0001579823 false --12-31 Q2 Yes Yes 13,155 5,560 0001579823 2021-01-01 2021-06-30 0001579823 2021-08-06 0001579823 2021-06-30 0001579823 2020-12-31 0001579823 2021-04-01 2021-06-30 0001579823 2020-04-01 2020-06-30 0001579823 2020-01-01 2020-06-30 0001579823 us-gaap:CommonStockMember 2020-12-31 0001579823 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001579823 NBEV:ObligationToIssueCommonStockMember 2020-12-31 0001579823 NBEV:NotesReceivableForStockSubscriptionMember 2020-12-31 0001579823 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001579823 us-gaap:RetainedEarningsMember 2020-12-31 0001579823 us-gaap:CommonStockMember 2021-01-01 2021-06-30 0001579823 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-06-30 0001579823 NBEV:ObligationToIssueCommonStockMember 2021-01-01 2021-06-30 0001579823 NBEV:NotesReceivableForStockSubscriptionMember 2021-01-01 2021-06-30 0001579823 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-06-30 0001579823 us-gaap:RetainedEarningsMember 2021-01-01 2021-06-30 0001579823 us-gaap:CommonStockMember 2021-06-30 0001579823 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001579823 NBEV:ObligationToIssueCommonStockMember 2021-06-30 0001579823 NBEV:NotesReceivableForStockSubscriptionMember 2021-06-30 0001579823 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0001579823 us-gaap:RetainedEarningsMember 2021-06-30 0001579823 us-gaap:CommonStockMember 2019-12-31 0001579823 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001579823 NBEV:ObligationToIssueCommonStockMember 2019-12-31 0001579823 NBEV:NotesReceivableForStockSubscriptionMember 2019-12-31 0001579823 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001579823 us-gaap:RetainedEarningsMember 2019-12-31 0001579823 2019-12-31 0001579823 us-gaap:CommonStockMember 2020-01-01 2020-06-30 0001579823 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-06-30 0001579823 NBEV:ObligationToIssueCommonStockMember 2020-01-01 2020-06-30 0001579823 NBEV:NotesReceivableForStockSubscriptionMember 2020-01-01 2020-06-30 0001579823 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-06-30 0001579823 us-gaap:RetainedEarningsMember 2020-01-01 2020-06-30 0001579823 us-gaap:CommonStockMember 2020-06-30 0001579823 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001579823 NBEV:ObligationToIssueCommonStockMember 2020-06-30 0001579823 NBEV:NotesReceivableForStockSubscriptionMember 2020-06-30 0001579823 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001579823 us-gaap:RetainedEarningsMember 2020-06-30 0001579823 2020-06-30 0001579823 us-gaap:WarrantMember 2021-01-01 2021-06-30 0001579823 2020-01-01 2020-12-31 0001579823 NBEV:SecuritiesPurchaseAgreementMember us-gaap:CommonStockMember us-gaap:PrivatePlacementMember 2021-02-27 2021-02-28 0001579823 NBEV:SecuritiesPurchaseAgreementMember us-gaap:PrivatePlacementMember 2021-02-28 0001579823 NBEV:SecuritiesPurchaseAgreementMember 2021-06-30 0001579823 srt:ScenarioForecastMember NBEV:AriixLLCMember us-gaap:SubsequentEventMember 2021-07-01 2022-06-30 0001579823 srt:ScenarioForecastMember us-gaap:SubsequentEventMember 2022-06-30 0001579823 us-gaap:SubsequentEventMember NBEV:PaycheckProtectionProgramLoanMember srt:ScenarioForecastMember 2021-07-01 2022-06-30 0001579823 srt:ScenarioForecastMember NBEV:AriixLLCMember NBEV:SeniorSecuredNotesMember 2022-06-30 0001579823 us-gaap:SubsequentEventMember srt:ScenarioForecastMember NBEV:ThroughAugust2022Member 2022-06-30 0001579823 NBEV:AriixMergerAgreementMember NBEV:AriixMember 2020-09-30 0001579823 NBEV:AriixMember 2020-11-15 2020-11-16 0001579823 NBEV:AriixMember 2020-11-16 0001579823 NBEV:AriixMergerAgreementMember 2021-01-29 0001579823 NBEV:AriixMergerAgreementMember NBEV:FirstAnniversaryMember 2021-01-27 2021-01-29 0001579823 NBEV:AriixMergerAgreementMember NBEV:AriixMember 2020-11-15 2020-11-16 0001579823 NBEV:AriixMergerAgreementMember NBEV:AriixMember 2021-01-27 2021-01-29 0001579823 NBEV:AriixMergerAgreementMember 2021-01-28 2021-01-29 0001579823 NBEV:AriixMergerAgreementMember 2021-01-01 2021-06-30 0001579823 NBEV:AriixMergerAgreementMember NBEV:AriixMember 2021-01-01 2021-06-30 0001579823 NBEV:AriixMergerAgreementMember srt:MinimumMember 2021-06-30 0001579823 NBEV:AriixMergerAgreementMember srt:MaximumMember 2021-06-30 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:AriixMember 2020-11-14 2020-11-16 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:AriixMember 2020-01-01 2020-12-31 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:AriixMember 2020-11-16 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:AriixMember 2021-01-01 2021-03-31 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:SellersAgentMember NBEV:AriixMember 2021-01-01 2021-03-31 0001579823 NBEV:InterimAriixMergerConsiderationMember srt:MaximumMember 2021-05-15 2021-05-16 0001579823 NBEV:InterimAriixMergerConsiderationMember srt:MaximumMember NBEV:AriixMember 2021-05-15 2021-05-16 0001579823 NBEV:InterimAriixMergerConsiderationMember NBEV:AriixMember 2021-05-15 2021-05-16 0001579823 NBEV:InterimAriixMergerConsiderationMember 2021-05-16 0001579823 NBEV:AmendedAriixMergerAgreementMember srt:MaximumMember 2021-01-01 2021-03-31 0001579823 NBEV:AmendedAriixMergerAgreementMember 2021-01-01 2021-06-30 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:FixedSharesMember 2021-01-01 2021-06-30 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:VariableSharesMember 2021-01-01 2021-06-30 0001579823 NBEV:AmendedAriixMergerAgreementMember 2020-01-01 2020-12-31 0001579823 NBEV:AmendedAriixMergerAgreementMember 2020-12-31 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:FixedSharesMember NBEV:AriixMember 2020-12-31 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:VariableSharesMember NBEV:AriixMember 2020-12-31 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:FixedSharesMember 2021-05-13 2021-05-14 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:FixedSharesMember us-gaap:SubsequentEventMember 2022-01-15 2022-01-16 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:FixedSharesMember 2021-05-14 0001579823 2021-11-15 2021-11-16 0001579823 NBEV:AssetPurchaseAgreementMember 2021-05-29 2021-06-02 0001579823 NBEV:AssetPurchaseAgreementMember 2021-06-02 0001579823 NBEV:FixedSharesMember 2021-06-30 0001579823 NBEV:FixedSharesMember 2020-12-31 0001579823 NBEV:VariableSharesMember 2021-06-30 0001579823 NBEV:VariableSharesMember 2020-12-31 0001579823 NBEV:LIMUCompanyLLCMember 2021-06-30 0001579823 NBEV:LIMUCompanyLLCMember 2020-12-31 0001579823 NBEV:ZennoaLLCMember 2021-06-30 0001579823 NBEV:ZennoaLLCMember 2020-12-31 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:FixedAndVariablesSharesMember 2020-01-01 2020-12-31 0001579823 NBEV:AmendedAriixMergerAgreementMember NBEV:FixedAndVariablesSharesMember 2020-12-31 0001579823 NBEV:LIMUCompanyLLCMember 2019-05-28 2019-05-31 0001579823 NBEV:LIMUCompanyLLCMember 2019-05-31 0001579823 NBEV:AriixLLCMember 2019-05-31 0001579823 2019-05-31 0001579823 NBEV:ZennoaLLCMember 2019-11-26 2019-11-27 0001579823 NBEV:ZennoaLLCMember 2019-11-27 0001579823 NBEV:AriixMember 2019-11-25 2019-11-27 0001579823 NBEV:ZennoaLLCMember 2019-11-25 2019-11-27 0001579823 NBEV:DerivativeLiabilitiesMember NBEV:VariableSharesMember 2020-12-31 0001579823 NBEV:DerivativeLiabilitiesMember NBEV:FixedSharesMember 2020-12-31 0001579823 NBEV:DerivativeLiabilitiesMember 2020-12-31 0001579823 NBEV:OtherMember 2020-12-31 0001579823 NBEV:DerivativeLiabilitiesMember NBEV:VariableSharesMember 2021-01-01 2021-06-30 0001579823 NBEV:DerivativeLiabilitiesMember NBEV:FixedSharesMember 2021-01-01 2021-06-30 0001579823 NBEV:DerivativeLiabilitiesMember 2021-01-01 2021-06-30 0001579823 NBEV:OtherMember 2021-01-01 2021-06-30 0001579823 NBEV:DerivativeLiabilitiesMember NBEV:VariableSharesMember 2021-06-30 0001579823 NBEV:DerivativeLiabilitiesMember NBEV:FixedSharesMember 2021-06-30 0001579823 NBEV:DerivativeLiabilitiesMember 2021-06-30 0001579823 NBEV:OtherMember 2021-06-30 0001579823 NBEV:BrandsWithinReachLLCMember 2020-09-30 0001579823 NBEV:BrandsWithinReachLLCMember 2020-09-01 2020-09-30 0001579823 NBEV:BrandsWithinReachLLCMember 2020-12-31 0001579823 NBEV:BWRAndUSTetailBrandMember 2020-04-01 2020-06-30 0001579823 NBEV:BWRAndUSTetailBrandMember 2020-01-01 2020-06-30 0001579823 2021-12-31 0001579823 NBEV:GouldAgreementMember NBEV:GregoryGouldMember 2021-03-02 2021-03-03 0001579823 NBEV:GregoryAGouldMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-04-01 2021-06-30 0001579823 NBEV:GregoryAGouldMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-01-01 2021-06-30 0001579823 NBEV:GregoryAGouldMember 2021-06-30 0001579823 NBEV:GregoryAGouldMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-04-01 2020-06-30 0001579823 NBEV:GregoryAGouldMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-01-01 2020-06-30 0001579823 2021-03-31 0001579823 2020-03-31 0001579823 NBEV:TCICoLtdMember 2021-06-30 0001579823 NBEV:TCICoLtdMember NBEV:ThirdPartyCustomersMember 2021-01-01 2021-06-30 0001579823 NBEV:TCICoLtdMember 2021-01-01 2021-06-30 0001579823 2019-06-01 2019-06-30 0001579823 srt:MinimumMember 2021-06-30 0001579823 srt:MaximumMember 2021-06-30 0001579823 NBEV:SeniorSecuredNotesMember 2021-06-30 0001579823 NBEV:SeniorSecuredNotesMember 2020-12-31 0001579823 NBEV:PaycheckProtectionProgramLoanDueAprilTwoThousandTwentyTwoMember 2020-12-31 0001579823 NBEV:PaycheckProtectionProgramLoanDueAprilTwoThousandTwentyTwoMember 2021-01-01 2021-06-30 0001579823 NBEV:PaycheckProtectionProgramLoanDueAprilTwoThousandTwentyTwoMember 2020-01-01 2020-12-31 0001579823 NBEV:PaycheckProtectionProgramLoanDueAprilTwoThousandTwentyTwoMember 2021-06-30 0001579823 NBEV:PaycheckProtectionProgramLoanDueMayTwoThousandTwentyTwoMember 2021-06-30 0001579823 NBEV:PaycheckProtectionProgramLoanDueMayTwoThousandTwentyTwoMember 2020-12-31 0001579823 NBEV:PaycheckProtectionProgramLoanDueMayTwoThousandTwentyTwoMember 2021-01-01 2021-06-30 0001579823 NBEV:PaycheckProtectionProgramLoanDueMayTwoThousandTwentyTwoMember 2020-01-01 2020-12-31 0001579823 us-gaap:SeniorNotesMember 2021-01-01 2021-06-30 0001579823 NBEV:SecuritiesPurchaseAgreementMember NBEV:SeniorSecuredNotesMember 2020-11-30 0001579823 NBEV:SecuritiesPurchaseAgreementMember NBEV:CommitmentSharesMember 2020-11-29 2020-11-30 0001579823 NBEV:SecuritiesPurchaseAgreementMember NBEV:ClassAWarrantsMember 2020-11-30 0001579823 NBEV:SecuritiesPurchaseAgreementMember NBEV:ClassBWarrantsMember 2020-11-30 0001579823 NBEV:SecuritiesPurchaseAgreementMember NBEV:SeniorSecuredNotesMember 2020-12-31 0001579823 us-gaap:SeniorNotesMember 2021-01-01 2021-06-30 0001579823 us-gaap:SeniorNotesMember 2021-06-30 0001579823 NBEV:SeniorSecuredNotesMember srt:MinimumMember 2021-06-30 0001579823 NBEV:SecuritiesPurchaseAgreementMember NBEV:SeniorSecuredNotesMember srt:MaximumMember 2021-06-30 0001579823 NBEV:PaycheckProtectionProgramMember 2020-04-14 0001579823 NBEV:PaycheckProtectionProgramMember 2020-05-01 2020-05-31 0001579823 NBEV:PaycheckProtectionProgramMember 2021-01-01 2021-06-30 0001579823 NBEV:PaycheckProtectionProgramMember 2020-04-13 2020-04-14 0001579823 us-gaap:CommonStockMember 2021-05-13 2021-05-14 0001579823 us-gaap:PreferredStockMember 2021-05-13 2021-05-14 0001579823 us-gaap:CommonStockMember 2021-03-31 0001579823 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001579823 NBEV:ObligationToIssueCommonStockMember 2021-03-31 0001579823 NBEV:NotesReceivableForStockSubscriptionMember 2021-03-31 0001579823 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001579823 us-gaap:RetainedEarningsMember 2021-03-31 0001579823 us-gaap:CommonStockMember 2021-04-01 2021-06-30 0001579823 us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30 0001579823 NBEV:ObligationToIssueCommonStockMember 2021-04-01 2021-06-30 0001579823 NBEV:NotesReceivableForStockSubscriptionMember 2021-04-01 2021-06-30 0001579823 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-04-01 2021-06-30 0001579823 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0001579823 us-gaap:CommonStockMember 2020-03-31 0001579823 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001579823 NBEV:ObligationToIssueCommonStockMember 2020-03-31 0001579823 NBEV:NotesReceivableForStockSubscriptionMember 2020-03-31 0001579823 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001579823 us-gaap:RetainedEarningsMember 2020-03-31 0001579823 us-gaap:CommonStockMember 2020-04-01 2020-06-30 0001579823 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0001579823 NBEV:ObligationToIssueCommonStockMember 2020-04-01 2020-06-30 0001579823 NBEV:NotesReceivableForStockSubscriptionMember 2020-04-01 2020-06-30 0001579823 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0001579823 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0001579823 NBEV:SecuritiesPurchaseAgreementMember 2021-02-14 2021-02-16 0001579823 NBEV:SecuritiesPurchaseAgreementMember 2021-02-16 0001579823 NBEV:SecuritiesPurchaseAgreementMember 2021-02-18 2021-02-19 0001579823 us-gaap:WarrantMember us-gaap:PrivatePlacementMember 2021-02-16 0001579823 us-gaap:CommonStockMember us-gaap:PrivatePlacementMember 2021-02-16 0001579823 us-gaap:PrivatePlacementMember 2021-02-16 0001579823 us-gaap:WarrantMember us-gaap:PrivatePlacementMember 2021-02-14 2021-02-16 0001579823 us-gaap:CommonStockMember us-gaap:PrivatePlacementMember 2021-02-14 2021-02-16 0001579823 us-gaap:PrivatePlacementMember 2021-02-14 2021-02-16 0001579823 NBEV:SecuritiesPurchaseAgreementMember us-gaap:CommonStockMember 2021-02-16 0001579823 NBEV:SecuritiesPurchaseAgreementMember us-gaap:MeasurementInputExercisePriceMember 2021-02-16 0001579823 NBEV:SecuritiesPurchaseAgreementMember us-gaap:MeasurementInputPriceVolatilityMember 2021-02-16 0001579823 NBEV:SecuritiesPurchaseAgreementMember us-gaap:MeasurementInputExpectedTermMember 2021-02-16 