0001193125-21-309370.txt : 20211027 0001193125-21-309370.hdr.sgml : 20211027 20211027162918 ACCESSION NUMBER: 0001193125-21-309370 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 109 FILED AS OF DATE: 20211027 DATE AS OF CHANGE: 20211027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Vintage Wine Estates, Inc. CENTRAL INDEX KEY: 0001834045 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 000000000 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-260530 FILM NUMBER: 211353355 BUSINESS ADDRESS: STREET 1: 937 TAHOE BOULEVARD STREET 2: SUITE 210 CITY: INCLINE VILLAGE STATE: NV ZIP: 89451 BUSINESS PHONE: 707-346-3640 MAIL ADDRESS: STREET 1: 937 TAHOE BOULEVARD STREET 2: SUITE 210 CITY: INCLINE VILLAGE STATE: NV ZIP: 89451 FORMER COMPANY: FORMER CONFORMED NAME: Bespoke Capital Acquisition Corp DATE OF NAME CHANGE: 20201125 S-1 1 d437113ds1.htm FORM S-1 Form S-1
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As filed with the Securities and Exchange Commission on October 27, 2021
Registration
No. 333-            
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
VINTAGE WINE ESTATES, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Nevada
 
2080
 
87-1005902
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification Number)
937 Tahoe Boulevard, Suite 210
Incline Village, Nevada 89451
Telephone: (877)
289-9463
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
Eric Miller
General Counsel
Vintage Wine Estates, Inc.
937 Tahoe Boulevard, Suite 210
Incline Village, Nevada 89451
Telephone: (970)
281-1017
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
Copies to:
Robert A. Profusek Joel T. May
Jones Day
250 Vesey Street
New York, New York 10281
Telephone: (404)
581-8967
 
 
Approximate date of commencement of proposed sale of the securities to the public:
From time to time after the effective date hereof.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:  ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or 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 7(a)(2)(B) of the Securities Act.   
 
 
CALCULATION OF REGISTRATION FEE
 
 
Title of each class of
securities to be registered
 
Amount
to be
registered
 
Proposed
maximum
offering price
per security
 
Proposed
maximum
aggregate
offering price
 
Amount of
registration fee
Common stock, no par value per share(2)
 
10,000,000(1)
 
$9.96(2)
 
$99,600,000(2)
 
$9,232.92
 
 
(1)
Pursuant to Rule 416 under the Securities Act of 1933 (the “Securities Act”), the registrant is also registering an indeterminable number of additional shares of the registrant’s common stock, no par value per share (“common stock”), that may become issuable as a result of any stock dividend, stock split, recapitalization or other similar transaction.
(2)
Estimated solely for the purpose of calculating the registration fee, based on the average of the high and low prices of the registrant’s common stock on The Nasdaq Global Market tier of The Nasdaq Stock Market LLC on October 25, 2021 (such date being within five business days of the date that this registration statement was filed with the U.S. Securities and Exchange Commission. This calculation is in accordance with Rule 457(c) under the Securities Act).
 
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant will file a further amendment which specifically states that this registration statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement will become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 
 
 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
PRELIMINARY PROSPECTUS
 
    SUBJECT TO COMPLETION
 
DATED OCTOBER 27, 2021
 
VINTAGE WINE ESTATES, INC.
10,000,000 Shares of Common Stock
 
 
This prospectus relates to the offer and sale from time to time by the selling securityholders named in this prospectus (each a “Selling Stockholder” and collectively, the “Selling Stockholders”), or their permitted transferees, of up to 10,000,000 shares of common stock.
The Selling Stockholders may offer, sell or distribute all or a portion of the securities hereby registered publicly or through private transactions at prevailing market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of our common stock. We will bear all costs, expenses and fees in connection with the registration of our common stock. The Selling Stockholders will bear all commissions, discounts and certain other limited expenses, if any, attributable to their respective sales of our common stock.
Our registration of the securities covered by this prospectus does not necessarily mean that the Selling Stockholders will offer or sell any of the securities. The Selling Stockholders may offer and sell the securities covered by this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Stockholders may sell the shares in the section entitled “
Plan of Distribution
.”
Our common stock is listed on the Nasdaq Global Market (“Nasdaq”) under the symbol “VWE.” On October 26, 2021, the last reported sales price of our common stock on Nasdaq was $10.09 per share.
 
 
We are an “emerging growth company” as defined under the U.S. federal securities laws and, as such, have elected to comply with certain reduced public company reporting requirements.
 
 
Investing in our common stock is highly speculative and involves a high degree of risk. See
beginning on page 7.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is                    , 2021

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F-1
 
 
i

ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on
Form S-1
that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, the Selling Stockholders may, from time to time, offer and sell any combination of the securities described in this prospectus in one or more offerings. The Selling Stockholders may use the shelf registration statement to sell up to an aggregate of up to 10,000,000 shares of common stock from time to time through any means described in the section entitled “
Plan of Distribution
.” More specific terms of any securities that the Selling Stockholders offer and sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the shares of common stock being offered and the terms of the offering.
We will not receive any proceeds from the sale by the Selling Stockholders of the securities offered by them described in this prospectus. A prospectus supplement may also add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should rely only on the information contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. See “
Where You Can Find More Information
.”
We and the Selling Stockholders have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus, any applicable prospectus supplement or any free writing prospectus we have prepared. We and the Selling Stockholders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover, regardless of the time of delivery of this prospectus or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.
This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “
Where You Can Find More Information
.”
On February 3, 2021, Bespoke Capital Acquisition Corp. (“BCAC”), VWE Acquisition Sub Inc., a wholly owned subsidiary of BCAC (“merger sub”), Vintage Wine Estates, Inc., a California corporation (“Legacy VWE”), Bespoke Sponsor Capital LP (the “Sponsor”), and Darrell D. Swank as the Seller Representative, entered into a transaction agreement (as amended, the “transaction agreement”). Following approval by the shareholders of BCAC and Legacy VWE and the satisfaction or waiver of other closing conditions, the transactions contemplated by the transaction agreement were consummated and closed on June 7, 2021 (the “Closing Date”).
Pursuant to the transaction agreement, on or prior to the Closing Date: (1) BCAC changed its jurisdiction of incorporation from the Province of British Columbia to the State of Nevada (the “domestication”); (2) merger sub merged with and into Legacy VWE (the “merger”) with Legacy VWE surviving the merger as a wholly owned subsidiary of BCAC; and (3) BCAC changed its name to Vintage Wine Estates, Inc. (“VWE,” “we,” “us,”
 
ii

“our” or the “Company”). The domestication, the merger and the other transactions contemplated by the transaction agreement are collectively referred to herein as the “transactions.”
VWE’s common stock is listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “VWE”. VWE’s common stock and warrants are listed on the Toronto Stock Exchange (“TSX”) under the symbols “VWE.U” and “VWE.WT.U”, respectively.
On February 3, 2021, prior to the execution of the transaction agreement, Wasatch (as defined below) acquired 956,618 shares of Legacy VWE Series A stock from former Legacy VWE stockholders for an aggregate price of $28 million, which converted into shares of common stock upon closing of the transactions. In addition, in connection with the transactions, BCAC, the Selling Stockholders (collectively with Casing & Co. f/b/o Wasatch Microcap Fund or any of them individually as the context may require, “Wasatch”) entered into subscription agreements for the sale and purchase, respectively, of 10.0 million shares of the Company’s common stock at $10.00 per share at the closing of the transactions for an aggregate amount of $100 million (the “PIPE Investment”). Such PIPE Investment shares were issued and sold to Wasatch on the Closing Date. Following the consummation of the transactions, Wasatch beneficially owned 14,558,244 shares of common stock.
Former Legacy VWE shareholders will be issued up to 5,726,864 additional shares of VWE’s common stock if certain conditions are met (the “Earnout Shares”). If, at any point after the Closing Date until the second anniversary of the Closing Date, the closing price of our common stock is greater than or equal to $15.00 per share but below $20.00 per share over any 20 trading days within any
30-trading
day period (the “First Target Price”), the former Legacy VWE shareholders will be entitled to 2,863,432 shares. If, at any point after the Closing Date until the second anniversary of the Closing Date, the closing price of our common stock is greater than or equal to $20.00 per share over any 20 trading days within any
30-trading
day period, the former Legacy VWE shareholders will be entitled to either an additional 2,863,432 shares, to the extent that the First Target Price has previously occurred, or 5,726,864 shares, to the extent that the First Target Price has not previously occurred. In no event will the former Legacy VWE shareholders be entitled to receive more than 5,726,864 Earnout Shares.
References to a fiscal year refer to our fiscal year ended June 30 of the specified year.
 
iii

SELECTED DEFINED TERMS
As used in this prospectus, unless otherwise noted or the context otherwise requires:
 
   
“BCAC” means Bespoke Capital Acquisition Corp., a British Columbia corporation and predecessor to VWE;
 
   
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act of 2020, Pub. L.
116-136;
 
   
“common stock” means the common stock, no par value per share, of Vintage Wine Estates, Inc., a Nevada corporation;
 
   
“domestication” means the change of jurisdiction of incorporation of BCAC from the Province of British Columbia to the State of Nevada under Section 92A.270 of the NRS;
 
   
“Earnout Shares” means 5,726,864 shares of common stock (as may be adjusted pursuant to the transaction agreement);
 
   
“effective time” means the time at which the merger became effective;
 
   
“GAAP” means accounting principles generally accepted in the United States of America;
 
   
“Legacy VWE” means Vintage Wine Estates, Inc., a California corporation;
 
   
“Major Investors” means the Sponsor, the Roney Investors, the Rudd Investors and the Sebastiani Investors;
 
   
“Nasdaq” means The Nasdaq Stock Market LLC;
 
   
“NRS” means the Nevada Revised Statutes;
 
   
“qualifying acquisition” means the acquisition, directly or indirectly, of one or more businesses or assets, by way of a merger, amalgamation, arrangement, share exchange, asset acquisition, share purchase, reorganization, or any other similar business combination involving BCAC;
 
   
“Roney Investors” means the Roney Trust and Sean Roney;
 
   
“Roney Trust” means the Patrick A. Roney and Laura G. Roney Trust;
 
   
“Rudd Investors” means the Rudd Trust and the SLR Trust;
 
   
“Rudd Trust” means Marital Trust D under the Leslie G. Rudd Living Trust U/A/D 3/31/1999, as amended (as successor to the Leslie G. Rudd Living Trust U/A/D 3/31/1999, as amended);
 
   
“Sebastiani Investors” means Sonoma Brands II, L.P., Sonoma Brands II Select, L.P., and Sonoma Brands VWE
Co-Invest, L.P.;
 
   
“SEC” means the United States Securities and Exchange Commission;
 
   
“Securities Act” means the Securities Act of 1933;
 
   
“SLR Trust” means the SLR
Non-Exempt
Trust U/A/D 4/21/2018 (as successor to the SLR 2012 Gift Trust U/A/D 12/31/2012);
 
   
“Specified Investors” means the Sponsor and all holders of VWE capital stock, excluding Wasatch;
 
   
“Sponsor” means Bespoke Sponsor Capital LP;
 
   
“Sunset Date” means the date of the first annual meeting of shareholders of VWE that is held after the fifth anniversary of the effective date of the VWE articles of incorporation.
 
   
“transactions” means the domestication, the merger and the other transactions contemplated by the transaction agreement;
 
   
“transaction agreement” means the transaction agreement dated February 3, 2021, among BCAC, merger sub, Legacy VWE, the Sponsor, and Darrell D. Swank as the Seller Representative, as amended;
 
iv

   
“TSX” means the Toronto Stock Exchange;
 
   
“VWE” means Vintage Wine Estates, Inc., a Nevada corporation (f/k/a Bespoke Capital Acquisition Corp.), and its consolidated subsidiaries; and
 
   
“Wasatch” refers to any or all of Wasatch Microcap Fund, Wasatch Ultra Growth Fund and Wasatch Small Cap Growth Fund, as the context may require; as disclosed elsewhere herein, the first such fund owns VWE stock and is a party to the investor rights agreement for registration rights purposes, and the last two such funds purchased shares of the Company’s common stock pursuant to the PIPE Investment.
Defined terms in the financial statements contained in this prospectus have the meanings given to them in the financial statements.
 
v

FORWARD-LOOKING STATEMENTS
This prospectus 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 headings “
Risk Factors
,” “
Management’s Discussion and Analysis of Financial Condition and Results of Operations
” and “
Description of Business
” and are 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 heading “
Item 1A. Risk Factors
” in our most recent Annual Report on Form
10-K
as well as those discussed in our other filings with the SEC.
Any forward-looking statement made by us in this prospectus is based only on information currently available to us and speaks only as of the date of this prospectus. 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.
 
vi

MARKET, RANKING AND OTHER INDUSTRY DATA
Market, ranking and other industry data used throughout this prospectus is based on reports of government agencies, published industry sources, and the good faith estimates of our management, which in turn are based on their knowledge and experience in the markets in which we operate. Data regarding the industry in which we compete and our market position and market share within our industry are inherently imprecise and subject to significant business, economic and competitive uncertainties beyond our control, but we believe they generally indicate size, position and market share within our industry. These estimates are based on information obtained from our customers, suppliers, trade and business organizations and other contacts in the markets in which we operate. While we are not aware of any misstatements regarding the data presented herein, these estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “
Risk Factors
” and “
Management’s Discussion and Analysis of Financial Condition and Results of Operations
” in this prospectus. These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “
Forward-Looking Statements
.” As a result, you should be aware that market, ranking and other similar industry data included in this prospectus, as well as estimates and beliefs based on that data, may not be reliable, and you are cautioned not to give undue weight to such data, estimates and beliefs. We cannot guarantee the accuracy or completeness of any such information contained in this prospectus.
NON-GAAP
FINANCIAL MEASURES
In addition to our results determined in accordance with GAAP, we use EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies. These metrics are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.
Adjusted EBITDA is defined as earnings (loss) before interest, income taxes, depreciation and amortization, stock-based compensation expense, casualty losses or gains, impairment losses, changes in the fair value of derivatives, restructuring related income or expenses, acquisition and integration costs, and certain
non-cash,
non-recurring,
or other items included in net income (loss) that we do not consider indicative of our ongoing operating performance, including COVID-related adjustments. COVID related adjustments relate to the delayed GAZE brand launch and nonrecurring costs of implementing safety protocols for production facilities, warehouse, tasting rooms and offices. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net revenues.
For more information about how we use these
non-GAAP
financial measures in our business and the limitations of these measures, as well as a reconciliation of each of Adjusted EBITDA and Adjusted EBITDA Margin as presented in this prospectus to the most directly comparable GAAP measure, see “
Management
s Discussion and Analysis of Financial Condition and Results of Operations
 — Key Measures to Assess the Performance of Our Business — Non-GAAP Financial Measures
.”
TRADEMARKS, SERVICE MARKS AND TRADE NAMES
This prospectus contains references to certain of our trademarks and service marks. Solely for convenience, trademarks, service marks and trade names referred to in this prospectus may appear without the
®
, SM or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks and trade names. It is not intended that any use or display of other companies’ trade names, trademarks or service marks implies a relationship with, or endorsement or sponsorship by, any other company.
 
vii


SUMMARY
This summary highlights selected information from this prospectus and does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. Before you decide to invest in our common stock, you should read the entire prospectus carefully, including “Risk Factors” beginning on page 12 and the financial statements and related notes included in this prospectus.
Unless the context otherwise requires, references in this prospectus to the “Company,” “VWE,” “Vintage Wine Estates” “we,” “us,” “our” and similar terms refer to Vintage Wine Estates, Inc., a Nevada corporation, and its consolidated subsidiaries.
The Company
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 largest wine producer based on cases of wine shipped in California.
Vintage Wine Estates has completed over 20 acquisitions in the past 10 years and completed over 10 acquisitions in the past 5 years. We generally acquire the brands and inventories of a targeted business, eliminating redundant corporate overhead. We then integrate the acquired assets into our highly efficient production, distribution and omni channel selling networks, quickly increasing the sales and margins of the acquired business.
Our mission is to maintain an entrepreneurial spirit, stay humble and focus on the customer. We respect the ways people buy wine—at the estate wineries, at retail, in restaurants, on the telephone, on the internet, on television and by mail.
Background
On February 3, 2021, Bespoke Capital Acquisition Corp. (“BCAC”), VWE Acquisition Sub Inc., a wholly owned subsidiary of BCAC (“merger sub”), Vintage Wine Estates, Inc., a California corporation (“Legacy VWE”), Bespoke Sponsor Capital LP (the “Sponsor”), and Darrell D. Swank as the Seller Representative, entered into a transaction agreement (as amended, the “transaction agreement”). Following approval by the shareholders of BCAC and VWE and the satisfaction or waiver of other closing conditions, the transactions contemplated by the transaction agreement were consummated and closed on June 7, 2021 (the “Closing Date”).
Pursuant to the transaction agreement, on or prior to the Closing Date: (1) BCAC changed its jurisdiction of incorporation from the Province of British Columbia to the State of Nevada (the “domestication”); (2) merger sub merged with and into Legacy VWE (the “merger”) with Legacy VWE surviving the merger as a wholly owned subsidiary of BCAC; and (3) BCAC changed its name to Vintage Wine Estates, Inc. The domestication, the merger and the other transactions contemplated by the transaction agreement are collectively referred to herein as the “transactions.” The transactions constituted BCAC’s qualifying acquisition.
The Company’s common stock began trading on Nasdaq on June 8, 2021 under the symbol “VWE”. The Company’s common stock and warrants began trading on the TSX on June 9, 2021 under the symbols “VWE.U” and “VWE.WT.U”, respectively.

