Q3false--12-310001782627five years2020-05-310001782627wbev:SeriesFRedeemableConvertiblePreferredStockMember2021-09-300001782627us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001782627wbev:UnvestedStockOptionsEarlyExercisedMember2021-07-012021-09-300001782627us-gaap:AdditionalPaidInCapitalMember2021-06-3000017826272021-12-080001782627wbev:SeriesB1PreferredStockExpiringDecemberSevenTwentyTwentyFourMember2021-09-300001782627us-gaap:TreasuryStockMember2020-12-310001782627us-gaap:MeasurementInputRiskFreeInterestRateMembersrt:MinimumMember2021-09-300001782627wbev:SeriesERedeemableConvertiblePreferredStockMember2021-09-300001782627us-gaap:SubsequentEventMemberwbev:ConsultingAgreementMember2021-11-012021-11-300001782627srt:MaximumMember2020-07-012020-09-3000017826272020-12-310001782627us-gaap:MeasurementInputPriceVolatilityMember2020-09-300001782627us-gaap:MeasurementInputSharePriceMembersrt:MinimumMember2021-09-300001782627wbev:EmployeePromissoryNotesMembersrt:ChiefExecutiveOfficerMember2021-04-012021-04-300001782627us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-09-300001782627us-gaap:RetainedEarningsMember2021-09-300001782627us-gaap:AdditionalPaidInCapitalMember2021-09-300001782627us-gaap:SubsequentEventMemberus-gaap:IPOMember2021-11-110001782627us-gaap:MeasurementInputExpectedDividendRateMember2020-09-300001782627wbev:BoutiqueWineDistributorMember2021-07-012021-09-300001782627us-gaap:SeriesDPreferredStockMember2020-12-310001782627us-gaap:IPOMember2021-09-300001782627srt:PresidentMemberwbev:EmployeePromissoryNotesMember2021-02-012021-05-310001782627us-gaap:CommonStockMember2021-01-012021-06-300001782627us-gaap:MeasurementInputSharePriceMembersrt:MinimumMember2020-09-300001782627us-gaap:EmployeeStockOptionMember2020-07-012020-09-300001782627us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001782627wbev:EmployeePromissoryNotesMembersrt:ChiefFinancialOfficerMember2021-02-012021-05-310001782627us-gaap:RedeemableConvertiblePreferredStockMember2020-12-310001782627wbev:DirectToConsumerDTCMember2021-01-012021-09-300001782627wbev:WholesaleMember2021-01-012021-09-300001782627wbev:SeriesERedeemableConvertiblePreferredStockMember2021-01-012021-09-300001782627us-gaap:SeriesDPreferredStockMember2020-01-012020-12-310001782627us-gaap:CommonStockMember2020-06-300001782627wbev:EmployeePromissoryNotesMembersrt:ChiefExecutiveOfficerMember2021-02-012021-02-280001782627us-gaap:ComputerEquipmentMember2021-09-300001782627us-gaap:RetainedEarningsMember2021-07-012021-09-300001782627us-gaap:MeasurementInputRiskFreeInterestRateMembersrt:MinimumMember2020-09-300001782627srt:MinimumMember2020-01-012020-09-300001782627wbev:TermLoanMember2021-01-012021-09-300001782627us-gaap:SeriesEPreferredStockMember2020-12-310001782627us-gaap:SeriesBPreferredStockMember2021-09-300001782627us-gaap:WarrantMember2021-09-300001782627us-gaap:RedeemableConvertiblePreferredStockMember2020-01-012020-06-300001782627us-gaap:IPOMember2020-12-310001782627wbev:SeriesSeedPreferredStockMember2021-01-012021-09-300001782627us-gaap:AllOtherSegmentsMember2021-01-012021-09-300001782627us-gaap:RedeemableConvertiblePreferredStockMemberus-gaap:SubsequentEventMember2021-11-1100017826272020-01-012020-12-3100017826272019-12-310001782627us-gaap:LineOfCreditMember2020-01-012020-09-3000017826272020-01-012020-06-300001782627us-gaap:CorporateNonSegmentMember2021-01-012021-09-300001782627us-gaap:TreasuryStockMember2020-06-300001782627wbev:SeriesB1PreferredStockMember2020-12-310001782627wbev:TwoThousandThirteenEquityIncentivePlanMember2021-09-300001782627