The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
the unaudited condensed consolidated financial statements.
1. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
General
Tattooed Chef, Inc. was originally incorporated
in Delaware on May 4, 2018 under the name of Forum Merger II Corporation (“Forum”), as a special purpose acquisition company
(“SPAC”) for the purpose of effecting a merger, capital stock exchange, asset acquisitions, stock purchase, reorganization
or similar business combination with one or more business.
On October 15, 2020 (the “Closing Date”),
Forum consummated the transactions contemplated within the Agreement and Plan of Merger dated June 11, 2020 as amended on August 10, 2020,
(the “Merger Agreement”), by and among Forum, Myjojo, Inc., a Delaware corporation (“Myjojo (Delaware)”), Sprout
Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Forum (“Merger Sub”), and Salvatore Galletti, in
his capacity as the holder representative (the “Holder Representative”). The transactions contemplated by the Merger Agreement
are referred to herein as the “Transaction”.
Upon the consummation of the Transaction, Merger
Sub merged with and into Myjojo (Delaware) (the “Merger”), with Myjojo (Delaware) surviving the merger in accordance with
the Delaware General Corporation Law. Immediately upon the completion of the Transaction, Myjojo (Delaware) became a direct wholly owned
subsidiary of Forum. In connection with the closing of the Transaction (the “Closing”), Forum changed its name to Tattooed
Chef, Inc. (“Tattooed Chef”). Tattooed Chef’s common stock began trading on the Nasdaq under the symbol “TTCF”
on October 16, 2020.
Tattooed Chef, Inc. and its subsidiaries, (collectively,
the “Company”) are principally engaged in the manufacturing of plant-based foods including, but not limited to, acai and smoothie
bowls, zucchini spirals, riced cauliflower, vegetable bowls and cauliflower crust pizza primarily in the United States and Italy.
About Myjojo and Subsidiaries
Myjojo, Inc. was an S corporation formed under
the laws of California (“Myjojo (California)”) on February 26, 2019 to facilitate a corporate reorganization of Ittella International
Inc. On March 27, 2019, the sole stockholder of Ittella International, Inc. contributed all of his share ownership of Ittella International,
Inc. to Myjojo (California) in exchange for 100% interest in the latter, becoming Myjojo (California)’s sole stockholder.
Ittella International, Inc. was formed in California
as a tax pass-through entity and subsequently converted on April 10, 2019 to a limited liability company, Ittella International, LLC (“Ittella
International”). On April 15, 2019, UMB Capital Corporation (“UMB”), a financial institution, acquired a 12.50% non-controlling
interest in Ittella International (Notes 3).
Ittella’s Chef, Inc. was incorporated under
the laws of the State of California on July 20, 2017 as a qualified Subchapter S subsidiary and a wholly owned subsidiary of Ittella International.
Ittella’s Chef, Inc. was formed as a tax passthrough entity for purposes of holding Ittella International’s 70% ownership
interest in Ittella Italy, S.R.L. (“Ittella Italy”). On March 15, 2019, Ittella’s Chef, Inc. was converted to a limited
liability company, Ittella’s Chef, LLC (“Ittella’s Chef”).
On May 21, 2020, Myjojo (Delaware) was formed
with Salvatore Galletti owning all of the shares of common stock. On May 27, 2020, Myjojo, Inc. (California) merged into Myjojo, Inc.,
(Delaware) with Myjojo, Inc. (Delaware) issuing shares of common stock to the sole stockholder of Myjojo (California).
In connection with the Transaction and as a condition
to the Closing, Myjojo (Delaware) entered into a Contribution Agreement with the minority members of Ittella International and the minority
shareholders of Ittella Italy. Under the Contribution Agreement, the minority holders contributed all of their equity interests in Ittella
International to Myjojo (Delaware) and Ittella Italy to Ittella’s Chef in exchange for Myjojo (Delaware) stock (the “Restructuring”).
The Restructuring was consummated prior to the Transaction. The shares of Myjojo (Delaware) were exchanged for shares of Forum’s
common stock upon consummation of the Transaction.
Basis of Consolidation. The condensed consolidated
financial statements include the accounts of Tattooed Chef and its subsidiaries in which Tattooed Chef has a controlling interest directly
or indirectly, and variable interest entities for which the Company is the primary beneficiary. All intercompany accounts and transactions
have been eliminated in consolidation.
Basis of Presentation. The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed consolidated or omitted, pursuant to the rules and regulations of the SEC for interim
financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial
position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial
statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial
position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31,
2020 as filed with the SEC on March 19, 2021, which contains the audited financial statements and notes thereto. The financial information
as of December 31, 2020 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2020. The interim results for the three months ended March 31, 2021 are not necessarily indicative of the
results to be expected for the year ending December 31, 2021 or for any future interim periods.
The Transaction was accounted for as a reverse
recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method, Forum was treated as the “acquired”
company (“Accounting Acquiree”) and Myjojo (Delaware), the accounting acquirer, was assumed to have issued stock for the net
assets of Forum, accompanied by a recapitalization.
The net assets of Forum are stated at historical
cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the
reverse recapitalization are those of Myjojo (Delaware). The shares and corresponding capital amounts and earnings per share available
for common stockholders, prior to the reverse recapitalization, have been retroactively restated.