 
1

Emerging Growth Company
VWE is an “emerging growth company” as defined in Section 2(a) of the Securities Act. The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date 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. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates, although we may decide to early adopt such new or revised accounting standards to the extent permitted by such standards.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act and compliance with applicable laws, if, as an emerging growth company, we intend to rely on such exemptions, we are not required to, among other things: (a) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002; (b) provide all of the compensation disclosure that may be required of
non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
We will remain an emerging growth company under the JOBS Act until the earliest of (a) December 31, 2026, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (c) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC or (d) the date on which we have issued more than $1.0 billion in
non-convertible
debt securities during the previous three years.
Risk Factors
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “
Risk Factors
,” that represent challenges that we face in connection with the successful implementation of our strategy and growth of our business.
Corporate Information
The mailing address of VWE’s principal executive office is 937 Tahoe Boulevard, Suite 210 Incline Village, Nevada 89451 and its telephone number is (877) 289-9463.

 
2

THE OFFERING
 
Issuer
Vintage Wine Estates, Inc.
 
Shares of common stock that may be offered and sold from time to time by the Selling Stockholders named herein or their permitted transferees
10,000,000
 
Shares of common stock outstanding (excluding shares issuable upon exercise of outstanding warrants)(1)
60,461,611 (as of October 1, 2021)
 
Use of Proceeds
We will not receive any proceeds from the sale of shares of common stock by the Selling Stockholders in this offering. See “
Use of Proceeds
.”
 
NASDAQ Global Market symbol
VWE’s common stock is listed on Nasdaq under the symbol “VWE”.
 
Toronto Stock Exchange symbol
VWE’s common stock is listed on the TSX under the symbol “VWE.U”.
 
Risk Factors
Investing in our common stock involves a high degree of risk. See “
Risk Factors
” beginning on page 12 and the other information in this prospectus for a discussion of the factors you should consider carefully before you decide to invest in our common stock.
 
(1)
Also excludes the Earnout Shares, consisting of up to 5,726,864 shares of common stock which may be issued to the former Legacy VWE shareholders subject to the achievement of certain stock price targets.


 
3

SUMMARY SELECTED HISTORICAL FINANCIAL DATA
Set forth below is VWE’s selected historical consolidated financial and other data as of the dates and for the periods indicated. The selected historical financial data as of the years ended June 30, 2021 and June 30, 2020 have been derived from VWE’s audited consolidated financial statements included elsewhere in this prospectus. The results of operations for any period are not necessarily indicative of the results to be expected for any future period. The following selected historical consolidated financial and other data for VWE set forth below should be read in conjunction with “
VWE Management’s Discussion and Analysis of Financial Condition and Results of Operations
” and VWE’s historical consolidated financial statements and the related notes thereto contained elsewhere in this prospectus.
Condensed Consolidated Statements of Operations Data
 
(in thousands)
  
2021
    2020  
Net revenues
  
$
220,742
 
  $ 189,919  
  
 
 
   
 
 
 
Gross profit
  
$
75,351
 
  $ 71,632  
Selling, general, and administrative expenses
  
 
72,505
 
    64,699  
Other operating expenses (income), net(1)
  
 
(6,334
    (805
  
 
 
   
 
 
 
Income from operations
  
 
9,180
 
    7,738  
  
 
 
   
 
 
 
Interest expense
  
 
(11,581
    (15,422
Other
non-operating
items expense (income), net(2)
  
 
13,255
 
    (11,973
  
 
 
   
 
 
 
Income (loss) before provision for income tax
  
 
10,854
 
    (19,657
Income tax provision (benefit)
  
 
(766
    9,957  
  
 
 
   
 
 
 
Net income (loss)
  
$
10,088
 
  $ (9,700
9-Liter
equivalent case volumes
  
 
1,875
 
    1,722  
Adjusted EBITDA(3)
  
 
38,566
 
    27,523  
Adjusted EBITDA margin(3)
  
 
17.5
    14.5
 
(1)
Includes impairment of intangible assets and goodwill, gain (loss) on sale of property, plant, and equipment, gain on litigation proceeds and gain on remeasurement of contingent consideration liabilities.
(2)
Includes gain on paycheck protection program, net unrealized gain (loss) on interest rate swap agreements and other, net.
(3)
In addition to our results determined in accordance with GAAP, we use EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies. These metrics are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.
Adjusted EBITDA is defined as earnings (loss) before interest, income taxes, depreciation and amortization, stock-based compensation expense, casualty losses or gains, impairment losses, changes in the fair value of derivatives, restructuring related income or expenses, acquisition and integration costs, and certain
non-cash,
non-recurring,
or other items included in net income (loss). These items include gain on PPP loan, inventory adjustments and cost of the go public transaction 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. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net revenues.
 
4

(in thousands)
  
June 30, 2021
    June 30, 2020  
Net income (loss)
   $ 10,088     $ (9,700
Interest expense
  
 
11,581
 
    15,422  
Income tax provision (benefit)
  
 
766
 
    (9,957
Depreciation and amortization
  
 
11,436
 
    11,805  
Amortization of label design fees
  
 
464
 
    260  
Gain on litigation proceeds, net of legal fees
  
 
(3,845
    —    
Taint provision
  
 
—  
 
    4,859  
Stock-based compensation expense
  
 
3,334
 
    289  
Inventory adjustment for wildfire impact—vineyard
  
 
3,302
 
 
 
—  
 
Inventory adjustment for wildfire impact—winery overhead
  
 
9,000
 
 
 
—  
 
PPP loan forgiveness
  
 
(6,604
    —    
Net unrealized (gain) loss on interest rate swap agreements
  
 
(6,136
    12,945  
(Gain) loss on disposition of assets
  
 
(2,336
    (1,052
Deferred lease adjustment
  
 
352
 
    501  
Transaction expenses
  
 
4,339
 
    —    
Impairment of intangible assets
  
 
1,081
 
    1,281  
Remeasurement of contingent consideration liabilities
  
 
(329
    (1,035
Post-acquisition accounts receivable write-down
  
 
109
 
    434  
COVID impact
  
 
1,563
 
    200  
Inventory acquisition basis adjustment
  
 
401
 
    1,271  
  
 
 
   
 
 
 
Adjusted EBITDA
   $ 38,566     $ 27,523  
  
 
 
   
 
 
 
Revenue
     220,742       189,919  
  
 
 
   
 
 
 
Adjusted EBITDA Margin
     17.5     14.5
  
 
 
   
 
 
 
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 indicators of our operating performance in isolation from, or as a substitute for, net income (loss), which is prepared in accordance with GAAP. We have presented Adjusted EBITDA and Adjusted EBITDA Margin solely as supplemental disclosure because we believe it allows for a more complete analysis of our results of operations. In the future, we may incur expenses such as those added back to calculate Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items.
 
5

Condensed Consolidated Balance Sheet Data
 
    
June 30,
 
(in thousands)
  
2021
     2020  
Inventories
  
$
221,145
 
   $ 206,458  
Total current assets
  
$
382,045
 
   $ 233,498  
Plant, property and equipment, net
  
$
213,673
 
   $ 162,173  
Total assets
  
$
743,498
 
   $ 511,687  
Line of credit
  
$
87,351
 
   $ 162,545  
Total current liabilities
  
$
152,694
 
   $ 219,508  
Long-term debt, less current maturities
  
$
183,541
 
   $ 143,039  
Total liabilities
  
$
381,561
 
   $ 402,569  
Total equity
  
$
360,255
 
   $ 107,736  
 
6

RISK FACTORS
In addition to the other information in this prospectus and our other filings with the SEC, you should carefully consider the risks and uncertainties described below, which could materially and adversely affect our business, financial condition and results of operations. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us.
Risks Related to Our Operations
The ongoing
COVID-19
pandemic has had, and will likely continue to have, adverse effects on the economy and on our business.
The outbreak of
COVID-19,
which the World Health Organization declared a pandemic in March 2020, has spread across the world and has disrupted the global economy and most industries, including the wine industry. Efforts to control the pandemic have slowed economic activity and disrupted, and reduced the efficiency of, normal business activities across the United States. The pandemic has resulted in authorities implementing numerous unprecedented measures such as travel restrictions, quarantines,
shelter-in-place
orders and workplace shutdowns. These measures have impacted, and will likely continue to impact, our business, customers, supply chain and employees.
We have experienced declines in visitors to our tasting rooms primarily due to travel restrictions,
shelter-in-place
orders and workplace shutdowns resulting from the
COVID-19
pandemic. In response to governmental directives and recommended safety measures, we modified our workplace practices. While we have implemented personal safety measures at all of our facilities where our employees are working onsite, any actions that we take may not be sufficient to mitigate the risk of infection and could result in a significant number of
COVID-19
related claims. Changes to state workers’ compensation laws, as have recently occurred in California, could increase VWE’s potential liability for such claims.
In the longer term, the
COVID-19
pandemic is likely to adversely affect the economies and financial markets and could result in an economic downturn and a recession. It is uncertain how this would affect demand for our products. While VWE continues to see robust demand in its industry, and has seen little impact to its results of operations from the
COVID-19
pandemic, the environment remains uncertain and it may not be sustainable over the longer term. The degree to which the pandemic ultimately impacts our business and results of operations will depend on future developments beyond our control, including the severity of the pandemic, the extent of actions to contain the virus, the availability and efficacy of a vaccine or other treatment, how quickly and to what extent normal economic and operating conditions can resume, and the severity and duration of the economic downturn that results from the pandemic.
Consumer demand for wine and alcoholic beverages could decline, which could adversely affect our results of operations.
We rely on consumers’ demand for our wine and other products. Consumer demand may decline due to a variety of factors, including a general decline in economic conditions, changes in the spending habits of consumers generally, a generational or demographic shift in consumer preferences, increased activity of anti-alcohol groups, increased state or federal taxes on alcoholic beverage products and concerns about the health consequences of consuming alcoholic beverage products. Furthermore, our ability to effectively manage production and inventory is inherently linked to actual and expected consumer demand for our products, particularly given the long product lead time and agricultural nature of the wine business. Unanticipated changes in consumer demand or preferences could have adverse effects on our ability to manage supply and capture growth opportunities, and substantial declines in the demand for one or more of our product categories could harm our results of operations, financial condition and prospects.
 
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We are subject to significant competition, which could adversely affect our profitability.
VWE’s wines compete for sales with thousands of other domestic and foreign wines. VWE’s wines also compete with other alcoholic beverages and, to a lesser degree,
non-alcoholic
beverages. As a result of this intense competition, we have been subject to, and may continue to be subject to, upward pressure on selling and promotional expenses. In addition, some of our competitors have greater financial, technical, marketing and public relations resources available to them than we do. These circumstances could adversely impact our revenues, margins, market share and profitability.
Our wholesale operations and wholesale revenues largely depend on independent distributors whose performance and continuity is not assured.
Our wholesale operations and wholesale revenues depend largely on independent distributors whose performance and continuity is not assured. Our wholesale operations generate revenue from products sold to distributors, who then sell them to off-premise retail locations such as grocery stores, specialty and multi-national retail chains, as well as
on-premise
locations such as restaurants and bars. Sales to distributors are expected to continue to represent a substantial portion of our revenues in the future. A change in relationships with one or more significant distributors could harm our business and reduce sales. The laws and regulations of several states prohibit changes of distributors except under certain limited circumstances, which makes it difficult to terminate a distributor for poor performance without reasonable cause as defined by applicable statutes. Difficulty or inability with respect to replacing distributors, poor performance of major distributors or inability to collect accounts receivable from major distributors could harm our business. There can be no assurance that existing distributors and retailers will continue to purchase our products or provide ours products with adequate levels of promotional support. Consolidation at the retail tier, among club and chain grocery stores in particular, can be expected to heighten competitive pressure to increase marketing and sales spending or constrain or reduce prices.
The loss or significant decline of sales to one or more of our more important distributors, marketing companies or retailers could have adverse effects on our results of operations, financial condition and prospects.
We derive significant revenue from distributors and marketing companies such as Deutsch Family Wine and Spirits, Republic National Distributing Company and Southern Glazer’s Wine & Spirits, and from retail business customers such as Costco, Albertson’s and Target. The loss of one or more of these customers, or significant decline in the volume of sales made to them, could have adverse effects on our results of operations, financial condition and prospects.
The strength of VWE’s brands is critical to our success.
Our reputation as a premier producer of wine and spirits among our customers and the wine industry is critical to the success of our business and our growth strategy. The wine market is driven by a relatively small number of active and well-regarded wine critics within the industry who have disproportionate influence over the perceived quality and value of wines. If we are unable to maintain the actual or perceived quality of our wines and other alcoholic beverage products, or if our wines otherwise do not meet the subjective expectations or tastes of one or more of a relatively small number of wine critics, the actual or perceived quality and value of one or more of our wines could be harmed, which could negatively impact not only the value of that wine, but also the value of the vintage, the particular brand or our broader portfolio. The winemaking process is a long and labor-intensive process that is built around yearly vintages, which means that once a vintage has been released we are not able to make further adjustments to satisfy wine critics or consumers. As a result, we are dependent on our winemakers and tasting panels to ensure that our wine products meet our exacting quality standards.
Any contamination or other quality control issue could have an adverse effect on sales of the impacted wine or our broader portfolio of winery brands. If any of our wines become unsafe or unfit for consumption, cause
 