wbev:PromissoryNotesForCommonStockIssuedMember2021-06-300001782627us-gaap:RetainedEarningsMember2020-07-012020-09-300001782627us-gaap:PrimeRateMemberus-gaap:LineOfCreditMemberwbev:PacificMercantileBankMember2021-01-012021-09-300001782627wbev:WesternAllianceBankMemberwbev:PaycheckProtectionProgramCaresActMember2021-03-012021-03-310001782627us-gaap:LineOfCreditMember2020-07-012020-09-300001782627us-gaap:TreasuryStockMember2021-09-300001782627wbev:NinthAmendedAndRestatedCertificateOfIncorporationMember2021-09-300001782627wbev:WesternAllianceBankMemberwbev:PaycheckProtectionProgramCaresActMember2020-04-200001782627us-gaap:SubsequentEventMemberwbev:ConsultingAgreementMember2021-11-300001782627us-gaap:LeaseholdImprovementsMember2021-09-300001782627wbev:MultiplierCapitalMembersrt:MaximumMemberwbev:TermLoanMember2017-12-310001782627srt:ChiefExecutiveOfficerMember2021-01-012021-09-300001782627us-gaap:MeasurementInputRiskFreeInterestRateMembersrt:MaximumMember2021-09-300001782627us-gaap:RedeemableConvertiblePreferredStockMember2020-09-300001782627us-gaap:CommonStockMember2019-12-3100017826272021-01-012021-06-300001782627wbev:DirectToConsumerDTCMember2021-07-012021-09-300001782627us-gaap:RedeemableConvertiblePreferredStockMember2021-06-300001782627us-gaap:RetainedEarningsMember2020-06-300001782627us-gaap:PrimeRateMemberus-gaap:LineOfCreditMemberwbev:PacificMercantileBankMember2020-12-310001782627wbev:GeneralCounselMemberwbev:EmployeePromissoryNotesMember2021-02-012021-05-310001782627us-gaap:LeaseholdImprovementsMember2020-12-310001782627us-gaap:AdditionalPaidInCapitalMember2020-09-300001782627us-gaap:RetainedEarningsMember2020-01-012020-06-300001782627us-gaap:MeasurementInputRiskFreeInterestRateMembersrt:MaximumMember2020-09-300001782627wbev:SeriesB1PreferredStockExpiringDecemberSevenTwentyTwentyFourMember2021-01-012021-09-300001782627us-gaap:AdditionalPaidInCapitalMember2020-01-012020-06-300001782627us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-3000017826272020-07-012020-09-300001782627wbev:MultiplierCapitalMemberwbev:TermLoanMember2017-12-310001782627us-gaap:MeasurementInputExpectedDividendRateMember2021-09-300001782627us-gaap:TreasuryStockMember2020-09-300001782627us-gaap:MeasurementInputSharePriceMembersrt:MaximumMember2021-09-300001782627us-gaap:SubsequentEventMemberus-gaap:IPOMember2021-11-112021-11-110001782627us-gaap:CorporateNonSegmentMember2020-01-012020-09-300001782627wbev:MultiplierCapitalMemberwbev:TermLoanMember2021-09-300001782627us-gaap:AdditionalPaidInCapitalMember2021-01-012021-06-300001782627us-gaap:RestrictedStockUnitsRSUMemberus-gaap:SubsequentEventMemberus-gaap:ShareBasedPaymentArrangementNonemployeeMember2021-10-012021-10-310001782627us-gaap:CommonStockMember2021-07-012021-09-300001782627wbev:WebsiteDevelopmentMember2020-12-310001782627us-gaap:LineOfCreditMemberwbev:PacificMercantileBankMember2020-12-310001782627wbev:PromissoryNotesForCommonStockIssuedMember2021-09-300001782627us-gaap:SeriesDPreferredStockMember2020-01-012020-06-300001782627wbev:BoutiqueWineDistributorMember2021-05-310001782627us-gaap:RedeemableConvertiblePreferredStockMember2021-09-300001782627wbev:SeriesB1PreferredStockExpiringDecemberTwentyNineTwentyTwentySevenMember2021-01-012021-09-300001782627wbev:PromissoryNotesForCommonStockIssuedMember2021-07-012021-09-300001782627wbev:WholesaleMember2020-07-012020-09-300001782627us-gaap:SeriesFPreferredStockMember2021-01-012021-06-300001782627us-gaap:RetainedEarningsMember2021-01-012021-06-300001782627srt:MaximumMember2020-01-012020-09-300001782627wbev:EmployeePromissoryNotesMembersrt:ChiefExecutiveOfficerMember2021-02-012021-05-310001782627us-gaap:SeriesAPreferredStockMember2020-12-310001782627us-gaap:AllOtherSegmentsMember2020-01-012020-09-300001782627srt:MaximumMemberus-gaap:MeasurementInputSharePriceMember2020-09-300001782627us-gaap:PrimeRateMemberus-gaap:LineOfCreditMemberwbev:PacificMercantileBankMember2021-09-300001782627us-gaap:WarrantMember2020-12-3100017826272021-06-300001782627us-gaap:SoftwareDevelopmentMember2020-12-310001782627us-gaap:AllOtherSegmentsMember2020-07-012020-09-300001782627wbev:EmployeePromissoryNotesMember2021-07-012021-09-300001782627wbev:PromissoryNotesForCommonStockIssuedMember2021-01-012021-06-300001782627us-gaap:SeriesCPreferredStockMember2021-09-300001782627wbev:MultiplierCapitalMemberwbev:TermLoanMember2020-01-012020-12-310001782627us-gaap:RetainedEarningsMember2020-12-310001782627us-gaap:RedeemableConvertiblePreferredStockMember2021-01-012021-06-300001782627us-gaap:LineOfCreditMember2021-01-012021-09-3000017826272021-09-300001782627wbev:SeriesFRedeemableConvertiblePreferredStockMember2021-01-012021-09-300001782627us-gaap:RevolvingCreditFacilityMemberwbev:WesternAllianceBankMember2015-11-012015-11-010001782627wbev:MultiplierCapitalMembersrt:MinimumMemberwbev:TermLoanMember2017-12-310001782627wbev:TermLoanMember2020-07-012020-09-300001782627us-gaap:RetainedEarningsMember2021-06-300001782627wbev:BoutiqueWineDistributorMember2021-05-012021-05-310001782627wbev:BoutiqueWineDistributorMember2020-07-012020-09-300001782627us-gaap:SeriesEPreferredStockMember2021-01-012021-06-300001782627us-gaap:TreasuryStockMember2019-12-3100017826272021-07-012021-09-300001782627us-gaap:MachineryAndEquipmentMember2020-12-310001782627wbev:BoutiqueWineDistributorMemberus-gaap:SeriesFPreferredStockMember2021-05-310001782627wbev:TwoThousandThirteenEquityIncentivePlanMember2021-01-012021-09-300001782627us-gaap:SeriesDPreferredStockMember2021-09-300001782627wbev:EmployeePromissoryNotesMember2021-01-012021-09-300001782627us-gaap:CorporateNonSegmentMember2021-07-012021-09-300001782627us-gaap:MachineryAndEquipmentMember2021-09-300001782627us-gaap:WarrantMember2021-01-012021-09-300001782627wbev:SeriesSeedPreferredStockMember2020-12-310001782627us-gaap:CommonStockMember2020-12-310001782627us-gaap:RetainedEarningsMember2019-12-310001782627wbev:DirectToConsumerDTCMember2020-07-012020-09-3000017826272021-01-012021-09-300001782627wbev:SeriesB1PreferredStockMember2021-09-300001782627us-gaap:CommonStockMember2021-09-300001782627us-gaap:RevolvingCreditFacilityMemberwbev:WesternAllianceBankMember2015-11-010001782627us-gaap:RedeemableConvertiblePreferredStockMember2020-06-300001782627us-gaap:RetainedEarningsMember2020-09-300001782627us-gaap:RedeemableConvertiblePreferredStockMember2021-07-012021-09-3000017826272020-06-300001782627wbev:NinthAmendedAndRestatedCertificateOfIncorporationMember2021-01-012021-09-300001782627us-gaap:PrimeRateMemberwbev:MultiplierCapitalMemberwbev:TermLoanMember2017-12-012017-12-310001782627srt:MinimumMemberus-gaap:MeasurementInputExpectedTermMember2020-09-300001782627us-gaap:SeriesEPreferredStockMember2021-09-300001782627srt:MaximumMember2021-07-012021-09-300001782627wbev:PromissoryNotesForCommonStockIssuedMember2020-12-310001782627us-gaap:CorporateNonSegmentMember2020-07-012020-09-300001782627wbev:TermLoanMember2021-07-012021-09-300001782627wbev:BoutiqueWineDistributorMember2021-01-012021-09-300001782627us-gaap:SeriesBPreferredStockMember2021-01-012021-09-300001782627wbev:WarrantsToPurchaseRedeemableConvertiblePreferredStockMember2021