements and related disclosures, which is not expected to be material.

In November 2023, the FASB issued ASU 2023-07: Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. This update will improve reportable segment disclosure requirements by enhancing disclosures around significant segment expenses and disclosures around the CODM, pertaining to what measures are used to evaluate profit or loss and such measures are used in assessing segment performance. These amendments will improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities. ASU 2023-07 is effective for public entities' fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is in the process of evaluating the impact the adoption of this ASU will have on the financial statements and related disclosures, which is not expected to be material.

In December 2023, the FASB issued ASU 2023-09: Income Taxes (Topic 740), Improvements to Income Tax Disclosures. On an annual basis, companies will be required to disclose a rate reconciliation with additional information for reconciling items that meet a quantitative threshold. Companies will need to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state and foreign taxes along with the amount of taxes paid (net of refunds received) disaggregated by individual jurisdictions in which the payments are equal to or greater than 5 percent of total income taxes paid (net of refunds received). Public companies will also need to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign along with income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. ASU 2023-09 is effective for public business entities' fiscal years beginning after December 15, 2024. The Company is in the process of evaluating the impact the adoption of this ASU will have on the financial statements and related disclosures, which is not expected to be material.

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2. Restructuring

On July 20, 2023, the Company's executive officers, authorized by the Board of Directors (the "Board") to take such action, approved an organizational restructuring plan (the "2023 Plan") intended to expand margin through simplification and improved execution, measurably reduce costs, improve cash management, monetize assets, reduce debt and grow revenue of its key brands. As part of the 2023 Plan, there was a reduction in force affecting approximately 25 roles, or 4% of the workforce.

On January 16, 2024, the Company's Board of Directors approved an organizational restructuring plan (the "2024 Plan") to monetize assets and reduce non-core lower margin product and service offerings. As part of the 2024 Plan, there was a reduction in force affecting approximately 15% of the workforce. The reduction in force was substantially complete by March 31, 2024. Cash expenditures for the 2024 Plan reduction in force are estimated to be $1.3 million, substantially all of which are related to employee severance and benefits costs, which were accrued in the three months ended March 31, 2024.

The total restructuring expense, shown on a separate line in the Company's condensed consolidated statements of operations and comprehensive income (loss), for the nine months ended March 31, 2024 was $5.1 million, substantially all of which was related to employee severance and related benefit costs.

The following table presents the changes in the Company's restructuring-related accrued employee compensation liabilities:


(in thousands)
Balance at June 30, 2023	$	-
Additions		5,288
Revisions to estimates		(158	)
Cash payments		(3,495	)
Balance at March 31, 2024	$	1,635

On May 8, 2024, the Company's Board of Directors approved a reduction in force affecting approximately 10% of the workforce. The Company expects the reduction in force to be substantially complete by the end of the fourth quarter of fiscal 2024. Cash expenditures for the reduction in force are estimated to be $0.6 million, substantially all of which are related to employee severance and benefits costs.

3. Inventory

Inventory consists of the following:


(in thousands)	March 31, 2024		June 30, 2023
Bulk wine, spirits and cider	$	60,765	$	84,602
Bottled wine, spirits and cider		63,863		100,075
Bottling and packaging supplies		6,996		15,690
Nonwine inventory		1,263		996
Total inventory, net of reserve	$	132,887	$	201,363

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 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.

During the second quarter of fiscal 2024 and as a result of continued simplification of the business, the Company performed a detailed review of its bottled wine, spirits and cider inventory and reduced the value of non-core lower margin products and aged inventory by $9.0 million. This allowed the sales team to focus on the Company's priority brands. Since the most recent harvest, the bulk wine market has been softer than expected. As a result, the Company recorded a $23.3 million charge against its bulk wine inventory to reflect market prices for unallocated product and to reserve for product related to non-core lower margin products. The Company recorded provisions for inventory reserves for the three and nine months ended March 31, 2024 of zero and $32.5 million, respectively. For the three and nine months ended March 31, 2023, the Company recognized costs related to reducing inventory to its net realizable value of $9.6 million and $10.1 million, respectively. Due to the inherent uncertainties in the reserve estimate, which is based primarily on market assumptions for the Company's products and bulk wine, the actual results could differ significantly from our estimates.

Inventory valued at $16.5 million is included in Assets held for sale, net on the Company's condensed consolidated balance sheet as of March 31, 2024.