8

injury or are otherwise improperly packaged or labeled, we may have to engage in a product recall and/or be subject to liability and incur additional costs. A widespread recall, multiple recalls, or a significant product liability judgment against us could cause our wines to be unavailable for a period of time, depressing demand and our brand reputation. Even if a product liability claim is unsuccessful or is not fully pursued, any resulting negative publicity could adversely affect our reputation with existing and potential customers and accounts, as well as our corporate and individual winery brands image in such a way that current and future sales could be diminished. In addition, should a competitor experience a recall or contamination event, we could face decreased consumer confidence by association as a producer of similar products.
Additionally, third parties may sell wines or inferior brands that imitate our winery brands or that are counterfeit versions of our labels, and customers could be duped into thinking that these imitation labels are our authentic wines. A negative consumer experience with such a wine could cause them to refrain from purchasing our brands in the future and damage our brand integrity. Any failure to maintain the actual or perceived quality of our wines could materially and adversely affect our business, results of operations and financial results.
Damage to our reputation or loss of consumer confidence in our wines for any of these or other reasons could result in decreased demand for our wines and could have a material adverse effect on our business, operational results and financial results, as well as require additional resources to rebuild our reputation, competitive position and winery brand strength.
Our advertising and promotional investments may not be effective.
In the ordinary course of conducting its business, we regularly incur significant advertising and promotional expenditures to enhance our winery brands and raise consumer awareness in both existing and emerging categories. Variations in the levels of advertising and promotional expenditures in the past have caused, and are expected in the future to continue to cause, variability in our results of operations. While we strive to invest only in effective advertising and promotional activities, it is difficult to correlate such investments with sales results. There is no guarantee that advertising and promotional expenditures will be effective in building brand strength or in growing repeat sales.
Decreases in wine quality ratings by important rating organizations could adversely affect our business.
Many of VWE’s brands are issued ratings by local or national wine rating organizations. In the wine industry, higher product ratings usually translate into greater demand and higher pricing. Although some VWE brands have been rated highly in the past, and VWE believes its farming and winemaking activities are of a quality to generate good ratings in the future, VWE has no control over ratings issued by third parties, which may or may not be favorable in the future. Significant or persistent declines in the ratings issued to VWE wines could have adverse effects on its business.
We may not be fully insured against catastrophic events and losses, which may adversely affect our financial condition.
A significant portion of our activities are located in California and the Pacific Northwest, which regions are increasingly prone to seismic activity, landslides, wildfires and other natural disasters (collectively, “catastrophes”). Although VWE insures against catastrophes, including through our use of a wholly-owned captive insurance company and by carrying insurance to cover our own property damage, business interruption and certain production assets, we may not be fully insured against all catastrophes, the occurrence of which may (i) disrupt our operations, (ii) delay production, shipments and revenue and (iii) result in significant expenses to repair or replace damaged vineyards or facilities. Any disruption caused by a catastrophe could adversely affect our business, results of operations or financial condition.
 
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Our inability to protect its trademarks and other intellectual property rights could adversely affect its business.
VWE’s business relies on intellectual property, mainly consisting of trademarks, customer lists and business practices. VWE does not register its business practices or customer lists, but they are kept highly confidential and considered trade secrets and, as such, are accessible to a very limited number of people within VWE. Although VWE believes that it does not rely significantly on any individual intellectual property right, a breach of confidentiality with respect to the customer lists or business practices, or loss of access to them, or the future expiration of intellectual property trademark rights, could have adverse impacts on VWE’s business.
VWE relies in part on confidentiality agreements, ownership of intellectual property, and
non-competition
agreements with employees, vendors and third parties in order to protect its intellectual property. It is possible that these agreements could be breached and that VWE might lack an adequate remedy for breach. Disputes may arise concerning the ownership of intellectual property or the extent to which the confidentiality agreements remain in force. Furthermore, VWE’s trade secrets may become revealed to its competitors or developed independently by them, in which case VWE will not be able to enjoy exclusive use of some of its formulas or maintain confidentiality concerning its products.
New lines of business or new products and services could subject us to additional risks.
VWE may invest in new lines of business, or may offer new products, such as within its spirits business or, upon federal legalization of cannabis, cannabis-infused beverages. There are risks and uncertainties associated with such efforts, particularly in instances where the markets are not fully developed or are evolving. In developing and marketing new lines of business and new products and services, VWE may invest significant time and resources. External factors, such as regulatory compliance obligations, competitive alternatives, lack of market acceptance and shifting consumer preferences, may also affect the successful implementation of a new line of business or a new product or service. With respect to cannabis-infused beverages, even if the federal government legalizes medical and/or
adult-use
cannabis, significant delays in the drafting and implementation of industry regulations and licensing and the costs associated with burdensome regulations and taxes could adversely impact VWE’s ability to operate profitably in the cannabis-infused beverage industry. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have adverse effects on VWE’s business, results of operations and financial condition.
Litigation relating to alcohol abuse or the misuse of alcohol could adversely affect our business.
Increased public attention has been directed at the beverage alcohol industry, which we believe is due to concern over problems related to alcohol abuse, including drinking and driving, underage drinking and health consequences from the misuse of alcohol. Adverse developments in these or similar lawsuits or a significant decline in the social acceptability of beverage alcohol products that could result from such lawsuits could materially adversely affect our business.
Risks Related to Our Production Activities
If we are unable to obtain adequate supplies of grapes or other raw materials, or if there is an increase in the cost of such materials, our profitability and production of wine could be negatively impacted, which could materially and adversely affect our business, results of operations and financial condition.
We source our grapes from the vineyards that we own and control and from independent growers. Our production activities also require adequate supplies of other quality agricultural, raw and processed materials, including corks, glass bottles, barrels, winemaking additives and agents, water and other supplies. A shortage of grapes of the required variety and quality, or an inability to obtain or significant increase in the price of other requisite raw materials, could impair our ability to produce wines in the quantity and quality demanded by our customers and reduce our profitability.
Any such occurrences could adversely affect our business, results of operations and financial condition.
 
10

Drought or inclement weather could reduce the amount of water available for use in our growing and production activities, which could materially and adversely affect our business, results of operations and financial condition.
Water supply and adequate rainfall are critical to the supply of grapes, other agricultural raw materials and generally our ability to operate our business. If climate patterns change or droughts occur, there may be a scarcity of water or poor water quality, which could affect production costs, consistency of yields or impose capacity constraints. VWE depends on sufficient amounts of quality water for operation of its wineries, as well as to irrigate its vineyards and conduct other operations. The suppliers of the grapes and other agricultural raw materials purchased by VWE also depend upon sufficient supplies of quality water for their vineyards and fields. Prolonged or severe drought conditions or restrictions imposed on irrigation options by governmental authorities could have an adverse effect on our business, results of operations and financial condition.
Increases in the cost, disruption of supply or shortage of energy could adversely affect our business.
Our production facilities use a significant amount of energy in their operations, including electricity, propane and natural gas. Increases in the price, disruption of supply or shortage of energy sources, which may result from increased demand, natural disasters, power outages or other causes could increase our operating costs and negatively impact our profitability. VWE has experienced increases in energy costs in the past, and energy costs could rise in the future. In addition, we incur costs in connection with the transportation and distribution of our materials and products. Higher fuel costs will result in higher transportation, freight, and other operating costs, which could significantly increase our production costs and, correlatively, decrease our operating margins and profit.
We could be negatively impacted by the occurrence of wine contamination.
We are subject to certain hazards and product liability risks, such as potential contamination, through tampering or otherwise, of ingredients or products. Contamination of our wine could result in destruction of our wine held in inventory and could cause the need for a product recall, which could significantly damage VWE’s reputation for product quality. We maintains insurance against certain of these kinds of risks, and others, under various insurance policies. However, our insurance may not be sufficient to fully cover any resulting liability or may not continue to be available at a price or on terms that are satisfactory to us.
Risks Related to Information Technology and Cybersecurity
A failure of one or more of our key IT systems, networks, processes, associated sites or service providers could have a material adverse impact on business operations, and if the failure is prolonged, our financial condition.
We rely on IT systems, networks, and services, including internet sites, data hosting and processing facilities and tools, hardware (including laptops and mobile devices), software and technical applications and platforms, some of which are managed, hosted, provided and used by third-parties or their vendors, to assist us in the operation of our business. The various uses of these IT systems, networks and services include, but are not limited to: hosting our internal network and communication systems; tracking bulk wine; supply and demand; planning; production; shipping wines to customers; hosting our winery websites and marketing products to consumers; collecting and storing customer, consumer, employee, stockholder, and other data; processing transactions; summarizing and reporting results of operations; hosting, processing and sharing confidential and proprietary research, business plans and financial information; complying with regulatory, legal or tax requirements; providing data security; and handling other processes necessary to manage our business.
Increased IT security threats and more sophisticated cybercrimes and cyberattacks, including computer viruses and other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, social engineering, hacking and other types of attacks pose a potential risk to the security of our IT systems,
 
11

networks and services, as well as the confidentiality, availability, and integrity of our data, and we have in the past, and may in the future, experience cyberattacks and other unauthorized access attempts to our IT systems. Because the techniques used to obtain unauthorized access are constantly changing and often are not recognized until launched against a target, we or our vendors may be unable to anticipate these techniques or implement sufficient preventative or remedial measures.
If we are unable to efficiently and effectively maintain and upgrade our system safeguards, we may incur unexpected costs and certain of our systems may become more vulnerable to unauthorized access. In the event of a ransomware or other cyber-attack, the integrity and safety of our data could be at risk or we may incur unforeseen costs impacting our financial position. If the IT systems, networks or service providers we rely upon fail to function properly, or if we suffer a loss or disclosure of business or other sensitive information due to any number of causes ranging from catastrophic events, power outages, security breaches, unauthorized use or usage errors by employees, vendors or other third parties and other security issues, we may be subject to legal claims and proceedings, liability under laws that protect the privacy and security of personal information (also known as personal data), litigation, governmental investigations and proceedings and regulatory penalties, and we may suffer interruptions in our ability to manage our operations and reputational, competitive or business harm, which may adversely affect our business, results of operations and financial results. In addition, such events could result in unauthorized disclosure of material confidential information, and we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us or to our employees, stockholders, customers, suppliers, consumers or others. In any of these events, we could also be required to spend significant financial and other resources to remedy the damage caused by a security breach or technological failure and the reputational damage resulting therefrom, to pay for investigations, forensic analyses, legal advice, public relations advice or other services, or to repair or replace networks and IT systems.
As a result of
the COVID-19 pandemic,
a greater number of our employees are working remotely and accessing our IT systems and networks remotely, which may further increase our vulnerability to cybercrimes and cyberattacks and increase the stress on our technology infrastructure and systems. Although we maintain cyber risk insurance, this insurance may not be sufficient to cover all of our losses from any future breaches or failures of our IT systems, networks and services.
Our failure to adequately maintain and protect personal information of our customers or our employees in compliance with evolving legal requirements could have a material adverse effect on our business.
We collect, use, store, disclose or transfer (collectively, “process”) personal information, including from employees and customers, in connection with the operation of our business. A wide variety of local and international laws as well as regulations and industry guidelines apply to the privacy and collecting, storing, use, processing, disclosure and protection of personal information and may be inconsistent among countries or conflict with other rules. Data protection and privacy laws and regulations are changing, subject to differing interpretations and being tested in courts and may result in increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions.
Compliance with applicable privacy and data protection laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance. Our actual or alleged failure to comply with any applicable privacy and data protection laws and regulations, industry standards or contractual obligations, or to protect such information and data that we process, could result in litigation, regulatory investigations, and enforcement actions against us, including fines, orders, public censure, claims for damages by employees, customers and other affected individuals, public statements against us by consumer advocacy groups, damage to our reputation and competitive position and loss of goodwill (both in relation to existing customers and prospective customers) any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Additionally, if third parties that we work with, such as vendors or developers, violate applicable laws or our policies, such violations may also place personal information at risk and have an adverse effect on our business. Even the perception of privacy concerns,
 
12

whether or not valid, may harm our reputation, subject us to regulatory scrutiny and investigations, and inhibit adoption of our wines by existing and potential customers.
Risks Related to Regulation of Our Business
VWE’s failure to obtain or maintain necessary licenses or otherwise fail to comply with applicable laws and regulations could have adverse effects on its results of operations, financial condition and business.
A complex multi-jurisdictional regime governs alcoholic beverage manufacturing, distribution, sales, and marketing in the United States. The alcoholic beverages industry in which VWE operates is subject to extensive regulation by the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) (and other federal agencies), each state’s liquor authority, and potentially local authorities depending on location. These regulations and laws dictate such matters as licensing requirements, production, importation, ownership restrictions, trade, and pricing practices, permitted distribution channels, delivery, and prohibitions on sales to minors, permitted, and required labeling, and advertising and relations with wholesalers and retailers. These laws, regulations and licensing requirements may, and sometimes are, interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other legal mandates or with VWE’s business practices. Further, these laws, rules, regulations, and interpretations are constantly changing as a result of litigation, legislation, and agency priorities, and could result in increased regulation. VWE’s actual or asserted
non-compliance
with any such law, regulation or requirement could expose VWE to investigations, claims, litigation, injunctive proceedings and other criminal or civil proceedings by private parties and regulatory authorities, as well as license suspension, license revocation, substantial fines, and negative publicity, any of which could adversely affect VWE’s results of operations, financial condition, and business.
Failure to comply with environmental, health and safety laws and regulations would expose us to civil and criminal liability.
The laws and regulations concerning the environment, health and safety may subject us to civil liability for
non-compliance
or environmental pollution. Such laws may include criminal sanctions (including substantial penalties) for violations. Some environmental laws also include provisions imposing strict liability for the release of hazardous substances into the environment, which could result in VWE becoming liable for
clean-up
efforts without any negligence or fault on our part. Other environmental laws impose liability jointly and severally, which could expose us to responsibility for cleaning up environmental pollution caused by others.
In addition, some environmental, health and safety laws are applied retroactively such that they could impose liability for acts done in the past even if such acts were carried out in accordance with the law in force at the time. Civil or criminal liability under such laws could have adverse effects on our business, results of operations and financial condition.
We may also become subject to claims for personal injury or property damage arising from exposure to hazardous substances if personal injury or environmental contamination was ostensibly caused by activity at one of its production sites. Such legal proceedings could be instituted by private individuals or
non-governmental
organizations.
In addition, any expansion of our existing facilities or development of new vineyards or wineries, or any expansion of our business into new product lines or new geographic markets, may be limited by present and future environmental restrictions, zoning ordinances and other legal requirements.
 