0001579823 NBEV:SecuritiesPurchaseAgreementMember 2021-02-19 0001579823 NBEV:SecuritiesPurchaseAgreementMember us-gaap:CommonStockMember 2021-02-18 2021-02-19 0001579823 NBEV:SecuritiesPurchaseAgreementMember us-gaap:CommonStockMember 2021-02-19 0001579823 srt:MaximumMember 2021-01-01 2021-06-30 0001579823 srt:MinimumMember 2021-01-01 2021-06-30 0001579823 2021-02-14 2021-02-16 0001579823 NBEV:CommitmentSharesMember 2021-01-01 2021-06-30 0001579823 NBEV:CommitmentSharesMember 2021-06-30 0001579823 NBEV:RedeemableCommonStockMember 2021-01-01 2021-03-31 0001579823 2021-01-01 2021-03-31 0001579823 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001579823 NBEV:PlacementSharesMember NBEV:AtTheMarketOfferingAgreementMember 2019-04-29 2019-04-30 0001579823 NBEV:ATMAgreementMember us-gaap:CommonStockMember 2020-04-01 2020-06-30 0001579823 NBEV:ATMAgreementMember us-gaap:CommonStockMember 2021-06-30 0001579823 NBEV:ATMAgreementMember us-gaap:CommonStockMember 2020-01-01 2020-06-30 0001579823 NBEV:ATMAgreementMember us-gaap:CommonStockMember 2020-06-30 0001579823 NBEV:ATMSalesAgreementMember NBEV:ManagerMember 2021-02-10 2021-02-11 0001579823 NBEV:CertainEmployeeSeveranceArrangementsMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansMember 2021-06-30 0001579823 NBEV:StockOptionPlansMember NBEV:ModifiedMember 2021-06-30 0001579823 NBEV:StockOptionPlansMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansMember NBEV:ModifiedMember 2021-01-01 2021-06-30 0001579823 NBEV:NewlyGrantedStockOptionsMember 2021-01-01 2021-06-30 0001579823 NBEV:ModifiedStockOptionsMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansEquityAwardsMember 2020-12-31 0001579823 NBEV:StockOptionPlansLiabilityAwardsMember 2020-12-31 0001579823 NBEV:StockOptionPlansEquityAwardsMember srt:ExecutiveOfficerMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansLiabilityAwardsMember srt:ExecutiveOfficerMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansEquityAwardsMember NBEV:BoardMembersMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansLiabilityAwardsMember NBEV:BoardMembersMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansEquityAwardsMember NBEV:EmployeesAndBrandPartnersMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansLiabilityAwardsMember NBEV:EmployeesAndBrandPartnersMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansEquityAwardsMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansLiabilityAwardsMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionPlansEquityAwardsMember 2021-06-30 0001579823 NBEV:StockOptionPlansLiabilityAwardsMember 2021-06-30 0001579823 us-gaap:ShareBasedCompensationAwardTrancheThreeMember 2021-03-08 2021-03-10 0001579823 us-gaap:RestrictedStockMember 2021-01-01 2021-06-30 0001579823 us-gaap:RestrictedStockMember 2021-01-01 2021-01-31 0001579823 NBEV:CertainEmployeeSeveranceArrangementsMember us-gaap:RestrictedStockMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionsAwardsMember 2021-04-01 2021-06-30 0001579823 NBEV:StockOptionsAwardsMember 2020-04-01 2020-06-30 0001579823 NBEV:StockOptionsAwardsMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionsAwardsMember 2020-01-01 2020-06-30 0001579823 NBEV:StockOptionsAwardsMember 2021-06-30 0001579823 NBEV:StockOptionsAwardsMember 2020-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:EquityClassifiedMember 2021-04-01 2021-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:EquityClassifiedMember 2020-04-01 2020-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:EquityClassifiedMember 2021-01-01 2021-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:EquityClassifiedMember 2020-01-01 2020-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:EquityClassifiedMember 2021-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:EquityClassifiedMember 2020-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:LiabilityClassifiedMember 2021-04-01 2021-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:LiabilityClassifiedMember 2020-04-01 2020-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:LiabilityClassifiedMember 2021-01-01 2021-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:LiabilityClassifiedMember 2020-01-01 2020-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:LiabilityClassifiedMember 2021-06-30 0001579823 NBEV:RestrictedStockAwardsMember NBEV:LiabilityClassifiedMember 2020-06-30 0001579823 NBEV:AriixLLCMember 2021-01-01 2021-06-30 0001579823 NBEV:AriixLLCMember 2021-06-30 0001579823 us-gaap:RestrictedStockMember 2021-06-30 0001579823 NBEV:StockOptionsMember 2021-01-01 2021-06-30 0001579823 NBEV:EquityClassifiedRestrictedStockAwardsMember 2021-01-01 2021-06-30 0001579823 NBEV:LiabilityClassifiedRestrictedStockAwardsMember 2021-01-01 2021-12-31 0001579823 NBEV:SecuritiesPurchaseAgreementMember NBEV:ClassBWarrantsMember 2021-01-01 2021-06-30 0001579823 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:CustomerMember 2021-01-01 2021-06-30 0001579823 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:CustomerMember 2020-01-01 2020-12-31 0001579823 NBEV:ParticipatingWarrantsMember 2020-12-01 2020-12-31 0001579823 NBEV:ParticipatingWarrantsMember 2021-02-01 2021-02-28 0001579823 NBEV:StockOptionsMember 2021-01-01 2021-06-30 0001579823 NBEV:StockOptionsMember 2020-01-01 2020-06-30 0001579823 NBEV:UnissuedAndUnvestedRestrictedStockAwardsMember 2021-01-01 2021-06-30 0001579823 NBEV:UnissuedAndUnvestedRestrictedStockAwardsMember 2020-01-01 2020-06-30 0001579823 NBEV:CommonStockPurchaseWarrantsMember 2021-01-01 2021-06-30 0001579823 NBEV:CommonStockPurchaseWarrantsMember 2020-01-01 2020-06-30 0001579823 us-gaap:SubsequentEventMember 2021-07-01 2021-07-31 0001579823 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember NBEV:FixedSharesMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember NBEV:FixedSharesMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember NBEV:FixedSharesMember 2021-06-30 0001579823 us-gaap:FairValueMeasurementsRecurringMember NBEV:FixedSharesMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember NBEV:FixedSharesMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember NBEV:FixedSharesMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember NBEV:FixedSharesMember 2020-12-31 0001579823 us-gaap:FairValueMeasurementsRecurringMember NBEV:FixedSharesMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember NBEV:VariableSharesMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember NBEV:VariableSharesMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember NBEV:VariableSharesMember 2021-06-30 0001579823 us-gaap:FairValueMeasurementsRecurringMember NBEV:VariableSharesMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember NBEV:VariableSharesMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember NBEV:VariableSharesMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember NBEV:VariableSharesMember 2020-12-31 0001579823 us-gaap:FairValueMeasurementsRecurringMember NBEV:VariableSharesMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2021-06-30 0001579823 us-gaap:FairValueMeasurementsRecurringMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0001579823 us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember NBEV:LIMUCompanyLLCMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember NBEV:LIMUCompanyLLCMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember NBEV:LIMUCompanyLLCMember 2021-06-30 0001579823 us-gaap:FairValueMeasurementsRecurringMember NBEV:LIMUCompanyLLCMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember NBEV:LIMUCompanyLLCMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember NBEV:LIMUCompanyLLCMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember NBEV:LIMUCompanyLLCMember 2020-12-31 0001579823 us-gaap:FairValueMeasurementsRecurringMember NBEV:LIMUCompanyLLCMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember NBEV:ZennoaLLCMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember NBEV:ZennoaLLCMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember NBEV:ZennoaLLCMember 2021-06-30 0001579823 us-gaap:FairValueMeasurementsRecurringMember NBEV:ZennoaLLCMember 2021-06-30 0001579823 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember NBEV:ZennoaLLCMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember NBEV:ZennoaLLCMember 2020-12-31 0001579823 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember NBEV:ZennoaLLCMember 2020-12-31 0001579823 us-gaap:FairValueMeasurementsRecurringMember NBEV:ZennoaLLCMember 2020-12-31 0001579823 us-gaap:MeasurementInputPriceVolatilityMember 2020-12-31 0001579823 us-gaap:MeasurementInputRiskFreeInterestRateMember 2020-12-31 0001579823 NBEV:MeasurementInputWeightedAverageCostOfCapitalMember 2020-12-31 0001579823 us-gaap:MeasurementInputPriceVolatilityMember 2021-06-30 0001579823 us-gaap:MeasurementInputRiskFreeInterestRateMember 2021-06-30 0001579823 us-gaap:CommonStockMember us-gaap:WarrantMember 2021-06-30 0001579823 NBEV:MeasurementInputWeightedAverageCostOfCapitalMember 2021-06-30 0001579823 us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:JuiceMAXAndOtherNoniBasedBeverageProductsMember 2021-04-01 2021-06-30 0001579823 us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:JuiceMAXAndOtherNoniBasedBeverageProductsMember 2020-04-01 2020-06-30 0001579823 us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:JuiceMAXAndOtherNoniBasedBeverageProductsMember 2021-01-01 2021-06-30 0001579823 us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:JuiceMAXAndOtherNoniBasedBeverageProductsMember 2020-01-01 2020-06-30 0001579823 us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:NoSingleCustomerMember 2021-04-01 2021-06-30 0001579823 us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:NoSingleSupplierMember 2020-04-01 2020-06-30 0001579823 us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:NoSingleSupplierMember 2021-01-01 2021-06-30 0001579823 us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:NoSingleSupplierMember 2020-01-01 2020-06-30 0001579823 country:US 2021-06-30 0001579823 country:CN NBEV:FinancialInstitutionOneMember 2021-06-30 0001579823 country:CN NBEV:FinancialInstitutionTwoMember 2021-06-30 0001579823 country:US NBEV:FinancialInstitutionOneMember 2020-12-31 0001579823 country:US NBEV:FinancialInstitutionTwoMember 2020-12-31 0001579823 country:CN NBEV:FinancialInstitutionOneMember 2020-12-31 0001579823 country:CN NBEV:FinancialInstitutionTwoMember 2020-12-31 0001579823 NBEV:DirectSocialSellingMember us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:CustomerMember 2021-01-01 2021-06-30 0001579823 NBEV:DirectSocialSellingMember us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:CustomerMember 2020-01-01 2020-06-30 0001579823 NBEV:DirectSocialSellingMember us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:CustomerMember 2020-04-01 2020-06-30 0001579823 NBEV:DirectSocialSellingMember us-gaap:ProductConcentrationRiskMember us-gaap:SalesRevenueNetMember NBEV:CustomerMember 2021-04-01 2021-06-30 0001579823 NBEV:DirectSocialSellingMember 2021-04-01 2021-06-30 0001579823 NBEV:DirectSocialSellingMember 2020-04-01 2020-06-30 0001579823 NBEV:DirectSocialSellingMember 2021-01-01 2021-06-30 0001579823 NBEV:DirectSocialSellingMember 2020-01-01 2020-06-30 0001579823 NBEV:DirectStoreMember 2021-04-01 2021-06-30 0001579823 NBEV:DirectStoreMember 2020-04-01 2020-06-30 0001579823 NBEV:DirectStoreMember 2021-01-01 2021-06-30 0001579823 NBEV:DirectStoreMember 2020-01-01 2020-06-30 0001579823 NBEV:DirectSocialSellingMember 2021-06-30 0001579823 NBEV:DirectSocialSellingMember 2020-12-31 0001579823 NBEV:DirectStoreMember 2021-06-30 0001579823 NBEV:DirectStoreMember 2020-12-31 0001579823 country:US 2021-04-01 2021-06-30 0001579823 country:US 2020-04-01 2020-06-30 0001579823 country:US 2021-01-01 2021-06-30 0001579823 country:US 2020-01-01 2020-06-30 0001579823 country:JP 2021-04-01 2021-06-30 0001579823 country:JP 2020-04-01 2020-06-30 0001579823 country:JP 2021-01-01 2021-06-30 0001579823 country:JP 2020-01-01 2020-06-30 0001579823 country:CN 2021-04-01 2021-06-30 0001579823 country:CN 2020-04-01 2020-06-30 0001579823 country:CN 2021-01-01 2021-06-30 0001579823 country:CN 2020-01-01 2020-06-30 0001579823 country:IT 2021-04-01 2021-06-30 0001579823 country:IT 2020-04-01 2020-06-30 0001579823 country:IT 2021-01-01 2021-06-30 0001579823 country:IT 2020-01-01 2020-06-30 0001579823 country:FR 2021-04-01 2021-06-30 0001579823 country:FR 2020-04-01 2020-06-30 0001579823 country:FR 2021-01-01 2021-06-30 0001579823 country:FR 2020-01-01 2020-06-30 0001579823 NBEV:RestofWorldMember 2021-04-01 2021-06-30 0001579823 NBEV:RestofWorldMember 2020-04-01 2020-06-30 0001579823 NBEV:RestofWorldMember 2021-01-01 2021-06-30 0001579823 NBEV:RestofWorldMember 2020-01-01 2020-06-30 0001579823 us-gaap:NonUsMember 2021-06-30 0001579823 us-gaap:NonUsMember 2020-12-31 0001579823 us-gaap:SubsequentEventMember NBEV:EmploymentAgreementMember 2021-07-01 2021-07-31 0001579823 us-gaap:SubsequentEventMember NBEV:EmploymentAgreementMember srt:MinimumMember 2021-07-31 0001579823 us-gaap:SubsequentEventMember NBEV:EmploymentAgreementMember srt:MaximumMember 2021-07-31 0001579823 us-gaap:SubsequentEventMember NBEV:EmploymentAgreementMember 2021-07-31 0001579823 us-gaap:SubsequentEventMember NBEV:EmploymentAgreementMember NBEV:MrManionMember 2021-07-31 0001579823 srt:ScenarioForecastMember NBEV:EmploymentAgreementMember 2022-07-01 2022-07-31 0001579823 srt:ScenarioForecastMember NBEV:EmploymentAgreementMember 2023-07-01 2023-07-31 0001579823 us-gaap:SubsequentEventMember 2021-07-31 0001579823 us-gaap:SubsequentEventMember NBEV:MrManionMember 2021-07-01 2021-07-31 0001579823 us-gaap:SubsequentEventMember NBEV:MrManionMember 2021-07-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares NBEV:Segments xbrli:pure NBEV:Employee

