AMSS 10-K & 10-Q changes, risk factors and insider trading

This MD&A, which should be read in conjunction with our financial statements, is organized as follows: Overview: a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends. Strategy: a description of our strategy and a discussion of recent developments, and significant divestitures, acquisitions, and investments. Recent developments: a summary of the material transactions and events that occurred during, or shortly after, the three months ended June 30, 2026. Results of operations: an analysis of our results of operations presented on a business segment basis, including Adjusted EBITDA, a non-GAAP measure. Liquidity and capital resources: an analysis of our cash flows, outstanding debt, liquidity position, and commitments. Critical accounting policies and estimates: accounting policies that are considered important to our results of operations and financial condition, require significant judgment, and involve significant management estimates. Emerging Growth Company and Smaller Reporting Company Status: a discussion of our reporting status

We are a consumer packaged goods company focused on developing, marketing, and distributing a portfolio of premium beverage brands across the wine, spirits, and functional non-alcoholic categories with the ethos of meeting the needs of the modern day consumer. Our products are primarily sold through a three-tier system to wholesale distributors, who then sell to retailers, bars, and restaurants, as well as directly to consumers through our e-commerce platforms. Our direct-to-consumer and e-commerce channel is growing, led by our non-alcoholic brands (Good Twin, which sells through its own e-commerce store and digital marketplaces, and AMASS Electrolytes, which launched direct-to-consumer during the second quarter of 2026), and we expect to continue developing direct sales alongside our three-tier wholesale distribution. Beginning in the second quarter of 2026, we report our operating results in two segments: (i) Wine & Spirits, comprising our alcoholic wine and spirits portfolios, and (ii) Non-Alcoholic and Functional, comprising our functional non-alcoholic beverage brands Good Twin and AMASS Electrolytes. Prior-period segment information has been recast to the new basis. See Note 16 to our unaudited condensed consolidated financial statements

The following table highlights summarized components of our unaudited consolidated statements of operations for the three months ended June 30, 2026 compared to three months ended June 30, 2025:

The following table highlights summarized components of our unaudited consolidated statements of operations for the six months ended June 30, 2026 compared to six months ended June 30, 2025:

Comparable Adjustments

(a) Sales from divested business unit relates to the sale of Winc.com in June 2023. All of those revenues pre-sale and associated costs are not part of our recurring business and are thus excluded from what the CODM views as regular operations, including storage costs incurred on the excess bulk wine. Operating expenses related to these revenues are also excluded from performance evaluations for the segments.

(b) The Company wrote-down inventory that was acquired as part of the Winc acquisition in 2023. When the Company sold the winc.com business, it lost its ability to sell wine unwanted on the wholesale channel through the winc.com channel. As such, excess bulk wine that was identified and written down was not considered to be a core/recurring operation for the business.

(c) The Company does not include stock-based compensation in its evaluation of performance.

(d) The Company does not include impairment loss in its evaluation of performance.

Non-Alcoholic and Functional net revenues more than doubled to $0.4 million for the second quarter of 2026 (up 132% from $0.2 million in the prior-year quarter), and grew 133% to $0.9 million for the six-month period, driven by continued growth of Good Twin (including expanded direct-to-consumer volume) and the launch of AMASS Electrolytes, which generated its first revenues in the second quarter of 2026 Wine & Spirits net revenues declined 3% for the second quarter of 2026 and 5% for the six-month period, reflecting continued portfolio optimization in the wine portfolio and the near-term deprioritization of certain legacy spirits products, partially offset by growth in Calirosa. We believe this optimization will better utilize working capital and allow for more stable growth in future periods, as marketing resources and focus can be more directed to the brands we have higher conviction behind The decline in comparable adjustments for the six-month period is due to the absence in 2026 of bulk wine sales associated with the divested Winc.com business.