-07-012021-09-300001782627wbev:BoutiqueWineDistributorMemberus-gaap:SeriesFPreferredStockMember2021-05-012021-05-310001782627us-gaap:AllOtherSegmentsMember2021-07-012021-09-300001782627wbev:SeriesSeedPreferredStockMember2021-09-300001782627us-gaap:SeriesAPreferredStockMember2021-09-300001782627srt:ChiefOperatingOfficerMemberwbev:EmployeePromissoryNotesMember2021-02-012021-05-310001782627us-gaap:FurnitureAndFixturesMember2020-12-3100017826272020-01-012020-09-300001782627srt:MinimumMemberus-gaap:MeasurementInputExpectedTermMember2021-09-300001782627us-gaap:ComputerEquipmentMember2020-12-310001782627us-gaap:RedeemableConvertiblePreferredStockMember2019-12-310001782627us-gaap:AdditionalPaidInCapitalMember2019-12-310001782627wbev:WholesaleMember2021-07-012021-09-300001782627wbev:SeriesB1PreferredStockExpiringDecemberTwentyNineTwentyTwentySevenMember2021-09-300001782627wbev:TwoThousandTwelveEquityIncentivePlanMember2021-01-012021-09-300001782627wbev:MultiplierCapitalMemberwbev:TermLoanMember2020-12-310001782627wbev:DirectToConsumerDTCMember2020-01-012020-09-300001782627wbev:TermLoanMember2020-01-012020-09-300001782627us-gaap:MeasurementInputPriceVolatilityMember2021-09-300001782627wbev:EmployeePromissoryNotesMembersrt:ChiefExecutiveOfficerMember2021-05-310001782627us-gaap:SoftwareDevelopmentMember2021-09-300001782627srt:MaximumMemberus-gaap:MeasurementInputExpectedTermMember2020-09-300001782627srt:MinimumMember2021-01-012021-09-300001782627us-gaap:SeriesEPreferredStockMember2020-01-012020-12-310001782627wbev:WholesaleMember2020-01-012020-09-300001782627us-gaap:AdditionalPaidInCapitalMember2020-06-300001782627us-gaap:RevolvingCreditFacilityMemberwbev:WesternAllianceBankMember2015-10-310001782627us-gaap:CommonStockMember2020-09-300001782627wbev:WebsiteDevelopmentMember2021-09-300001782627us-gaap:AdditionalPaidInCapitalMember2020-12-310001782627wbev:MultiplierCapitalMemberwbev:TermLoanMember2021-01-012021-09-300001782627us-gaap:SeriesDPreferredStockMember2020-07-012020-09-300001782627us-gaap:CommonStockMember2021-06-300001782627wbev:TwoThousandThirteenEquityIncentivePlanMembersrt:MinimumMember2021-01-012021-09-300001782627us-gaap:FurnitureAndFixturesMember2021-09-300001782627us-gaap:SeriesBPreferredStockMember2020-12-3100017826272020-09-300001782627wbev:BoutiqueWineDistributorMember2020-01-012020-09-300001782627wbev:EmployeePromissoryNotesMembersrt:ChiefExecutiveOfficerMember2021-05-012021-05-310001782627srt:MaximumMemberus-gaap:MeasurementInputExpectedTermMember2021-09-300001782627us-gaap:LineOfCreditMemberwbev:PacificMercantileBankMember2021-09-300001782627us-gaap:SeriesCPreferredStockMember2020-12-310001782627us-gaap:TreasuryStockMember2021-06-300001782627wbev:TwoThousandTwelveEquityIncentivePlanMember2021-09-300001782627us-gaap:PrimeRateMemberus-gaap:LineOfCreditMemberwbev:PacificMercantileBankMember2020-01-012020-12-310001782627srt:MaximumMember2021-01-012021-09-300001782627us-gaap:SeriesFPreferredStockMember2021-01-012021-09-300001782627wbev:WarrantsToPurchaseRedeemableConvertiblePreferredStockMember2020-07-012020-09-300001782627us-gaap:RedeemableConvertiblePreferredStockMember2020-07-012020-09-300001782627us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2020-12-310001782627us-gaap:SubsequentEventMember2021-10-122021-10-120001782627us-gaap:LineOfCreditMember2021-07-012021-09-300001782627wbev:MultiplierCapitalMemberwbev:TermLoanMember2017-12-012017-12-310001782627us-gaap:SeriesFPreferredStockMember2021-09-30xbrli:pureiso4217:USDxbrli:sharesxbrli:shareswbev:Leasewbev:Segmentutr:Yiso4217:USD

