Fresh Vine Wine Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to those statements as included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. See “Cautionary Note Regarding Forward-looking Statements”, included elsewhere in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in Part I “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and in our subsequently filed documents with the SEC.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to those statements as included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. See “Cautionary Note Regarding Forward-looking Statements” and Part II “Item 1A. Risk Factors, included elsewhere in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in Part I “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and in our subsequently filed documents with the SEC.

Previous wording

Brand recognition: As we expand our marketing presence and drive visibility through traditional and modern marketing methods, we expect to build awareness and name recognition for Fresh Vine Wine in consumers’ minds. Brand awareness will be built substantially through social media channels. Our brand, and to a large extent our direct-to-consumer sales outlet, has historically been dependent on the image and popularity of, and affinity towards, Nina Dobrev and Julianne Hough. Ms. Dobrev and Ms. Hough served as celebrity spokespersons and ambassadors of our company, and actively endorsed our wines on their sizable social media and other outlets pursuant to agreements that granted us licenses to use their pre-approved name, likeness, image, and other indicia of identity, as well as certain content published on their social media and other channels, on and in conjunction with the sale and related pre-approved advertising and promotion of our wine. Such license agreements terminated on September 7, 2023 and, as a result, we will be required to refocus our marketing and brand promotion efforts. See “Item 1A Risk Factors - We have relied heavily on celebrities to endorse our wines and market our brand pursuant to license agreements which have been terminated.”

Current wording

Brand recognition: As we drive visibility through traditional and modern marketing methods, we expect to build awareness and name recognition for Fresh Vine Wine in consumers’ minds. Brand awareness will be built substantially through social media channels.

Previous wording

While we seek to increase revenue across all channels, we expect the majority of our future revenue to be driven through the wholesale channel. We intend to maintain and expand relationships with existing distributors and form relationships with new distributors as we work to grow the Company. With multiple varietals within the Fresh Vine Wine portfolio, we consider ourselves to be a ‘one-stop shop’ for better-for-you wines. We continue to innovate with new products at competitive price points and strive to enhance the experience as we increase revenue with new and existing consumers.

Current wording

While we seek to increase revenue across all channels, we expect the majority of our future revenue to be driven through the direct to consumer channel. We intend to maintain and expand relationships with existing distributors and form relationships with new distributors as we work to grow the Company. With multiple varietals within the Fresh Vine Wine portfolio, we consider ourselves to be a ‘one-stop shop’ for better-for-you wines. We continue to innovate with new products at competitive price points and strive to enhance the experience as we increase revenue with new and existing consumers.

Previous wording

Cost of revenues is comprised of all direct product costs such as juice, bottles, caps, corks, labels, and capsules. Additionally, we also categorize boxes and quality assurance testing within our cost of revenues. Fresh Vine expects that cost of revenues will decrease as net revenue decreases.

Current wording

Cost of revenues is comprised of all direct product costs such as juice, bottles, caps, corks, labels, and capsules. Additionally, we also categorize boxes and quality assurance testing within our cost of revenues as well as inventory write downs. Fresh Vine expects that cost of revenues will decrease as net revenue decreases.

Previous wording

Comparison of the Three months ended March 31, 2024 and 2023

Current wording

Comparison of the Three and Six months ended June 30, 2024 and 2023

Previous wording

For the three months ended March 31, 2024, selling, general and administrative expenses decreased 34%, compared to the three months ended March 31, 2023. The decrease related to selling expenses was largely driven by terminations of consultants and contractors in the first quarter of 2024 compared to the first quarter of 2023, as well as less travel since overall sales have decreased. General and administrative expenses saw an increase attributed to an increase in legal expenses quarter over quarter due to the pending lawsuits described in Part II, Item 1 (Legal Proceedings) and the anticipated Merger with Notes Live, Inc. The decrease in marketing expenses primarily resulted from decreased advertising, social media marketing, tastings, and other promotion materials and events as selling and marketing expenses are directly related to sale trends.

Current wording

For the three and six months ended June 30, 2024, selling, general and administrative expenses decreased 58% and 47%, respectively, compared to the three and six months ended June 30, 2023. The decrease related to selling expenses was largely driven by terminations of consultants and contractors in 2024 compared to the same period of 2023, as well as less travel since overall sales have decreased. General and administrative expenses decreased as the workforce decreased as well as general insurance and legal expenses. The decrease in marketing expenses primarily resulted from decreased advertising, social media marketing, tastings, and other promotion materials and events as selling and marketing expenses are directly related to sale trends.

