Fresh Vine Wine(VINE) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Q1 2022 financial statements show revenue growth, widened net loss, decreased cash, and critical going concern and concentration risks Balance Sheets As of March 31, 2022, total assets decreased to $16.7 million from $19.3 million, driven by a $4.9 million cash reduction Balance Sheet Summary (unaudited) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $11,150,158 | $16,063,941 | | Total Current Assets | $15,813,846 | $18,257,537 | | Total Assets | $16,730,633 | $19,252,694 | | Liabilities & Equity | | | | Total Current Liabilities | $2,116,552 | $2,176,704 | | Total Liabilities | $2,116,552 | $2,176,704 | | Accumulated Deficit | ($4,903,594) | ($617,351) | | Total Stockholder's Equity | $14,614,081 | $17,075,990 | Statements of Operations For Q1 2022, total revenue surged to $929,125, but net loss widened significantly to $4.3 million due to increased operating expenses Statements of Operations Summary (unaudited) | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Total Revenue | $929,125 | $119,925 | | Gross Profit | $317,073 | $53,718 | | Selling, general and administrative expenses | $2,705,200 | $649,733 | | Equity-based compensation | $1,902,584 | $727,583 | | Operating Loss | ($4,290,711) | ($1,323,598) | | Net Loss | ($4,286,243) | ($1,322,941) | | Net Loss per Share – Basic & Diluted | ($0.35) | ($0.19) | Statements of Cash Flows In Q1 2022, net cash used in operating activities increased to $4.5 million, leading to a $4.9 million net decrease in cash for the quarter Cash Flow Summary (unaudited) | Cash Flow Activity | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($4,542,945) | ($162,116) | | Net cash provided by (used in) financing activities | ($370,838) | $200,000 | | Net (Decrease) Increase in Cash | ($4,913,783) | $37,884 | | Cash - End of Period | $11,150,158 | $42,369 | Notes to Financial Statements Notes disclose critical 'going concern' uncertainty, significant customer and supplier concentration, and substantial equity-based compensation - The company's ability to continue as a going concern is in question, with existing cash projected to fund operations only into Q4 2022 without additional financing[35][37] - The company faces significant concentration risk, with 100% of Q1 2022 inventory purchases from one supplier and 50% of wholesale revenue from a single customer[105][107] - In Q1 2022, revenue mix shifted, with wholesale accounting for 57.1% of total revenue, up from 46.2% in Q1 2021[52] - The company generated $150,884 in service revenue from a related party, Appellation Brands, LLC, in Q1 2022, with services expected to be suspended[121][50] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 operational growth, revenue increase, surging expenses, and reiterates the critical 'going concern' risk Overview and Key Metrics The company operates an asset-light model for premium wines, showing strong Q1 2022 operational growth with over 6,000 cases sold and doubled PODs - The company operates an asset-light model, utilizing third-party assets for production to mitigate agribusiness risks[132] Q1 2022 Operational Highlights | Metric | Q1 2022 Performance | | :--- | :--- | | Cases Sold | > 6,000 (approx. 100% increase over Q4 2021) | | Points of Distribution (PODs) | 1,945 (up from 911 at Dec 31, 2021) | Results of Operations Q1 2022 net revenue increased by $809,200 to $929,125, while SG&A expenses surged 316% to $2.7 million due to expansion costs Comparison of Results for the Three Months Ended March 31 | Metric | 2022 | 2021 | Change ($) | | :--- | :--- | :--- | :--- | | Net revenue | $929,125 | $119,925 | $809,200 | | Gross profit | $317,073 | $53,718 | $263,355 | | SG&A expenses | $2,705,200 | $649,733 | $2,055,467 | - The increase in SG&A expenses was driven by higher selling, marketing, and general/administrative costs to support operational expansion[167] Liquidity and Capital Resources Despite a $19.2 million IPO, the company faces critical liquidity issues, with existing cash projected to fund operations only into Q4 2022, raising going concern doubt - The company projects existing cash will only fund operations into Q4 2022, necessitating additional financing[177] - The company's financial condition and need for near-term financing raise substantial doubt about its ability to continue as a going concern[178] - As of May 13, 2022, cash on hand was $8,097,467, a decrease from $11,150,158 at the end of Q1 2022[176][174] Item 3. Quantitative and Qualitative Disclosures About Market Risk This disclosure is not required for a smaller reporting company - Disclosure not required[200] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2022, due to material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of March 31, 2022[202] - Material weaknesses were identified in controls over related party transactions, segregation of duties, accounts receivable review, and equity-based compensation[203] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings - None[211] Item 1A. Risk Factors The company directs readers to its Annual Report for risk factors and adds an updated risk regarding the critical need for near-term financing, raising going concern doubt - An updated risk factor highlights the company's need for near-term debt or equity financing to sustain operations, potentially dilutive to shareholders[213] - The company explicitly states its financing need 'calls into question our ability to remain a going concern'[213] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities - None[214]