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2021

OR

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

For the transition period from ________ to ________

Commission File Number: 001-41055

 

Winc, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

45-2988960

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1751 Berkeley St, Studio 3

Santa Monica, CA

90404

(Address of principal executive offices)

(Zip Code)

 

(800) 297-1760

(Registrant’s telephone number, including area code)

Not Applicable.

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

WBEV

 

The NYSE American

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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

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

As of December 8, 2021, the registrant had 13,159,170 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

4

Item 1.

Condensed Consolidated Financial Statements (unaudited)

 

 

Condensed Consolidated Balance Sheets (unaudited)

4

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)

5

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit (unaudited)

6

 

Condensed Consolidated Statements of Cash Flows (unaudited)

7

 

Notes to Unaudited Condensed Consolidated Financial Statements (unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

36

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

76

Item 3.

Defaults Upon Senior Securities

76

Item 4.

Mine Safety Disclosures

76

Item 5.

Other Information

76

Item 6.

Exhibits

77

Signatures

78

 

 

 

 

i


 

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or this Quarterly Report, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements contained in this Quarterly Report other than statements of historical fact, are forward-looking statements, including statements regarding:

Estimates of our total addressable market, future results of operations, financial position, research and development costs, capital requirements and our needs for additional financing.
Our expectations about market trends and our ability to capitalize on these trends.
The impact on our business, financial condition and results of operation from the ongoing and global COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide.
Our ability to effectively and efficiently develop new brands of wines and introduce products in beverage categories beyond wine.
Our ability to efficiently increase online consumer acquisition.
Our ability to increase awareness of our portfolio of brands in order to successfully compete with other companies.
Our ability to maintain and improve our technology platform supporting our Winc digital platform.
Our ability to maintain and expand our relationship with wholesale distributors and retailers.
Our ability to continue to operate in a heavily regulated environment.
Our ability to establish and maintain intellectual property protection or avoid claims of infringement.
Our ability to hire and retain qualified personnel.
Our ability to obtain adequate financing.