Revision of Previously Issued Financial Statements for Correction
of Immaterial Errors.
The Company identified errors in its previously
issued annual financial statements that were determined to be individually, and in the aggregate, quantitatively and qualitatively immaterial
based on its analysis of Staff Accounting Bulletin (“SAB”) No. 99, “Materiality,” and SAB No. 108, “Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”. These immaterial
errors have been corrected in the accompanying consolidated balance sheet as of December 31, 2020, and the consolidated statements
of operations and comprehensive income, stockholders’ equity and cash flows for the three months ended March 31,
2020. The nature of these error corrections is as follows:
|
● |
In further consideration of the guidance in Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity, the Company concluded that a provision in the warrant agreement related to certain settlement methods specific to the Private Placement Warrants precludes the Private Placement Warrants from being accounted for as components of equity. As the Private Placement Warrants meet the definition of a derivative as contemplated in ASC 815, the Private Placement Warrants should have been recorded as derivative liabilities on the consolidated balance sheet and measured at fair value upon recognition on the Closing Date and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the consolidated statement of operations and comprehensive income in the period of change. Therefore, the Company concluded that it is appropriate to revise the classification of the Private Placement Warrants as of and for the year ended December 31, 2020. |
| ● | The Company revised the accompanying consolidated balance sheet and statement of stockholders’ equity as of December 31, 2020 to reflect the correction of an immaterial error related to the presentation of 81,087 treasury shares. The treasury shares are now presented separately from common stock shares. This revision has an immaterial impact on the Company’s previously reported net income, earnings per share, or stockholders’ equity. |
| | |
| ● | The Company revised the accompanying consolidated statements of equity and operations and comprehensive income for the year ended December 31, 2020 to reflect the correction of an immaterial error related to the grant of 825,000 stock awards to Harrison Co. (“Harrison”) on October 15, 2020 as consideration for advisory services provided by Harrison to facilitate the successful completion of the Transaction (see Note 18). The stock awards were fully vested on grant date, and therefore a weighted average 174,041 shares should have been included in basic and diluted outstanding shares when calculating earnings per share for the year ended December 31, 2020. In addition, the fair value of the stock awards issued in the amount of $20.54 million should have been included as a reduction to the “Reverse Recapitalization” line item and an increase by the same amount to the “Transaction costs, net of tax” line item. Both items are included within the Company’s additional paid-in capital for the year ended December 31, 2020. The Company also identified a $4.0 million deferred tax asset (with the corresponding offset to additional paid-in capital) that should have been recorded in connection with this grant. The revision has no impact on the Company’s previously reported net income but reduced the earnings per share for the year ended December 31, 2020. The impact of the tax consequences associated with the grant have been reflected in the balance sheet and statement of stockholders’ equity. |
| | |
| ● | The Company revised the accompanying condensed consolidated statements of operations and comprehensive income for the period ended March 31, 2020 to reflect the correction of an immaterial error for amounts previously not reflected in the comprehensive income attributable to noncontrolling interest. This revision has no impact on the Company’s net income, retained earnings, or earnings per share. |
|
● |
The Company identified errors related to inventoriable
costs and the classification of certain expense accounts that primarily impacted revenue, cost of goods sold and operating expenses.
|
|
● |
A presentation error to the prior quarter stockholders’ equity balance within the condensed consolidated statement of stockholders’ equity for the three months ended March 31, 2020 was found. The common stock shares balance as of January 1, 2020 was improperly included in the cross-footing for the total of stockholders’ equity for the three months ended March 31, 2020. |
|
|
|
|
● |
The Company identified a classification error between accounts receivable and deferred revenue, which affected the balance sheet as of December 31, 2020. |
The following table summarizes the effect of the revision on each financial
statement line item as of the dates, and for the periods ended, indicated:
(In thousands) | |
As | | |
Consolidated Balance Sheet | | |
| |
| |
Originally | | |
| | |
Re- | | |
As | |
As of December 31, 2020 | |
Reported | | |
Revisions | | |
classification
| | |
Revised | |
Accounts receivable | |
$ | 17,991 | | |