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 June 30, 2021

   
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: 001-38014

 

  NewAge, Inc.  
  (Exact Name of Registrant as Specified in its Charter)  

 

Delaware   27-2432263
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     

2420 17th Street, Suite 220

Denver, CO

  80202
(Address of principal executive offices)   (Zip Code)
     
Registrant’s telephone number, including area code:   (303) 566-3030

 

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, par value $0.001 per share   NBEV   The Nasdaq Capital Market

 

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, a 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

 

The registrant had 136,788,047 shares of its Common Stock, $0.001 par value per share, outstanding as of August 6, 2021.

 

 

 

 

 

 

NewAge, Inc.

Table of Contents

 

      Page
       
PART I. FINANCIAL INFORMATION  
       
  ITEM 1. Financial Statements 2
     
    Unaudited Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 2
       
    Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2021 and 2020 3
       
    Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2021 and 2020 4
       
    Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 5
       
    Notes to Unaudited Condensed Consolidated Financial Statements 7
       
  ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32
       
  ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 50
       
  ITEM 4. Controls and Procedures 50
       
PART II. OTHER INFORMATION  
       
  ITEM 1. Legal Proceedings 51
       
  ITEM 1A. Risk Factors 51
       
  ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 51
       
  ITEM 3. Defaults Upon Senior Securities 51
       
  ITEM 4. Mine Safety Disclosures 51
       
  ITEM 5. Other Information 51
       
  ITEM 6. Exhibits 52
       
SIGNATURES 53

 

1
 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. Financial Statements.

 

NewAge, Inc.

 

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except par value per share)

 

    2021     2020  
    June 30,     December 31,  
  2021     2020  
ASSETS            
Current assets:                
Cash and cash equivalents   $ 80,922     $ 43,711  
Trade accounts receivable, net of allowance of $590 and $582, respectively     10,470       12,341  
Inventories     44,219       48,051  
Assets held for sale     7,088       -  
Current portion of restricted cash     5,568       10,000  
Prepaid expenses and other     13,086       13,032  
Total current assets     161,353       127,135  
                 
Long-term assets:                
Identifiable intangible assets, net of accumulated amortization     164,093       169,611  
Goodwill     55,281       54,993  
Right-of-use lease assets     29,741       38,764  
Property and equipment, net of accumulated depreciation     23,771       28,076  
Restricted cash, net of current portion     5,969       11,524  
Deferred income taxes     7,476       7,782  
Deposits and other     4,771       5,297  
Total assets   $ 452,455     $ 443,182  
                 
LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $ 17,111     $ 22,774  
Accrued liabilities     65,009       70,007  
Operating lease liability related to right-of-use assets held for sale     4,707       -  
Current portion of business combination liabilities     1,140       11,750  
Current maturities of long-term debt     19,440       18,016  
Total current liabilities       107,407       122,547  
                 
Long-term liabilities:                
Business combination liabilities, net of current portion     49,013       95,826  
Long-term debt, net of current maturities     12,063       16,181  
Operating lease liabilities, net of current portion:                
Lease liability     26,745       34,788  
Deferred lease financing obligation     15,543       15,882  
Warrant derivative liability     5,695       -  
Deferred income taxes     5,091       5,391  
Other     8,295       8,313  
                   
Total liabilities     229,852       298,928  
                   
Commitments and contingencies (Note 10)     -          
                 
Redeemable Common Stock, 800 shares as of December 31, 2020     -       2,101  
                 
Stockholders’ equity:                
Preferred stock, $0.001 par value per share. Authorized 1,000 shares; no shares issued     -       -  
Common Stock, $0.001 par value per share. Authorized 400,000 and 200,000 shares as of June 30, 2021 and December 31, 2020, respectively; issued and outstanding 136,606 and 99,146 shares as of June 30, 2021 and December 31, 2020, respectively     137       99  
Additional paid-in capital     340,937       236,732  
Obligation to issue 14,551 and 19,704 shares of Common Stock as of June 30, 2021 and December 31, 2020, respectively     30,263       54,186  
Note receivable for stock subscription     -       (1,250 )
Accumulated other comprehensive income     3,478       4,201  
Accumulated deficit     (152,212 )     (151,815 )
Total stockholders’ equity     222,603       142,153  
Total liabilities, redeemable Common Stock, and stockholders’ equity   $ 452,455     $ 443,182  

 

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

 

2
 

 

NewAge, Inc.

 

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

(In thousands, except loss per share amounts)


 

    2021     2020     2021     2020  
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2021     2020     2021     2020  
                         
Net revenue   $ 124,040     $ 62,637     $ 249,558     $ 126,330  
Cost of goods sold     40,241       24,559       78,358       46,728  
                                 
Gross profit     83,799       38,078       171,200       79,602  
                                 
Operating expenses:                                
Commissions     43,320       18,405       90,717       37,920  
Selling, general and administrative     41,042       26,277       79,901       56,885  
Depreciation and amortization expense     4,723       1,761       9,398       3,542  
Loss on disposal of Divested Business     4,339       -       4,339       -  
Impairment of right-of-use assets     -       400       -       400  
                                 
Total operating expenses     93,424       46,843       184,355       98,747  
                                 
Operating loss     (9,625 )     (8,765 )     (13,155 )     (19,145 )
                                 
Non-operating income (expense):                                
Interest expense     (3,040 )     (600 )     (6,163 )     (1,172 )
Gain (loss) from change in fair value of derivatives     30,829       20       21,216       (306 )
Interest and other income (expense), net     (53 )     342       (405 )     725  
                                 
Income (loss) before income taxes     18,111       (9,003 )     1,493       (19,898 )
Income tax expense     (740 )     (551 )     (1,890 )     (1,274 )
                                 
Net income (loss)     17,371       (9,554 )     (397 )     (21,172 )
Other comprehensive income (loss):                                
Foreign currency translation adjustments, net of tax     722       448       (723 )     (943 )
                                 
Comprehensive income (loss)   $ 18,093     $ (9,106 )   $ (1,120 )   $ (22,115 )
                                 
Net income (loss) per share of Common Stock:                                
Basic   $ 0.11     $ (0.10 )   $ (0.00 )   $ (0.24 )
Diluted   $ (0.04 )   $ (0.10 )   $ (0.08 )   $ (0.24 )
                                 
Weighted average number of shares of Common Stock outstanding:                                
Basic     143,636       93,003       135,534       89,187  
Diluted     170,609       93,003       166,323       89,187  

 

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

 

3
 

 

NewAge, Inc.

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2021 and 2020

(In thousands)

 

    Shares     Amount     Capital     Stock     Subscription     Income (Loss)     Deficit     Total  
                      Obligation     Note     Accumulated              
          Additional     to Issue     Receivable     Other              
    Common Stock     Paid-in     Common     For Stock     Comprehensive     Accumulated        
    Shares     Amount     Capital     Stock     Subscription     Income (Loss)     Deficit     Total  
                                                 
Six Months Ended June 30, 2021                                                                
                                                                 
Balances, December 31, 2020     99,146     $ 99     $ 236,732     $ 54,186     $ (1,250 )   $ 4,201     $ (151,815 )   $ 142,153  
Issuance of Common Stock:                                                                
In Ariix business combination     19,704       20       54,166       (54,186 )     -       -       -       -  
In Aliven business combination     1,072       1       2,587       -       -       -       -       2,588  
Private placement of Common Stock, net of issuance costs     14,636       15       39,635       -       -       -       -       39,650  
Upon vesting of restricted stock awards     560       1       (1 )     -       -       -       -       -  
For exercise of stock options     288       -       528       -       -       -       -       528  
Reclassification of Redeemable Common Stock     1,200       1       3,160       -       -       -       -       3,161  
Reclassification of Fixed Shares derivative liability     -       -       -       30,263       -       -       -       30,263  
Stock-based compensation expense     -       -       4,130       -       -       -       -       4,130  
Allowance for Divested Business stock subscription receivable     -       -       -       -       1,250       -       -       1,250  
Net change in accumulated other comprehensive income (loss)     -       -       -       -       -       (723 )     -       (723 )
Net loss     -       -       -       -       -       -       (397 )     (397 )
                                                                 
Balances, June 30, 2021     136,606     $ 137     $ 340,937     $ 30,263     $ -     $ 3,478     $ (152,212 )   $ 222,603  
                                                                 
Six Months Ended June 30, 2020                                                                
                                                                 
Balances, December 31, 2019     81,873     $ 82     $ 203,862     $ -     $ -     $ 802     $ (112,471 )   $ 92,275  
Issuance of Common Stock:                                                                
In ATM public offering, net of offering costs     16,130       16       25,012       -       -       -       -       25,028  
For exercise of stock options     2       -       4       -       -       -       -       4  
Upon vesting of restricted stock awards     437       -       -       -       -       -       -       -  
Stock-based compensation expense     -       -       2,323       -       -       -       -       2,323  
Net change in accumulated other comprehensive income (loss)     -       -       -       -       -       (943 )     -       (943 )
Net loss     -       -       -       -       -       -       (21,172 )     (21,172 )
                                                                 
Balances, June 30, 2020     98,442     $ 98     $ 231,201     $ -     $ -     $ (141 )   $ (133,643 )   $ 97,515  

 

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

 

4
 

 

NewAge, Inc.

 

Unaudited Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2021 and 2020

(In thousands)

 

    2021     2020  
             
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (397 )   $ (21,172 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Loss (gain) from change in fair value of derivatives, net     (21,216 )     306  
Depreciation and amortization     9,596       3,752  
Non-cash lease expense     6,244       2,792  
Accretion of debt discount     4,372       302  
Stock-based compensation expense     4,149       2,449  
Allowance for uncollectible note receivable and accrued interest from Divested Business     2,701       -  
Impairment of right-of-use assets     -       400  
Deferred income tax benefit     (149 )     (173 )
Loss from sale of property and equipment     60       66  
Other     118       73  
Changes in operating assets and liabilities, net of effects of business combination:                
Accounts receivable     (37 )     (2,276 )
Inventories     4,681       2,819  
Prepaid expenses, deposits and other     1,640       517  
Accounts payable     (5,840 )     (551 )
Other accrued liabilities     (11,482 )     (12,900 )
                 
Net cash used in operating activities     (5,560 )     (23,596 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Cash payments for Ariix business combination     (10,000 )     -  
Proceeds from sale of equipment     -       159  
Capital expenditures for property and equipment     (765 )     (1,980 )
                 
Net cash used in investing activities     (10,765 )     (1,821 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from private placement of Units, net of placement fee:                
Fair value of warrants to purchase 7,318 shares of Common Stock     14,128       -  
Residual fair value of 14,636 shares of Common Stock     39,673       -  
Proceeds from borrowings     -       6,868  
Principal payments on borrowings     (6,000 )     (10,450 )
Debt issuance costs paid     (21 )     (85 )
Proceeds from issuance of common stock     -       25,122  
Payments for deferred offering costs     (24 )     (94 )
Proceeds from exercise of stock options     528       4  
Principal payments on business combination obligations     (4,496 )     (298 )
Payments under deferred lease financing obligation     (329 )     (319 )
                 
Net cash provided by financing activities     43,459       20,748  
                 
Effect of foreign currency translation changes     90       (857 )
                 
Net change in cash, cash equivalents and restricted cash     27,224       (5,526 )
Cash, cash equivalents and restricted cash at beginning of period     65,235       64,571  
                 
Cash, cash equivalents and restricted cash at end of period   $ 92,459     $ 59,045  

 

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

 

5
 

 

NewAge, Inc.

 

Unaudited Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2021 and 2020

(In thousands)

 

    2021     2020  
             
SUMMARY OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD:                
Cash and cash equivalents   $ 80,922     $ 40,672  
Current portion of restricted cash     5,568       1,500  
Long-term portion of restricted cash     5,969       16,873  
                 
Total   $ 92,459     $ 59,045  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
Cash paid for interest   $ 1,092     $ 506  
Cash paid for income taxes   $ 1,132     $ 14,739  
Cash paid for amounts included in the measurement of operating lease liabilities   $ 5,235     $ 4,031  
Right-of-use assets acquired in exchange for operating lease liabilities   $ 1,768     $ 2,452  
                 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Issuance of Common Stock in Ariix business combination   $ 54,186     $ -  
Reclassification of Fixed Shares derivative liability to equity   $ 30,263     $ -  
Reclassification of 1,200 shares of Redeemable Common Stock to equity   $ 3,161     $ -  
Clarification Letter obligation in exchange for reduction of shares issuable for derivative liability   $ 3,056     $ -  
Issuance of Common Stock in Aliven business combination   $ 2,588     $ -  
Issuance of 400 shares of Redeemable Common Stock for Senior Notes amendment fee   $ 1,060     $ -  
Increase in payables for debt issuance costs   $ -     $ 150  

 

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

 

6
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 1 —BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

 

Overview

 

NewAge, Inc. (the “Company”) was formed under the laws of the State of Washington on April 26, 2010. Effective May 24, 2021, NewAge, Inc. (the “Company”) reincorporated to the State of Delaware (the “Reincorporation”) under a plan of conversion, dated May 14, 2021 (the “Plan of Conversion”). Pursuant to the Plan of Conversion, the Company also adopted new bylaws (the “Delaware Bylaws”). As a result of the Reincorporation, each outstanding share of Common Stock of the Company as a Washington corporation automatically converted into an outstanding share of Common Stock of the Company as a Delaware corporation. In addition, each outstanding stock option and warrant, or right to acquire shares of Common Stock of the Company as a Washington corporation converted into an equivalent stock option, warrant, or right to acquire, upon the same terms and conditions and for the same number of shares of Common Stock of the Company as a Delaware corporation (including the vesting schedule and exercise or conversion price per share applicable to each such option, warrant or other convertible right).