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4. Assets Held for Sale

The Company classifies an asset group (‘asset’) as held for sale in the period that (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable and transfer of the asset is expected to qualify for recognition as a completed sale within one year (subject to certain events or circumstances), (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially and subsequently measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in loss (gain) on sale of assets and assets held for sale in the period in which the held for sale criteria are met. Conversely, gains are generally not recognized on the sale of a long-lived asset until the date of sale. Upon designation as an asset held for 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 sell at each reporting period until the asset is no longer classified as held for sale.

The Company has engaged an investment bank to monetize assets and has four asset groups classified as held for sale. The assets held for sale include certain real and intangible property related to Clos Pegase and certain real property related to Viansa as previously disclosed. All four asset groups are being marketed for sale.

On February 26, 2024, the Company entered into a non-binding letter of intent with respect to a proposed disposition of the stock of a subsidiary of VWE to a third-party purchaser. During the three months ended March 31, 2024, the Company recorded an estimated loss on assets held for sale related to this disposition of $5.2 million.

During February 2024, the Company determined that certain standalone DTC operations should be classified as assets held for sale. The assets held for sale include certain real and intangible property related to these DTC operations. The Company entered into a non-binding letter of intent related to certain standalone DTC operations.

The Company intends to complete the sales of the assets within twelve months, but the assets do not qualify for discontinued operations because the sales would not represent a strategic shift that would have a major effect on the Company's operations.

The following table summarizes the carrying amounts of assets and liabilities classified as held for sale on the Company’s consolidated balance sheet:


(in thousands)	March 31, 2024			June 30, 2023
Assets
Accounts receivable	$	2,725		$	-
Inventory		16,494			-
Prepaid expenses		5			-
Assets held for sale - current		19,224			-
Property, plant and equipment, net		38,123			511
Operating lease right-of-use assets		6			-
Finance lease right-of-use assets		5			-
Other Assets		154			-
Intangible assets, net		7,156			-
Assets held for sale - long-term		45,444			511
Valuation allowance		(5,219	)		-
Total assets held for sale		59,449			511

Liabilities
Accounts payable and accrued expenses		2,873			-
Current operating lease liabilities		5			-
Current finance lease liabilities		4			-
Liabilities held for sale - current		2,882			-
Long-term operating lease liabilities		1			-
Long-term finance lease liabilities		1			-
Liabilities held for sale - long-term		2			-
Total liabilities held for sale		2,884			-
Assets held for sale, net	$	56,565		$	511

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5. Intangible Assets

The following tables summarize other intangible assets by class:


	March 31, 2024
(in thousands)	Gross Intangible		Accumulated Amortization			Accumulated Impairment Losses			Net Intangible
Indefinite-life intangibles
Trade names and trademarks	$	29,503	$	-		$	(20,995	)	$	8,508
Winery use permits		4,250		-			-			4,250
Total Indefinite-life intangibles		33,753		-			(20,995	)		12,758

Definite-life intangibles
Customer relationships		24,477		(13,640	)		(925	)		9,912
Trade names and trademarks		1,565		(905	)		(660	)		-
Total definite-life intangibles		26,042		(14,545	)		(1,585	)		9,912
Total other intangible assets	$	59,795	$	(14,545	)	$	(22,580	)	$	22,670


	June 30, 2023
(in thousands)	Gross Intangible		Accumulated Amortization			Accumulated Impairment Losses			Net Intangible
Indefinite-life intangibles
Trade names and trademarks	$	30,102	$	-		$	(17,477	)	$	12,625
Winery use permits		6,750		-			-			6,750
Total Indefinite-life intangibles		36,852		-			(17,477	)		19,375

Definite-life intangibles
Customer relationships		28,200		(9,812	)		-			18,388
Trade names and trademarks		1,900		(669	)		-			1,231
Total definite-life intangibles		30,100		(10,481	)		-			19,619
Total other intangible assets	$	66,952	$	(10,481	)	$	(17,477	)	$	38,994

Intangible assets, net of $7.2 million are included in Assets held for sale in the Company's condensed consolidated balance sheet as of March 31, 2024.

Our indefinite-lived intangible asset balance consists of trade names, trademarks and winery use permits, which had an aggregate carrying amount of $12.8 million as of March 31, 2024. We test our trade names, trademarks, and winery use permits for impairment annually, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a trade name, trademark or winery use permit is less than its carrying amount.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual intangible assets using the relief from royalty method under the income approach requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax rates, royalty rates, discount rates, growth rates, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, change, or if management’s expectations or plans otherwise change, then one or more of our intangible assets might become impaired in the future.