$ | (1,710 | ) | |
$ | - | | |
$ | 16,281 | |
Inventory | |
| 38,660 | | |
| (658 | ) | |
| - | | |
| 38,002 | |
Prepaid expenses and other current assets | |
| 18,240 | | |
| 176 | | |
| - | | |
| 18,416 | |
TOTAL CURRENT ASSETS | |
| 206,470 | | |
| (2,192 | ) | |
| - | | |
| 204,278 | |
Deferred income taxes, net | |
| 43,525 | | |
| 4,024 | | |
| - | | |
| 47,549 | |
TOTAL ASSETS | |
| 266,683 | | |
| 1,832 | | |
| - | | |
| 268,515 | |
Accounts payable | |
| 25,391 | | |
| - | | |
| (1,316 | ) | |
| 24,075 | |
Accrued expenses | |
| 2,961 | | |
| 649 | | |
| - | | |
| 3,610 | |
Deferred revenue | |
| 1,711 | | |
| (1,711 | ) | |
| - | | |
| - | |
Other current liabilities | |
| 87 | | |
| - | | |
| 1,316 | | |
| 1,403 | |
TOTAL CURRENT LIABILITIES | |
| 30,349 | | |
| (1,062 | ) | |
| - | | |
| 29,287 | |
Warrant liabilities | |
| - | | |
| 5,184 | | |
| - | | |
| 5,184 | |
TOTAL LIABILITIES | |
| 32,339 | | |
| 4,122 | | |
| - | | |
| 36,461 | |
Additional paid-in capital | |
| 170,799 | | |
| (2,351 | ) | |
| - | | |
| 168,448 | |
Retained earnings | |
| 63,537 | | |
| 61 | | |
| - | | |
| 63,598 | |
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | |
| 234,344 | | |
| (2,290 | ) | |
| - | | |
| 232,054 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| 266,683 | | |
| 1,832 | | |
| - | | |
| 268,515 | |
| |
Condensed Consolidated | |
(In thousands, except EPS) | |
Statements of Operations and
Comprehensive Income | |
| |
As | | |
| | |
| |
| |
Originally | | |
| | |
| |
For the three months ended March 31, 2020 | |
Reported | | |
Revisions | | |
As Revised | |
Revenue | |
$ | 33,170 | | |
$ | 2 | | |
$ | 33,172 | |
Cost of goods sold | |
| 23,927 | | |
| 109 | | |
| 24,036 | |
Gross profit | |
| 9,243 | | |
| (107 | ) | |
| 9,136 | |
Operating expense | |
| 2,390 | | |
| (30 | ) | |
| 2,360 | |
Income from operations | |
| 6,853 | | |
| (77 | ) | |
| 6,776 | |
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES | |
| 6,629 | | |
| (77 | ) | |
| 6,552 | |
Net income (loss) | |
| 5,899 | | |
| (77 | ) | |
| 5,822 | |
LESS: INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | |
| 1,022 | | |
| (10 | ) | |
| 1,012 | |
NET INCOME (LOSS) ATTRIBUTABLE TO TATTOOED CHEF, INC. | |
| 4,877 | | |
| (67 | ) | |
| 4,810 | |
Basic net income (loss) per share | |
| 0.17 | | |
| - | | |
| 0.17 | |
Diluted net income (loss) per share | |
| 0.17 | | |
| - | | |
| 0.17 | |
Comprehensive income | |
$ | 5,547 | | |
| (77 | ) | |
$ | 5,470 | |
Less: income (loss) attributable to the noncontrolling interest | |
| (11 | ) | |
| 1,012 | | |
| 1,001 | |
Comprehensive income attributable to Tattooed Chef, Inc. stockholders | |
$ | 5,558 | | |
| (1,089 | ) | |
$ | 4,469 | |
(In thousands) | |
Condensed Consolidated
Statements of Stockholders’ Equity | |
For the three months ended March 31, 2020 | |
As originally reported | | |
Revisions | | |
As revised | |
| |
| | |
| | |
| |
Redeemable noncontrolling interest beginning balance | |
$ | 6,930 | | |
| (30 | ) | |
$ | 6,900 | |
Net income in redeemable noncontrolling interest | |
| 424 | | |
| (10 | ) | |
| 414 | |
Redeemable noncontrolling interest ending balance | |
| 11,785 | | |
| (40 | ) | |
| 11,745 | |
Retained earnings beginning balance | |
| 1,265 | | |
| (209 | ) | |
| 1,056 | |
Net income in retained earnings | |
| 4,877 | | |
| (67 | ) | |
| 4,810 | |
Retained earnings ending balance | |
| 273 | | |
| (276 | ) | |
| (3 | ) |
Total Stockholders’ equity beginning balance | |
| 28,327,184 | | |
| (28,324,247 | ) | |
| 2,937 | |
Total Stockholders’ equity ending balance | |
| 28,326,793 | | |
| (28,324,314 | ) | |
| 2,479 | |
(In thousands) | |
Condensed Consolidated
Statements of Cash Flows | |
For the three months ended March 31, 2020 | |
As originally reported | | |
Revisions | | |
As revised | |
Cash Flows from Operating Activities: | |
| | |
| | |
| |
Net income | |
$ | 5,899 | | |
| (77 | ) | |
$ | 5,822 | |
Adjustments to reconcile net income (loss) to net cash from operating activities: | |
| | | |
| | | |
| | |
Inventory | |
| (4,703 | ) | |
| 77 | | |
| (4,626 | ) |
Net cash (used in) provided by operating activities | |
| (1 | ) | |
| - | | |
| (1 | ) |
Restatement of Previously Issued Financial
Statements
In connection with the preparation of the consolidated financial statements
as of and for the year ended December 31, 2021 included in the Form 10-K filed with the Securities and Exchange Commission (the “SEC”)
on March 16, 2022, the Company identified errors related to (i) deferred tax assets resulting from the reverse recapitalization transaction
that occurred in 2020; (ii) classification among accounts of inventory, accounts receivable, accounts payable and deferred revenue; and
(iii) other errors previously identified but not corrected as they were previously determined to be immaterial. Amounts depicted as “As
Restated” throughout the accompanying condensed consolidated financial statements and footnotes include the impact of the restatement,
as well as the impact of the adoption of ASC 842, Leases as of January 1, 2021 to the quarter ended March 31, 2021. See Note 24
to the consolidated financial statements and Item 8 of the Form 10-K, as aforementioned.