 

Effective July 28, 2020, the Company amended its Articles of Incorporation to change its name from New Age Beverages Corporation to NewAge, Inc. Accordingly, all references herein have been changed to reflect the new name. The Company changed its name to NewAge, Inc. as it built out its distribution system and was in a position to drive a broader portfolio of products through that system that spans more than 50 markets worldwide with a network of more than 400,000 exclusive independent distributors (“Brand Partners”) and customers. The Company is a healthy and organic consumer products company engaged in the development and commercialization of a portfolio of brands in three core category platforms including health and wellness, healthy appearance, and nutritional performance primarily in a direct-to-consumer route to market.

 

Segments

 

The Company’s chief operating decision maker (the “CODM”), who is the Company’s Chief Executive Officer, allocates resources and assesses performance based on financial information of the Company. The CODM reviews financial information presented for each reportable segment for purposes of making operating decisions and assessing financial performance. The Company’s CODM assesses performance and allocates resources based on the financial information of two operating segments, the Direct / Social Selling segment and the Direct Store segment. These two reportable segments focus on the sale of distinctly different products and are managed separately because they have different marketing strategies, customer bases, and economic characteristics. Please refer to Note 13 for additional information about the Company’s operating segments.

 

Basis of Presentation

 

The unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly-owned subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by U.S. GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. These unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021 and 2020 should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2020, included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC on March 18, 2021 (the “2020 Form 10-K”).

 

The accompanying condensed consolidated balance sheet and related disclosures as of December 31, 2020 have been derived from the Company’s audited financial statements. The Company’s financial condition as of June 30, 2021 and its operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the financial condition and results of operations that may be expected for any future interim period or for the year ending December 31, 2021.

 

7
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

Use of Estimates

 

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. The Company bases its estimates and assumptions on existing facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant accounting estimates include, but are not necessarily limited to, impairment of goodwill and long-lived assets; valuation assumptions for business combination obligations and the related assets acquired in business combinations; valuation assumptions for stock options, warrants and other equity instruments; the number of shares of restricted stock that will ultimately vest based on the future achievement of performance criteria; estimated useful lives for identifiable intangible assets and property and equipment; allowances for sales returns, chargebacks and inventory obsolescence; deferred income taxes and the related valuation allowances; and the evaluation and measurement of contingencies. Additionally, the full impact of COVID-19 is unknown and cannot be reasonably estimated. However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are material differences between the Company’s estimates and the actual results, the Company’s future consolidated results of operation will be affected.

 

Recent Accounting Pronouncements

 

The following accounting standard was adopted effective January 1, 2021:

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity). ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, which results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Additionally, ASU 2020-06 affects the diluted earnings per share calculation for instruments that may be settled in cash or shares and for convertible instruments and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. Effective January 1, 2021, the Company elected to adopt ASU 2020-06 using the modified retrospective transition method which did not result in any changes to the Company’s financial statements upon adoption.

 

No recently issued accounting pronouncements are currently expected to have a material impact on the Company’s consolidated financial statements.

 

NOTE 2 — LIQUIDITY AND GOING CONCERN

 

For the six months ended June 30, 2021, the Company incurred an operating loss of $13.2 million and cash used in operating activities was $5.6 million. For the year ended December 31, 2020, the Company incurred an operating loss of $34.9 million and cash used in operating activities was $34.3 million. As of June 30, 2021, the Company had an accumulated deficit of $152.2 million.

 

In February 2021, the Company entered into a securities purchase agreement in connection with a private placement of units that consisted of an aggregate of approximately 14.6 million shares of Common Stock and warrants to purchase an aggregate of 7.3 million shares of Common Stock. At the closing, the Company received net proceeds of approximately $53.8 million. As of June 30, 2021, the Company had cash and cash equivalents of $80.9 million and the current portion of restricted cash was $5.6 million, for a total of $86.5 million. As of June 30, 2021, the Company had working capital of $53.9 million.

 

During the 12-month period ending on June 30, 2022, cash payments will be required to settle certain obligations, including operating lease payments of $9.1 million, deferred consideration related to business combinations of $1.1 million, and up to $25.1 million of principal and interest under the 8.00% Original Issue Discount Senior Secured Notes discussed in Note 6. Management believes the Company’s existing cash and cash equivalents of $80.9 million and the current portion of restricted cash of $5.6 million will be sufficient to fund contractual obligations and working capital requirements at least through August 2022.

 

NOTE 3 — BUSINESS COMBINATIONS AND DISPOSITIONS

 

Ariix Merger Agreement

 

On September 30, 2020, the Company entered into an Amended and Restated Agreement and Plan of Ariix Merger (the “Ariix Merger Agreement”), by and among Ariix, LLC (“Ariix”), Ariel Merger Sub, LLC (“Ariix Merger Sub”), Ariel Merger Sub 2, LLC (“Ariix Merger Sub 2”), certain Members of Ariix (the “Sellers”), and Dr. Frederick W. Cooper, the principal member of Ariix who serves as sellers’ agent (the “Sellers’ Agent”), pursuant to which the Company agreed to acquire 100% of the equity interests of Ariix, subject to customary representations, warranties, covenants and indemnities and closing conditions. The Company entered into the Ariix Merger Agreement to accelerate organic growth with its direct-to-consumer business model and to expand its portfolio of healthy products.

 

8
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

On November 16, 2020, the Company entered into a letter agreement (the “Waiver Letter”), with Ariix and the Sellers’ Agent that resulted in closing of the Ariix Merger on November 16, 2020 (the “Ariix Closing Date”) and the Sellers’ Agent was appointed as a member of the Company’s Board of Directors. On the Ariix Closing Date, Ariix merged with Ariix Merger Sub, with Ariix as the surviving entity and a wholly owned subsidiary of the Company. Subsequently, Ariix Merger Sub was merged with and into Ariix Merger Sub 2 and remains a wholly owned subsidiary of the Company. Ariix Merger Sub 2 was subsequently renamed “Ariix, LLC”. The preliminary purchase consideration to acquire Ariix amounted to $155.1 million, consisting of (i) an obligation to issue 19.7 million shares of Common Stock with a fair value of $54.2 million, (ii) an obligation to pay $10.0 million in cash, and (iii) the fair value of the aggregate derivative liability of $90.9 million as discussed below.

 

On January 29, 2021, the Company and the Sellers’ Agent entered into a letter of clarification (the “Clarification Letter”) to the Ariix Merger Agreement. The Clarification Letter explained the intent of the parties as of the Ariix Closing Date whereby (i) a cash account of Ariix with a Chinese bank that had a balance of $3.1 million was payable to the Sellers, and (ii) the number of shares of the Company’s Common Stock issuable to the Sellers on the first anniversary of the Ariix Closing Date was reduced by 0.5 million shares, from 25.5 million shares to 25.0 million shares. In addition, the impact of the $3.1 million reduction of cash reduced the number of shares issuable by 0.6 million shares due to the impact of the working capital adjustment discussed below. Effective January 29, 2021, the Company recognized a business combination liability for $3.1 million as a result of the Clarification Letter. During the six months ended June 30, 2021, the Company transferred $3.1 million of the cash balance to certain Sellers to settle this business combination liability. The Clarification Letter did not result in any change to goodwill. However, net assets acquired were reduced by $3.1 million, and the fair value of the derivative liability decreased by $3.1 million to $87.8 million.

 

Pursuant to the Ariix Merger Agreement as modified by the Waiver Letter and the Clarification Letter (the “Amended Ariix Merger Agreement”), the Company was obligated to issue 19.7 million shares of Common Stock on the Ariix Closing Date, and to pay $10.0 million to the Sellers after certain post-closing conditions were satisfied. As of December 31, 2020, the obligation to issue the 19.7 million shares of Common Stock with a fair value of $54.2 million was included within stockholders’ equity and the obligation to pay $10.0 million to the Sellers was reflected as a current liability. During the first quarter of 2021, the 19.7 million shares of Common Stock were issued, and the post-closing conditions were satisfied whereby $10.0 million was paid to the Sellers.

 

On or before May 16, 2021, under the Amended Ariix Merger Agreement, the Company was required to either pay up to an additional $10.0 million in cash to the Sellers or issue a variable number of shares of its Common Stock with a value up to $10.0 million (the “Interim Ariix Merger Consideration”). The Interim Ariix Merger Consideration was reduced to the extent that working capital of Ariix was less than $11.0 million as of the Ariix Closing Date. Based on the balance sheet provided by Ariix as of the Ariix Closing Date, working capital of Ariix amounted to a negative $18.0 million, resulting in a $29.0 million shortfall of the targeted working capital per the Amended Ariix Merger Agreement. In addition, Ariix failed to repay $5.0 million of long-term accrued business combination liabilities by the Ariix Closing Date as agreed to by the parties. Accordingly, the requirement to pay the Interim Ariix Merger Consideration of $10.0 million was eliminated.

 

In addition to the 19.7 million shares of Common Stock issued in the first quarter of 2021, the Company was required to seek approval from its shareholders to issue up to an additional 39.6 million shares of Common Stock to settle the remainder of the merger consideration. Based on the post-closing adjustments discussed above, the number of shares of Common Stock remaining to be issued to the Sellers was reduced from 39.6 million shares to approximately 34.6 million shares, consisting of (i) approximately 14.5 million shares that are fixed whereby the only contingency is the passage of time (the “Fixed Shares”), and (ii) 20.1 million shares that are subject to variation based on the outcome of potential indemnification claims (the “Variable Shares”). As of December 31, 2020, the obligation to issue shares of the Company’s Common Stock or pay $163.3 million of cash was accounted for as a derivative liability with an estimated fair value of $90.9 million, consisting of approximately $37.0 million allocable to the Fixed Shares and $53.9 million allocable to the Variable Shares.

 

On May 14, 2021, the Company’s shareholders approved the issuance of shares of Common Stock to settle the Fixed Shares and the Variable Shares. The Fixed Shares are issuable for 11.7 million shares as soon as the Sellers provide detailed issuance instructions, and the remaining 2.9 million shares are issuable by January 16, 2022. Since the conditions that required accounting for the Fixed Shares as a derivative liability were eliminated upon receipt of shareholder approval, the fair value of the Fixed Shares of $30.3 million was reclassified from a liability to a component of stockholders’ equity on May 14, 2021.

 

9
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

The Variable Shares are issuable on November 16, 2021. However, the number of shares is subject to subsequent adjustments based on the outcome of potential indemnification claims by either party. Under the Amended Ariix Merger Agreement, indemnification claims awarded to either party through November 16, 2021 will be settled by increasing or decreasing the number of Variable Shares based on a fixed conversion price of $5.53 per share. Accordingly, the Company is required to continue to account for the Variable Shares as a derivative liability until the number of shares is fixed. Please refer to Note 11 for further discussion of the treatment of the Fixed Shares and the Variable Shares for the calculation of basic and diluted earnings per share.

 

Aliven Business Combination

 

On June 1, 2021 (the “Aliven Closing Date”), the Company entered into an Asset Purchase Agreement (“APA”) with Aliven, Inc. (“Aliven”) that was accounted for using the acquisition method of accounting under ASC 805, Business Combinations, and using the fair value concepts set forth in ASC 820, Fair Value Measurement. Aliven is a Japan-based direct selling company. The Company entered into the APA to accelerate growth with its direct-to-consumer business model in Japan and to expand its portfolio of healthy products. Pursuant to the APA, the Company acquired the assets and assumed the liabilities of Aliven on the Aliven Closing Date. The total purchase consideration issued by the Company consisted of approximately 1,072,000 shares of the Company’s Common Stock with a fair value of approximately $2,588,000. The preliminary purchase price allocation is presented below (dollars in thousands):

 

Identifiable assets acquired:        
Accounts receivable, net   $ 525  
Inventories       1,356 (1)
Prepaid expenses and other assets     295  
Property and equipment     86  
Distributor sales force       1,590 (2)
Trade name        400 (2)
Total identifiable assets acquired     4,252  
Liabilities assumed:        
Accounts payable and accrued liabilities     (1,953 )
Net identifiable assets acquired     2,299  
Goodwill        289 (3)
         
Total purchase price allocation   $ 2,588  

 

 

  (1) Based in part on the preliminary report of an independent valuation specialist, the fair value of work-in-process and finished goods inventories on the Aliven Closing Date exceeded the historical carrying value by approximately $0.1 million. This amount represents an element of built-in profit that is being charged to cost of goods sold as the related inventories are subsequently sold. The fair value of inventories was determined using both the “cost approach” and the “market approach”.
     
  (2) Based in part on the preliminary report of an independent valuation specialist, the fair value of identifiable intangible assets was determined primarily using variations of the “income approach,” which is based on the present value of the future after-tax cash flows attributable to each identifiable intangible asset. These intangible assets are being amortized over estimated useful lives of seven years for the distributor sales force and three years for the trade name, with an aggregate weighted average life of 6.2 years.
     
  (3) Goodwill was recognized for the difference between the total purchase consideration transferred to consummate the business combination and the fair value of the net identifiable assets acquired. Goodwill primarily relates to expected synergies to be realized due to combining Aliven with the Company, and the value of the assembled workforce on the Aliven Closing Date. Goodwill is expected to be deductible for income tax purposes.

 

10
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

Unaudited Pro Forma Disclosures

 

The following table summarizes the results of operations for the Company after giving effect to the pre-acquisition results of Ariix and Aliven on an unaudited pro forma basis (in thousands, except per share amounts):

 

    2021     2020     2021     2020  
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2021     2020     2021     2020  
                         
Net revenue   $ 125,922     $ 130,934     $ 255,073     $ 249,332  
Net income (loss)     17,005     $ (6,835 )     (982 )   $ (19,321 )
Net income (loss) per share:                                
Basic   $ 0.12     $ (0.06 )   $ 0.01     $ (0.18 )
Diluted   $ (0.04 )   $ (0.06 )   $ (0.08 )   $ (0.18 )
Weighted average number of shares of common stock outstanding:                                
Basic     154,951       113,779       136,427       109,963  
Diluted     171,323       113,779       167,216       109,963  

 

The pro forma financial results shown above reflect the historical operating results of the Company, including the unaudited pro forma results of Ariix and Aliven as if these business combinations and the related equity issuances had occurred at the beginning of the first full calendar year preceding the acquisition dates. The calculations of pro forma net revenue and pro forma net income (loss) give effect to the pre-acquisition operating results of Ariix and Aliven based on (i) the historical net revenue and net income of Ariix and Aliven, and (ii) incremental depreciation and amortization based on the fair value of property, equipment and identifiable intangible assets acquired and the related estimated useful lives. The pro forma information presented above does not purport to represent what the actual results of operations would have been for the periods indicated, nor does it purport to represent the Company’s future results of operations.