13

Risks Related to Our Financial Condition
We have identified a material weakness in our internal control over financial reporting, and if our remediation of such material weakness is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.
In the course of our financial close process for the fiscal year ended June 30, 2021, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified relates to our process and controls regarding the tracking of costs through the various stages of inventory accounting, particularly as they pertain to bulk wine and spirits. Management concluded that this material weakness arose because we did not have effective business processes and controls to perform reconciliations of certain inventory-related account balances.
To address and remediate this material weakness, we are securing additional inventory cost accounting resources to help ensure that we effectively document and track bulk wine and spirits inventory costs from raw materials to cost of goods sold. We will not be able to fully remediate this material weakness until these steps have been completed and we have been operating effectively for a sufficient period of time. See “
Part II, Item 9A—Controls and Procedures
” in our Annual Report on Form
10-K
for the fiscal year ended June 30, 2021 for additional information about this material weakness and our remediation efforts.
If we are unable to further implement and maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price. If we are unable to assert that our internal control over financial reporting is effective, or, if and when required, our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected, our common stock could become subject to delisting and we could become subject to litigation or investigations by the stock exchange or exchanges on which our securities are listed, the SEC or other regulatory authorities, any of which could require additional financial and management resources.
Furthermore, we cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weakness in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of financial statements for prior periods.
We may be unable to obtain additional financing to fund the operations and growth of our business on terms favorable to us, or at all.
We may require additional financing to fund our operations or growth. The failure to secure additional financing could have a material adverse effect on our continued development or growth. Such financings may result in dilution to stockholders, issuance of securities with priority as to liquidation and dividend and other rights more favorable than our common stock, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business. In addition, we may seek additional capital due to favorable
 
14

market conditions or strategic considerations even if we believe that we have sufficient funds for current or future operating plans. There can be no assurance that financing will be available to us on favorable terms, or at all. The inability to obtain financing when needed may make it more difficult for us to operate its business or implement its growth plans.
The terms of the VWE credit facility may restrict our flexibility, and failure to comply with such terms would have a variety of adverse effects.
The VWE credit facility contains various covenants and restrictions that may, in certain circumstances and subject to carve-outs and exceptions, limit VWE’s ability to, among other things:
 
   
create liens;
 
   
make loans to third parties;
 
   
incur additional indebtedness;
 
   
make capital expenditures in excess of agreed upon amounts;
 
   
merge or consolidate with another entity;
 
   
dispose of its assets;
 
   
make dividends or distributions to its shareholders;
 
   
change the nature of its business;
 
   
amend its organizational documents;
 
   
make accounting changes; and
 
   
conduct transactions with affiliates.
Under the VWE credit facility, VWE also is required to maintain compliance with a minimum fixed charge coverage ratio covenant (not less than 1.10:1.00).
As a result of the covenants and other restrictions contained in its credit facility, VWE is limited in how it may choose to conduct its business. VWE cannot guarantee that it will be able to remain in compliance with these covenants and other restrictions or be able to obtain waivers for noncompliance in the future. Failure to comply with the covenants and other restrictions contained in its debt instruments would likely have adverse effects on its financial condition and business by impairing its ability to continue financing its business.
Of particular significance, VWE could be forced to repay immediately and in full any outstanding borrowings under its credit facility if it were to breach its covenants and not cure the breach, even if it could otherwise satisfy its debt service obligations. Also, if VWE were to experience a change of control, as defined in its credit facilities, it could be required to repay in full all loans outstanding thereunder, plus accrued interest and fees.
VWE may be adversely affected by the
phase-out
of, or changes in the method of determining, the London Interbank Offered Rate (“LIBOR”), or the replacement of LIBOR with different reference rates.
LIBOR is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on U.S. dollar-denominated loans globally. The VWE credit facility uses LIBOR as a reference rate such that the interest due to VWE’s creditors under this facility is calculated using LIBOR.
On July 27, 2017, the U.K.’s Financial Conduct Authority (the authority that administers LIBOR) announced that it intends to phase out LIBOR by the end of 2021. It is unclear whether new methods of
 
15

calculating LIBOR will be established such that it continues to exist after 2021, or if alternative rates or benchmarks will be adopted. Changes in the method of calculating LIBOR, or the replacement of LIBOR with an alternative rate or benchmark, may adversely affect interest rates and result in higher borrowing costs. This could materially and adversely affect our results of operations, cash flows and liquidity. VWE cannot predict the effect of the potential changes to LIBOR or the establishment and use of alternative rates or benchmarks. VWE may need to renegotiate its credit facility or incur other indebtedness. Changes in the method of calculating LIBOR, or the use of an alternative rate or benchmark, could negatively impact the terms of such renegotiated credit facility or such other indebtedness. If changes are made to the method of calculating LIBOR or LIBOR ceases to exist, VWE might need to amend certain contracts and cannot predict what alternative rate or benchmark would be negotiated. This may result in an increase to VWE interest expense.
If VWE’s intangible assets or goodwill become impaired, then VWE may be required to record charges to earnings, which could be significant.
VWE has substantial intangible assets and goodwill on its balance sheet resulting from acquisitions that VWE has completed. VWE reviews intangible assets and goodwill for impairment annually or more frequently if events or circumstances indicate that these assets might be impaired. Application of impairment tests requires judgment. A significant deterioration in a key estimate or assumption or a less significant deterioration to a combination of assumptions or the sale of a part of a reporting unit could result in an impairment charge in the future, which could have an impact, possibly significant, on VWE’s reported earnings.
We may not realize the benefits anticipated from our recent business combination, which could adversely affect our common stock price.
The anticipated benefits from the recently completed business combination are, necessarily, based on projections and assumptions that may not materialize as expected or which may prove to be inaccurate. Our ability to achieve the anticipated benefits will depend on our ability to successfully implement our growth strategies, as well as the availability of cash. We may encounter significant challenges with recognizing the anticipated benefits of the business combination, including the following:
 
   
potential disruption of, or reduced growth in, our historical core businesses;
 
   
challenges arising from the expansion of VWE’s product offerings into adjacencies with which VWE has limited experience;
 
   
coordinating sales and marketing efforts to effectively position VWE’s capabilities and the direction of product development;
 
   
difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from combining VWE’s business with the capital resources resulting from the transactions;
 
   
the increased scale and complexity of VWE’s operations resulting from the business combination;
 
   
retaining key employees, suppliers and other stakeholders of VWE;
 
   
retaining and efficiently managing VWE’s expanded distributor and supplier base; and
 
   
difficulties in anticipating and responding to actions that may be taken by competitors in response to VWE’s business combination.
If we do not successfully manage these issues and the other challenges inherent in operating a business of our scale, then we may not achieve the anticipated benefits of the business combination, could incur unanticipated expenses and charges and the results of operations and the market price of our common stock could be adversely affected.
 
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A significant aspect of VWE’s expansion plan is to grow through strategic acquisitions. If the liabilities VWE assumes as part of making strategic acquisitions are greater than anticipated, VWE’s financial results could be adversely affected.
When VWE acquires the equity, i.e., the stock of a corporation or the membership interests in a limited liability company, rather than the assets, of a target company, it also generally assumes the liabilities of the target company, which often include known, unknown, and contingent liabilities. VWE’s ability to accurately identify and assess the magnitude of these assumed liabilities may be limited by, among other things, the information available to VWE and the limited operating experience VWE has with these acquired businesses. If VWE is unable to accurately assess the scope of these liabilities or if these liabilities are neither probable nor estimable at the time of the acquisition, VWE’s projected financial results for the acquired company could be adversely affected. To the extent that VWE’s overall results of operations are affected by any of these events, the price of VWE common stock could decrease.
General Risk Factors
Mergers and acquisitions in which VWE might engage involve risks that could adversely affect its business.
As part of its growth strategy, VWE will continue considering and entering into discussions, negotiations and agreements regarding possible transactions such as mergers, acquisitions and other business combinations. The purchase price for possible acquisitions of brands, other assets and businesses might be paid in cash, through the issuance of common stock or other securities, borrowings or a combination of these methods. Business combinations entail numerous risks, including:
 
   
difficulties in the integration of acquired operations, supply and distribution networks, and products, which can impact retention of customer goodwill;
 
   
failure to achieve expected synergies;
 
   
diversion of management’s attention from other business concerns;
 
   
assumption of unknown material liabilities of acquired companies, which could become material or subject us to litigation or regulatory risks;
 
   
amortization of acquired intangible assets, which could reduce future reported earnings; and
 
   
potential loss of customers or key employees.
There can be no assurance that VWE will continue to be able to identify, consummate and successfully integrate business combinations.
VWE is an emerging growth company and can offer no assurance that the reduced reporting requirements applicable to emerging growth companies will not make its shares less attractive to investors.
VWE is an emerging growth company as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as VWE continues to be an emerging growth company, it may take advantage of exemptions from various reporting requirements that apply to public companies other than emerging growth companies, including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. VWE will remain an emerging growth company until the earlier of (1) the date (a) December 31, 2026, (b) on which VWE has total annual gross revenue of at least $1.07 billion, or (c) on which VWE is deemed to be a large accelerated filer, which means the market value of shares of VWE’s common stock that are held by
non-affiliates
exceeds $700 million as of the prior June 30th, and (2) the date on which VWE has issued more than $1.0 billion in
non-convertible
debt during the prior three-year period.
 
17

VWE can offer no assurance that investors will not find its common stock less attractive because VWE may rely on these exemptions. If some investors find such less attractive as a result, then there may be a less active trading market for such stock and its market price may be more volatile.
VWE will continue to incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.
VWE, as a public company, faces increased legal, accounting, administrative and other costs and expense. VWE also is a reporting issuer in all of the provinces and territories of Canada, other than Quebec. The Sarbanes-Oxley Act, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board (United States), Nasdaq and the TSX impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. In addition, expenses associated with SEC and Canadian reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or a significant deficiency in the internal control over financial reporting), then VWE could incur additional costs rectifying those issues, and the existence of those issues could adversely affect VWE’s reputation or investor perceptions of it. It may also be more expensive to obtain director and officer liability insurance in such a situation. Risks associated with VWE’s status as a public company may make it more difficult to attract and retain qualified persons to serve on the board of directors or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require VWE to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.
VWE is subject to financial reporting and other requirements that places increased demands on its accounting and other management systems and resources and for which VWE may not be adequately prepared.
VWE is subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404(a) of the Sarbanes-Oxley Act and similar legislation imposed on reporting issuers under Canadian law, as applicable. Section 404 requires annual management assessments of the effectiveness of VWE’s internal controls over financial reporting and, after VWE is no longer an “emerging growth company,” its independent registered public accounting firm may be required to express an opinion on the effectiveness of VWE’s internal controls over financial reporting. To the extent applicable, these reporting and other obligations will place significant demands on VWE’s management, administrative, operational, and accounting resources and will cause VWE to incur significant expenses. VWE is in the process of creating systems, implementing financial and management controls, reporting systems and procedures, and hiring additional accounting and finance staff. If VWE is unable to accomplish these objectives in a timely and effective manner, then its ability to comply with the financial reporting requirements and other rules that apply to public reporting companies could be impaired. Any failure to maintain effective internal controls could have adverse effects on our business, results of operations and stock price.
We compete for skilled management and labor and our future success depends in large part on key personnel.
Our future success depends in large part on our ability to retain and motivate to a high degree our senior management team. Our ability to deliver high-quality products also depends on retaining and motivating proficient winemakers, grape growers and other skilled management and operations personnel. The loss of such personnel or a labor shortage could adversely affect our business and our ability to implement our strategy.
 
18

VWE’s management has limited experience operating a public company. This could lead to diversion of time otherwise spent on business operations and could necessitate the incurrence of additional costs to staff for regulatory expertise.
Although several of the directors of the Company have substantial public market experience, VWE’s executive officers have limited experience in the management of a publicly traded company subject to significant regulatory oversight and reporting obligations under federal securities laws. VWE’s management team may struggle to manage VWE successfully or effectively as a public company. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of VWE. It is possible that VWE will be required to expand its employee base and hire additional qualified personnel, or engage additional outside consultants and professionals, to support its operations as a public company, increasing its operating costs in future periods.
The terms of the investor rights agreement, VWE’s organizational documents and Nevada law could inhibit a takeover that VWE shareholders might consider favorable.
Features of the investor rights agreement, the VWE articles of incorporation and bylaws and Nevada law will make it difficult for any party to acquire control of VWE in a transaction not approved by the VWE board of directors. These features include:
 
   
until the 2028 annual meeting of shareholders of VWE, the Roney Representative (which will be Patrick Roney, so long as he is alive) may designate five individuals (the “Roney Nominees”), the former Bespoke shareholders may designate two individuals (the “Bespoke Nominees”) and the VWE nominating committee may designate two individuals (the “Nominating Committee Nominees”) in the slate of nominees recommended to VWE shareholders for election as directors at any annual or special meeting of the shareholders at which directors are to be elected, subject to certain terms and conditions;
 
   
the affirmative vote of shareholders holding at least
66-2/3%
of the voting power of the issued and outstanding shares of capital stock of VWE will be required to amend or repeal certain provisions of the articles of incorporation and bylaws of VWE, including those relating to election, removal and replacement of directors, for five years following the closing of the transactions;
 
   
the ability of the board of directors to issue and determine the terms of preferred stock;
 
   
advance notice for shareholder proposals and nominations of directors by shareholders to be considered at VWE’s annual meetings of shareholders;
 
   
certain limitations on convening shareholder special meetings;
 
   
limiting the ability of shareholders to act by written consent; and
 
   
anti-takeover provisions of Nevada law.
These features may have an anti-takeover effect and could delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a VWE shareholder might consider in its best interest, including those attempts that might result in a premium over the market price of their common stock.
The VWE articles of incorporation provide that the Second Judicial District Court in the State of Nevada, located in Washoe County, Nevada will be the sole and exclusive forum for substantially all disputes between VWE and its shareholders, which could limit VWE shareholders’ ability to obtain a favorable judicial forum for disputes with VWE or its directors, officers or employees.
The VWE articles of incorporation provide that, unless VWE consents in writing to the selection of an alternative forum, the Second Judicial District Court, in and for the State of Nevada, located in Washoe County,
 
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Nevada, will, to the fullest extent permitted by law, be the exclusive forum for (i) any derivative action, suit or proceeding brought on behalf of VWE, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or stockholder of VWE to VWE or to its stockholders, or (iii) any action, suit or proceeding arising pursuant to any provision of the NRS or the VWE articles of incorporation or bylaws (as either may be amended and/or restated from time to time). Subject to the foregoing, the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Such exclusive forum provision will not relieve VWE of its duties to comply with the federal securities laws and the rules and regulations thereunder, and its shareholders will not be deemed to have waived VWE’s compliance with such laws, rules and regulations.
The VWE articles of incorporation further provide that any person or entity purchasing or otherwise acquiring any interest in any VWE securities will be deemed to have notice of and consented to these provisions. Such articles provide that if any action whose subject matter is within the scope of clause (i), (ii) or (iii) above is filed in a court other than the courts in the State of Nevada (a “foreign action”) in the name of any stockholder, such stockholder will be deemed to have consented to (1) the personal jurisdiction of the state and federal courts in Nevada in connection with any action brought in any such court to enforce the provisions of such clause and (2) having service of process made upon any such stockholder’s counsel in the foreign action as agent for such stockholder. These exclusive forum provisions may limit a shareholder’s ability to bring an action, suit or proceeding in a judicial forum of its choosing for disputes with VWE or its directors, officers, employees or stockholders, which may discourage such actions, suits and proceedings. None of the aforementioned provisions of the VWE articles of incorporation will apply to suits to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts of the United States have exclusive jurisdiction.
If a court were to find the exclusive forum provision contained in the VWE articles of incorporation to be inapplicable or unenforceable in an action, suit or proceeding, then VWE may incur additional costs associated with resolving such action, suit or proceeding in other jurisdictions, which could harm its business, results of operations, and financial condition. Even if VWE is successful in defending against such actions, suits and proceedings, litigation could result in substantial costs and be a distraction to management and other employee.
 
20

USE OF PROCEEDS
All of the shares of our common stock offered by the Selling Stockholders pursuant to this prospectus will be sold by the Selling Stockholders for their respective accounts. We will not receive any of the proceeds from these sales.
 
