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Winc raises $3+ million in latest offering, but fails to disclose federal court case brought against it by state of Ohio

NOTE: Full legal filings are available online for Wine Executive News premium subscriber who may log in at the following links:

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Winc says it raised more than $3 million by late October as part of their $17 million investor solicitation despite making no mention in its Offering Circular of the Federal Court lawsuit brought against it by the Ohio State  Attorney General.

 

The lawsuit was brought on July 8 in U.S. District Court for the Southern District of Ohio, (Eastern Division) against:

 

  • Wine.Com, Inc.,
  • U.S. Beverage Advertising Corp.,
  • Pacific Wine & Spirits, LLC,
  • ShakeStir, LLC,
  • Winc, Inc.,
  • Houdini, Inc.,
  • and AWS Hopkins, LLC

 

The legal action asks for a preliminary injunction enjoining the defendants from shipping any wine or spirituous liquor into the State of Ohio.

 

According to the July 20, 2020 issue of the Wine Spectator:

“Executives at Winc believe their company was incorrectly named in Yost’s lawsuit, as it has paid taxes to the state and holds all permits necessary to send wine into Ohio.

The court has given Winc until Nov. 11, to respond.

Winc over-delivers in Ohio sting operation

According to the Ohio Attorney General’s motion for a preliminary Injunction, the Ohio Division of Liquor Control conducted a sting operation in May 2020.

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According to the Division shipping data, Winc directly shipped approximately [redacted] packages containing wine to Ohio consumers in 2019. The number of packages delivered were derived “from shipping data reported to the Division by common carriers FedEx and UPS

Winc offers boiler-plate legal disclosure, no mention of lawsuit

Winc offering statement page 8:

Our wine business relies substantially on state laws that authorize the shipping of wine by out-of-state producers directly to in-state consumers. Those laws are relatively new in many states, and it is common for the laws to be modified or regulators to change prior interpretations of governing licensing requirements.

While most states permit direct-to-consumer shipping, some states on occasion have proposed legislation that would prevent the company from selling wine directly to consumers or to restrict the total amount of wine that we may ship to those states.

This proposed legislation, or other new regulations, requirements or taxes, could harm our business and operating results. Future legal or regulatory challenges to the wine industry could also harm our business and impact our operating results.

Winc offering circular, Page 21:

The company is involved, from time to time, in disputes that are incidental to its business. In management’s opinion, none of these legal matters, individually or in the aggregate, are likely to have a material adverse effect on the company’s financial position or results of operations.

Winc offering circular, F-24

The Company is involved, from time to time, in disputes that are incidental to its business.  Management has reviewed these matters to determine if reserves are required for losses that  are probable to materialize and reasonable to estimate in accordance with the authoritative guidance on accounting for contingencies.

Management evaluates such reserves, if any, based upon several criteria including the merits of each claim, settlements discussions and outside legal counsel, as well as indemnification of amounts expended by the Company’s insurers or others, if any.

In management’s opinion, none of these legal matters, individually or in the aggregate, are likely to have a material adverse effect on the Company’s combined financial position or results of operations.

Recent Winc Coverage

Full documents for Wine Executive News premium subscriber who may log in at the following links: CCBill   <<>>   Stripe

  • Ohio Attorney General Complaint for Injunctive Relief
  • Ohio Attorney General Motion for Preliminary Injunction
  • Winc Offering Circular, August 12, 2020