 

Business Combination Liabilities

 

As of June 30, 2021 and December 31, 2020, business combination liabilities were as follows (in thousands):

 

    2021     2020  
             
Liabilities to former owners of Ariix:                
Fixed Shares derivative liability   $ - (2)   $ 37,028 (1)
Variable Shares derivative liability     44,773 (3)     53,846 (1)
Total derivative liabilities     44,773       90,874 (1)
Short-term debt payable in cash     -       10,000  
Business combination liabilities assumed from Ariix:                
Fair value of deferred consideration payable:                
LIMU     3,495 (4)     3,656  
Zennoa     1,885 (5)     2,196  
Short-term debt for Zennoa     -       850  
Total     50,153       107,576  
Less current portion     1,140       11,750  
Long-term portion   $ 49,013     $ 95,826  

 

 

  (1) As of December 31, 2020, the Company had an obligation under the Amended Ariix Merger Agreement to issue the Fixed Shares and the Variable Shares, or pay $163.3 million of cash. These obligations were accounted for as derivative liabilities with an aggregate estimated fair value of $90.9 million as of December 31, 2020. Key valuation assumptions as of December 31, 2020 are set forth in Note 12 under the caption Recurring Fair Value Measurements.
     
  (2) The conditions that required accounting for the Fixed Shares as a derivative liability were eliminated upon receipt of shareholder approval on May 14, 2021. Therefore, the fair value of the Fixed Shares derivative liability as of May 14, 2021 was reclassified to equity.
     
  (3) The Variable Shares derivative liability provides for ongoing adjustments in the number of shares based on the outcome of any potential indemnification claims by either party to the Amended Ariix Merger Agreement. Accordingly, the Variable Shares derivative liability is being adjusted to fair value at the end of each reporting period until the underlying shares are issued in November 2021. Key valuation assumptions as of June 30, 2021 are set forth in Note 12 under the caption Recurring Fair Value Measurements.

 

11
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

  (4) On May 31, 2019, Ariix completed a business combination with The LIMU Company, LLC (“LIMU”) that provided for a cash payment of $3.0 million on the closing date and $5.0 million of deferred consideration payable based on 5.0% of monthly post-closing sales related to the LIMU business. Through June 30, 2021, payments of deferred consideration made by both Ariix and the Company amounted to a total of approximately $1.1 million, resulting in a remaining balance due to the former owners of LIMU of $3.9 million. This obligation is subject to a security agreement until the entire amount is paid in full. The net carrying value of $3.5 million represents the fair value of this obligation based on a discount rate of 4.5%. This discount is being accreted using the effective interest method.
     
  (5) On November 27, 2019, Ariix completed a business combination with Zennoa, LLC (“Zennoa”) that provided for fixed cash payments of $2.25 million and deferred consideration of $2.5 million that is payable based on annualized sales from the Zennoa business for the latest completed month (the “Zennoa Sales Metric”). Payments related to the deferred consideration commenced in December 2020 and are computed using a variable percentage based on the Zennoa Sales Metric. No amounts are payable if the Zennoa Sales Metric is less than $6.0 million, and payments ranging from 3% to 5% of monthly sales are payable if the Zennoa Sales Metric exceeds $6.0 million. After the stated purchase price of $4.75 million is paid in full, the Company is obligated to begin making Growth Incentive Payments (“GI Payments”) through November 2026. The amount of GI Payments due for each month is based on varying percentages starting at 2.0% if the Zennoa Sales Metric is at least $25.0 million, up to a maximum of 3.0% if the Zennoa Sales Metric is $45.0 million or higher. The Company determined that the probability of the Zennoa Sales Metric exceeding $25.0 million is remote. The net carrying value of the Zennoa deferred consideration of $1.9 million represents the fair value of the Company’s obligations to pay the stated purchase price and the GI Payments based on a discount rate of 3.9%. This discount is being accreted using the effective interest method.

 

Changes in Business Combination Obligations

 

For the six months ended June 30, 2021, activity related to the Variable Shares and the Fixed Shares derivative liabilities, and other business combination obligations were as follows (in thousands):

 

    Variable     Fixed     Total     Other     Total  
    Derivative Liabilities              
    Variable     Fixed     Total     Other     Total  
                                         
Balances, December 31, 2020   $ 53,846 (1)   $ 37,028 (1)   $ 90,874     $ 16,702     $ 107,576  
Reclassify Clarification Letter obligation     (3,056 )(2)     -       (3,056 )     3,056 (2)     -  
Cash payments for:                                        
Short-term debt paid to Sellers of Ariix     -       -       -       (10,000 )     (10,000 )
Clarification Letter obligation     -       -       -       (3,056 )     (3,056 )
LIMU and Zennoa deferred consideration     -       -       -       (590 )     (590 )
Zennoa short-term debt     -       -       -       (850 )     (850 )
Net gain on change in fair value of derivatives     (6,017 )(3)     (6,765 )(4)     (12,782 )     -       (12,782 )
Accretion of discount on deferred consideration     -       -       -       118       118  
Fixed Shares derivative liability reclassified to equity     -       (30,263 )(5)     (30,263 )     -       (30,263 )
                                         
Balances, June 30, 2021   $ 44,773     $ -     $ 44,773     $ 5,380     $ 50,153  

 

 

  (1) Represents the allocable fair value associated with the Variable Shares and the Fixed Shares derivative liabilities as of December 31, 2020.
     
  (2) Represents the impact of the Clarification Letter entered into on January 29, 2021, whereby the number of shares subject to shareholder approval was reduced and a payable was recognized.
     
  (3) Represents the gain recognized from changes in fair value of the Variable Shares derivative liability for the six months ended June 30, 2021.
     
  (4) Represents the gain recognized from changes in fair value of the Fixed Shares derivative liability for the period from January 1, 2021 through May 14, 2021 when this derivative liability was reclassified to equity.
     
  (5) The fair value of the Fixed Shares derivative liability as of May 14, 2021 was reclassified as a component of equity since shareholder approval to issue the shares eliminated the conditions that previously required liability treatment.

 

12
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

Disposition of BWR and U.S. Retail Brands

 

In September 2020, the Company sold Brands Within Reach, LLC (“BWR”) and substantially all of the Company’s legacy U.S. retail brands (collectively, the “Divested Business”). Zachert Private Equity GmbH (the “Buyer”) issued to the Company an unsecured promissory note payable by BWR with a principal balance of $2.5 million that was issued in exchange for the Company’s $1.25 million cash payment and the issuance of shares of Common Stock with a fair value of $1.25 million. This promissory note bears interest at 10% per annum, matures in September 2023, and is fully guaranteed by the Buyer until the earlier of such time that (i) the promissory note is repaid in full, (ii) the Buyer makes equity contributions to BWR of at least $2.5 million, or (iii) BWR recognizes net income of at least $2.5 million for any 12-month period following the BWR closing date (the “Guaranty Note”). A portion of the consideration for the Guaranty Note was the issuance of approximately 692,000 shares of the Company’s Common Stock issued to the Buyer with an estimated fair value of $1.25 million. Accordingly, $1.25 million of the Guaranty Note was reflected as a reduction of stockholders’ equity and $1.25 million was included under the caption “Deposits and other” in the accompanying consolidated balance sheets as of December 31, 2020.

 

Based on recent communications with the Buyer, the Company determined that collection of the $2.5 million note receivable and accrued interest of $0.2 million is unlikely whereby a reserve for the entire balance was recognized as of June 30, 2021. Additionally, the Company recorded a liability for approximately $1.6 million of former supplier obligations. Accordingly, aggregate losses related to the Divested Business of $4.3 million were recognized for the three and six months ended June 30, 2021.

 

For the three months ended June 30, 2020, the operating results related to the Divested Business were included in the Direct Store segment and accounted for net revenue of $5.9 million and an operating loss of $2.5 million. For the six months ended June 30, 2020, the operating results related to the Divested Business were included in the Direct Store segment and accounted for net revenue of $10.7 million and an operating loss of $5.2 million.

 

NOTE 4 — OTHER FINANCIAL INFORMATION

 

Inventories

 

As of June 30, 2021 and December 31, 2020, inventories consisted of the following (in thousands):

 

    2021     2020  
             
Raw materials   $ 12,065     $ 12,628  
Work-in-process     626       1,225  
Finished goods, net     31,528       34,198  
Total inventories   $ 44,219     $ 48,051  

 

Other Accrued Liabilities

 

As of June 30, 2021 and December 31, 2020, other accrued liabilities consisted of the following (in thousands):

 

    2021     2020  
 
Accrued commissions   $ 22,236     $ 23,594  
Accrued compensation and benefits     9,468       9,443  
Accrued marketing events     6,972       8,212  
Deferred revenue     1,898       6,278  
Provision for sales returns     1,368       1,322  
Income taxes payable     3,619       3,461  
Current portion of operating lease liabilities     5,716       6,948  
Current portion of deferred lease financing obligation     671       659  
Other accrued liabilities     13,061       10,090  
                 
Total accrued liabilities   $ 65,009     $ 70,007  

 

13
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

Depreciation and Amortization

 

For the three and six months ended June 30, 2021 and 2020, depreciation expense related to property and equipment and amortization expense related to identifiable intangible assets, including amounts charged to cost of goods sold, were as follows (in thousands):

 

    2021     2020     2021     2020  
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2021     2020     2021     2020  
                         
Depreciation   $ 1,061     $ 977     $ 2,100     $ 1,959  
Amortization     3,761       896       7,496       1,793  
                                 
Total   $ 4,822     $ 1,873     $ 9,596     $ 3,752  

 

Accumulated depreciation of property and equipment amounted to $10.2 million as of June 30, 2021, and $8.8 million as of December 31, 2020. Accumulated amortization of identifiable intangible assets amounted to $16.0 million as of June 30, 2021, and $8.5 million as of December 31, 2020.

 

Gain (loss) on change in fair value of derivatives

 

For the three and six months ended June 30, 2021 and 2020, gain (loss) from changes in fair value of derivatives is comprised of the following (in thousands):

 

Description of Derivative   2021     2020     2021     2020  
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
Description of Derivative   2021     2020     2021     2020  
                         
Ariix business combination consideration:                                
Fixed Shares derivative   $ 11,380 (1)   $ -     $ 6,765 (1)   $ -  
Variable Shares derivative     12,743 (1)     -       6,018 (1)     -  
Warrants issued in private placement     6,706 (2)     -       8,433 (2)     -  
Interest rate swap     -       20       -       (306 )
                                 
Gain (loss) on change in fair value of derivatives   $ 30,829     $ 20     $ 21,216     $ (306 )

 

 

  (1) For further discussion of the Ariix Fixed Shares and Variable Shares derivative liabilities, please refer to Note 3.
     
  (2) For further discussion of the derivative liability for warrants, please refer to Note 7 under the caption Private Placement of Units.

 

Severance and Restructuring Activities

 

On March 3, 2021, the Company and Gregory A. Gould, the former Chief Financial Officer of the Company, entered into a Modification and Transition Addendum to Employment Agreement and Indemnification Agreement (the “Gould Agreement”). The Gould Agreement amended an employment agreement with Mr. Gould, whereby he continued to serve as Chief Financial Officer of the Company until July 2, 2021 (the “Term”). As part of the transition, Mr. Gould was entitled to (i) a payment made in March 2021 for his 2020 performance bonus of $250,000, (ii) a target performance bonus of $650,000 for services through July 2, 2021, (iii) severance compensation of one year of base salary of $500,000 plus target bonus of $250,000 pursuant to his employment agreement, (iv) payment of health insurance premiums for one year, and (v) title to Company-owned automobiles and a laptop computer that have been transferred to Mr. Gould.

 

14
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

In addition, the Company agreed to issue stock options for 125,000 shares of Common Stock to Mr. Gould that vested on July 2, 2021 and have an expiration date of three years after the issuance date. The Gould Agreement also provides that any unvested shares of restricted stock and stock options previously granted to Mr. Gould continued to vest on their existing schedules until July 2, 2021, when they became fully vested. Such stock options may be exercised at any time until their original stated expiration date. Under the Gould Agreement, each party agreed to release any and all claims such party may have against the other party. The confidentiality, non-disparagement and non-solicitation provisions of the employment agreement remain in effect. The Gould Agreement also modifies the Indemnification Agreement, dated December 28, 2019, between the Company and Mr. Gould. For the three and six months ended June 30, 2021, the severance costs under the Gould Agreement are included in selling, general and administrative expense for $0.3 million and $1.6 million, respectively. As of June 30, 2021, the unpaid portion of accrued severance costs for Mr. Gould amounted to $1.4 million, which is included in accrued liabilities as of June 30, 2021.

 

In April 2020, the Company initiated a restructuring plan designed to achieve selling, general and administrative cost reductions. This restructuring plan was primarily focused on reductions in marketing and other personnel. For the three months ended June 30, 2020, the Company implemented headcount reductions of approximately 100 employees that had estimated annualized compensation and benefit costs of $5.8 million. In connection with the termination of employees, the Company incurred severance costs of $0.9 million which are included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2020.

 

For the three and six months ended June 30, 2021 and 2020, activity affecting the accrued liability for severance benefits for all employees is summarized as follows (in thousands):

 

    2021     2020     2021     2020  
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2021     2020     2021     2020  
                         
Accrued severance, beginning of period   $ 1,333     $ -     $ 191     $ -  
Severance expense incurred     325       885       1,697       885  
Cash payments     (209 )     (885 )     (439 )     (885 )
                                 
Accrued severance, end of period   $ 1,449     $ -     $ 1,449     $ -  

 

Assets Held for Sale

 

On June 30, 2021, the Company entered into a memorandum of understanding (the “MOU”) with TCI Co., Ltd. (“TCI”). Under the MOU, the Company and TCI intend to enter into definitive agreements to (i) sell certain manufacturing equipment to TCI for $3.5 million and a 3.0% share of TCI’s future revenue from third party customers for five years, (ii) transfer the Company’s lease for its facility in American Fork, Utah to TCI, and (iii) engage TCI to manufacture products currently manufactured at the leased property. All of the assets under the MOU are held in the Company’s Direct / Social Selling segment. The net carrying value of the manufacturing equipment subject to the MOU is $2.5 million. As of June 30, 2021, the Company has a right-of-use asset of $4.6 million and a corresponding operating lease liability of $4.7 million related to the leased facility in American Fork, Utah. This transaction, including any gain, will be recognized in the period in which a definitive agreement is executed.

