Fresh Vine Wine(VINE) - 2024 Q2 - Quarterly Report

Financial Performance - For the three months ended June 30, 2024, net revenue was $70,484, a decrease of 79% compared to $330,125 for the same period in 2023[97] - For the six months ended June 30, 2024, net revenue was $175,052, down 76% from $738,755 in the prior year[97] - Gross loss for the three months ended June 30, 2024, was $(43,676), significantly improved from $(1,999,530) in the same period of 2023[111] - Cost of revenues for the three months ended June 30, 2024, was $114,160, a decrease of 95% compared to $2,329,655 in 2023[111] - The company incurred net losses of approximately $2.1 million and $6.4 million during the six months ended June 30, 2024 and 2023, respectively[119] Revenue Channels - The direct-to-consumer (DTC) channel accounted for 94.8% of net revenue in June 2024, up from 51.8% in June 2023[106] - The wholesale channel represented only 5.2% of net revenue in June 2024, down from 48.2% in June 2023[106] Marketing and Strategy - Fresh Vine Wine's marketing strategy targets consumers aged 21 to 34 with moderate to affluent income, focusing on a healthy lifestyle[93] - The company expects net revenue to peak during the October to December quarter due to increased consumer demand around major holidays[99] - Fresh Vine Wine plans to continue expanding its distribution network, working with major distributors like Southern Glazer's Wine & Spirits and RNDC[92] Inventory and Expenses - The company anticipates a significant reduction in inventory write-downs, with approximately $110,000 for the six months ended June 30, 2024, compared to $1.7 million in the same period of 2023[114] - Selling, general and administrative expenses decreased by 58% to $834,267 for the three months ended June 30, 2024, compared to $1,970,380 for the same period in 2023[115] Cash Flow and Financing - Net cash used in operating activities improved to ($946,562) for the six months ended June 30, 2024, from ($4,218,620) in 2023, primarily due to one-time expenses related to a settlement[118] - The company raised $1.0 million through the issuance of 10,000 shares of Series A Convertible Preferred Stock at $100.00 per share in August 2023[123] - The company has received subscriptions for 9,135 shares of Series B Convertible Preferred Stock, totaling $913,500 in gross subscription funds as of June 30, 2024[126] - The company projects that its existing cash balance will be sufficient to fund operations through the third quarter of 2024, but requires additional financing to sustain operations[127] - The company may need to curtail operations or initiate bankruptcy proceedings if it cannot raise additional working capital in a timely manner[127] Internal Controls and Compliance - The company concluded that its disclosure controls and procedures were not effective as of June 30, 2024, due to material weaknesses in internal control over financial reporting[139] - Material weaknesses identified include a lack of segregation of incompatible duties and inadequately designed controls for preparing complete and accurate financial statements[139] - The company plans to hire additional experienced staff to address the inability to prepare complete and accurate financial statements and footnotes[140] Legal Matters - A jury awarded damages of $585,976.25 to Timothy Michaels in a lawsuit against the company, which the company intends to appeal[141] - The company entered into a settlement agreement regarding a lawsuit alleging website accessibility violations, agreeing to remediate its website within a stipulated time period[142] Working Capital - As of June 30, 2024, the company had a working capital deficit of approximately $2.7 million, with current assets of approximately $357,000 and current liabilities of $3.0 million[120] - The company has an accumulated deficit of approximately $28.6 million as of June 30, 2024[119] Strategic Opportunities - Fresh Vine announced an exploration of strategic opportunities for mergers or acquisitions in August 2023, but the Merger Agreement with Notes Live was terminated on July 31, 2024[124][132]