21

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of financial condition and results of operations together with our audited consolidated financial statements and related notes included elsewhere in this prospectus. This discussion may contain forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this prospectus. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our” and “the Company” are intended to mean the business and operations of Vintage Wine Estates, Inc. (“VWE”) and its consolidated subsidiaries.
Overview
Vintage Wine Estates 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 largest wine producer based on cases of wine shipped in California. We’ve exceeded 20% net revenue and adjusted EBITDA compound annual growth rates since 2010. We now sell nearly 2 million cases annually.
Our key differentiator is our diversification—what we call our three-legged stool business model.
We are diversified in our brand collection, producing over 50 brands ranging in retail price from $10 to $150, with a focus on the fastest growing $10 and $20 segment. Approximately eighty percent of our business is done in this critical segment.
We are diversified in our omni-channel sales strategy balanced between
direct-to-consumer,
30% of sales, traditional wholesale, 33% of sales and
business-to-business
at 35% of sales. Our
direct-to-consumer
segment is particularly robust. Where most wine companies have two direct sales levers to pull: tasting rooms and wine clubs, we have seven: tasting rooms, wine clubs, ecommerce, Cameron Hughes, Windsor/custom label design and engraving, QVC/HSN and The Sommelier Company.
We are diversified in our sourcing with a strong asset base of 2,800 owned and leased vineyard acres in located in the premier winegrowing regions of the U.S. and 10 owned winery estates. These properties extend from the Central Coast of California to storied appellations in Napa Valley and Sonoma County, north to Oregon and Washington. We obtain fruit for our wines from owned and leased vineyards, as well as other sources, including independent growers and the spot wine market.
We have completed over 20 acquisitions in the past 10 years and completed over 10 acquisitions in the past 5 years. We generally acquire the brands and inventories of a targeted business, eliminating redundant corporate overhead. We then integrate the acquired assets into our highly efficient production, distribution and omni channel selling networks, quickly increasing the sales and margins of the acquired business.
Our growth has allowed us to reinvest in our business and create the scale and infrastructure needed to successfully manage a variety of different wine brands and channels and reduce costs. Our owned winery facilities have the current capacity to produce up to 7 million cases of wine per year. As of the date of this prospectus, we are near completion of a $45 million investment into our Ray’s Station production facility, which includes a high-speed bottling facility with the capacity to bottle over 13.5 million cases annually and a 364,000 square foot warehouse and distribution center.
 
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Additional bottling capacity will not only be used for our products, but also will allow us to further expand our bottling and fulfillment services offered to third parties on a contract basis. The additional capacity of the bottling facility may not initially be fully utilized but provides us with capacity consistent with our growth plans. Our scale and consolidated operations are expected to enable us to increase margins of the businesses that we acquire, providing accretive value promptly after the acquisition.
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. We believe we have completed more brand mergers and acquisitions in the U.S. wine industry over the last 10 years than any other company in the industry. 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 DTC and retail customers with a range of wines to choose from.
We have historically targeted a significant increase in the target company’s EBITDA within three years of the acquisition. To achieve these results, our acquisitions are subject to a rigorous, data-driven, due diligence and underwriting process, to assure that minimum financial thresholds with meaningful upside can be satisfied in each transaction. In accordance with GAAP, the results of the acquisitions we have completed are reflected in our consolidated financial statements. We typically incur minimal transaction costs in connection with identifying and completing acquisitions and ongoing integration costs as we integrate acquired companies and seek to achieve synergies.
Recent Developments
Our Business Combination
We were formed in 2019 as Bespoke Capital Acquisition Corp. (“BCAC”), a special purpose acquisition corporation 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 consummated its business combination (the “Business Combination”) with Vintage Wine Estates, Inc., a California corporation (“Legacy VWE”), pursuant to a transaction agreement dated February 3, 2021. As a result of the Business Combination and the related transactions, BCAC changed its jurisdiction of incorporation from the Province of British Columbia to the State of Nevada, BCAC changed its name to “Vintage Wine Estates, Inc.” and Legacy VWE became our wholly-owned subsidiary.
For accounting purposes, and in accordance with generally accepted accounting principles, BCAC was treated as the acquired company and Legacy VWE was treated as the acquirer.
U.S. Wildfires
Significant wildfires in California, Oregon and Washington states, have recently engulfed the affected regions in smoke and flames. The long-term trend is that wildfires are increasing resulting from drought conditions. Drought 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 the wildfires has impacted our revenues, costs of revenues and winery overhead for the periods presented.
 
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Acquisitions and Divestitures
The Sommelier Company
On June 22, 2021, we acquired the net assets of The Sommelier Company consisting of customer relationships, independent Sommelier relationships and brand trademarks, for total consideration of $12.0 million. Consideration transferred consisted of a cash payment of $8.0 million and contingent consideration up to $4.0 million, whereby the Company will pay the seller three annual
earn-out
payments over three years, determined as a percentage of EBITDA.
Kunde Acquisition
On April 19, 2021, we acquired 100% of the outstanding equity of Kunde Enterprise Inc. (“Kunde”) for total consideration, including amounts to acquire the combined 33.3% ownership held by two of the Company stockholders, of which one is an executive officer of the Company, of approximately $53.0 million, net of $5.9 million in
pre-existing
net liabilities due to Kunde. Kunde produces and sells premium Sonoma Valley varietal wines via the wholesale channel as well as internationally and locally through its tasting room, wine club, and internet site. In addition, Kunde provides wine storage, processing, and bottling services for other wineries. The operations of Kunde align with those of us, providing for expanded synergies and growth through the acquisition. See Note 3 to the consolidated financial statements.
The $53.0 million purchase consideration was comprised of approximately $21.5 million of cash, approximately $11.7 million of notes payable to the sellers, and the issuance of 906,345 shares (2,589,507 shares retroactively restated giving effect to the recapitalization transaction discussed in Note 1) of the Company’s Series A stock, with a value of $25.8 million, totaling $58.9 million less the release of
pre-existing
net liabilities between the Company and Kunde of $5.9 million. Two of the three notes payable issued to the sellers have a interest rate of Prime plus 1.00%, compounded quarterly, and mature on January 5, 2022, while the third note has a stated interest rate of 1.61%, compounded quarterly, and matures on December 31, 2021. To fund the cash portion of the purchase consideration, we utilized our line of credit and delay draw term loan. For a summary of the allocation of the purchase price to the fair value of the assets acquired, see Note 3 to the consolidated financial statements.
Owen Roe Winery
In September 2019, the Company acquired assets, including inventory, land, winery equipment and brand trademarks from Owen Roe Winery for total consideration of approximately $16.1 million. Consideration consisted of cash of approximately $15.1 million and contingent consideration of $1.0 million whereby we will pay the seller a fixed fee based on sales of the wine brands acquired for four years.
Divestiture of Certain Assets
Grounded Wine Project Divestiture
On October 31, 2020, we entered into a purchase and sale agreement with a former employee pursuant to which we sold our 51% interest in Grounded Wine Project, LLC (“GWP”), certain bulk wine and cased goods inventory related to GWP’s business, and certain other assets used in the operation of GWP’s business, including trademarks, customer lists, website content, domain names, marketing materials and certain assignable contracts, but excluding cash on hand and accounts receivable relating to the GWP business, for a purchase price of $1.0 million. In connection with the sale, we entered into an interim services agreement with the purchaser for a period ending on the earlier of six months from the closing date and purchaser’s receipt of necessary permits for the operation of GWP,whereby we would continue to operate GWP and store and maintain its wine assets and purchaser would provide certain services to us relating to the operation of GWP. The services agreement was
 
24

extended to August 31, 2021. Management routinely evaluates the profitability of our brands and determined that GWP branded products were underperforming our expectations for the two years prior to June 30, 2020. GWP accounted for approximately 0.09% and 0.62% of our consolidated net revenues for fiscal years ended June 30, 2021 and 2020.
Sales Pro and Master Class Divestiture
On December 30, 2019, we entered into an asset purchase agreement with a current employee pursuant to which we agreed to sell the intellectual property and marketing materials of Sales Pro and Master Class in exchange for a royalty payment per case sold by the purchaser between January 1, 2020 and December 1, 2025. The effective date of the transfer of Sales Pro and Master Class was January 1, 2020. We acquired Sales Pro and Master Class as part of the acquisition of the assets of Cameron Hughes Wine. Sales Pro and Master Class is engaged in
in-store
wine tasting and promotion, which is not core to our business. Sales Pro and Master Class represented approximately 1.4% of our consolidated net revenues for fiscal 2020.
Potential Divestiture of Certain Real Estate Assets
In the first quarter of fiscal 2020, our board of directors authorized management to explore the divestiture of certain
non-core
real estate assets with a combined appraised value in excess of $70.0 million. These efforts continue as of June 30, 2021.
Key Measures to Assess the Performance of our Business
We consider a variety of financial and operating measures in assessing the performance of our business, formulating goals and objectives and making strategic decisions. The key GAAP measures we consider are net revenues; gross profit; selling, general and administrative expenses; and income from operations. The key
non-GAAP
measure we consider is Adjusted EBITDA. We also monitor our case volume sold and depletions from our distributors to retailers to help us forecast and identify trends affecting our growth.
Net Revenues
We generate revenue from our segments: Wholesale, B2B, DTC and Other. We recognize revenue from wine sales when obligations under the terms of a contract with our customer are satisfied. Generally, this occurs when the product is shipped, and title passes to the customer, and when control of the promised product or service is transferred to the customer. Our standard terms are free on board, or FOB, shipping point, with no customer acceptance provisions. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. We recognize revenue net of any taxes collected from customers, which are subsequently remitted to governmental authorities. We account for shipping and handling as activities to fulfill our promise to transfer the associated products. Accordingly, we record amounts billed for shipping and handling costs as a component of net sales and classify such costs as a component of costs of sales. Our products are generally not sold with a right of return unless the product is spoiled or damaged. Historically, returns have not been significant to us.
Gross Profit
Gross profit is equal to net revenues less cost of sales. Cost of sales includes the direct cost of manufacturing, including direct materials, labor and related overhead, 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
 
25

expenses are generally not directly proportional to net revenues, but are expected to increase over time to support the needs of the Company.
Income from Operations
Income from operations is gross profit less selling, general and administrative expenses; acquisition and restructuring related expense or income and amortization of intangible assets. Income from operations excludes interest expense, income tax expense, and other expenses, net. We use income from operations as well as other indicators as a measure of the profitability of our business.
Case Volume
In addition to acquisitions, the primary drivers of net revenue growth in any period are attributable to changes in case volume and changes in product mix and sales price. Case volume represents the number of
9-liter
equivalent cases of wine that we sell during a particular period. Case volume is an important indicator of what is driving gross margin. This metric also allows us to develop our supply and production targets for future periods.
 
    
VWE 9L Equivalent Case Sales by
Segment
 
    
            Year ended June 30,            
 
(in thousands)
  
2021
     2020  
Wholesale
  
 
969
 
     1,037  
B2B
  
 
558
 
     411  
DTC
  
 
348
 
     274  
  
 
 
    
 
 
 
Total case volume
  
 
1,875
 
     1,722  
  
 
 
    
 
 
 
Case volume was up 9% for the fiscal year driven by volume increase in the B2B and DTC segments. B2B volumes grew 35.8% for the year due to expanded relationships in private label. DTC volume was up 27% driven by increased tasting room activity and special programming through a large
e-commerce
company. Wholesale volumes were down 6.6% due to the discontinuation of certain brands partially offset by the inclusion of Kunde in the fourth quarter.
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
In addition to our results determined in accordance with GAAP, we use EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies. These metrics are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.
Adjusted EBITDA is defined as earnings (loss) before interest, income taxes, depreciation and amortization, stock-based compensation expense, casualty losses or gains, impairment losses, changes in the fair value of derivatives, restructuring related income or expenses, acquisition and integration costs, and certain
non-cash,
non-recurring,
or other items included in net income (loss) that we do not consider indicative of our ongoing operating performance, including COVID-related adjustments. COVID related adjustments relate to the delayed GAZE brand launch and nonrecurring costs of implementing safety protocols for production facilities,
 
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warehouse, tasting rooms and offices. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net revenues.
 
(in thousands)
  
June 30, 2021
    June 30, 2020  
Net income (loss)
  
$
10,088
 
  $ (9,700
Interest expense
  
 
11,581
 
    15,422  
Income tax provision (benefit)
  
 
766
 
    (9,957
Depreciation and amortization
  
 
11,436
 
    11,805  
Amortization of label design fees
  
 
464
 
    260  
Gain on litigation proceeds, net of legal fees
  
 
(3,845
    —    
Taint provision
  
 
—  
 
    4,859  
Stock-based compensation expense
  
 
3,334
 
    289  
Inventory adjustment for wildfire impact—vineyard
  
 
3,302
 
 
 
—  
 
Inventory adjustment for wildfire impact—winery overhead
  
 
9,000
 
 
 
—  
 
PPP loan forgiveness
  
 
(6,604
    —    
Net unrealized (gain) loss on interest rate swap agreements
  
 
(6,136
    12,945  
(Gain) loss on disposition of assets
  
 
(2,336
    (1,052
Deferred lease adjustment
  
 
352
 
    501  
Transaction expenses
  
 
4,339
 
    —    
Impairment of intangible assets
  
 
1,081
 
    1,281  
Remeasurement of contingent consideration liabilities
  
 
(329
    (1,035
Post-acquisition accounts receivable write-down
  
 
109
 
    434  
COVID impact
  
 
1,563
 
    200  
Inventory acquisition basis adjustment
  
 
401
 
    1,271  
  
 
 
   
 
 
 
Adjusted EBITDA
   $ 38,566     $ 27,523  
  
 
 
   
 
 
 
Revenue
     220,742       189,919  
  
 
 
   
 
 
 
Adjusted EBITDA Margin
     17.5     14.5
  
 
 
   
 
 
 
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 indicators of our operating performance in isolation from, or as a substitute for, net income (loss), which is prepared in accordance with GAAP. We have presented Adjusted EBITDA and Adjusted EBITDA Margin solely as supplemental disclosure because we believe it allows for a more complete analysis of our results of operations. In the future, we may incur expenses such as those added back to calculate Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items.
 