The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties, and assumptions, including those described under the sections in this Quarterly Report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Any forward-looking statements made herein speak only as of the date of this Quarterly Report, and you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or achievements reflected in the forward-looking statements will be achieved or will occur. Except as required by applicable law, we undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report or to conform these statements to actual results or revised expectations.

 

GENERAL

Unless the context otherwise requires, all references in this Quarterly Report to “we,” “us,” “our,” “Winc” or the “Company” refer to Winc, Inc. and its consolidated subsidiaries.

All reports we file with the SEC are available for download free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC’s website at www.sec.gov. We also make electronic copies of our reports available for download, free of charge, through our investor relations website at ir.winc.com as soon as reasonably practicable after filing such material with the SEC.

We may announce material business and financial information to our investors using our investor relations website at ir.winc.com. We therefore encourage investors and others interested in Winc to review the information that we make available on our website, in addition to following our filings with the SEC, webcasts, press releases and conference calls. Information contained on our website is not part of this Quarterly Report.

 

2


 

 

Risk Factor Summary

Our business is subject to numerous risks and uncertainties, including those described in Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

We have a history of net losses and we may not be able to achieve or maintain profitability in the future.
Our historical growth may not be indicative of our future growth and, if we continue to grow rapidly, we may not be able to effectively manage our growth or evaluate our future prospects. If we fail to effectively manage our future growth or evaluate our future prospects, our business could be adversely affected.
Our quarterly operating results may fluctuate, which could cause our stock price to decline.
We must expend resources to maintain consumer awareness of our brand, build brand loyalty and generate interest in our brands. As our marketing strategies and channels evolve, our efforts may not be successful.
The success of our business depends heavily on the strength of brands, and our brands and reputation may be diminished due to real or perceived quality, safety, efficacy or environmental impact issues with our brands, which could have an adverse effect on our business, financial condition, results of operations and prospects.
If we fail to cost-effectively acquire new consumers or retain our existing consumers, our business could be adversely affected. Our sales and profit are dependent upon our ability to expand our existing consumer relationships and acquire new consumers.
Our ability to maintain our competitive position is largely dependent on the services of our senior management and other key personnel.
We rely on third-party suppliers, producers, retailers and other vendors, and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.
Our business may be adversely affected if we are unable to provide our consumers with a technology platform that is able to respond and adapt to rapid changes in technology, if our platform encounters disruptions in usability or if our consumers find our platform less usable or attractive than our competitors’.
Consumer demand for wine could decline for a variety of reasons. Reduced demand could harm our results of operations, financial condition and prospects.
The occurrence of an environmental catastrophe could disrupt our business. Climate change, wildfires, disease, pests, weather conditions and problems with water supply could also have adverse effects on our business.
Due to the legacy alcohol beverage distribution system in the United States, we are heavily reliant on wholesale distributors and government agencies that resell Alcoholic Beverages in all states. A significant reduction in wholesale distributor demand for our wines would materially and adversely affect our sales and profitability.
The consumer reception of the launch and expansion of our brands is inherently uncertain and may present new and unknown risks and challenges in production and marketing that we may fail to manage optimally and which could have a materially adverse effect on our business, results of operations and financial results.
If we are unable to obtain adequate supplies of premium grapes and bulk wine from third-party grape growers and bulk wine suppliers, the quantity or quality of our annual production of wine could be adversely affected, causing a negative impact on our business, results of operations and financial condition.
As a producer of Alcoholic Beverages, we are regularly the subject of regulatory reviews, proceedings and audits by governmental entities, any of which could result in an adverse ruling or conclusion, and which could have a material adverse effect on our business, financial condition, results of operations and future prospects.