The table below sets forth the condensed consolidated financial statements,
including as originally reported, the impacts resulting from ASC 842 adoption, the adjustments resulting from the restatement, the reclassification,
, and the as restated balances for the quarterly period ended March 31, 2021 (in thousands):
CONDENSED CONSOLIDATED BALANCE SHEETS |
(in thousands, Unaudited) | |
As Reported | | |
Adoption of ASC 842 | | |
Adjustments | | |
Re- classification | | |
As Restated | |
Accounts receivable | |
$ | 31,796 | | |
| - | | |
| (2,625 | ) | |
| - | | |
$ | 29,171 | |
Inventory | |
| 38,701 | | |
| - | | |
| 280 | | |
| - | | |
| 38,981 | |
Prepaid expenses and other current assets | |
| 11,739 | | |
| (27 | ) | |
| - | | |
| - | | |
| 11,712 | |
TOTAL CURRENT ASSETS | |
| 267,397 | | |
| (27 | ) | |
| (2,345 | ) | |
| - | | |
| 265,025 | |
Operating lease right-of-use asset, net | |
| - | | |
| 3,968 | | |
| - | | |
| - | | |
| 3,968 | |
Deferred taxes | |
| 45,273 | | |
| - | | |
| 4,024 | | |
| - | | |
| 49,297 | |
TOTAL ASSETS | |
$ | 332,905 | | |
| 3,941 | | |
| 1,679 | | |
| - | | |
$ | 338,525 | |
Accounts payable | |
| 31,252 | | |
| - | | |
| (496 | ) | |
| (46 | ) | |
| 30,710 | |
Accrued expenses | |
| 6,135 | | |
| - | | |
| 423 | | |
| - | | |
| 6,558 | |
Deferred revenue | |
| 974 | | |
| - | | |
| (974 | ) | |
| - | | |
| - | |
Forward contract derivative liability | |
| 2,042 | | |
| - | | |
| (84 | ) | |
| - | | |
| 1,958 | |
Operating lease liabilities, current | |
| - | | |
| 651 | | |
| - | | |
| - | | |
| 651 | |
Other current liabilities | |
| 1,188 | | |
| (47 | ) | |
| - | | |
| 46 | | |
| 1,187 | |
TOTAL CURRENT LIABILITIES | |
| 41,770 | | |
| 604 | | |
| (1,131 | ) | |
| - | | |
| 41,243 | |
Operating lease, net of current portion | |
| - | | |
| 3,344 | | |
| - | | |
| - | | |
| 3,344 | |
TOTAL LIABILITIES | |
| 45,548 | | |
| 3,948 | | |
| (1,131 | ) | |
| - | | |
| 48,365 | |
Additional paid in capital | |
| 230,970 | | |
| - | | |
| 4,024 | | |
| - | | |
| 234,994 | |
Retained earnings | |
| 56,269 | | |
| (7 | ) | |
| (1,214 | ) | |
| - | | |
| 55,048 | |
Total equity | |
| 287,357 | | |
| (7 | ) | |
| 2,810 | | |
| - | | |
| 290,160 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 332,905 | | |
| 3,941 | | |
| 1,679 | | |
| - | | |
$ | 338,525 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
(in thousands except shares and per share amounts, Unaudited) | |
As Reported | | |
Adoption of ASC 842 | | |
Adjustments | | |
As Restated | |
REVENUE | |
$ | 52,682 | | |
| - | | |
| (213 | ) | |
$ | 52,469 | |
COST OF GOODS SOLD | |
| 45,905 | | |
| - | | |
| (616 | ) | |
| 45,289 | |
GROSS PROFIT | |
| 6,777 | | |
| - | | |
| 403 | | |
| 7,180 | |
OPERATING EXPENSES | |
| 13,795 | | |
| 7 | | |
| 394 | | |
| 14,196 | |
INCOME (LOSS) FROM OPERATIONS | |
| (7,018 | ) | |
| (7 | ) | |
| 9 | | |
| (7,016 | ) |
Other income (expense) | |
| (2,589 | ) | |
| - | | |
| (92 | ) | |
| (2,681 | ) |
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES | |
| (9,627 | ) | |
| (7 | ) | |
| (83 | ) | |
| (9,717 | ) |
NET (LOSS) INCOME | |
| (8,152 | ) | |
| (7 | ) | |
| (83 | ) | |
| (8,242 | ) |
NET (LOSS) INCOME ATTRIBUTABLE TO TATTOOED CHEF, INC. | |
$ | (8,152 | ) | |
| (7 | ) | |
| (83 | ) | |
$ | (8,242 | ) |
NET (LOSS) INCOME PER SHARE | |
| | | |
| | | |
| | | |
| | |
Basic | |
| (0.10 | ) | |
| - | | |
| (0.00 | ) | |
| (0.10 | ) |
Diluted | |
| (0.11 | ) | |
| - | | |
| (0.00 | ) | |
| (0.11 | ) |
WEIGHTED AVERAGE COMMON SHARES | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 79,415,105 | | |
| - | | |
| 825,000 | | |
| 80,240,105 | |
Diluted | |
| 79,719,129 | | |
| - | | |
| 825,000 | | |
| 80,544,129 | |
Comprehensive income | |
| (8,043 | ) | |
| (7 | ) | |
| (83 | ) | |
| (8,133 | ) |
Comprehensive income attributable to Tattooed Chef, Inc. stockholders | |
$ | (8,043 | ) | |
| (7 | ) | |
| (83 | ) | |
$ | (8,133 | ) |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY |
(in thousands except per share amounts, Unaudited) | |