Core brands

We manage our portfolio around a small number of priority core brands (Summer Water, Pizzolato MUSE, Good Twin and AMASS Electrolytes), where we concentrate marketing investment and distribution focus, and a broader set of other brands that we manage for cash flow and selective growth. Net revenues by brand grouping were as follows :

Net revenues from our core brands grew 12% for the three months and 11% for the six months ended June 30, 2026, and represented 67% of revenue attributable to brands for the second quarter of 2026 compared with 62% in the prior-year quarter. Pizzolato MUSE and Good Twin drove the increase, together with the launch of AMASS Electrolytes, partially offset by Summer Water, which reflects the timing of seasonal shipments. Other brands declined 9% for the quarter and 8% for the six-month period, driven primarily by Biokult, whose sales were disrupted by an inventory quality issue affecting product received at distributors, which resulted in returns and distributor billbacks, together with lower volume across the balance of the imported portfolio and the legacy AMASS wine and spirits labels, partially offset by growth in Calirosa and the launch of the Pizzolato non-alcoholic spritz line. Discontinued brands declined 27% and 52%, consistent with the portfolio optimization described under “Strategy” above, which deprioritized our spirits portfolio and certain legacy wine labels. Beginning with this Report we separately present discontinued brands (Gem&Bolt and the wine labels we have exited or are winding down, including the remaining Winc-legacy labels) so that the performance of the continuing other-brand portfolio is visible. As our core and priority brands become a larger share of total revenue, we expect revenue to become more capital efficient.

Trade spend and other amounts not attributed to a brand consist of trade spend (promotional allowances, distributor billbacks and chargebacks, and similar payments and credits to distributors and retailers that are recorded as reductions of revenue), together with other revenue adjustments that are recorded after the initial sale and are not attributed to an individual brand in our general ledger; they are presented as a single reconciling line rather than allocated to the brand groupings above. These amounts increased 69% to $0.3 million for the second quarter of 2026 and 50% to $0.4 million for the six-month period, reflecting expanded promotional programming behind wholesale placements for our core brands, deductions associated with the discounted sell-through of slower-moving inventory described under “Gross profit, non-GAAP” below, and approximately $0.1 million of nonrecurring distributor chargebacks and reconciliation items ($0.2 million for the six-month period); excluding these nonrecurring items, trade spend was approximately flat year over year.

Channel mix — direct-to-consumer and e-commerce

Direct-to-consumer and e-commerce net revenues increased to $0.2 million for the second quarter of 2026 from $31 thousand in the prior-year quarter, and to $0.3 million from $0.1 million for the six-month period. All of our direct-to-consumer and e-commerce net revenues for the three and six months ended June 30, 2026 related to non-alcoholic products: Good Twin, which sells through its own e-commerce store and through digital marketplaces, and AMASS Electrolytes, which launched direct-to-consumer in the second quarter of 2026. AMASS Electrolytes also commenced wholesale distribution during the quarter; those sales are presented within wholesale and other. The prior-year periods included a negligible amount of alcoholic direct-to-consumer revenue. We no longer sell alcoholic products through this channel. While direct-to-consumer remains a small share of consolidated net revenues, it carries a direct customer relationship and is a channel we expect to continue developing alongside our three-tier wholesale distribution.

Wine & Spirits gross profit, non-GAAP decreased 31% to $1.4 million (27.4% of segment net revenues) for the second quarter of 2026 from $2.1 million (39.0% of segment net revenues) for the second quarter of 2025. The largest drivers of the decline were deliberate, largely one-time actions we took to convert slower-moving inventory to cash and to rationalize the portfolio. First, we cleared slower-moving finished goods at a discount: the sale of Calirosa Añejo to a discount grocery retailer generated a gross loss, and other below-cost clearance sales added approximately $32,000 of gross loss in the quarter. Second, we recognized inventory obsolescence and write-down charges of approximately $0.1 million in the second quarter of 2026 (approximately $0.3 million for the six-month period) as we continued to clear wine inventory associated with brand rationalization and with the bulk wine and finished goods remaining from the sale of the Winc direct-to-consumer business. In addition to these items, recurring cost pressures also weighed on margin: tariffs on imported wine increased landed product cost, and freight rates rose over the prior-year period, together compressing margin on imported brands. The balance of the decline reflects unfavorable inventory variances and brand mix.