3


 

PART I—FINANCIAL INFORMATION

Winc, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

1,612

 

 

$

7,008

 

Accounts receivable, net of allowance for doubtful accounts and sales returns of
$
0.7 million and $0.2 million as of September 30, 2021 and December 31, 2020, respectively

 

 

2,886

 

 

 

1,505

 

Inventory

 

 

22,371

 

 

 

11,880

 

Prepaid expenses and other current assets

 

 

4,463

 

 

 

3,046

 

Total current assets

 

 

31,332

 

 

 

23,439

 

Property and equipment, net

 

 

826

 

 

 

654

 

Intangible assets, net

 

 

9,834

 

 

 

 

Other assets

 

 

2,209

 

 

 

131

 

Total assets

 

$

44,201

 

 

$

24,224

 

Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,482

 

 

$

3,673

 

Accrued liabilities

 

 

6,136

 

 

 

4,759

 

Contract liabilities

 

 

10,995

 

 

 

8,691

 

Current portion of long-term debt

 

 

1,205

 

 

 

1,526

 

Line of credit

 

 

5,500

 

 

 

 

Total current liabilities

 

 

29,318

 

 

 

18,649

 

Deferred rent

 

 

139

 

 

 

223

 

Warrant liabilities

 

 

3,746

 

 

 

1,067

 

Paycheck Protection Program note payable

 

 

 

 

 

1,364

 

Long-term debt, net

 

 

 

 

 

812

 

Early exercise stock option liability

 

 

1,974

 

 

 

 

Other liabilities

 

 

1,433

 

 

 

496

 

Total liabilities

 

 

36,610

 

 

 

22,611

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.0001 par value, 80,083,782 and 71,512,354 shares authorized, 8,384,906 and 7,266,986 shares issued and outstanding, aggregate liquidation preference of $87,385 and $71,746 as of September 30, 2021 and December 31, 2020, respectively

 

 

68,884

 

 

 

56,462

 

Stockholders’ deficit:

 

 

 

 

 

 

Common stock, $0.0001 par value, 115,490,000 and 106,910,000 shares authorized as of September 30, 2021 and December 31, 2020, respectively, 3,153,906 and 945,794, shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

2

 

 

 

1

 

Treasury stock (168,750 shares outstanding as of both September 30, 2021 and December 31, 2020)

 

 

(7

)

 

 

(7

)

Additional paid-in capital

 

 

4,854

 

 

 

2,229

 

Accumulated deficit

 

 

(66,142

)

 

 

(57,072

)

Total stockholders’ deficit

 

 

(61,293

)

 

 

(54,849

)

Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit

 

$

44,201

 

 

$

24,224

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

Winc, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net revenues

 

$

18,457

 

 

$

17,848

 

 

$

53,573

 

 

$

47,014

 

Cost of revenues

 

 

10,653

 

 

 

10,302

 

 

 

30,605

 

 

 

28,525

 

Gross profit

 

 

7,804

 

 

 

7,546

 

 

 

22,968

 

 

 

18,489

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Marketing

 

 

3,700

 

 

 

4,824

 

 

 

11,678

 

 

 

11,772

 

Personnel

 

 

7,153

 

 

 

2,055

 

 

 

12,540

 

 

 

5,521

 

General and administrative

 

 

2,987

 

 

 

1,744

 

 

 

8,555

 

 

 

5,117

 

Production and operation

 

 

44

 

 

 

47

 

 

 

97

 

 

 

136

 

Creative development

 

 

131

 

 

 

19

 

 

 

287

 

 

 

73

 

Total operating expenses

 

 

14,015

 

 

 

8,689

 

 

 

33,157

 

 

 

22,619

 

Loss from operations

 

 

(6,211

)

 

 

(1,143

)

 

 

(10,189

)

 

 

(4,130

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(127

)

 

 

(145

)

 

 

(548

)

 

 

(676

)

Change in fair value of warrant liabilities

 

 

248

 

 

 

 

 

 

(644

)

 

 

(229

)