As Reported | | |
Adjustments | | |
As Restated | |
Additional Paid-In Capital beginning balance | |
$ | 164,423 | | |
| 4,025 | | |
$ | 168,448 | |
Additional Paid-In Capital ending balance | |
| 230,969 | | |
| 4,025 | | |
| 234,994 | |
Retained earnings (Deficit) beginning balance | |
| 64,729 | | |
| (1,131 | ) | |
| 63,598 | |
Net loss in retained earnings (Deficit) | |
| (8,152 | ) | |
| (90 | ) | |
| (8,242 | ) |
Retained earnings (Deficit) ending balance | |
| 56,269 | | |
| (1,221 | ) | |
| 55,048 | |
Total Stockholders’ equity beginning balance | |
| 229,160 | | |
| 2,894 | | |
| 232,054 | |
Total Stockholders’ equity ending balance | |
| 287,356 | | |
| 2,804 | | |
| 290,160 | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(in thousands, Unaudited) | |
As Reported | | |
Adoption of ASC 842 | | |
Adjustments | | |
Re-classification | | |
As Restated | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | |
| | |
| | |
| | |
| |
Net (loss) income | |
$ | (8,152 | ) | |
| (7 | ) | |
| (83 | ) | |
| - | | |
$ | (8,242 | ) |
Adjustments to reconcile net (loss) income to net cash from operating activities: | |
| | | |
| | | |
| | | |
| | | |
| | |
Non-cash lease cost | |
| - | | |
| 27 | | |
| - | | |
| - | | |
| 27 | |
Changes in operating assets and liabilities: | |
| | | |
| - | | |
| - | | |
| - | | |
| | |
Accounts receivable | |
| (13,926 | ) | |
| - | | |
| 914 | | |
| - | | |
| (13,012 | ) |
Inventory | |
| (41 | ) | |
| - | | |
| (938 | ) | |
| - | | |
| (979 | ) |
Prepaid expenses and other assets | |
| (7,359 | ) | |
| 27 | | |
| - | | |
| - | | |
| (7,332 | ) |
Accounts payable | |
| 4,534 | | |
| - | | |
| (496 | ) | |
| 1,270 | | |
| 5,308 | |
Accrued expenses | |
| 3,173 | | |
| - | | |
| (226 | ) | |
| - | | |
| 2,947 | |
Deferred revenue | |
| (737 | ) | |
| - | | |
| 737 | | |
| - | | |
| - | |
Other current liabilities | |
| 963 | | |
| (47 | ) | |
| 92 | | |
| (1,270 | ) | |
| (262 | ) |
Net cash used in operating activities | |
| (17,574 | ) | |
| - | | |
| - | | |
| - | | |
| (17,574 | ) |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |
| | | |
| | | |
| | | |
| | | |
| | |
Noncash investing and financing activities | |
| | | |
| | | |
| | | |
| | | |
| | |
Cashless warrant exercises | |
| 2,990 | | |
| - | | |
| (2,990 | ) | |
| - | | |
| - | |
Reclassifications. Reclassifications of
certain prior period amounts to conform to the current period presentation. Reclassifications have no impact on net income (loss) and
do not relate to errors and are included here in order to conform the presentation across the periods presented.
Cash. The Company’s cash may be in
excess of amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in these accounts.
Foreign Currency. The Company’s functional
currency is the United States dollar for its U.S. entities. Ittella Italy’s functional currency is the Euro. Transactions in currency
other than the functional currency are recognized at the rates of exchange prevailing at the dates of the transaction. Transaction gains
and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency of
each entity are included in the results of operations in income from operations as incurred.
The accompanying condensed consolidated financial
statements are expressed in United States dollars. Assets and liabilities of foreign operations are translated at period-end rates of
exchange. Revenues, costs and expenses are translated at average rates of exchange prevailing during the period. Equity adjustments resulting
from translating foreign currency financial statements are accumulated as a separate component of stockholders’ equity.
The Company conducts business globally and is
therefore exposed to adverse movements in foreign currency exchange rates, specifically the Euro to US dollar. To limit the exposure related
to foreign currency changes, the Company entered into foreign currency exchange forward contracts starting in 2020. The Company does not
enter into contracts for speculative purposes.