Previous wording

Net cash used in operating activities was ($332,814) and ($2,091,809) for the three months ended March 31, 2024 and 2023, respectively. Cash used in operating activities decreased in the three months ended March 31, 2024 primarily because of one-time expenses related to the settlement payable and accrued compensation of approximately $1.7 million paid to the former Chief Executive Officer in 2023.

Current wording

Net cash used in operating activities was ($946,562) and ($4,218,620) for the six months ended June 30, 2024 and 2023, respectively. Cash used in operating activities decreased in the six months ended June 30, 2024 primarily because of one-time expenses related to the settlement payable and accrued compensation of approximately $1.7 million paid to the former Chief Executive Officer in 2023.

Previous wording

Net cash provided by financing activities was $105,325 and $2,615,014 for the three months ended March 31, 2024 and 2023, respectively. The difference is mostly attributed to the Rights Offering of $2,615,014 during the three months ended March 31, 2023.

Current wording

Net cash provided by financing activities was $805,017 and $2,615,014 for the six months ended June 30, 2024 and 2023, respectively. The difference is mostly attributed to the Rights Offering of $2,615,014 in 2023 compared to the Issuance of Preferred Stock of $805,017 in 2024.

Previous wording

We have incurred losses and negative cash flows from operations since our inception in May 2019, including net losses of approximately $1.2 million and $2.0 million during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of approximately $27.7 million and a total stockholders’ deficit of approximately $2.0 million. We expect to incur losses in future periods as we continue to operate our business and incur expenses associated with being a public company.

Current wording

We have incurred losses and negative cash flows from operations since our inception in May 2019, including net losses of approximately $2.1 million and $6.4 million during the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of approximately $28.6 million and a total stockholders’ deficit of approximately $2.2 million. We expect to incur losses in future periods as we continue to operate our business and incur expenses associated with being a public company.

Previous wording

As of March 31, 2024, we had $108,851 in cash and restricted cash, accounts receivable of $48,982, inventory of $172,332, prepaid expenses of $31,865 and deferred offering costs of $22,850. On March 31, 2024, current assets amounted to approximately $385,000 and current liabilities were $2.9 million, resulting in a working capital deficit (with working capital defined as current assets minus current liabilities) of approximately $2.5 million.

Current wording

As of June 30, 2024, we had approximately $195,000 in cash and restricted cash, $38,000 in accounts receivable, $101,000 in inventory and $23,000 in prepaid expenses. On June 30, 2024, current assets amounted to approximately $357,000 and current liabilities were $3.0 million, resulting in a working capital deficit (with working capital defined as current assets minus current liabilities) of approximately $2.7 million.

Previous wording

On August 2, 2023, the Company entered into a Securities Purchase Agreement with two accredited investors (the “Purchasers”) pursuant to which the Company agreed to issue and sell in a private placement shares of a newly created series of preferred stock designated as Series A Convertible Preferred Stock (the “Series A Stock”). Pursuant to the Securities Purchase Agreement, the Purchasers collectively purchased 10,000 shares of Series A Stock at a per share purchase price equal to $100.00, for total gross proceeds of $1.0 million. For a description of the Company’s offering of Series A Stock, see Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of our Annual Report on Form 10-K for the year ended December 31, 2023 under the caption “Financing Transactions.”

Current wording

On August 2, 2023, the Company entered into a Securities Purchase Agreement with two accredited investors (the “Purchasers”) pursuant to which the Company agreed to issue and sell in a private placement shares of a newly created series of preferred stock designated as Series A Convertible Preferred Stock (the “Series A Stock”). Pursuant to the Securities Purchase Agreement, the Purchasers collectively purchased 10,000 shares of Series A Stock at a per share purchase price equal to $100.00, for total gross proceeds of $1.0 million. For a description of the Company’s offering of Series A Stock, see Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of our Annual Report on Form 10-K for the year ended December 31, 2023 under the caption “Financing Transactions.” As of June 30, 2024, we had approximately $98,000 of accumulated undeclared dividends on the Series A Stock.