 

Long-lived assets are classified as held for sale when the Company commits to a plan to sell the assets. Accordingly, the Company determined that the MOU qualifies as a commitment whereby accounting for the assets as held for sale is appropriate. Such assets are classified within current assets if there is reasonable certainty that the sale will take place within one year. Upon classification as held for sale, long-lived assets are no longer depreciated, and a measurement for impairment is performed to determine if there is any excess of carrying value over fair value less costs to sell. As of June 30, 2021, the Company determined that no impairment exists for the manufacturing equipment and the right-of-use asset whereby the aggregate net carrying value of $7.1 million is included as a current asset in the accompanying unaudited condensed consolidated balance sheet. The Company has also classified the entire operating lease liability of $4.7 million related to the leased facility as a current liability in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2021.

 

15
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 5 — LEASES

 

Operating Leases

 

The Company leases various office and warehouse facilities, vehicles and equipment under non-cancellable operating lease agreements that expire between July 2021 and March 2039. The Company has made accounting policy elections (i) to not apply the recognition requirements for short-term leases and (ii) for facility leases, when there are lease and non-lease components, such as common area maintenance charges, to account for the lease and non-lease components as a single lease component. For the three and six months ended June 30, 2021 and 2020, the Company did not incur any material amounts for variable and short-term lease expense. For the three months ended June 30, 2021 and 2020, the Company incurred operating lease expense of $2.8 million and $2.6 million, respectively. For the six months ended June 30, 2021 and 2020, the Company incurred operating lease expense of $5.8 million and $5.1 million, respectively.

 

As of June 30, 2021 and December 31, 2020, the weighted average remaining lease term under operating leases was 11.0 years and 11.5 years, respectively. As of June 30, 2021 and December 31, 2020, the weighted average discount rate for operating lease liabilities was 5.6% and 5.5%, respectively.

 

Impairment of Right-Of-Use Asset

 

In June 2019, the Company began attempting to sublease a portion of its right-of-use assets previously used for warehouse space that are no longer needed for current operations. As a result, impairment evaluations were completed during 2019 that resulted in the recognition of an impairment charge of $2.3 million. These evaluations were based on the expected time to obtain a suitable subtenant and current market rates for similar commercial properties. Due to longer than expected timing to obtain a subtenant, an updated impairment evaluation was completed in June 2020 that resulted in recognition of an additional impairment charge of $0.4 million for the three and six months ended June 30, 2020. The Company is continuing its efforts to obtain subtenants for this space.

 

Future Lease Payments

 

As of June 30, 2021, future payments under operating lease agreements, including a lease for the Company’s facility in American Fork, Utah that is discussed in Note 4 under the caption Assets Held for Sale, are as follows (in thousands):

 

Years Ending December 31,      
 
Remainder of 2021   $ 4,736  
2022     7,147  
2023     5,940  
2024     5,472  
2025     5,346  
Thereafter     23,139  
         
Total operating lease payments     51,780  
Less imputed interest     (14,612 )(1)
         
Present value of operating lease payments   $ 37,168  

 

 

  (1) Calculated based on the term of the respective leases using discount rates ranging from 2.0% to 10.0%.

 

16
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 6 — DEBT

 

Summary of Debt

 

As of June 30, 2021 and December 31, 2020, the Company’s debt consisted of the following (dollars in thousands):

 

    2021     2020  
             
Senior Notes, net of discount of $4,609 as of June 30, 2021 and $7,900 as of December 31, 2020   $ 21,823     $ 24,532  
PPP Loan payable, interest at 1.0%, unsecured, due April 2022     6,868 (1)     6,868  
Assumed PPP Loan payable, interest at 1.0%, unsecured, due May 2022     2,797 (1)     2,781  
Installment notes payable     15       16  
Total     31,503       34,197  
Less current maturities     19,440 (2)     18,016  
                 
Long-term debt, less current maturities   $ 12,063     $ 16,181  

 

 

  (1) As discussed in Note 14, the PPP Loans were forgiven in July 2021. Accordingly, these loans are included as a debt obligation until the date of forgiveness when the obligation will be eliminated.
     
  (2) Current maturities of long-term debt include the aggregate principal payments of $24.0 million due under the Senior Notes, net of accretion of debt discount of approximately $4.6 million, expected for the 12 months ending June 30, 2022. Due to forgiveness of the PPP Loans in July 2021, they are excluded from current debt maturities.

 

Private Placement of Senior Notes

 

On November 30, 2020, the Company entered into a securities purchase agreement (the “November 2020 SPA”) for a private placement of (i) 8.00% Original Issue Discount Senior Secured Notes with an initial principal balance of $32.4 million (the “Senior Notes”), (ii) 800,000 shares of Common Stock (the “Commitment Shares”), (iii) Class A Warrants to purchase 750,000 shares of Common Stock exercisable at $3.75 per share (the “Class A Warrants”), and (iv) Class B Warrants to purchase 750,000 shares of Common Stock exercisable at $5.75 per share (the “Class B Warrants,” and together with the Class A Warrants, the “Warrants”). The Warrants are indexed to the Company’s shares of Common Stock and otherwise meet the criteria for classification within stockholders’ equity. The closing for the private placement occurred on December 1, 2020. Please refer to Note 7 under the captions Private Placement of Units and Redeemable Common Stock for further discussion of the Warrants and the Commitment Shares.

 

The Senior Notes bear interest at an annual rate of 8.0% applied to the stated principal balance with accrued interest payable monthly in cash. As of the closing date, the aggregate discount related to the Senior Notes was approximately $8.5 million that resulted in a net carrying value of $23.9 million. The discount is being accreted to interest expense using the effective interest method that resulted in an overall effective interest rate of approximately 42.3% as of December 31, 2020.

 

For the months of February 2021 through April 2021, the holders of the Senior Notes were entitled to request that the Company make principal payments up to $1.0 million per month and these payments were made on a timely basis. Beginning in May 2021 and continuing for each subsequent month, the holders of the Senior Notes are entitled to request that the Company make principal payments up to $2.0 million per month. The holders of the Senior Notes requested principal payments of $1.0 million in May 2021 and $2.0 million in June 2021, and these payments were made on a timely basis. The maturity date of the Senior Notes is on December 1, 2022. However, if the holders of the Senior Notes exercise their rights to demand the maximum principal payments permitted in each future month, the Senior Notes will be repaid in full by August 2022. The Company may prepay all or a portion of the outstanding principal amount of the Senior Notes at any time, subject to a prepayment fee of 3.0% of the outstanding stated principal balance through December 1, 2021.

 

As a post-closing deliverable, the Company was required to provide certain historical financial statements of Ariix to the lenders by January 4, 2021. The required financial statements were not available by the deadline, which would have resulted in a default under the November 2020 SPA. The lenders agreed to amend the Senior Notes to extend the deadline in exchange for the issuance of 400,000 shares of Common Stock with a fair value of approximately $1.1 million as of the issuance date. These shares were subject to the same redemption rights as the Commitment Shares discussed in Note 7. The amendment fee was accounted for as a modification that resulted in an additional discount of $1.1 million related to the Senior Notes. This amendment fee and other lender-initiated changes that affect the timing and amount of principal payments are accounted for prospectively as a revision of the effective interest rate. Accordingly, as of June 30, 2021, the overall effective interest rate was approximately 46.8%, including the 8.0% stated rate.

 

17
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

The Company was required to maintain restricted cash balances of $18.0 million as of December 31, 2020. Beginning in February 2021, the requirement to maintain restricted cash balances was reduced to $8.0 million until such time that the outstanding principal balance of the Senior Notes is reduced below $8.0 million without regard to the unaccreted discount, which is expected to occur during the second quarter of 2022. As of June 30, 2021, approximately $5.6 million of this restricted cash balance is classified as a current asset since those funds may be utilized to make principal payments that are classified within current maturities of long-term debt.

 

The obligations of the Company under the Senior Notes are secured by substantially all of the assets of the Company and its subsidiaries, including all personal property and all proceeds and products thereof, goods, contract rights and other general intangibles, accounts receivable, intellectual property, equipment, and deposit accounts and a lien on certain real estate. The Senior Notes contain certain restrictions and covenants, which restrict the Company’s ability to incur additional debt or make guarantees, sell assets, make investments or loans, make distributions or create liens or other encumbrances. The Senior Notes also require that the Company comply with certain financial covenants, including maintaining minimum cash, minimum adjusted EBITDA, minimum revenue, and a maximum ratio of cash in foreign bank accounts to cash in U.S. deposit accounts subject to account control agreements. As of June 30, 2021, the Company was in compliance with all covenants related to the Senior Notes. The Senior Notes contain customary events of default, including failure to pay any principal or interest when due, failure to perform or observe covenants, breaches of representations and warranties, certain cross defaults, certain bankruptcy related events, monetary judgments defaults, material adverse effect defaults, change of management defaults, and a change in control. Upon the occurrence of an event of default, the outstanding obligations may be accelerated and become immediately due and payable and the contractual interest rate on the obligations increases from 8.0% to 12.0%.

 

PPP Loans

 

Pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Company obtained a PPP loan (the “NewAge PPP Loan”) in April 2020 for approximately $6.9 million. In May 2020, Ariix obtained a PPP loan (the “Ariix PPP Loan”) for approximately $2.8 million, and the Company assumed this obligation in connection with the business combination discussed in Note 3. The PPP Loans are unsecured and guaranteed by the SBA, bear interest at a fixed rate of 1.0% per annum and provide for maturity dates on the second anniversary of the respective loan agreements. The Company and Ariix applied to their lenders to request forgiveness of their PPP Loans, with the amounts that may be forgiven equal to the sum of payroll costs, covered rent and mortgage obligations, and covered utility payments incurred during the permitted period as calculated in accordance with the terms of the CARES Act. The eligibility for the PPP Loans, expenditures that qualify toward forgiveness, and the final balance of the PPP Loans that may be forgiven are subject to audit and final approval by the SBA. As discussed in Note 14, the Company was informed in July 2021 that forgiveness of its PPP Loans was approved by the SBA for an aggregate of approximately $9.7 million including accrued interest through June 30, 2021. The terms of the PPP Loans provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events. The PPP Loans may be accelerated upon the occurrence of an event of default, including if the SBA subsequently reaches an audit determination that the eligibility criteria were not met.

 

The PPP Loans are being accounted for under Accounting Standards Codification (“ASC”) 470, Debt whereby interest expense was accrued at the contractual rate of 1.0% per annum. The Company will recognize forgiveness of the PPP Loans during the third quarter of 2021 when the Company was released of its obligation to repay the PPP Loans.

 

NOTE 7 — STOCKHOLDERS’ EQUITY

 

Authorized Shares of Capital Stock

 

On May 14, 2021, the Company’s shareholders approved an increase in authorized shares of Common Stock and the Reincorporation discussed in Note 1. Accordingly, as a Delaware corporation, the Company has authority to issue up to 400.0 million shares of Common Stock and up to 1.0 million shares of Preferred Stock.

 

18
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

Changes in Stockholders’ Equity

 

Changes in stockholders’ equity for the three months ended June 30, 2021 and 2020 were as follows (in thousands):

 

    Shares     Amount     Capital     Stock     Subscription     Income (Loss)     Deficit     Total  
                      Obligation     Note     Accumulated              
          Additional     to Issue     Receivable     Other              
    Common Stock     Paid-in     Common     For Stock     Comprehensive     Accumulated        
    Shares     Amount     Capital     Stock     Subscription     Income (Loss)     Deficit     Total  
                                                 
Three Months Ended June 30, 2021                                                                
                                                                 
Balances, March 31, 2021     135,399     $ 135     $ 336,128     $ -     $ (1,250 )   $ 2,756     $ (169,583 )   $ 168,186  
Issuance of Common Stock:                                                                
In Aliven business combination     1,072       1       2,587       -       -       -       -       2,588  
Upon vesting of restricted stock awards     112       1       (1 )     -       -       -       -       -  
For exercise of stock options     23       -       43       -       -       -       -       43  
Reclassification of Fixed Shares derivative liability     -       -       -       30,263       -       -       -       30,263  
Stock-based compensation expense     -       -       2,180       -       -       -       -       2,180  
Allowance for Divested Business stock subscription receivable     -       -       -       -       1,250       -       -       1,250  
Net change in accumulated other comprehensive income (loss)     -       -       -       -       -       722       -       722  
Net income     -       -       -       -       -       -       17,371       17,371  
                                                                 
Balances, June 30, 2021     136,606     $ 137     $ 340,937     $ 30,263     $ -     $ 3,478     $ (152,212 )   $ 222,603  
                                                                 
Three Months Ended June 30, 2020                                                                
                                                                 
Balances, March 31, 2020     87,245     $ 87     $ 213,385     $ -     $ -     $ (589 )   $ (124,089 )   $ 88,794  
Issuance of Common Stock:                                                                
In ATM public offering, net     11,191       11       16,731       -       -       -       -       16,742  
Upon vesting of restricted stock awards     6       -       -       -       -       -       -       -  
Stock-based compensation expense     -       -       1,085       -       -       -       -       1,085  
Net change in accumulated other comprehensive income (loss)     -       -       -       -       -       448       -       448  
Net loss     -       -       -       -       -       -       (9,554 )     (9,554 )
                                                                 
Balances, June 30, 2020     98,442     $ 98     $ 231,201     $ -     $ -     $ (141 )   $ (133,643 )   $ 97,515  

 

Private Placement of Units

 

On February 16, 2021, the Company entered into a securities purchase agreement (the “February 2021 SPA”) in connection with a private placement of units (the “Units”). The Units consisted of an aggregate of approximately 14.6 million shares of Common Stock and warrants to purchase an aggregate of 7.3 million shares (the “Warrant Shares”) of Common Stock. At the closing on February 19, 2021, the gross proceeds from issuance of the Units amounted to approximately $58.0 million. Roth Capital Partners, LLC acted as the exclusive placement agent in exchange for a fee equal to 7% of the gross proceeds. After deducting the placement agent fees, the net proceeds were approximately $53.8 million.