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Trends and Other Factors Affecting Our Business
Various trends and other factors affect or have affected our operating results, including:
COVID-19
The outbreak of
COVID-19,
which the World Health Organization declared a pandemic in March 2020, has spread across the globe and the U.S and has disrupted the global economy and most industries, including the wine industry. In an effort to contain and slow the spread of
COVID-19,
governments implemented various measures, such as ordering
non-essential
businesses to close, issuing travel advisories and restrictions, canceling large public events, ordering
shelter-in-place
and requiring the public to practice social distancing. While many of these measures have been lifted or eased, some are continuing and others are being reimplemented as
COVID-19
continues to spread.
Although we have not experienced significant business disruptions to date from the
COVID-19
pandemic, we experienced a year over year decline in visitors to our 14 tasting rooms during fiscal year ended June 30, 2021 primarily due to continued
COVID-19
measures. However, the decrease in the business we derive from our tasting rooms was offset by an increased amount of
e-commerce
and DTC wine sales. We sold approximately 1,875 cases for the year ended June 30, 2021 compared to 1,722 cases for the year ended June 30, 2020. We expect that, following acceptance of
COVID-19
vaccines and lifting of travel restrictions, tasting room volumes will, over time, increase from the current lows.
In response to governmental directives and recommended safety measures, we modified our workplace practices. While we have implemented personal safety measures at all of our facilities where our employees are working onsite, any actions that we take may not be sufficient to mitigate the risk of infection and could result in a significant number of
COVID-19
related claims. Changes to state workers’ compensation laws, as have recently occurred in California, could increase our potential liability for such claims. To support employees and protect the health and safety of employees and customers, we provided temporary pay increases to certain employees and purchased additional sanitation supplies and personal protective materials. These measures will increase operating costs and adversely affect liquidity.
In the longer-term, the
COVID-19
pandemic is likely to adversely affect the economies and financial markets, and could result in an economic downturn and a recession. It is uncertain how this would affect demand for our products. While we continue to see robust demand in our industry, and have seen little impact to our business from the
COVID-19
pandemic, we are unable to predict the full impact the
COVID-19
pandemic will have on our future results of operations, liquidity and financial condition due to numerous uncertainties, including the duration of the pandemic, the actions that may be taken by government authorities across the U.S., the impact to our customers, employees and suppliers, and other factors described in the section titled “
Risk Factors
” in this prospectus. These factors are beyond our knowledge and control and, as a result, at this time, we are unable to predict the ultimate impact, both in terms of severity and duration, that the
COVID-19
pandemic will have on our business, operating results, cash flows and financial condition.
Seasonality
There is a degree of seasonality in the growing cycles, procurement and transportation of grapes. The wine industry in general tends to experience seasonal fluctuations in revenues and net income. Typically, we have lower sales and net income during our third fiscal quarter (January through March) and higher sales and net income during or second fiscal quarter (October through December) due to usual timing of seasonal holiday buying, as well as wine club shipments. We expect these trends to continue.
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,
 
28

biodiversity loss and competing land use, impact the quality and quantity of grapes available to us for the production of wine from year to year. Our vineyards and properties, as well as other sources from which we purchase grapes, are affected by these factors. For example, the effects of abnormally high rainfall or drought in a given year may impact production of grapes, which can impact both our revenues and costs from year to year.
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.
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. Over the past ten years, the premium segment ($10 to $20 retail sales price) has grown on average by 6.6% annually. 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.
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 was settled in December 2020 for approximately $3.8 million, net of legal costs. The gain of litigation proceeds consists of payments we received from our insurer.
 
29

Results of Operations
Comparison of the years ended June 30, 2021 and 2020
The following table summarizes our operating results for the periods presented:
 
   
Year Ended June 30,
   
Dollar

Change
   
Percent

Change
 
(in thousands, except shares and per share data)
 
2021
    2020  
Net revenues
       
Wine and spirits
 
$
177,331
 
  $ 155,741     $ 21,590       14
Nonwine
 
 
43,411
 
    34,178       9,233       27
 
 
 
   
 
 
   
 
 
   
 
 
 
 
 
220,742
 
    189,919       30,823       16
Cost of revenues
       
Wine and spirits
 
 
119,350
 
    98,236       21,114       21
Nonwine
 
 
26,041
 
    20,051       5,990       30
 
 
 
   
 
 
   
 
 
   
 
 
 
 
 
145,391
 
    118,287       27,104       23
 
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
 
 
75,351
 
    71,632       3,719       5
Selling, general, and administrative expenses
 
 
72,505
 
    64,699       7,806       12
Impairment of intangible assets
 
 
1,081
 
    1,282       (201     -16
Gain on sale of property, plant, and equipment
 
 
(2,336
    (1,052     (1,284     122
Gain on litigation proceeds
 
 
(4,750
    —         (4,750     *  
Gain on remeasurement of contingent consideration liabilities
 
 
(329
    (1,035     706       68
 
 
 
   
 
 
   
 
 
   
 
 
 
Income from operations
 
 
9,180
 
    7,738       1,442       19
Other income (expense)
       
Interest expense
 
 
(11,581
    (15,422     (3,841     -25
Net unrealized gain (loss) on interest rate swap agreements
 
 
6,136
 
    (12,945     19,081       147
Gain on Paycheck Protection Program loan forgiveness
 
 
6,604
 
    —         6,604       *  
Other, net
 
 
515
 
    972       (457     -47
 
 
 
   
 
 
   
 
 
   
 
 
 
Total other income (expense), net
 
 
1,674
 
    (27,395     29,069       106
Income (loss) before provision for income taxes
 
 
10,854
 
    (19,657     30,511       155
Income tax provision
 
 
(766
    9,957       (10,723     -108
 
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss)
 
 
10,088
 
    (9,700     19,788       204
Net income attributable to the noncontrolling interests
 
 
(218
    (41     (177     432
 
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) attributable to Vintage Wine Estates, Inc.
 
 
9,870
 
    (9,741     19,611       201
Accretion on redeemable Series B stock
 
 
5,785
 
    4,978       807       16
 
 
 
   
 
 
   
 
 
   
 
 
 
Net income allocable to common stockholders
 
$
4,085
 
  $ (14,719   $ 18,804       128
 
 
 
   
 
 
   
 
 
   
 
 
 
Net earnings (loss) per share allocable to common stockholders
       
Basic
 
$
0.14
 
  $ (0.67    
Diluted
 
$
0.14
 
  $ (0.67    
Weighted average shares used in the calculation of earnings (loss) per share allocable to common stockholders
       
Basic
 
 
24,696,828
 
    21,920,583      
Diluted
 
 
25,179,502
 
    21,920,583      
 
 
 
   
 
 
     
 
*
Not meaningful
Net Revenues
Net revenues for the year ended June 30, 2021 increased $30.8 million, or 16.2%, to $220.7 million, from $189.9 million for the year ended June 30, 2020. The increase was driven by an increase in B2B net revenues of
 
30

approximately $23.4 million, coupled with an increase in DTC net revenues of approximately $11.0 million, partially offset by a decrease in Wholesale net revenues of approximately $2.5 million and a decrease in Other net revenues of approximately $1.0 million. Nearly all of the increase in B2B net revenues for fiscal 2021 as compared to fiscal 2020 resulted from organic growth with less than 1% coming from acquisitions.
Gross Profit
Gross profit for the year ended June 30, 2021 increased $3.7 million, or 5.2%, to $75.4 million, from $71.6 million for the year ended June 30, 2020. The increase in gross profit was driven by the increased volume in the B2B and DTC segments partially offset by wholesale volume and mix and by an atypical year end inventory adjustments of approximately $9.0 million (11.9% impact on margin), primarily related to the impact of wildfires on the 2020 harvest. In addition, the shift in mix to greater B2B volume, which is the lowest gross margin business, combined with a shift of channels within the DTC segment had an approximate 5.5% reduction of margin.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for the year ended June 30, 2021 increased $7.8 million, or 12.1%, to $72.5 million, from $64.7 million for the year ended June 30, 2020. The increase in selling, general and administrative expenses was driven primarily by costs related to going public, increased costs of insurance, freight, shipping and labor.
Income from Operations
Income from operations for the year ended June 30, 2021 increased $1.4 million, or 18.6%, to $9.2 million from $7.7 million for the year ended June 30, 2020. The increase was driven by growth in B2B and DTC segments, gain on litigation proceeds related to the smoke taint lawsuit, and gain on sale of assets partially offset by lower wholesale revenue, inventory adjustments and impairment of intangible assets.
Other Income (Expense)
Total other income (expense) was $1.7 million income for the year ended June 30, 2021 compared to $(27.4) million expense for the year ended June 30, 2020, a net increase year over year of $29.1 million or 106.1%. The change was due primarily to a change from an unrealized loss on interest rate swap agreements to an unrealized gain accounting for $19.1 million of the change. In addition, $6.6 million related to the forgiveness of the Paycheck Protection Program (“PPP”) loan of $6.6M, and a $3.8 million decrease in interest expense due to amendments to the debt and lower interest rates.
Income Tax Provision
Income tax expense was $(766) thousand for the year ended June 30, 2021 compared to income tax benefit of $10.0 million for the year ended June 30, 2020. The income tax expense in fiscal 2021 was primarily due to an increase in annual net income and costs related to the transaction, partially offset by the PPP Loan forgiveness, stock based compensation and research and development tax credits. The income tax benefit for the year ended June 30, 2020 was primarily due to a net loss in fiscal 2020, the release of valuation allowance, a research and development tax credit and other adjustments.
Segment Results
Our financial performance is classified into the following segments: Wholesale, B2B, DTC 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
 
31

than our long-term property, plant and equipment for wine tasting facilities, and the customer list and trademark intangible assets specific to the Sommelier acquisition, 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.
Segment Results for the Years Ended June 30, 2021 and 2020
Wholesale Segment Results
 
(in thousands, except %)
  
Year Ended June 30,
     Dollar
Change
     Percent
Change
 
  
2021
     2020  
Wholesale Segment Results
           
Net revenues
   $ 72,908      $ 75,435      $ (2,527      -3.3
Income from operations
   $ 15,044      $ 14,777      $ 267        1.8
Wholesale net revenues for the year ended June 30, 2021 decreased by approximately $2.5 million, or 3.3%, from the year ended June 30, 2020. The decrease was attributable to a decrease in case volumes due to the normalized case volumes in the 2021 period as compared to the 2020 period when retailers increased case volume related to COVID as well as the impact of the discontinuation of two brands and partially offset by favorable mix.
Wholesale income from operations for the year ended June 30, 2021 increased by approximately $267 thousand, or1.8%, from the year ended June 30, 2020. The increase was attributable to improved mix, partially offset by a decreased case volumes.
B2B Segment Results
 
(in thousands, except %)
  
Year Ended June 30,
     Dollar
Change
     Percent
Change
 
  
2021
     2020  
B2B Segment Results
           
Net revenues
   $ 77,440      $ 54,056      $ 23,384        43.3
Income from operations
   $ 17,944      $ 14,783      $ 3,161        21.4
B2B net revenues for the year ended June 30, 2021 increased by approximately $23.4 million, or 43.3% from the year ended June 30, 2020. The increase was attributable to increased custom production as well as increased case volumes, reflecting the Company’s continued strong relationships with private label and custom production customers.
B2B income from operations for the year ended June 30, 2021 increased by $3.2 million, or 21.4%, from the year ended June 30, 2020. The increase was attributable to the increased custom production activity coupled with increased case volumes delivering a low mix.
 
32

DTC Segment Results
 
(in thousands, except %)
  
Year Ended June 30,
     Dollar
Change
     Percent
Change
 
  
2021
     2020  
DTC Segment Results
           
Net revenues
   $ 66,605      $ 55,639      $ 10,966        19.7
Income from operations
   $ 11,437      $ 7,149      $ 4,288        60.0
DTC net revenues of $66.6 million for the year ended June 30, 2021 increased by approximately $11.0 million, or 19.7%, from the year ended June 30, 2020. The increase was primarily attributable to an increase in case volume from tasting rooms and
e-commerce.
The overall mix affected by a shift to special programming through a large
e-commerce
company.
DTC income from operations for the year ended June 30, 2021 increased by approximately $4.3 million, or 60.0%, from the year ended June 30, 2020. The increase was due to improved traffic in tasting rooms compared to the prior year and wine clubs resulting in positive mix and continued strong growth in
e-commerce.
Other Segment Results
 
(in thousands, except %)
  
Year Ended June 30,
     Dollar
Change
     Percent
Change
 
  
2021
     2020  
Other Segment Results
           
Net revenues
   $ 3,789      $ 4,789      $ (1,000      -20.9
Income from operations
   $ (35,245    $ (28,971    $ (6,274      21.7
Other net revenues for the year ended June 30, 2021 decreased by approximately $1.0 million, or 20.9%, from the year ended June 30, 2020. The decrease was primarily attributable to fewer bulk wine sales in the year compared to the year prior.
Other losses from operations for the year ended June 30, 2021 increased by $6.3 million, or 21.7%, from the year ended June 30, 2020. The increase in losses were due to the go public transaction costs, increased costs of warehousing freight, insurance and labor partially offset by the proceeds from the smoke taint litigation and the gain on sale of assets.
Liquidity and Capital Resources
Our ongoing operations have, to date, been funded by a combination of cash flow from operations, the Business Combination with BCAC, borrowings under our credit facility and other debt financing. As of June 30, 2021, we had cash and cash equivalents on hand of approximately $118.9 million and approximately $125.0 million in borrowing capacity available under our credit facility. We had approximately $293.9 million in total debt as of June 30, 2021.
Our principal uses of cash have been to provide working capital, meet debt service requirements, fund capital expenditures and finance strategic plans, including acquisitions. We continuously reinvest in our properties and production assets and are currently working on several capital projects. Our capital expenditures are expected to be approximately $5 million to $9 million over the next twelve months, $5.6 million of which will be used to complete the construction of additional warehouse and storage space at our Ray’s Station facility located in Hopland, California.
We believe our existing cash and cash equivalents, cash flow from operations, and availability under our credit facility will provide sufficient liquidity to fund our current obligations, projected working capital
 
33

requirements, debt service requirements and capital spending requirements. We may also seek to finance capital expenditures under capital leases or other debt arrangements that provide liquidity or favorable borrowing terms.
COVID-19
has negatively impacted the global economy and financial markets which could interfere with our ability to access sources of liquidity at favorable rates and generate operating cash flows. We took advantage of the Paycheck Protection Program (the “PPP”) established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).
We continue to consider acquisition opportunities, but the size and timing of any future acquisitions and the related potential capital requirements cannot be predicted. While we have in the past financed certain acquisitions with internally generated cash, term loans and our credit facility, in the event that suitable businesses are available for acquisition upon acceptable terms, we may obtain all or a portion of the necessary financing through the incurrence of additional long-term borrowings.
Our future capital requirements will depend on many factors, including funding needs to support our business growth and to respond to business opportunities, challenges or unforeseen circumstances. If our forecasts prove inaccurate, we may be required to seek additional equity or debt financing from outside sources, which we may not be able to raise on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, financial condition and results of operations would be adversely affected.
Indebtedness
Credit Facility
During our fiscal year ended June 30, 2020, we entered into a $350 million credit facility consisting of (i) a $100.0 million term loan; (ii) a $50.0 million capital expenditure facility; and (iii) a $200.0 million revolving credit facility. On April 13, 2021, we entered into an amended and restated loan and security agreement to increase the credit facility from an aggregate of $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 new delay draw term loan facility in an aggregate principal amount of up to $100.0 million. All other terms of the original agreement generally remain the same. Concurrent with the amendment, we executed approximately a $29.3 million delayed draw term loan. Proceeds from the new loan were used to pay down $10.8 million and $12.0 million of the existing term loan and outstanding line of credit, respectively, deposit cash of $4.8 million into a restricted cash collateral account, and pay bank fees and third party expenses associated with the amendment.
The credit facility can be used to fund acquisitions, real estate purchases, capital equipment purchases and for other general corporate purposes. The credit facility is collateralized by our eligible inventory and accounts receivable and matures as follows:
 
(in thousands)
  
Maximum
funding
    
Maturity
 
Description
Term loan
   $ 100,000        July 18, 2026  
Revolving credit facility
   $ 230,000        July 18, 2026  
Delay draw term loan
   $ 100,000        July 18, 2024  
Capital expenditure facility
   $ 50,000        July 18, 2026  
Repayments of the term loan and the capital expenditure facility are calculated based on whether the purpose of the original loan or draw was for real estate or capital equipment purchases or draw and are subject to periodic third-party valuations. For real estate purchases, quarterly repayments are equal to 1% of the original principal balance at closing. For capital equipment purchases, quarterly repayments are equal to 1/28th of the
 