Previous wording

In August 2023, Fresh Vine announced that it had initiated an exploration of strategic opportunities by way of merger, acquisition, or any accretive strategic transaction to enhance stockholder value, which is a focus of the Company’s plan to increase its stockholders’ equity and regain compliance with the NYSE American’s continued listing standards. On January 25, 2024, Fresh Vine entered intoan Agreement and Plan of Merger (the “Merger Agreement”) Notes, Live, Inc., a Colorado corporation (“Notes Live”), pursuant to which, among other things, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, our newly-formed wholly-owned subsidiary will merge with and into Notes Live, with Notes Live continuing as a wholly-owned subsidiary of the Company and the surviving corporation of the merger (the “Merger”). See Part I, “Item 1 Business - Recent Developments – Anticipated Merger with Notes Live, Inc.” included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

In August 2023, Fresh Vine announced that it had initiated an exploration of strategic opportunities by way of merger, acquisition, or any accretive strategic transaction to enhance stockholder value, which is a focus of the Company’s plan to increase its stockholders’ equity and regain compliance with the NYSE American’s continued listing standards. On January 25, 2024, Fresh Vine entered into an Agreement and Plan of Merger (the “Merger Agreement”) Notes, Live, Inc., a Colorado corporation (“Notes Live”), which contemplated that, among other things, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, our newly-formed wholly-owned subsidiary would merge with and into Notes Live, with Notes Live continuing as a wholly-owned subsidiary of the Company and the surviving corporation of the merger (the “Merger”). See Part I, “Item 1 Business - Recent Developments – Anticipated Merger with Notes Live, Inc.” included in our Annual Report on Form 10-K for the year ended December 31, 2023. On July 31, 2024, the Merger Agreement was terminated.

Previous wording

On March 14, 2024, Fresh Vine filed with the Secretary of State of the State of Nevada a Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Certificate”). The Series B Certificate designates 50,000 shares of the Fresh Vine’s undesignated preferred stock as Series B Convertible Preferred Stock (“Series B Stock”) and establishes the rights and preferences of the Series B Stock. Fresh Vine’s board of directors has approved the issuance and sale of up to 20,000 shares of Series B Convertible Preferred Stock for a purchase price equal to $100.00 per share. As of May 14, 2024, Fresh Vine has received subscriptions from accredited investors for the purchase of a total of 6,785 shares of Series B Stock and has received aggregate subscription funds (gross) of $678,500. The total number of shares of Series B Stock that the Company will issue and sell has not been finally determined.

Current wording

On March 14, 2024, Fresh Vine filed with the Secretary of State of the State of Nevada a Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Certificate”). The Series B Certificate designates 50,000 shares of the Fresh Vine’s undesignated preferred stock as Series B Convertible Preferred Stock (“Series B Stock”) and establishes the rights and preferences of the Series B Stock. Fresh Vine’s board of directors has approved the issuance and sale of up to 20,000 shares of Series B Convertible Preferred Stock for a purchase price equal to $100.00 per share. As of June 30, 2024, Fresh Vine has received subscriptions from accredited investors for the purchase of a total of 9,135 shares of Series B Stock and has received aggregate subscription funds (gross) of $913,500. The total number of shares of Series B Stock that the Company will issue and sell has not been finally determined.

Previous wording

At the current reduced pace of incurring expenses and without receipt of additional financing, the Company projects that the existing cash balance will be sufficient to fund current operations through the second quarter of 2024. The Company requires additional debt or equity financing to satisfy its existing obligations, sustain existing operations, pay expenses associated with its pending business combination transaction and to satisfy financial related conditions to the closing of such transaction. See “Current Strategy — The Merger” below. Additional financing may not be available on favorable terms or at all. If additional financing is available, it may be highly dilutive to existing stockholders and may otherwise include burdensome or onerous terms. The Company’s inability to raise additional working capital in a timely manner will negatively impact the ability to fund operations, generate revenues, maintain or grow the business and otherwise execute the Company’s business plan, including its pursuit of its pending business combination transaction, leading to the reduction or suspension of operations and ultimately potentially ceasing operations altogether and initiating bankruptcy proceedings. Should this occur, the value of any investment in the Company’s securities would be adversely affected.

Current wording

At the current reduced pace of incurring expenses and without receipt of additional financing, the Company projects that the existing cash balance will be sufficient to fund current operations through the third quarter of 2024. The Company requires additional debt or equity financing to satisfy its existing obligations, sustain existing operations, pay expenses associated with continuing to pursue its plan to re-comply with the listing standards of the NYSE American stock exchange. See “Current Strategy” below. Additional financing may not be available on favorable terms or at all. If additional financing is available, it may be highly dilutive to existing stockholders and may otherwise include burdensome or onerous terms. The Company’s inability to raise additional working capital in a timely manner will negatively impact the ability to fund operations, generate revenues, maintain or grow the business and otherwise execute the Company’s business plan, including pursuing its plan to re-comply with the listing standards of the NYSE American stock exchange, leading to the reduction or suspension of operations and ultimately potentially ceasing operations altogether and initiating bankruptcy proceedings. Should this occur, the value of any investment in the Company’s securities would be adversely affected.