In February 2020, the Company entered into a trading
facility for derivative forward contracts. Under this facility, the Company has access to open foreign exchange forward contract instruments
to purchase a specific amount of funds in Euros and to settle, on an agreed-upon future date, in a corresponding amount of funds in United
States dollars. During the three months ended March 31, 2021 and 2020, the Company entered into foreign currency exchange forward contracts
to purchase 22.00 million Euros and 13.35 million Euros, respectively. The notional amounts of these derivatives are $26.90 million and
$14.68 million for the three-month period ended March 31, 2021 and 2020, respectively.
These derivatives are not designated as hedging
instruments. Gains and losses on the contracts are included in other income net, and substantially offset foreign exchange gains and losses
from the short-term effects of foreign currency fluctuations on assets and liabilities, such as purchases, receivables and payables, of
which are denominated in currencies other than the functional currency of the reporting entity. These derivative instruments generally
have maturities of up to nine months.
Accounts Receivable. Trade receivables
are customer obligations due under normal trade terms requiring payment generally within 7 to 45 days from the invoice date. The Company’s
allowance for doubtful receivables is based on an analysis that estimates the amount of its total customer receivable balance that is
not collectible. This analysis includes assessing a default probability to customers’ receivable balances, which is influenced by
several factors, including (i) current market conditions, (ii) periodic review of customer credit worthiness, and (iii) review of customer
receivable aging and payment trends.
Inventory. Inventory consists of raw materials
and packaging materials, work in process and finished goods. Inventories are carried at the lower of cost or net realizable value on a
weighted average basis. Inventory is initially measured at cost and consists of the sum of the applicable expenditures and charges directly
and indirectly incurred to bring products to their existing condition and location. These costs include purchase costs and any other charges
necessary to prepare the items for production. For work in process and finished goods, these costs normally include those incurred directly
or indirectly in the production of inventory (i.e., direct labor and production overheads or conversion costs), and other expenses (i.e.,
inbound freight, transportation and handling charges, taxes and duties).
Overhead costs are allocated to the units produced
within the reporting period, while abnormal costs are charged to current operations as incurred. The Company monitors the remaining utility
of its inventory and writes down inventory for excess or obsolescence as appropriate.
Property, Plant and Equipment. Property,
plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property, plant
and equipment is calculated using the straight-line method over a period considered adequate to amortize the total cost over the useful
lives of the assets, which range from 5 to 7 years for machinery and equipment, 5 to 7 years for furniture and fixtures, 20 to 25 years
for buildings, and 3 to 5 years for computer equipment. Leasehold improvements are amortized over the shorter of the lease term or the
estimated useful life of the improvements. Repairs and maintenance are expensed as incurred. Renewals and enhancements are capitalized
and depreciated over the remaining life of the specific property unit. When the Company retires or disposes of property, plant or equipment,
the cost and accumulated depreciation are removed from the Company’s accounts and any resulting gain or loss is reflected in the
condensed consolidated statements of operations and comprehensive income (loss).
Long-Lived Assets. Long-lived assets are
reviewed for impairment at the asset group level whenever events or changes in circumstances indicate that the carrying amount of such
asset group may not be recoverable. Recoverability of assets within an asset group to be held and used is measured by a comparison of
the carrying amount of an asset group to the future undiscounted net cash flows expected to be generated by the asset group. If such asset
groups are considered to be impaired, the impairment to be recognized is based upon their fair value. No impairment was recorded during
the three months ended March 31, 2021 and 2020.
Fair Value of Financial Instruments. Certain
assets and liabilities are required to be recorded at fair value on a recurring basis. Fair value is determined based on the exchange
price that would be received for an asset or transferred for a liability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants. The carrying amounts of cash, accounts receivables,
accounts payable and certain notes payable approximate fair value because of the short maturity and/or variable rates associated with
these instruments. Long-term debt as of March 31, 2021 and December 31, 2020 approximates its fair value as the interest rates are indexed
to market rates. The Company categorizes the inputs to the fair value measurements into three levels based on the lowest level input that
is significant to the fair value measurement in its entirety. These levels are:
|
Level 1 - |
Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company is able to access at the measurement date. |
|
|
|
|
Level 2 - |
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, and can reference interest rates, yield curves, implied volatilities and credit spreads. |
|
|
|
|
Level 3 - |
Inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. |
Warrants. The Public Warrants are considered
freestanding equity-classified instruments due to their detachable and separately exercisable features and meet the indexation criteria
in ASC 815-40-15-7C. Accordingly, the Public Warrants are presented as a component of Stockholders’ Equity in accordance with ASC
815-40-25. The Agreements with respect to the Company’s Private Placement Warrants include provisions related to determining settlement
amounts that preclude the Warrants from being accounted for as components of equity. As these Warrants meet the definition of a derivative
as contemplated in ASC 815-40, the Private Placement Warrants are recorded as derivative liabilities on the condensed consolidated balance
sheets and measured at fair value at inception (on the Closing date) and at each reporting date in accordance with ASC 820, with changes
in fair value recognized in the condensed consolidated statements of operations and other comprehensive income (loss) in the period of
change.