34

original balance. Any unpaid principal is due upon the termination of these loans at maturity. Repayment of the revolving credit facility is required if the borrowing base (as defined in the credit facility) does not support the amount of borrowing on the facility. Borrowings under the credit facility bear interest at a rate per annum equal to, at our option, either (a) a LIBOR rate determined by reference to the LIBOR rate for dollar deposits with a term equivalent to the interest period relevant to such borrowing as administered by the ICE Benchmark Administration, plus an applicable margin or (b) an adjusted base rate, or ABR, determined by reference to the highest of (i) 0.50% above the federal funds effective rate, (ii) the rate of interest established by the administrative agent as its “prime rate” and (iii) 1.0% above the LIBOR rate for dollar deposits with a
one-month
term commencing that day, plus an applicable margin. See Note 8 to our consolidated financial statements included elsewhere in this prospectus for a discussion of our interest rate swap transactions.
In addition, we pay certain recurring fees with respect to the credit facility, including (i) a fee for the unused commitments of the lenders under the revolving credit facility and the capital expenditure facility as of the end of each month, accruing at a rate equal to 0.125% per annum, which may be reduced to 0.0% if the average availability under the revolving credit facility is less than 50%, (ii) letter of credit fees, including a fronting fee and processing fees to each issuing bank, which vary depending on the applicable margin rate based on the average availability under the revolving credit facility and (iii) administration fees. Amortization expense related to debt issuance fees was approximately $0.1 million and $0.2 million for the years ended June 30, 2021 and 2020, respectively.
The credit facility contains various covenants and restrictions that may, in certain circumstances and subject to carve-outs and exceptions, limit our ability to, among other things:
 
   
create liens;
 
   
make loans to third parties;
 
   
incur additional indebtedness;
 
   
make capital expenditures in excess of agreed upon amounts;
 
   
merge or consolidate with another entity;
 
   
dispose of our assets;
 
   
make dividends or distributions to our shareholders;
 
   
change the nature of our business;
 
   
amend our organizational documents;
 
   
make accounting changes; and
 
   
conduct transactions with affiliates.
We are required to maintain compliance with a minimum fixed charge coverage ratio covenant of not less than 1.10:1.00.
We may prepay, in full or in part, borrowings under the credit facility without premium or penalty, subject to notice requirements, minimum prepayment amounts and increment limitations, provided that prepayments on all LIBOR loans will be subject to customary “breakage” costs.
Convertible Notes
Woodbridge Notes
On January 2, 2018, we issued a secured convertible promissory note in favor of Jayson Woodbridge in the original principal amount of $19.0 million. Interest on the outstanding principal amount accrues at the prime rate,
 
35

as published in the Wall Street Journal on the issuance date, subject to adjustment every six months. The principal amount of the convertible promissory note was due and payable in four equal annual installments commencing on January 2, 2019. The outstanding principal amount of the note could be repaid at any time without premium or penalty. The holder of the note could, at its option, convert all or part of any regularly scheduled principal payment into shares of Series A stock. In addition, the holder had conversion rights upon a liquidity event. As of June 30, 2021, Jayson Woodbridge converted the remaining outstanding principal of the secured convertible promissory note of $4.8 million resulting in us having no further liability or obligations under this convertible promissory note.
Rudd Trust Notes
On January 2, 2018, we entered into a convertible promissory note, which was subsequently amended, in favor of the Rudd Trust in the original principal amount of $9.0 million, which was issued pursuant to a credit agreement of the same date. Interest on the outstanding principal amount accrued at the prime rate in effect on the issuance date plus 4%, subject to adjustment on the first day of each calendar quarter. The note matured on May 31, 2021. In May 2021, we repaid $9.0 million aggregate principal, at which time we had no further liability or obligations under this convertible promissory note.
Patrick Roney Note
On January 2, 2018, we entered into a convertible promissory note, which was subsequently amended, in favor of Patrick Roney in the original principal amount of $1.0 million issued pursuant to a credit agreement of the same date. Interest on the outstanding principal amount accrued at the prime rate in effect on the issuance date plus 4%, subject to adjustment on the first day of each calendar quarter. The note matured on May 31, 2021. We repaid $1.0 million aggregate principal, at which time we had no further liability or obligations under this convertible promissory note.
Paycheck Protection Program
Our Paycheck Protection Program loan (the “PPP Loan”), under Division A, Title I of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act on April 14, 2020, of approximately $6.5 million required monthly amortized principal and interest payments to begin six months after the date of disbursement. In October 2020, the deferral period associated with the monthly payments was extended from six to ten months. While the PPP Loan currently had a
two-year
maturity, the amended law permitted the borrower to request a five-year maturity from its lender.
Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, we were eligible to apply for and receive forgiveness for all or a portion of the PPP Loan. Such forgiveness is determined, subject to limitations, based on the use of loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs (as defined under the PPP) and mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”), and on the maintenance of employee and compensation levels during the twenty-four week period following the funding of the PPP Loan.
On June 25, 2021, the Company received notification from the Small Business Association that the Company’s Forgiveness Application of the PPP Loan and accrued interest, totaling approximately $6.6 million, was approved in full, and the Company had no further obligations related to the PPP Loan. Accordingly, the Company recorded a gain on the forgiveness of the PPP Loan.
 
36

Cash Flows
Information about our cash flows, by category, is presented in our consolidated statements of cash flows and is summarized below:
 
    
Year Ended June 30,
 
(in thousands)
  
2021
     2020  
Operating activities
  
$
8,991
 
   $ (23,045
Investing activities
  
$
(60,288
   $ 1,289  
Financing activities
  
$
173,225
 
   $ 20,730  
Cash Flows provided by (used in) Operating Activities
Net cash provided by operating activities was $9.0 million for the year ended June 30, 2021 compared to net cash used in operating activities of $23.0 million for the year ended June 30, 2020, representing an increase of net cash of $32.0 million. The increase in net cash provided was primarily attributable to the increase in net income of $19.8 million, net changes in certain
non-cash
adjustments of $0.9 million to reconcile net income to operating cash flow and net changes in other operating assets and liabilities as detailed on the consolidated statement of cashflows.
Cash Flows provided by (used in) Investing Activities
Net cash used in investing activities was $60.3 million for the year ended June 30, 2021, compared to net cash provided by investing activities of $1.3 million for the year ended June 30, 2020, representing an increase of net cash used of $61.6 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 in net cash used was primarily attributable to the purchase of plant, property and equipment of $38.0 million and $23.6 to acquire businesses.
Cash Flows provided by (used in) Financing Activities
Net cash provided by financing activities was $173.2 million for the year ended June 30, 2021 compared to net cash provided of $20.7 million for the year ended June 30, 2020, representing an increase of net cash provided of $152.5 million. The increase in net cash provided consisted primarily of $250.1 million of cash provided by the merger and PIPE financing, net of transactions costs, offset by cashed used of $27.5 million for payments, net of proceeds on our line of credit and long-term debt and cash used of $32.0 million to purchase Series B redeemable stock (See Note 2).
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
 
37

While our significant accounting policies are described in more detail in Note 1 to our audited consolidated financial statements and notes thereto included elsewhere in this prospectus, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
We recognize revenue from the sale of wine, including private label wines, to wholesale distributors and to consumers. We also recognize revenue from custom winemaking and production services, grape and bulk sales, private events held at its winery estates and storage services, as well as the sale of other merchandise and services.
We recognize revenue when control of promised goods or services is transferred to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for its arrangements, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We recognize revenue when obligations under the terms of a contract with our customer are satisfied. Generally, this occurs when the product is shipped, and title passes to the customer, and when control of the promised product or service is transferred to the customer. Our standard terms are free on board (“FOB”) shipping point, with no customer acceptance provisions. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. 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.
Revenue is generated from one of our three reporting segments as described below:
Wholesale
: Wholesale operations generate revenue from product sold to distributors, which then sell the product 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 transfer control and recognize revenue for these orders upon shipment of the wine out of our own or third-party warehouse facilities. We pay depletion and marketing allowances to certain distributors, based on sales to our customers, or the allowance is netted against the purchase price.
Direct to Consumer
: We sell our wine and other merchandise directly to consumers through wine club memberships, at wineries’ tasting rooms and through the internet. Wine club membership sales are made under contracts with customers, which specify the quantity and timing of future wine shipments. Customer credit cards are charged in advance of wine shipments in accordance with each contract. We recognize revenue for these contracts at the time that control of the wine passes to the customer, which is generally at the time of shipment. Tasting room and internet wine sales are paid for at the time of sale. We transfer control and recognize revenue for this wine when the product is either received by the customer
(on-site
tasting room sales) or upon the shipment to the customer (internet sales). Sales taxes are calculated based upon the customer’s location and are collected at the time of the sale and recorded in a sales tax liability account. Sales reporting requirements to the states are performed as required by the state and sales taxes are remitted to the government agencies when due.
Our winery estates hold various public and private events for customers and our wine club members. Upfront consideration received from the sale of tickets or under private event contracts for future events is recorded as deferred revenue. We recognize event revenue on the date the event is held.
 
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Business-to-Business
: This segment generates revenue primarily from the sale of private label wines and custom winemaking services. Annually, we work with our national retail partners to develop private label wines incremental to our wholesale channel businesses. Additionally, we provide custom winemaking and production services. These services are made under contracts with customers, which include specific protocols, pricing, and payment terms. The customer retains title and control of the wine during the production process. We recognize revenue over time as the contract specific performance obligations are met. Additionally, we provide storage services for wine inventory of various customers. The customer retains title and control of the inventory during the storage agreement. We recognize revenue over time for storage services, and when the contract specific performance obligations are met.
Other
: Our Other segment includes revenue from grape and bulk sales, storage services, and for the year ended June 30, 2020 revenue under the Sales Pro LLC (“SalesPro”) and Master Class Marketing, LLC (“Master Class”) business line sold in 2019. We transfer control and recognize revenue for grape sales when product specification has been met and title to the grapes has transferred, which is generally on the date the grapes are harvested, weighed and shipped. We transfer control and recognizes revenue for wine and spirits bulk contracts upon shipment. SalesPro and Master Class revenue represents fees earned from
off-premise
tastings for third-party customers. These customers include other wine and beer brand owners and producers.
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.
Inventories
Inventories of bulk and bottled wines and spirits 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.
Goodwill and Intangible Assets
Goodwill represents the excess of consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. We have three reporting units under which goodwill has been allocated. We conduct a goodwill impairment analysis annually for impairment, as of the end of the respective fiscal year, or sooner if events or circumstances indicate the carrying amount of the asset may not be recoverable.
Our intangible assets represent purchased intangible assets consisting of both indefinite and finite lived assets. Certain criteria are used in determining whether intangible assets acquired in a business combination must be recognized and reported separately. Our indefinite lived intangible assets, representing trademarks and winery
 
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use permits, are initially recognized at fair value and subsequently stated at adjusted costs, net of any recognized impairments. The indefinite lived assets are not subject to amortization. Our finite-lived intangible assets, comprised of customer relationships and Sommelier relationships, are amortized using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used. If that pattern cannot be reliably determined, the intangible assets are amortized using the straight-line method over their estimated useful lives and are tested for impairment along with other long-lived assets. Amortization related to the finite-lived assets is included in selling, general and administrative expenses. Intangible assets are reviewed annually for impairment, as of the end of the reporting period, or sooner if events or circumstances indicate the carrying amount of the asset may not be recoverable.
Stock-Based Compensation, Stock Option and Series A Stock Valuation
Stock-based compensation is reported at calculated fair value based on the grant date of the share-based payment. The Black-Scholes option-pricing model is used to estimate the calculated fair value of each option grant on the date of grant. We amortize the calculated value to stock-based compensation expense using the straight-line method over the vesting period of the option.
As there has been no public market for the stock options we have granted, the grant date fair value of such awards has been determined by our board of directors with the assistance of management and an independent third-party valuation specialist. We believe our board of directors has the relevant experience and expertise to determine the fair value of our stock options. The grant date fair value of stock options was determined first by estimating our aggregate equity value using a weighting of discounted cash flows, comparable public companies, and comparable-transactions valuation methodologies. An option-pricing method, which utilizes certain assumptions including volatility, time to liquidation, a risk-free interest rate, and an assumption for a discount for lack of marketability, was then used to allocate the total equity value to our different classes of equity according to the rights and preferences. A discount for lack of marketability was applied to determine the stock option equity values. In determining the fair value of the stock options, the methodologies used to estimate its enterprise value were performed using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (“AICPA Accounting and Valuation Guide”). The assumptions we used in the valuation model were based on future expectations combined with management’s judgment. In the absence of a public trading market, the board of directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of the stock options as of the date of each award, including the following factors:
 
   
independent valuations performed at periodic intervals by an independent third-party valuation firm;
 
   
operating and financial performance, forecasts and capital resources;
 
   
current business conditions;
 
   
the hiring of key personnel;
 
   
the status of research and development efforts;
 
   
any adjustment necessary to recognize a lack of marketability for the stock options;
 
   
trends and developments in the industry;
 
   
the market performance of comparable publicly traded technology companies; and
 
   
the U.S. and global economic and capital market conditions.
The dates of our valuation reports, which were prepared on a periodic basis, were not contemporaneous with the grant dates of our option awards. Therefore, we considered the amount of time between the valuation report date and the grant date to determine whether to use the latest valuation report for the purposes of determining the fair value of the options for financial reporting purposes. The additional factors considered when determining any
 
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changes in fair value between the most recent valuation report and the grant dates included, when available, the prices paid in recent transactions involving our Series A stock, as well as our operating and financial performance, current industry conditions and the market performance of comparable publicly traded companies. There were significant judgments and estimates inherent in these valuations, which included assumptions regarding our future operating performance and the determinations of the appropriate valuation methods to be applied. If we had made different estimates or assumptions, our stock-based compensation expense, net income (loss) per unit attributable to our series A stockholders could have been significantly different from those reported in this prospectus.
In valuing the series A stock, we determined the equity value of our business by taking a weighted combination of the value indications using the income approach and the market comparable approach valuation methods.
Income Approach
The income approach estimates value based on the expectation of future cash flows a company will generate, such as cash earnings, cost savings, tax deductions and the proceeds from disposition. These future cash flows are discounted to their present values using a discount rate derived from an analysis of the cost of capital of comparable publicly traded companies in its industry or similar lines of business as of each valuation date. This weighted-average cost of capital discount rate, or WACC, is adjusted to reflect the risks inherent in the business. The WACC used for these valuations was determined to be reasonable and appropriate given our debt and equity capitalization structure at the time of each respective valuation. The income approach also assesses the residual value beyond the forecast period and is determined by taking the projected residual cash flow for the final year of the projection and applying a terminal exit multiple. This amount is then discounted by the WACC less the long-term growth rate.
Market Comparable Approach
The market comparable approach estimates value based on a comparison of the subject company to comparable public companies in a similar line of business. From the comparable companies, a representative market multiple is determined which is applied to its financial metrics to estimate the value of its parent or its subsidiary.
To determine our peer group of companies, we considered winery and consumer product public companies and selected those most similar to us based on various factors, including, but not limited to, financial risk, company size, geographic diversification, profitability, growth characteristics and stage of life cycle.
In some cases, we considered the amount of time between the valuation date and the award grant date to determine whether to use the latest valuation determined pursuant to one of the methods described above or to use a valuation calculated by management between the two valuation dates.
Once we determined an equity value, we utilized the Black-Scholes Option Pricing Model (“BSOPM”) to allocate the equity value to our options. BSOPM values its options by creating call options on the respective equity value, with exercise prices based on the liquidation preferences, participation rights and strike prices. This method is generally preferred when future outcomes are difficult to predict and dissolution or liquidation is not imminent.
Emerging Growth Company Election
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act, and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. We expect to continue to take advantage of the benefits of the extended transition period, although we may
 
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decide to early adopt such new or revised accounting standards to the extent permitted by such standards. We expect to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and
non-public
companies until the earlier of the date 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. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act and compliance with applicable laws, if, as an emerging growth company, we rely on such exemptions, we are not required to, among other things: (a) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002; (b) provide all of the compensation disclosures that may be required of
non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
We will remain an emerging growth company under the JOBS Act until the earliest of (a) December 31, 2026, (b) the last date of our fiscal year in which we had total annual gross revenue of at least $1.07 billion, (c) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC or (d) the date on which we have issued more than $1.0 billion in
non-convertible
debt securities during the previous three years.
Recent Accounting Pronouncements
See Note 1 of notes to the consolidated financial statements for a discussion of recent accounting standards and pronouncements.
 