Other income (expense), net

 

 

358

 

 

 

(27

)

 

 

2,330

 

 

 

(19

)

Total other income (expense), net

 

 

479

 

 

 

(172

)

 

 

1,138

 

 

 

(924

)

Loss before provision for income taxes

 

 

(5,732

)

 

 

(1,315

)

 

 

(9,051

)

 

 

(5,054

)

Income tax expense

 

 

1

 

 

 

9

 

 

 

17

 

 

 

15

 

Net loss

 

$

(5,733

)

 

$

(1,324

)

 

$

(9,068

)

 

$

(5,069

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(2.55

)

 

$

(1.49

)

 

$

(4.72

)

 

$

(5.70

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

2,252,128

 

 

 

889,559

 

 

 

1,922,559

 

 

 

889,559

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

Winc, Inc.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

(Unaudited)

(In thousands, except share amounts)

 

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Treasury Stock

 

 

Promissory Notes for Common

 

 

Additional Paid-in

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Stock Issued

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2020

 

 

7,266,986

 

 

$

56,462

 

 

 

945,794

 

 

$

1

 

 

 

168,750

 

 

$

(7

)

 

$

-

 

 

$

2,229

 

 

$

(57,072

)

 

$

(54,849

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

172

 

 

 

 

 

 

172

 

Stock option exercises

 

 

 

 

 

 

 

 

2,109,308

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1,627

 

 

 

 

 

 

1,628

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Employee promissory notes issued for the exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,453

)

 

 

 

 

 

 

 

 

(3,453

)

Issuance of Series E Preferred Stock, net of $499 of issuance costs

 

 

332,220

 

 

 

4,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series F Preferred Stock, net of $694 of issuance costs

 

 

714,272

 

 

 

7,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series F Preferred Stock in connection with an acquisition

 

 

71,428

 

 

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,337

)

 

 

(3,337

)

Balance at June 30, 2021

 

 

8,384,906

 

 

 

68,896

 

 

 

3,055,102

 

 

 

2

 

 

 

168,750

 

 

 

(7

)

 

 

(3,453

)

 

 

4,033

 

 

 

(60,409

)

 

 

(59,834

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

819

 

 

 

 

 

 

819

 

Stock option exercises

 

 

 

 

 

 

 

 

15,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

 

 

 

 

 

29

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27

)

 

 

 

 

 

(27

)

Forgiveness of promissory notes receivable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,453

 

 

 

 

 

 

 

 

 

3,453

 

Issuance costs of Series E preferred stock

 

 

 

 

 

(12

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,733

)

 

 

(5,733

)

Balance at September 30, 2021

 

 

8,384,906

 

 

$

68,884

 

 

 

3,070,934

 

 

$

2

 

 

 

168,750

 

 

$

(7

)

 

$

-

 

 

$

4,854

 

 

$

(66,142

)

 

$

(61,293

)

 

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2019

 

 

6,401,491

 

 

$

49,629

 

 

 

889,544

 

 

$

1

 

 

 

168,750

 

 

$

(7

)

 

$

1,936

 

 

$

(50,114

)

 

$

(48,184

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

110

 

 

 

 

 

 

110

 

Issuance of Series D Preferred Stock, net of $1,831 of issuance costs

 

 

632,753

 

 

 

5,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,746

)

 

 

(3,746

)

Balance at June 30, 2020

 

 

7,034,244

 

 

 

54,962

 

 

 

889,544

 

 

 

1

 

 

 

168,750

 

 

 

(7

)

 

 

2,046

 

 

 

(53,860

)

 

 

(51,820

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64

 

 

 

 

 

 

64

 

Issuance of Series D preferred stock, net of $402 of issuance costs

 

 

32,631

 

 

 

(33

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance costs of Series E preferred stock

 

 

 

 

 

(436

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,324

)

 

 

(1,324

)

Balance at September 30, 2020

 

 

7,066,875

 

 

$

54,493

 

 

 

889,544

 

 

$

1