We periodically assess whether any indicators of impairment exist related to our intangible assets. During the second quarter of fiscal 2024, we identified a triggering event as a result of a decline in actual and projected revenue related to certain trade names. As a result of the impairment analysis performed, the Company recorded a non-cash impairment charge of $4.7 million, which consisted of $2.0 million related to Wholesale and $1.1 million related to Direct-to-Consumer. The impairment loss arose due to a softening of the wine industry. In addition, the Company recognized an impairment charge of $1.6 million related to customer relationships and definite-lived trade names and trademarks as it continues to simplify the Direct-to-Consumer business.

As observed in our analysis of actual to projected revenues, the revenue decline related to certain trade names and overall softening of the wine industry continued during the third quarter of fiscal 2024 and triggered an additional impairment assessment. As a result of the impairment analysis performed, the Company recorded a non-cash impairment charge of $0.4 million, which was primarily related to Wholesale. The impairment losses are included in intangible asset impairment losses in the consolidated statements of operations and comprehensive income (loss).

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6. Fair Value Measurements

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


	March 31, 2024
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	1,132	$	-	$	-	$	1,132
Interest rate swaps (1)		-		6,498		-		6,498
Total	$	1,132	$	6,498	$	-	$	7,630

Liabilities:
Contingent consideration liabilities (2)	$	-	$	-	$	176	$	176
Total	$	-	$	-	$	176	$	176


	June 30, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	9,874	$	-	$	-	$	9,874
Interest rate swaps (1)		-		8,986		-		8,986
Total	$	9,874	$	8,986	$	-	$	18,860

Liabilities:
Contingent consideration liabilities (2)	$	-	$	-	$	8,656	$	8,656
Total	$	-	$	-	$	8,656	$	8,656

(1) 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. The long-term portion of the contingent consideration liabilities was $42 thousand and $3.8 million as of March 31, 2024 and June 30, 2023, respectively.

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
Balance at June 30, 2023		8,656
Acquisitions		-
Payments		(2,207	)
Change in fair value		(6,273	)
Balance at March 31, 2024		176
Less: current portion		(134	)
Long-term portion		42

During the nine months ended March 31, 2024, the Company recognized a decrease in the fair value of contingent consideration of $6.3 million from prior acquisitions based on a decline in actual and projected revenue for the acquired businesses over their earnout periods.

Our non-financial assets, such as indefinite-lived intangible assets and long-lived assets are adjusted to fair value when an impairment charge is recognized.

7. Commitments, Contingent Liabilities and Litigation

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 material impact on the Company’s consolidated financial position or results of operations, the

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adjudication of such matters are subject to inherent uncertainties and management’s assessment may change depending on future events. The Company records a loss contingency when it is both probable and reasonably estimable. Management's estimates of loss contingencies are based on the latest information available.

Litigation

On November 14, 2022, a purported securities class action lawsuit was filed in the U.S. District Court for the District of Nevada against the Company and certain current and former members of its management team. The lawsuit is captioned Ezzes v. Vintage Wine Estates, Inc., et al. (“Ezzes“), and alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, by making material misstatements or omissions in certain of the Company's periodic reports filed with the SEC relating to, among other things, the Company’s business, operations, and prospects, including with respect to the Company’s inventory metrics and overhead burden. The lawsuit seeks an unspecified amount of damages and an award of attorney’s fees, in addition to other relief. On November 28, 2022, a second purported securities class action lawsuit, captioned Salbenblatt v. Vintage Wine Estates, Inc., et al. (“Salbenblatt”), was filed in the same court, containing similar claims and allegations, and seeking similar relief, as the Ezzes lawsuit. On February 14, 2023, the Court consolidated both actions and appointed the lead plaintiffs. The Salbenblatt action was transferred to and consolidated with the Ezzes action. On May 1, 2023, the lead plaintiffs filed a consolidated amended class action complaint (“amended complaint”). On June 30, 2023 defendants filed a motion to dismiss the amended complaint. The motion to dismiss was fully briefed on September 25, 2023, and the court dismissed the case on March 1, 2024 with leave to file an amended complaint. On April 5, 2024, the lead plaintiffs filed a second consolidated amended class action complaint. Defendants filed a motion to dismiss on May 10, 2024. As previously noted, litigation is inherently uncertain, and the Company is unable to predict the outcome of this litigation and is unable to estimate the range of loss, if any, that could result from an unfavorable outcome. The Company also cannot provide any assurance that the ultimate resolution of this litigation will not have a material adverse effect on our reputation, business, prospects, results of operations or financial condition.