Revenue Recognition. The Company recognizes
revenue in accordance with ASC Topic 606. The Company’s principal business is the manufacturing of plant-based foods including,
but not limited to, acai and smoothie bowls, zucchini spirals, riced cauliflower, vegetable bowls and cauliflower crust pizza primarily
in the United States and Italy. Revenue recognition is determined by (a) identifying the contract, or contracts, with a customer; (b)
identifying the performance obligation in each contract; (c) determining the transaction price; and (d) allocating the transaction price
to the performance obligation in each contract; and (e) recognizing revenue when, or as, the Company satisfies performance obligations
by transferring the promised goods or services. Each unit of product delivered is determined as a separate performance obligation and
in the event there are more than one unit of a product ordered, there will be multiple performance obligations satisfied under the same
contract. When control of the promised products and services are transferred to the Company’s customers, the Company recognizes
revenue in the amount that reflects the consideration the Company expects to receive in exchange for these products and services.
Control generally transfers to the customer when
the product is shipped or delivered to the customer based upon applicable shipping terms. Customer contracts generally do include more
than one performance obligation and the performance obligations in the Company’s contracts are satisfied within one year. No payment
terms beyond one year are granted at contract inception.
The Company disaggregates revenue based on the
type of products sold to its customers – private label, Tattooed Chef and other. The other revenue stream constitutes sale of similar
food products directly to customers through a third-party vendor and the Company acts as a principal in these transactions.
Some contracts also include some form of variable
consideration, the most common form are discounts and demonstration costs. Variable consideration is treated as a reduction in revenue
when product revenue is recognized. Depending on the specific type of variable consideration, the Company uses either the expected value
or most likely amount method to determine the variable consideration. The Company reviews and updates its estimates and related accruals
of variable consideration each period based on the terms of the agreements, historical experience, and any recent changes in the market.
The Company does not have significant unbilled
receivable balances arising from transactions with customers. The Company does not capitalize contract inception costs as contracts are
one year or less and the Company does not incur significant fulfillment costs requiring capitalization.
The Company recognizes shipping and handling costs
related to products transferred to the end customer as fulfillment cost and includes these costs in cost of goods sold upon delivery of
the product to the customer.
Sales and Marketing Expenses (As Restated).
The Company expenses costs associated with sales and marketing as incurred. Sales and marketing expenses were $6.65 million and $1.21
million for the periods ended March 31, 2021 and 2020, respectively, and are included in operating expenses in the condensed consolidated
statements of operations and comprehensive income (loss).
Interest Expense. Interest expense includes
interest primarily related to the amortization of deferred financing costs, the Company’s notes payable and line of credit.
Deferred Financing Costs. Deferred financing
costs include fees associated with the Company’s line of credit agreement. Such fees are amortized on a straight-line basis over
the term of the related line of credit agreement as a component of interest expense, which approximates the effective interest rate method,
in accordance with the terms of the agreement. Deferred financing costs, net were $0.09 million and $0.09 million at March 31, 2021 and
December 31, 2020, respectively, and are recorded as a component of other assets in the accompanying condensed consolidated balance sheets.
Amortization expense of deferred financing costs were $0.00 million and $0.02 million during the periods ended March 31, 2021 and 2020,
respectively.
Stock-based Compensation. The Company measures
compensation expense for stock options and other stock awards in accordance with ASC 718, Compensation — Stock Compensation.
Stock-based compensation is measured at fair value on grant date and recognized as compensation expense over the requisite service period.
The Company accounts for forfeitures when they occur. Generally, the Company issues stock options and other stock awards to employees
with service-based and/or performance-based vesting conditions. For awards with only service-based vesting conditions, the Company records
compensation cost for these awards using the straight-line method. For awards with performance-based vesting conditions, the Company recognizes
compensation cost on a tranche-by-tranche basis (the accelerated attribution method) over the expected service period.
Under the provisions of ASC 718, Compensation—Stock
Compensation, the Company measures stock-based awards granted to non-employees based on the fair value of the award on the date on
which the related service is completed. Compensation expense is recognized over the period during which services are rendered by non-employees
until service is completed.
Income Taxes
As part of the process of preparing its condensed
consolidated financial statements, the Company is required to estimate its provision for income taxes in each of the tax jurisdictions
in which it conducts business, in accordance with the Income Tax Topic 740 of the ASC (“ASC 740”). The Company computes its
annual tax rate based on the statutory tax rates and tax planning opportunities available to it in the various jurisdictions in which
it earns income. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method,
deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in
tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance
is provided when it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The factors
used to assess the likelihood of realization include the Company’s forecast of the reversal of temporary differences, future taxable
income, and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted
taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase
in the Company’s effective tax rate on future earnings. Based on our assessment, it appears more likely than not that the net deferred
tax assets will be realized through future taxable income.
ASC 740 prescribes a recognition threshold and
a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must first be determined to be more likely to be sustained based solely on
its technical merits, and if so, then measured to be the largest benefit that has a greater than 50% likelihood of being sustained upon
examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2021 and December 31, 2020, respectively. The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued
for the payment of interest and penalties as of March 31, 2021. The Company is currently not aware of any issues under review that could
result in significant payment, accruals, or material deviation from its position. The Company is subject to income tax examinations by
major taxing authorities since inception. See Note 13 for more information on the Company’s accounting for income taxes.