 

The warrants have an initial exercise price of $5.00 per share, subject to adjustment in certain circumstances. The warrants are exercisable until February 19, 2024, and exercise of the warrants is subject to a beneficial ownership limitation of 4.99% (or 9.99% at the option of the purchasers). In the event of certain fundamental transactions described in the warrant agreements, the holders of the warrants could be entitled to a net cash settlement whereby the warrants are not considered to be indexed to the Company’s shares of Common Stock. Accordingly, the warrants are required to be recorded at fair value and classified as liabilities in the Company’s balance sheet beginning on the issuance date. Future changes in the fair value of the warrant liabilities result in noncash gains and losses in the Company’s statements of operations. Since the warrants are required to be carried at fair value on a recurring basis, the net proceeds from the private placement of approximately $53.8 million were allocated as follows (in thousands):

 

          Common        
Description   Warrants     Stock     Total  
                   
Fair value on issuance date   $ 14,128 (1)   $ 46,105 (2)   $ 60,233  
Adjustment to reduce Common Stock to residual fair value     -       (6,455 )(3)     (6,455 )
                         
Total   $ 14,128 (1)   $ 39,650 (3)   $ 53,778 (4)

 

 

  (1) Fair value was determined on the issuance date using the Black-Scholes-Merton (“BSM”) option-pricing model. Key valuation inputs as of the issuance date included the closing price of $3.15 per share for the Company’s Common Stock, the exercise price of the warrants of $5.00 per share, historical volatility of 117%, and the contractual term of 3.0 years. Based on these valuation inputs, the weighted-average grant date fair value was $1.93 per share as of February 19, 2021.

 

19
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

  (2) Represents fair value of 14.6 million shares of Common Stock based on the closing price of $3.15 per share for the Company’s Common Stock as of February 19, 2021.
     
  (3) Adjustment required to record shares of Common Stock at residual fair value since the total fair value of the warrants and shares of Common Stock exceeded the net proceeds received in the private placement.
     
  (4) Represents the net proceeds received in the private placement.

 

As of June 30, 2021, the fair value of the warrants had decreased from $14.1 million to $5.7 million which resulted in the recognition of a noncash gain from changes in fair value of the warrant derivative liability of $8.4 million for the six months ended June 30, 2021. Please refer to Note 12 under the caption Recurring Fair Value Measurements for key valuation inputs as of June 30, 2021.

 

Pursuant to a registration rights agreement entered into concurrently, the Company filed an initial registration statement on Form S-3 covering the resale of the shares of Common Stock and the Warrant Shares with the SEC on March 18, 2021, and the registration statement was declared effective by the SEC on March 29, 2021. The Company also agreed to maintain effectiveness of the registration statement within prescribed deadlines set forth in the registration rights agreement. If the Company does not comply with these requirements, the investors are entitled to liquidated damages equal to 2.0% of the aggregate subscription amount on each 30-day anniversary of such failure. The Company believes it is probable that compliance with the terms of the registration rights agreement will be maintained.

 

The February 2021 SPA provides that through August 15, 2021 the Company is generally not permitted to enter into any agreement that could result in the issuance of shares of Common Stock in a variable rate transaction. In addition, as a condition of the February 2021 SPA, each of the Company’s officers and directors entered into a Lock-up Agreement whereby they were prohibited from selling any of their shares of Common Stock through June 27, 2021.

 

Redeemable Common Stock

 

In connection with the November 2020 SPA and the January 2021 amendment discussed in Note 6, the Company issued Commitment Shares for an aggregate of 1.2 million shares of Common Stock. The holders of the Commitment Shares had the right to demand redemption if a registration statement for the shares was not declared effective by March 31, 2021. The redemption price was the greater of $3.36 per share and the volume weighted average price of the Company’s shares on the date prior to the date that the holders elect to demand redemption. Based on this redemption contingency, the Commitment Shares were classified as temporary equity as of December 31, 2020. Since the registration statement related to the Commitment Shares was declared effective by the SEC on February 8, 2021, the carrying value of the Commitment Shares was reclassified to permanent equity in February 2021. Presented below is a summary of activity for the Commitment Shares for the six months ended June 30, 2021 (in thousands):

 

    Number of     Carrying  
Description   Shares     Value  
             
Balance, December 31, 2020     800     $ 2,101  
Amendment Fee     400       1,060  
                 
Total reclassified to permanent equity     1,200     $ 3,161  

 

20
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

At the Market Offering Agreements

 

On April 30, 2019, the Company entered into an At the Market Offering Agreement (“ATM Agreement”) with Roth Capital Partners, LLC (the “Agent”), pursuant to which the Company could offer and sell from time to time up to an aggregate of $100 million in shares of the Company’s Common Stock (the “2019 Placement Shares”) through the Agent. The amended ATM Agreement was scheduled to terminate when all of the 2019 Placement Shares had been sold, or earlier if elected by either party. Presented below is a summary of Common Stock issued pursuant to the ATM Agreement for the three and six months ended June 30, 2020 (in thousands, except per share amounts):

 

    Number     Gross Proceeds     Offering Costs     Net  
Three Months Ended   Of Shares     Per Share     Amount     Commissions     Other     Proceeds  
                                     
March 31, 2020     4,939     $ 1.73     $ 8,545     $ (257 )   $ (3 )   $ 8,285  
June 30, 2020     11,191     $ 1.54       17,270       (436 )     (91 )     16,743  
                                                 
Total     16,130     $ 1.60     $ 25,815     $ (693 )   $ (94 )   $ 25,028  

 

On February 9, 2021, the Company notified the Agent of its election to terminate the ATM Agreement. On February 11, 2021, the Company entered into a sales agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (the “Manager”), under which the Company may offer and sell from time-to-time up to an aggregate of approximately $53.5 million in shares of the Company’s Common Stock (the “2021 Placement Shares”) through the Manager. The Manager agreed to act as sales agent and use commercially reasonable efforts to sell on the Company’s behalf all of the 2021 Placement Shares requested to be sold by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the Manager and the Company. Under the Sales Agreement, no shares were sold for the six months ended June 30, 2021.

 

NOTE 8 — STOCK OPTIONS AND WARRANTS

 

Stock Option Activity

 

The following table sets forth stock option activity under the Company’s stock option plans for the six months ended June 30, 2021 (shares in thousands):

 

    Shares     Price (1)     Term (2)  
                   
Outstanding, beginning of period     3,856     $ 2.72       8.2  
Grants     528       2.74          
Forfeited     (190 )     3.10          
Exercised     (288 )(3)     1.84          
                         
Outstanding, end of period     3,906 (4)     2.77       8.2  
                         
Vested, end of period     1,586 (4)     2.71       7.0  

 

 

  (1) Represents the weighted average exercise price.
     
  (2) Represents the weighted average remaining contractual term until the stock options expire.
     
  (3) On the respective exercise dates, the weighted average intrinsic value per share of Common Stock issued upon exercise of stock options amounted to $1.72 per share for a total of $0.5 million for the six months ended June 30, 2021.
     
  (4) As of June 30, 2021, based on the closing price of the Company’s Common Stock of $2.23 per share, the intrinsic value amounted to $0.6 million for outstanding stock options and $0.3 million for vested stock options.

 

In connection with certain employee severance arrangements during the six months ended June 30, 2021, the Company agreed to accelerate vesting and extend the exercise period for options for a total of 0.2 million shares that would have otherwise expired unexercised. The Company accounted for these modifications of the original awards, whereby compensation cost was remeasured on the date of the modification resulting in an increase in fair value of $0.5 million. Accordingly, stock-based compensation expense related to modifications of $0.5 million was recognized for the six months ended June 30, 2021.

 

21
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

For the six months ended June 30, 2021, the valuation assumptions for newly-granted stock options and modifications under the Company’s stock option plans were estimated on the respective date of grant or modification using the BSM option-pricing model with the following weighted-average assumptions:

 

 

    Grants     Modifications  
             
Closing price of Common Stock on measurement date   $ 2.74     $ 2.84  
Exercise price   $ 2.74     $ 3.21  
Expected life (in years)     5.0       7.6  
Volatility     104 %     111 %
Dividend yield     0 %     0 %
Risk-free interest rate     0.6 %     0.1 %

 

Using the BSM option-pricing model based on the valuation inputs set forth above, the weighted-average grant date fair value was $2.00 per share for newly-granted stock options and $2.35 per share for modified stock options for the six months ended June 30, 2021.

 

Restricted Stock Activity

 

The following table sets forth share activity related to grants of restricted stock under the Company’s stock option plans for the six months ended June 30, 2021 (in thousands):

 

    Type of Awards  
    Equity     Liability (1)  
 
Unvested shares, December 31, 2020     2,039       18  
Unvested awards granted to:                
Executive officer     2,275 (2)     -  
Board members     187 (3)     -  
Employees and Brand Partners     303 (4)     -  
Forfeitures     (65 )     (1 )
Vested shares     (697 )     -  
                 
Unvested shares, June 30, 2021     4,042       17  
                 
Intrinsic value, June 30, 2021   $ 9,015 (5)   $ 37 (5)

 

 

  (1) Certain awards granted to employees in China are not permitted to be settled in shares, which requires classification as a liability in the Company’s condensed consolidated balance sheets. This liability is adjusted based on the closing price of the Company’s Common Stock at the end of each reporting period until the awards vest.
     
  (2) On March 10, 2021, the Board of Directors approved restricted stock grants to the Company’s Chief Executive Officer for (i) 175,000 shares that vest for one-third of the shares on each of the first, second and third anniversaries of the grant date, (ii) a grant of 350,000 shares up to 1,050,000 shares that vest to the extent that prescribed amounts of measurable merger synergies are realized by the Company over the three-year period ending December 31, 2023, and (iii) a grant of 350,000 shares up to 1,050,000 shares that vest if the Company achieves adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) margins ranging from 4.0% to 12.0% over the three-year period ending December 31, 2023. Adjusted EBITDA margin is a non-GAAP measure computed by dividing Adjusted EBITDA, as defined by the Board of Directors, by net revenue. The fair value of the Company’s Common Stock was $2.79 per share on the grant date, resulting in total compensation expense of $0.5 million that is being recognized over the 3-year service period for the award described in (i) above, and up to an aggregate of $5.9 million if the maximum performance targets are achieved for both awards described in (ii) and (iii) above whereby an aggregate of 2.1 million shares would vest. If the Company does not achieve the minimum targets set by the Board of Directors for merger synergies and Adjusted EBITDA margin, none of the 2.1 million shares will vest.

 

22
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

    For the six months ended June 30, 2021, an aggregate of approximately $0.2 million of compensation expense was recognized for the awards described in (ii) and (iii) above, which was calculated assuming that an aggregate of 0.7 million shares will ultimately vest and that the performance criteria will not be achieved for an aggregate of 1.4 million shares that are included in the table. This compensation calculation was based on management’s estimate of the most likely outcome for the performance conditions and considering the portion of the service period that had been rendered through June 30, 2021. Compensation expense will be recomputed at the end of each reporting period with the future impact of changes in management’s estimates reflected prospectively.
     
  (3) Represents grants to members of the Board of Directors in January 2021, whereby the shares of Common Stock will vest one year after the grant date. The fair value of the Company’s Common Stock was $3.21 per share on the grant date, resulting in total compensation expense of $0.6 million that is being recognized over the one-year vesting period.
     
  (4) Represents restricted stock awards that generally vest over three years with fair value determined based on the closing price of the Company’s Common Stock on the respective grant dates.
     
  (5) The intrinsic value is based on the closing price of the Company’s Common Stock of $2.23 per share on June 30, 2021.

 

In connection with certain employee severance arrangements during the six months ended June 30, 2021, the Company modified certain restricted stock awards for 0.2 million shares that otherwise would have expired upon termination of employment. These modifications resulted in an increase in the fair value of the awards of $0.7 million that was recognized as stock-based compensation expense for the six months ended June 30, 2021.

 

Stock-Based Compensation Expense

 

Substantially all stock-based compensation expense is included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. The table below summarizes stock-based compensation expense related to stock options and restricted stock awards for the three and six months ended June 30, 2021 and 2020, and the unrecognized compensation expense as of June 30, 2021 and 2020 (in thousands):

 

    Three Months Ended     Six Months Ended     Unrecognized Expense  
    June 30:     June 30:     as of June 30:  
    2021     2020     2021     2020     2021     2020  
                                     
Plan-based stock option awards   $ 871     $ 471     $ 1,721     $ 1,096     $ 3,398 (1)   $ 3,680  
Plan-based restricted stock awards:                                                
Equity-classified     1,309       614       2,409       1,340       5,104 (2)     4,188  
Liability-classified     7       7       19       13       19       41  
                                                 
Total   $ 2,187     $ 1,092     $ 4,149     $ 2,449     $ 8,521     $ 7,909  

 

 

  (1) Includes $0.1 million related to stock options for an aggregate of 100,000 shares exercisable at $3.06 per share that vest upon achievement of cost savings of $25.0 million related to the successful integration of the Ariix business combination discussed in Note 3.
     
  (2) Pursuant to the March 2021 grant of performance-based restricted stock to the Company’s Chief Executive Officer, the amount includes $1.7 million of unrecognized compensation. This amount is based on management’s estimate that 0.7 million shares will ultimately vest as discussed above under the caption Restricted Stock Activity. Accordingly, unrecognized compensation of $3.9 million related to an additional 1.4 million shares is excluded from the table based on management’s estimate that both performance conditions will be achieved at the target level. Accordingly, $3.9 million of additional stock-based compensation expense could be recognized if the maximum performance targets are achieved over the remaining performance period through December 2023.

 

As of June 30, 2021, unrecognized stock-based compensation expense related to service-based awards is expected to be recognized on a straight-line basis over a weighted-average period of approximately 2.1 years for stock options, 1.9 years for equity-classified restricted stock awards, and 0.5 years for liability-classified restricted stock awards. For awards with performance-based vesting, compensation expense is recognized over the period that the performance criteria are expected to be achieved as discussed above under the caption Restricted Stock Activity.

 

23
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

Warrants

 

The following table sets forth changes in outstanding warrants for the six months ended June 30, 2021 (shares in thousands):

 

    Shares     Price (1)     Term (2)  
                   
Outstanding, beginning of period     1,803     $ 4.77       5.1  
Issuance in private placement of Units     7,318 (3)     5.00          
                         
Outstanding, end of period     9,121 (4)     4.95       3.0  

 

 

  (1) Represents the weighted average exercise price.
     
  (2) Represents the weighted average remaining contractual term in years until the warrants expire.
     
  (3) As discussed in Note 7, the Company completed a private placement of equity securities in February 2021 that included warrants to purchase an aggregate of 7.3 million shares of Common Stock at an exercise price of $5.00 per share.
     
  (4) All warrants are vested and exercisable as of June 30, 2021.

