Segments

12 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Segments

0. Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. When determining the reportable segments, we aggregated operating segments based on their similar economic and operating characteristics. Segment results are presented in the same manner as we present our operations internally to make operating decisions and assess performance. Financial performance is reported in three segments: Wholesale, Direct to Consumer, and Business to Business.

Our Corporate and Other segment generates revenue from grape and bulk wine sales and storage services. We record corporate level expenses, non-direct selling expenses and other expenses not specifically allocated to the results of operations in our Corporate and Other segment.

Wholesale Segment—We sell our wine, spirits and cider to wholesale distributors under purchase orders. Wholesale operations generate revenue from product sold to distributors, who then sell them off to off-premise retail locations such as grocery stores, wine clubs, specialty and multi-national retail chains, as well as on-premise locations such as restaurants and bars.

We pay depletion and marketing allowances to certain distributors, based on sales to their customers, or the allowance is netted directly against the purchase price. When recording a sale to the distributor, a depletion and marketing allowance liability is recorded to accrued liabilities and sales are reported net of those expenses. Depletion and marketing allowance payments are made when completed incentive program payment requests are received from the customers or are net of initial pricing. Depletion and marketing allowance payments reduce the accrued liability. For the years ended June 30, 2022 and 2021 we recorded $1.4 million and $1.7 million respectively, as a reduction in sales on the consolidated statement of operations related to depletions. As of June 30, 2022 and 2021, we recorded a depletion allowance and marketing liability in the amount of $347.9 thousand and $216.0 thousand, respectively, which is included as a component of other accrued expenses in accrued liabilities and other payables on the consolidated balance sheets. Estimates are based on historical and projected experience for each type of program or customer.

Direct-to-Consumer Segment—We sell our wine and other merchandise directly to consumers through wine club memberships, at wineries’ tasting rooms, at Sommelier wine tasting events, and through the Internet. Winery estates hold various public and private events for customers and our wine club members. The certified Sommeliers provide guided tasting experiences customized for each audience through virtual and in-person events internationally. Upfront consideration received from the sale of tickets or under private event contracts for future events is recorded as deferred revenue. The Company recognizes event revenue on the date the event is held.

Business-to-Business—Our Business-to-Business sales channel generates revenue primarily from the sale of private label wines and spirits, and custom services. Annually, we work with our national retail partners to develop private label wines incremental to their wholesale channel businesses. These services are made under contracts with customers, which includes specific protocols, pricing, and payment terms. The customer retains title and control of the product during the process.

We have determined that operating income is the profit or loss measure that the CODM uses to make resource allocation decisions and evaluate segment performance. Operating income 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 operating profit 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, however, centralized selling expenses, general and administrative and other factors including the re-measurements of contingent consideration and impairment of intangible assets and goodwill are not allocated to a segment as management does not believe such items directly reflect the core operations and therefore are not included in measuring segment performance. Excluding the property, plant, and equipment specific to assets located at our tasting facilities, and the customer Sommelier relationships and intangible assets specific to the 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 information continues to be aggregated.

Following is financial information related to operating segments:

	Year Ended June 30, 2022
(in thousands)	Wholesale		Direct-to-Consumer		Business-to-Business		Corporate and Other			Total
Segment Results
Net revenues	$	84,534	$	92,416	$	113,934	$	2,886		$	293,770
Income (loss) from operations	$	5,507	$	15,047	$	16,920	$	(45,396	)	$	(7,922	)

	Year Ended June 30, 2021
(in thousands)	Wholesale		Direct-to-Consumer		Business-to-Business		Corporate and Other			Total
Segment Results
Net revenues	$	72,908	$	66,605	$	77,440	$	3,789		$	220,742
Income (loss) from operations	$	15,044	$	11,437	$	17,944	$	(35,245	)	$	9,180

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 years ended:
	2022	$	130	$	1,121	$	1,328	$	1,529	$	4,108
	2021	$	-	$	1,500	$	-	$	-	$	1,500

Amortization expense recognized by operating segment is summarized below:

(in thousands)		Wholesale		Direct-to-Consumer		Business-to-Business		Corporate and Other		Total
For the years ended:
	2022	$	1,657	$	3,579	$	712	$	-	$	5,948
	2021	$	-	$	100	$	-	$	-	$	100

All of our long-lived assets are located within the United States.