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DESCRIPTION OF BUSINESS
Our Company
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 largest wine producer based on cases of wine shipped in California. We’ve exceeded 20% net revenue and adjusted EBITDA compound annual growth rates since 2010. We now sell nearly 2 million cases annually.
Our key differentiator is our diversification—what we call our three-legged stool business model.
We are diversified in our brand collection, producing over 50 brands ranging in retail price from $10 to $150, with a focus on the growing segment between $10 and $20. Eighty percent of our business is done in this critical segment.
We are diversified in our omni-channel sales strategy balanced between
direct-to-consumer,
30% of sales, traditional wholesale, 33% of sales and
business-to-business
at 35% of sales. Our
direct-to-consumer
segment is particularly robust. Where most wine companies have two direct sales levers to pull: tasting rooms and wine clubs, we have six: tasting rooms, wine clubs, ecommerce, Cameron Hughes, Windsor/custom label design and engraving, and QVC/HSN.
We are diversified in our sourcing with a strong asset base of 2,800 owned and leased vineyard acres located in the premier winegrowing regions of the U.S. and 10 owned winery estates. These properties extend from the Central Coast of California to storied appellations in Napa Valley and Sonoma County, north to Oregon and Washington. We obtain fruit for our wines from owned and leased vineyards, as well as other sources, including independent growers and the spot wine market.
Vintage Wine Estates has completed over 20 acquisitions in the past 10 years and completed over 10 acquisitions in the past 5 years. We generally acquire the brands and inventories of a targeted business, eliminating redundant corporate overhead. We then integrate the acquired assets into our highly efficient production, distribution and omni channel selling networks, quickly increasing the sales and margins of the acquired business.
Our growth has allowed us to reinvest in our business and create the scale and infrastructure needed to successfully manage a variety of different wine brands and channels and reduce costs. Our owned winery facilities have the current capacity to produce up to 7 million cases of wine per year. We are in the process of completing a $45 million investment into our Ray’s Station production facility, which includes a high-speed bottling facility with the capacity to bottle over 13.5 million cases annually and a 364,000 square foot warehouse and distribution center. This project will be complete at the end of Q1 FY 22.
Additional bottling capacity will not only be used for our products, but also will allow us to further expand our bottling and fulfillment services offered to third parties on a contract basis. The additional capacity of the bottling facility may not initially be fully utilized but provides us with capacity consistent with our growth plans. Our scale and consolidated operations are expected to enable us to increase margins of the businesses that we acquire, providing accretive value promptly after the acquisition. We intend to continue to grow our business organically and through acquisitions, with a view towards making two to three acquisitions per year over the next five years.
Our acquisition strategy is to acquire brands and inventories while eliminating redundant corporate overhead, increasing gross margins of the acquired businesses by leveraging scale economies, and driving
 
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revenue growth through our distribution network. Gross margins improve by incorporating brands into a more efficient operating system. In addition, operating margins improve from synergies of acquisitions.
There are more than 11,000 wineries in the U.S., with the largest 50 wineries controlling approximately 90% of the market share by volume, but less than 60% of consumer spending. We plan to use our financial capacity to: (i) continue to acquire family-owned brands from small wineries, (ii) acquire
non-core
brands from medium sized and large competitors, and (iii) potentially acquire one or more large businesses in our industry.
Our primary unique selling proposition for a seller is that we have a strong track record of closing once the price and structure are agreed upon. We also believe our managers are perceived as excellent brand stewards, having increased the market share and profitability of virtually all of our acquired brands. We intend to be a disciplined acquirer, exercising cost discipline, with a focus on the industry’s growth in premium and super-premium wines. We expect that the fragmented nature of the wine industry, coupled with our infrastructure and experience, will enable us to continue to gain market share.
Our innovation strategy is focused on creating and building new wine brands for today’s wine consumer. In the past five years, we have launched over 15 new wine brands, which are primarily sold to major national retail accounts and through
direct-to-consumer
channels. We also develop private labels and produce wine for major retail clients, including Costco and Target, to sell as proprietary brands. The ability to create new wine brands and quickly bring them to market allows us to respond swiftly to trends and changing consumer tastes and needs.
Our mission is to maintain an entrepreneurial spirit, stay humble and focus on the customer. We respect the ways people buy wine—at the estate wineries, at retail, in restaurants, on the telephone, on the internet, on television and by mail.
Our Business Combination
We were formed in 2019 as Bespoke Capital Acquisition Corp. (“BCAC”), a special purpose acquisition corporation 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 consummated its business combination (the “Business Combination”) with Vintage Wine Estates, Inc., a California corporation (“Legacy VWE”), pursuant to a transaction agreement dated February 3, 2021. As a result of the Business Combination and the related transactions, BCAC changed its jurisdiction of incorporation from the Province of British Columbia to the State of Nevada, BCAC changed its name to “Vintage Wine Estates, Inc.” and Legacy VWE became our wholly-owned subsidiary.
For accounting purposes, and in accordance with generally accepted accounting principles, BCAC was treated as the acquired company and Legacy VWE was treated as the acquirer.
Core Business Segments
We report our results of operations through the following segments: Wholesale,
Business-to-Business
(“B2B”),
Direct-to-Consumer
(“DTC”) and Other.
Fundamentally, we are an omni-channel consumer goods business that happens to operate in the wine industry. Unlike wine companies that solely or mainly sell to wholesale distributors, we sell our products through a number of different channels.
 
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A description of our segments follows:
Wholesale
Our wholesale operations generate revenue from products sold to distributors, who then sell them to
off-premise
retail locations such as grocery stores, specialty and multi-national retail chains, as well as
on-premise
locations such as restaurants and bars.
We have longstanding relationships with our distribution network and marketing companies, including with industry leaders such as Deutsch Family Wine and Spirits, Republic National Distributing Company and Southern Glazer’s Wine & Spirits. Through these relationships, our products are sold in all 50 states and in 37 countries outside the U.S. In addition to our geographical reach, our products are available for purchase at 34,500
off-premise
locations as of June 30, 2021 including leading national chains such as Costco, Kroger, Target, Albertsons and Total Wine & More. Our products were also sold at 17,657 restaurants and bars as of June 30, 2021.
Our wholesale segment generated $72.9 million and $75.4 million of revenue for the fiscal years ended June 30, 2021 and June 30, 2020, respectively.
Business-to-Business
Our B2B sales segment generates revenue from the sale of private label wines and custom winemaking services.
We work with national retailers, including Costco, Albertsons, Target and other major retailers, to provide private label wines incremental to their existing beverage alcohol business. Retailers generally earn higher margins on sales of their private label wines than on sales of third-party wines. Consequently, retailers are increasingly offering more private label products in their stores. We expect retailers’ demand for private labels to continue to increase and believe that our private label business will continue to grow. Retailers frequently request brand, label and product line extensions.
Our custom winemaking services are governed by long-term contracts with other wine industry participants and include services such as fermentation, barrel aging, procurement of dry goods, bottling and cased goods storage. Additionally, we believe that our custom winemaking services business allows us to maximize our production assets’ throughput and efficiency and thus improves profit margins for our proprietary brands.
Our B2B segment generated $77.4 million and $54.1 million of revenue for the fiscal years ended June 30, 2021 and June 30, 2020, respectively.
Direct-to-Consumer
Our DTC segment generates revenue from sales made directly to the consumer. DTC sales have higher gross profit margins than wholesale sales because DTC sales allow us to capture the profit margin that otherwise would go to our distribution partners on sales in the wholesale segment. As a result, our profit margins in the DTC segment are significantly higher than in our other segments while operating margins are consistent with other segments. We believe that our DTC business is one of the largest in the U.S. wine industry.
Our DTC sales are made primarily through our tasting rooms, wine clubs and
e-commerce.
Tasting Rooms
— We currently operate 14 tasting rooms that served over 135,000 visitors during the fiscal year ended June 30, 2021, down from over 188,000 for the fiscal year ended June 30, 2020 due to the effects of the
COVID-19
pandemic. We expect that, after there has been availability and public acceptance of effective
 
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COVID-19
vaccines and travel restrictions have been lifted, tasting room volumes will, over time, increase from the current lows. Our tasting rooms are designed to provide a welcoming atmosphere where we can introduce the consumer to our brands with a view towards developing an authentic relationship over time. These tasting rooms feature our exclusive,
low-production
wines, at higher-than-average price points, as well as our more accessible, higher-production, wines. Visitors are encouraged to taste, and then purchase, our wines.
Wine Clubs
— We currently offer 26 branded wine clubs and had more than 35,000 wine club members as of June 30, 2021. Our wine club members sign up to purchase regular shipments of our wines and receive additional benefits such as volume discounts, exclusive visits to our tasting rooms, invitations to member-only events, access to winemakers and the ability to try each of our wines before they are widely sold in stores. We leverage digital technology through virtual tastings and mixers, giving members new ways to network with one another.
E-Commerce
— Sales through our various brand websites are a growing part of DTC sales. We have an active email list with over 859,000 subscribers. Our digital marketing team drafted and sent over 5,200 unique emails that generated over 64 million impressions for the fiscal year ended June 30, 2021. We have used digital marketing since the early 2000s, recently increasing our
e-commerce
customer conversion rate to 9.3%, which is substantially above the food and drink industry’s
e-commerce
conversion rate of 1.7%, as of August 2021.
Custom Label Design and Engraving
— We also offer custom label design and engraving services whereby customers can design and engrave wine bottles to their specifications. We believe that we are the only wine producer with the ability to do custom engraving on wine bottles. As a result, we are able to offer our services profitably at a lower price than competitors that need to outsource bottle engraving. In addition to our core private label customers, we have created custom bottles for weddings, major corporate events and other promotional opportunities.
Our DTC segment generated $66.6 million and $55.6 million of revenue for the fiscal years ended June 30, 2021 and June 30, 2020, respectively.
Other
Our Other segment generates revenue from grape and bulk sales, storage services and for the year ended June 30, 2020, revenue under the Sales Pro and Master Class business line sold in 2019. We record corporate level expenses,
non-direct
selling expenses and other expenses not specifically allocated to the results of operations in our Other segment.
Our Other segment generated $3.8 million and $4.8 million of revenue for the years ended June 30, 2021 and 2020, respectively.
Our Diversified Portfolio
Our asset base and product portfolio have been strategically built to provide significant flexibility throughout the business cycle. Our wine portfolio has three tiers: lifestyle brands, luxury brands, and digitally native brands. We also produce and sell craft spirits.
Lifestyle Brands
Our lifestyle wines primarily sell through
off-premise
channels at retail prices ranging from $10.00 to $25.00 per bottle. The lifestyle tier accounts for more of our branded case volume than the luxury tier due to the lifestyle tier’s wider distribution and lower pricing. Our lifestyle brands are designed to deliver a compelling
price-to-quality
ratio. We believe our infrastructure, sourcing network and
bottling-on-demand
capabilities allow us to adjust production in line with market demand.
 
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Our lifestyle brands include the following, among others:
Layer Cake
— Layer Cake is a vintage-dated, premium wine brand featuring Cabernet Sauvignon, Pinot Noir and Chardonnay and other varietals sourced from various vineyards from around the world. The wines are designed to be approachable and food-friendly, with layers of flavor. Layer Cake is distributed nationally, at retail prices between $11.99 and $19.99 per bottle.
Firesteed
— Founded in 1982, Firesteed is one of Oregon’s most recognized wine marques, well-known as an award-winning, high scoring top Pinot Noir producer. Located in Oregon’s Willamette Valley and considered a foundation brand for Oregon Pinot Noir, Firesteed serves the growing interest in and demand for authentic, cool-climate Oregon Pinot Noir. The signature wine, Firesteed Pinot Noir, is notably 100% Pinot Noir, with no blending wines added to alter the pure varietal character. Recognizing the appeal and demand for Oregon Pinot Noir, Firesteed is one of our top retail sales priorities. Firesteed wines are also available for sale DTC through our
e-commerce
channel and wine club. Firesteed wines sell at retail prices between $16.00 and $40.00 per bottle.
Bar Dog
— Bar Dog is vintage-dated, premium California wine, including Chardonnay, Cabernet Sauvignon and Pinot Noir varietals, along with Red Blend. Bar Dog launched as a
first-to-market
brand in Target stores in 2019 and now is distributed nationally with significant room to be distributed further. Bar Dog’s Cabernet Sauvignon has earned 94 points from the Toronto International Wine Competitions, its Red Wine and Chardonnay have earned Gold Medals, and its Pinot Noir has earned a Silver Medal from the San Francisco International Wine Competition. These wines sell at retail prices between $12.00 and $20.00 per bottle.
Middle Sister
— Middle Sister is a
non-vintage,
premium California wine. The star of the “sisters” is Middle Sister Sweet & Savvy, the
top-selling
California Moscato in the United States, featuring a sister of color on the label. Middle Sister is a longstanding lifestyle brand, launched over 15 years ago in Target stores. It enjoys strong brand equity with a devoted consumer base. Middle Sister was the first wine label to feature a cast of stick figure characters on the label, engaging consumers in a novel, cheeky and humorous way. Middle Sister also was one of the early wine industry adopters of social media, having launched at the same time that Facebook was becoming a widely-used consumer platform. Middle Sister wines sell at a retail price of $10.00 per bottle.
Cherry Pie
— Cherry Pie wines are a vintage, premium California wine. These wines are 100% Pinot Noir sourced from select, cooler climate vineyards in Northern California and the Central Coast that highlight the variety. These wines sell at a retail prices between $20.00 and $50.00 per bottle.
Cartlidge
 & Browne
— Cartlidge & Browne is a legacy, premium California wine brand founded in 1980. Cartlidge & Brown wines appeals to consumers looking for quality and value. The brand continues to grow on the strength of longstanding trust in the wine quality and its appealing price point, with national distribution in retail chains, independent retailers and
on-premise.
Cartlidge & Brown wines sell at a retail price of $12.00 per bottle.
GAZE Wine Cocktails
— GAZE Wine Cocktails are refreshing, light,
low-alcohol
blends of Green Tea Moscato, Blueberry Pomegranate Moscato and White Peach Moscato. GAZE Wine Cocktails blend quality California wine with natural ingredients popular with wellness-minded consumers. The GAZE package is a sleek, portable, recyclable aluminum bottle with a resealable
twist-off
closure and bright, fashion-forward silkscreened graphics. The Blueberry Pomegranate Moscato flavor was awarded 94 points and a Double Gold award at the 2019 San Francisco International Wine Competition. A case of six GAZE Wine Cocktails sells at a retail price of $36.00.
Luxury Brands
Our super-premium to ultra-premium wines are generally smaller-production, estate-based wines. We also have a tier of more widely sourced and available appellation wines. Our luxury wines consistently garner 90+
 
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scores, awards and accolades from top wine industry publications. They appeal to the wine aficionado who is intensely interested in