Non-Alcoholic and Functional gross profit, non-GAAP was $75 thousand (18.3% of segment net revenues) for the second quarter of 2026, compared with $61 thousand (34.7% of segment net revenues) for the second quarter of 2025; gross profit dollars grew with the revenue base while margin compressed. The compression is concentrated in Good Twin, where tariffs on imported product increased landed cost and we used expedited modes of freight to keep the brand in stock through a period of rapid growth, which increased costs. We expect these pressures to moderate as freight and inventory positions normalize.

Gross margin, non-GAAP, by channel

Gross margin by channel, on the same basis as the channel revenue table above, was as follows. Channel gross margins reflect costs directly attributable to each channel; inventory write-down and variance charges, which are not attributable to a specific channel, are presented separately:

Direct-to-consumer and e-commerce gross margin was 16.7% for the second quarter of 2026 compared with 30.7% in the prior-year quarter, and 11.9% for the six-month period compared with 51.1%. The decline principally reflects outbound parcel freight (the recurring weekly e-commerce shipping cost for Good Twin and AMASS Electrolytes, which ran approximately 44% of direct-to-consumer net revenues in the quarter), together with tariffs on imported product; prior-year margins also reflect a very small revenue base. Wholesale and other gross margin was 33.9% for the second quarter of 2026 compared with 39.0% in the prior-year quarter, and 32.2% for the six-month period compared with 35.8%, reflecting the tariff, freight and clearance-sale dynamics described above.

Product margin, non-GAAP, by brand grouping

Product margin for the brand groupings presented under “Core brands” above, on the same item-level basis as the revenue attributable to brands table, with trade spend and cost of net revenues that are recorded in our general ledger without reference to a specific item (including outbound freight, third-party logistics and fulfillment fees, warehouse labor, excise taxes, and inventory write-down and variance charges) presented as a single reconciling line, was as follows:

Core brands carried a 43.7% product margin for the second quarter of 2026 (44.9% in the prior-year quarter) and 41.6% for the six-month period, while continuing other brands declined to 28.1% from 38.2% for the quarter (reflecting the Biokult disruption, tariffs and the clearance activity described above), and discontinued brands ran at 14.2% as they wind down. The margin pressure on the portfolio is therefore concentrated in the brands we are deprioritizing, while the core brands we are investing behind held their margin profile.

The reconciling line reflects where these costs are recorded rather than a judgment that they do not relate to our brands: because they are recorded without item-level detail, they are not allocated to the brand groupings even where they are associated with particular brands. In particular, the line includes the outbound parcel freight and third-party fulfillment costs of our direct-to-consumer channel, which support our non-alcoholic core brands (Good Twin and AMASS Electrolytes); these costs are presented, together with the net revenues they support, in the direct-to-consumer and e-commerce gross profit discussion above.

Management uses product margin to evaluate the underlying unit economics of the brand portfolio and to guide marketing investment and distribution focus among brand groupings, because it isolates item-level profitability from shared fulfillment, logistics and other costs that are managed at the consolidated level. Because product margin excludes these recurring costs, it is not a measure of overall profitability and should not be considered a substitute for gross profit or gross margin determined in accordance with GAAP.

To reduce repetition across our non-GAAP presentations, we present adjusted gross profit and adjusted gross margin within this gross profit discussion. The following bridge presents consolidated gross profit excluding the cost-of-revenue items that are included in the Adjusted EBITDA adjustments described under “Adjusted EBITDA” below (inventory write-downs and variance and bulk wine, net). Adjusted gross margin is computed on consolidated net revenues without adjustment. These measures are non-GAAP; the adjustment amounts agree to the corresponding lines of the Adjusted EBITDA reconciliation.