Previous wording

In August 2023, Fresh Vine announced that it had initiated an exploration of strategic opportunities by way of merger, acquisition, or any accretive strategic transaction to enhance stockholder value, which is a focus of the Company’s plan to increase its stockholders’ equity and regain compliance with the NYSE American’s continued listing standards. On January 25, 2024, Fresh Vine entered into the Merger Agreement. See Part I, “Item 1 Business - Recent Developments – Anticipated Merger with Notes Live, Inc.” included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

In August 2023, Fresh Vine announced that it had initiated an exploration of strategic opportunities by way of merger, acquisition, or any accretive strategic transaction to enhance stockholder value, which is a focus of the Company’s plan to increase its stockholders’ equity and regain compliance with the NYSE American’s continued listing standards. On January 25, 2024, Fresh Vine entered into the Merger Agreement. See Part I, “Item 1 Business - Recent Developments – Anticipated Merger with Notes Live, Inc.” included in our Annual Report on Form 10-K for the year ended December 31, 2023. On July 31, 2024, the Merger Agreement was terminated.

Previous wording

Although Fresh Vine has entered into the Merger Agreement and intends to consummate the Merger, there is no assurance that it will be able to successfully consummate the Merger on a timely basis, or at all. Among other conditions to the closing of the Merger, Fresh Vine is required to have cash, cash equivalent assets or other liquid assets at the closing of the Merger in an amount that equals or exceeds the “Net Cash Target,” and having no liabilities on its balance sheet or unpaid or unsatisfied obligations that will require a cash expenditure by Fresh Vine after the effective time of the Merger. If, for any reason, the Merger does not close, the Fresh Vine board of directors may elect to, among other things, attempt to complete another strategic transaction like the Merger, attempt to sell or otherwise dispose of the various assets of Fresh Vine, continue to operate the business of Fresh Vine or dissolve and liquidate its assets.

Current wording

As a result of the recent termination of the Merger Agreement, Fresh Vine management and board of directors is assessing its strategic options. The Fresh Vine board of directors may elect to, among other things, attempt to complete another strategic transaction like the Merger, attempt to sell or otherwise dispose of the various assets of Fresh Vine, continue to operate the business of Fresh Vine or dissolve and liquidate its assets.

Previous wording

If the Merger is not completed, the Fresh Vine board of directors may decide that it is in the best interests of the Fresh Vine stockholders to suspend or cease its operations, seek to dissolve the Company and liquidate its assets, or initiate bankruptcy proceedings. In that event, the amount of cash available for distribution to the Fresh Vine stockholders would depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as Fresh Vine funds its operations and incurs fees and expenses related to the Merger. In addition, if the Fresh Vine board of directors were to approve and recommend, and the Fresh Vine stockholders were to approve, a dissolution of Fresh Vine, it would be required under Nevada corporate law to pay its outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to the Fresh Vine stockholders. As a result of this requirement, a portion or all of Fresh Vine’s assets may need to be reserved pending the resolution of such obligations. In addition, Fresh Vine may be subject to litigation or other claims related to a liquidation and dissolution of the company. If a liquidation and dissolution were pursued, the Fresh Vine board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, the Fresh Vine stockholders could lose all or a significant portion of their investment in the event of a liquidation and dissolution of Fresh Vine.

Current wording

The Fresh Vine board of directors may decide that it is in the best interests of the Fresh Vine stockholders to suspend or cease its operations, seek to dissolve the Company and liquidate its assets, or initiate bankruptcy proceedings. If the Fresh Vine board of directors were to approve and recommend, and the Fresh Vine stockholders were to approve, a dissolution of Fresh Vine, it would be required under Nevada corporate law to pay its outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to the Fresh Vine stockholders. As a result of this requirement, all or a portion of Fresh Vine’s assets would need to be reserved pending the resolution of such obligations. In addition, Fresh Vine may be subject to litigation or other claims related to a liquidation and dissolution of the company. If a liquidation and dissolution were pursued, the Fresh Vine board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, the Fresh Vine stockholders could lose all or a significant portion of their investment in the event of a liquidation and dissolution of Fresh Vine.