The Company is involved in two disputes with One True Vine, LLC and Jayson Woodbridge (the "Claimant") (together, the "Claimants") relating to an Asset Purchase Agreement (“APA”) and a related Non-Compete Agreement/Non-Solicitation Agreement (the “Non-Compete Agreement”) from a 2018 acquisition. Claimant has alleged that the Company did not make certain earnout payments allegedly due under the APA and has alleged that the Company misused alleged rights of publicity with respect to the brands in violation of the Non-Compete Agreement. On or about August 30, 2023, Claimants served a demand for arbitration on the Company. On October 16, 2023, the Company paid the Claimant $0.4 million. At present, Claimants collectively have not quantified the total amount of their alleged damages for all claims; however, based on information provided by claimants, the Company would anticipate that any claim of damages would likely be at least approximately $3.0 million. The Company disputes both that any amounts in excess of the accrued earn-out liability of approximately $0.4 million for the dispute period are owed and that the Company misused the alleged rights of publicity. The Company intends to vigorously defend itself against the claims. At this time, in view of the complexity and ongoing nature of the matters, we are unable to reasonably estimate a possible loss or range of loss that the Company may incur to resolve these matters or defend against these claims.

The Company has received a complaint in California Superior Court alleging certain violations of California employment law and seeking class certification for certain current and former employees of the Company. The Company intends to defend the matter vigorously. The Company is unable to predict the outcome of this matter and is unable to estimate the range of loss, if any, that could result from an unfavorable outcome.

From time to time, the Company is subject to other legal proceedings, claims and litigation arising in the ordinary course of business. In addition, the Company may receive letters alleging infringement of patent or other intellectual property rights. The Company is not currently a party to any other material legal proceedings, nor is it aware of any pending or threatened litigation that, in the Company’s opinion, would have a material adverse effect on the business, operating results, cash flows or financial condition should such litigation be resolved unfavorably.

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 from a breach of representations or covenants 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.

In January 2024, the Company was notified of alleged quality breaches in connection with production of wines for a Business-to-Business customer. The Company has recorded a loss contingency of $1.5 million and $5.5 million in the three and nine months ended March 31, 2024. Such expense is included in cost of revenue on the Company's condensed consolidated statements of operations and comprehensive income.

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:

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(in thousands)
Year ending June 30,	Total
Remainder of 2024	$	1,133
2025		15,462
2026		6,775
2027		1,458
2028		264
	$	25,092

Grape, bulk wine and cider purchases under contracts totaled $0.8 million and $17.9 million and $31.2 million and $47.9 million for the three and nine months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the Company has recorded a loss contingency totaling $2.1 million relating to future bulk wine contracts, which are expected to result in a loss at the consummation of the purchase.

8. Long-Term and Other Short-Term Obligations

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


	March 31,		June 30,
(in thousands)	2024		2023
Note to a bank with one month interest at SOFR (5.46%) at March 31, 2024 plus 4%; payable in quarterly installments of $1,454 principal with applicable interest; matures in December 2027; secured by specific assets of the Company.		139,624		142,532

Capital expenditures borrowings payable at SOFR (5.46%) at March 31, 2024 plus 4%, payable in quarterly installments of $801 with draw expiring June 2027.		11,160		12,762

Equipment Term Loan payable at SOFR (5.46%) at March 31, 2024 plus 4%, payable in quarterly installments of $250 with draw expiring December 2026.		2,933		3,433

Note to a bank with interest fixed at 2.75%, payable in monthly installments of $61 principal with applicable interest. This note matured and was repaid in full in March 2024.		-		541

Note to a bank with interest fixed at 7.50%, payable in monthly installments of $61 principal with applicable interest; matures in April 2026.		1,416		1,873

Delayed Draw Term Loan ("DDTL") with interest at SOFR (5.46%) at March 31, 2024 plus 4%, payable in quarterly installments of $818. Matures in December 2027.		26,547		28,183
Total debt		181,680

Vintage Wine Estates, Inc. 10-Q