 

The November 2020 SPA discussed in Note 6 included the issuance of Class B Warrants to purchase 750,000 shares of Common Stock exercisable at $5.75 per share. The February 2021 SPA discussed in Note 7 was considered a dilutive issuance that resulted in a reduction of the exercise price of the Class B Warrants from $5.75 per share to $5.53 per share. The change in fair value of the Class B Warrants as a result of this dilutive issuance was immaterial whereby the reduction of the exercise price for the Class B Warrants did not have any impact on the Company’s financial statements for the six months ended June 30, 2021.

 

NOTE 9 — INCOME TAXES

 

The Company’s provision for income taxes for the three months ended June 30, 2021 and 2020 resulted in income tax expense of $0.7 million and $0.6 million, respectively. The effective tax rate as a percentage of income (loss) before income taxes for the three months ended June 30, 2021 and 2020 was 4% and negative 6% compared to the U.S. federal statutory rate of 21%. The difference between the lower effective tax rate and the statutory rate for the three months ended June 30, 2021 and 2020 was primarily due to foreign income tax expense on profitable foreign operations and the impact of the domestic valuation allowance offsetting domestic income tax benefits and the impact of the gain (loss) from change in fair value of derivatives which has no income tax effect.

 

The Company’s provision for income taxes for the six months ended June 30, 2021 and 2020 resulted in income tax expense of $1.9 million and $1.3 million, respectively. The effective tax rate as a percentage of income (loss) before income taxes for the six months ended June 30, 2021 and 2020 was 127% and negative 6% compared to the U.S. federal statutory rate of 21%. The difference between the effective tax rate and the statutory tax rate for the six months ended June 30, 2021 and 2020 was primarily due to foreign income tax expense on profitable foreign operations and the impact of the domestic valuation allowance offsetting domestic income tax benefits and the impact of the gain (loss) from change in fair value of derivatives which has no income tax effect.

 

Interim income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the period in which they occur. Although the Company believes its tax estimates are reasonable, the Company can make no assurance that the final tax outcome of these matters will not be different from that which it has reflected in its historical income tax provisions and accruals. Such differences could have a material impact on the Company’s income tax provision and operating results in the period in which the Company makes such determinations.

 

As of June 30, 2021 and December 31, 2020, $1.1 million of unrecognized income tax benefits is included in other long-term liabilities with the remainder of $4.3 million being offset with other deferred tax assets. As of June 30, 2021 and December 31, 2020, unrecognized tax benefits that are classified in other long-term liabilities, would result in changes to the Company’s effective tax rate if recognized. As of June 30, 2021 and December 31, 2020, unrecognized tax benefits that were offset against other deferred tax assets, if recognized, would not affect the Company’s effective tax rate since the tax benefits would increase a deferred tax asset that would be offset by a valuation allowance. The Company does not anticipate that unrecognized tax benefits will significantly increase or decrease within the next twelve months.

 

NOTE 10 — COMMITMENTS AND CONTINGENCIES

 

Litigation, Claims and Assessments

 

From time to time, the Company may be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

 

24
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

The Company’s operations are subject to numerous governmental rules and regulations in each of the countries it does business. These rules and regulations include a complex array of tax and customs regulations as well as restrictions on product ingredients and claims, the commissions paid to the Company’s Brand Partners, labeling and packaging of products, conducting business as a direct-selling business, and other facets of manufacturing and selling products. In some instances, the rules and regulations may not be fully defined under the law or are otherwise unclear in their application. Additionally, laws and regulations can change from time to time, as can their interpretation by the courts, administrative bodies, and the tax and customs authorities in each country. The Company actively seeks to be in compliance, in all material respects, with the laws of each of the countries in which it does business and expects its Brand Partners to do the same. The Company’s operations are often subject to review by local country tax and customs authorities and inquiries from other governmental agencies. No assurance can be given that the Company’s compliance with governmental rules and regulations will not be challenged by the authorities or that such challenges will not result in assessments or required changes in the Company’s business that could have a material impact on its business, consolidated financial statements and cash flow.

 

The Company has various non-income tax contingencies in several countries. Such exposures could be material depending upon the ultimate resolution of each situation. As of June 30, 2021 and December 31, 2020, the Company has recorded current liabilities for non-income tax contingencies of approximately $1.2 million.

 

On November 19, 2020, Ariix’s subsidiary in Japan (the “Japanese Subsidiary”) received an order from the Japan Consumer Affairs Agency notifying it of a nine-month suspension from recruiting new Brand Partners in Japan. In comparison to pre-acquisition levels of net revenue generated by the Japanese subsidiary, the suspension of recruiting is resulting in a reduction in net revenue for the nine-month suspension period. According to the order, the Japanese Subsidiary may continue to sell products to customers through existing Brand Partners and may continue to attract new customers. Accordingly, the Japanese Subsidiary has refocused its efforts to attract new customers by introducing new products and a new customer program. The Japanese Subsidiary has terminated non-compliant distributors whose actions led to the sanction, and many other distributors have elected to terminate their relationship with the Japanese Subsidiary.

 

In December 2020, the Company engaged external counsel, accountants, and other advisors to conduct an independent investigation of Ariix’s international business practices, during which the investigation team identified conduct that potentially was in violation of the FCPA. In August 2021, the Company made a voluntary self-disclosure to the U.S. Department of Justice (“DOJ”) and the SEC about these items and our investigation. Although the reporting to the DOJ and SEC is ongoing, the Company believes its investigation is substantially complete. The Company has initiated procedures to remediate such practices. These findings provide opportunity for targeted, enhanced controls and additional training and other remediation. The Company intends to fully cooperate with the DOJ and SEC, with the assistance of legal counsel, to conclude this matter.

 

The Company is unable at this time to predict when the government agencies’ review of these matters will be completed or what regulatory or other consequences may result. The ultimate outcome of this investigation, including potential claims that may arise from the matters under investigation, is uncertain and the Company cannot reasonably estimate the amount of any potential loss on its financial statements at this time.

 

COVID-19 Pandemic

 

In December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of the virus resulted in a world-wide pandemic. By March 2020, the U.S. economy had been largely shut down by mass quarantines and government mandated stay-in-place orders (the “Orders”) to halt the spread of the virus. Many of these Orders have been relaxed or lifted in jurisdictions where large portions of the population have been vaccinated, but there is considerable uncertainty about whether the Orders will need to be reinstated due to the ongoing spread of new variants of COVID-19. A significant portion of the worldwide population remains unvaccinated, and uncertainty also exists about whether existing vaccines will be effective as new variants of COVID-19 emerge. Accordingly, the overall impact of COVID-19 continues to have an adverse impact on global business activities. The Orders required some of the Company’s employees to work from home when possible, and other employees were entirely prevented from performing their job duties at times. The world-wide response to the pandemic has resulted in a significant downturn in economic activity and there is no assurance that government stimulus programs will successfully restore the economy to the levels that existed before the pandemic. If an economic recession or depression is sustained, it could have a material adverse effect on the Company’s business as consumer demand for its products could decrease.

 

Foreign jurisdictions accounted for approximately 78% and 68% of the Company’s net revenue for the six months ended June 30, 2021 and the year ended December 31, 2020, respectively. The impact of COVID-19 was a significant contributing factor for much of the year ended December 31, 2020 that resulted in decreases in net revenue in foreign countries as a group. While the Company’s direct-to-consumer selling model typically relies heavily on the use of its Brand Partner sales force in close contact with customers, the pandemic has required alternative selling approaches such as through social media. Until vaccines or other successful mitigation of COVID-19 have been widely administered throughout the population, no assurance can be provided that the Company will be able to avoid future reductions in net revenue using alternative selling approaches that avoid direct contact with customers. While the current disruption to the Company’s business is expected to be temporary, the long-term financial impact on the Company’s business cannot be reasonably estimated at this time.

 

25
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 11 —NET INCOME (LOSS) PER SHARE

 

Basic and diluted net income (loss) per share (“EPS”) is computed by dividing (i) net income (loss), as adjusted for certain gains and losses related to contingently issuable shares and the two-class method allocation of earnings (the “Numerator”), by (ii) the weighted average number of common shares outstanding during the period, as adjusted to give effect to certain contingently issuable shares (the “Denominator”). The calculation of diluted EPS also includes the dilutive effect, if any, of stock options, unvested restricted stock awards, and other Common Stock equivalents computed using the treasury stock method, in order to compute the weighted average number of shares outstanding. For the three and six months ended June 30, 2021 and 2020, all Common Stock equivalents were anti-dilutive. Presented below are the calculations of the Numerators and the Denominators for basic and diluted EPS (in thousands, except per share amounts):

 

    2021     2020     2021     2020  
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2021     2020     2021     2020  
                         
Calculation of Numerators:                                
Net income (loss)   $ 17,371     $ (9,554 )   $ (397 )   $ (21,172 )
Two-class method earnings allocation adjustment     (1,005 )(1)     -       - (1)     -  
                                 
Earnings for calculation of basic EPS     16,366       (9,554 )     (397 )     (21,172 )
Reverse two-class method earnings allocation adjustment     1,005 (1)     -       - (1)     -  
Eliminate derivative gains on Fixed Shares     (11,380 )(2)     -       (6,765 )(2)     -  
Eliminate derivative gains on Variable Shares     (12,743 )(2)     -       (6,018 )(2)     -  
                                 
Earnings for calculation of diluted EPS   $ (6,752 )   $ (9,554 )   $ (13,180 )   $ (21,172 )
                                 
Calculation of Denominators:                                
Weighted average shares outstanding before adjustments     135,961       93,003       131,675       89,187  
Give effect to elimination of contingency on May 14, 2021:                                
Fixed Shares     7,675 (3)     -       3,859 (3)     -  
Variable Shares     - (4)     -       - (4)     -  
                                 
Weighted average shares for basic EPS     143,636       93,003       135,534       89,187  
Give effect to elimination of contingency at beginning of period:                                
Fixed Shares     6,876 (5)     -       10,692 (5)     -  
Variable Shares     20,097 (5)     -       20,097 (5)     -  
                                 
Weighted average shares for diluted EPS     170,609       93,003       166,323       89,187  
                                 
Net income (loss) per share of Common Stock:                                
Basic   $ 0.11     $ (0.10 )   $ (0.00 )   $ (0.24 )
Diluted   $ (0.04 )   $ (0.10 )   $ (0.08 )   $ (0.24 )

 

 

  (1) The Company issued warrants in December 2020 and February 2021 for the purchase of an aggregate of 8.8 million shares of Common Stock (the “Participating Warrants”) whereby the holders are entitled to share in any dividends or distributions payable to holders of Common Stock on an as-converted basis. Accordingly, the calculation of basic EPS for the three months ended June 30, 2021 requires use of the two-class method whereby earnings for the reporting period were allocated between the holders of Common Stock and the Participating Warrants. This allocation is required regardless of whether a dividend is declared for such undistributed earnings. For all other periods, the impact of using the two-class method was antidilutive which resulted in the reversal of the amount allocated for basic EPS in the diluted EPS calculation for the three months ended June 30, 2021.
     
  (2) As discussed under footnote (5) below, the Fixed Shares and the Variable Shares are included in the Denominator for the calculation of diluted EPS beginning on the first day of each of the three- and six-month periods ended June 30, 2021. Accordingly, it is necessary to adjust the Numerator to eliminate the related net gains from changes in fair value of the derivative liabilities associated with these shares for the three and six months ended June 30, 2021.

 

26
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

  (3) For purposes of the calculation of basic EPS, the Fixed Shares are treated as issued and outstanding beginning on May 14, 2021 when the shareholder approval contingency discussed in Note 3 was eliminated. This number represents the weighted average number of shares for the respective periods that the Fixed Shares were considered outstanding from May 14, 2021 through June 30, 2021.
     
  (4) As discussed in Note 3 under the caption Business Combination Liabilities, the Variable Shares provide for the possibility of future adjustments in the number of shares based on the outcome of any potential indemnification claims by either party to the Amended Ariix Merger Agreement. Accordingly, the Variable Shares are required to be excluded from the calculation of basic EPS until the underlying shares are issued in November 2021.
     
  (5) For purposes of the calculation of diluted EPS, the Fixed Shares and the Variable Shares are treated as issued and outstanding beginning on the first day of each of the three- and six-month periods ended June 30, 2021. This adjustment increases the number of shares in the basic EPS calculation to equal the total number of Fixed Shares and Variable shares that are considered outstanding for the entirety of the three and six months ended June 30, 2021 for the diluted EPS calculation.

 

As of June 30, 2021 and 2020, the following potential Common Stock equivalents were excluded from the computation of diluted net income (loss) per share since the impact of inclusion was anti-dilutive (in thousands):

 

    2021     2020  
             
Equity Incentive Plan awards:                
Stock options     3,906       3,883  
Unvested restricted stock awards     4,042       2,499  
Common stock purchase warrants     9,121       311  
                 
Total     17,069       6,693  

 

NOTE 12 — FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS

 

Fair Value Measurements

 

Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

 

Level 1—Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date

 

Level 2—Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market collaboration, for substantially the full term of the asset or liability

 

Level 3—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date

 

As of June 30, 2021 and December 31, 2020, the fair value of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximated their carrying values due to the short-term nature of these instruments. Cash equivalents consist of short-term certificates of deposit that are classified as Level 2. The estimated fair value of the Senior Notes discussed in Note 6 is classified as Level 2 and amounted to approximately $24.4 million as of June 30, 2021 and $28.9 million as of December 31, 2020. The recorded amounts for short-term debts payable related to the Ariix Clarification Letter and the Zennoa business combination discussed in Note 3 approximated fair value due to the short-term maturities and lack of changes in the Company’s credit risk. Due to the U.S. government guarantee and the otherwise unique terms of the PPP Loans discussed in Note 6, it was not possible to determine fair value of these debt instruments. As discussed in Note 14, the Company was informed in July 2021 that forgiveness of its PPP Loans of approximately $9.7 million was approved.

 

27
 

 

NewAge, Inc.

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

Recurring Fair Value Measurements

 

Recurring measurements of the fair value of liabilities as of June 30, 2021 and December 31, 2020 were as follows (in thousands):

 

    2021     2020  
    Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3     Total  
                                                 
Derivative Liabilities:                                                                
Ariix Fixed Shares   $ -     $ -     $ -     $ -     $ -     $ -     $ 37,028 (1)   $ 37,028  
Ariix Variable Shares     -       -       44,773 (2)     44,773       -       -       53,846 (1)     53,846  
Warrants     -       -       5,695 (3)     5,695       -       -       -       -  
Deferred consideration payable:                                                                
LIMU     -       3,495 (4)     -       3,495       -       3,656 (4)     -       3,656  
Zennoa     -       1,885 (4)     -       1,885       -       2,196 (4)