Accumulated Other Comprehensive Loss. Accumulated
other comprehensive loss is defined as the change in equity resulting from transactions from non-owner sources. Other comprehensive income
consisted of gains and losses associated with changes in foreign currency as a result of the translation of the financial results of the
Company’s Italian subsidiary.
Use of Estimates. The preparation of condensed
consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
Concentrations of Credit Risk (As Restated).
The Company grants credit, generally without collateral, to customers primarily in the United States. Consequently, the Company is
subject to potential credit risk related to changes in business and economic factors in this geographical area. No external suppliers
accounted for more than 10% of the Company’s cost of goods sold during the period ended March 31, 2021 and 2020.
Three customers accounted for 89% and 87% of the Company’s revenue
during the three months ended March 31, 2021 and 2020, respectively.
Customer | |
2021 | | |
2020 | |
| |
| | |
| |
Customer C | |
| 41 | % | |
| 41 | % |
Customer A | |
| 38 | % | |
| 29 | % |
Customer B | |
| 10 | % | |
| 17 | % |
Customers accounting for more than 10% of the Company’s accounts
receivable as of March 31, 2021 (As Restated) and December 31, 2020 were:
| |
March 31, | | |
December 31, | |
Customer | |
2021 | | |
2020 | |
| |
| | |
| |
Customer A (As Restated) | |
| 47 | % | |
| 24 | % |
Customer B | |
| * | | |
| 10 | % |
Customer C (As Restated) | |
| 40 | % | |
| 53 | % |
| * | Customer B accounted for less than 10% of accounts receivable as of March 31, 2021. However, Customer B accounted for 10% as of December
31, 2020 and as such was included in the disclosure above for comparison purposes. |
Segment Information. The Company manages
its operations on a company-wide basis as one operating segment, thereby making determinations as to the allocation of resources to the
business as a whole rather than on a segment-level basis. Operating segments are identified as components of an enterprise about which
separate discrete financial information is available for evaluation by the Chief Operating Decision Maker (“CODM”) in making
decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer is the
CODM. To date, the Company’s CODM has made such decisions and assessed performance at the Company-level.
A majority of the Company’s products are sold from the United
States to customers.
Long-lived assets consist of property, plant and equipment - net. The
geographic location of long-lived assets is as follows:
| |
March 31, | | |
December 31, | |
Long Lived Assets (in thousands) | |
2021 | | |
2020 | |
Italy | |
$ | 10,733 | | |
$ | 9,113 | |
United States | |
| 8,579 | | |
| 6,970 | |
Total | |
$ | 19,312 | | |
$ | 16,083 | |
COVID-19 Pandemic – The novel coronavirus
(“COVID-19”), which was categorized by the World Health Organization as a pandemic in March 2020, continues to significantly
impact the United States and the rest of the world and has altered the Company’s business environment and the overall working conditions.
Despite partial remote working conditions, the Company’s business
activities have continued to operate with minimal interruptions.
Management acknowledges the pandemic may adversely
affect the Company’s suppliers and could impair its ability to obtain raw material inventory in the quantities or of a quality the
Company desires. The Company currently sources most of its raw materials from Italy. Though the Company is not dependent on any single
Italian grower for its supply of a certain crop, events (including the pandemic) generally affecting these growers could adversely affect
the Company’s business. If the Company is unable to manage its supply chain effectively and ensure that its products are available
to meet consumer demand, operating costs could increase, and sales and profit margins could decrease.
On March 27, 2020, the Coronavirus Aid, Relief,
and Economic Security Act (“CARES Act”) was enacted. The CARES Act, among other things, includes provisions relating to refundable
payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax
credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions and
technical corrections to tax depreciation methods for qualified improvement property. It also appropriated funds for the SBA Paycheck
Protection Programs that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans
to provide liquidity to small businesses harmed by COVID-19. The Company has elected not to apply for a Paycheck Protection Program loan.
As of March 31, 2021 and December 31, 2020, the Company has analyzed the provisions of the CARES Act and determined it did not have a
material impact on the Company’s financial condition, results of operations or cash flows.
The extent to which this pandemic will adversely
impact the Company’s future business, financial condition and results of operations is dependent upon various factors, many of which
are highly uncertain and outside the control of the Company.
Earnings per share. Basic earnings per
share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding
during the period. The weighted-average number of common shares outstanding during the period includes common stock but is exclusive of
certain unvested stock awards that have no economic or participating rights. Diluted earnings per share is computed by dividing the net
income by the weighted average number of common shares and common share equivalents outstanding for the period. Common stock equivalents
are only included when their effect is dilutive. The Company’s potentially dilutive securities which include outstanding stock options
and restricted stock awards under the Company’s equity incentive plan and warrants have been considered in the computation of diluted
earnings per share.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (As restated for the adoption of ASC 842)
In December 2019, the FASB issued Accounting Standards
Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”),
as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or
improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions
to the general principles of Topic 740, Income Taxes, and simplification in several other areas. ASU 2019-12 is effective for annual
reporting periods beginning after December 15, 2020, and interim periods therein. The Company adopted the new standard on January 1, 2021,
the first day of the reporting year. One of the amendments eliminates a limitation on the amount of income tax benefit that can be recognized
in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The adoption of this standard did not have material
impact Company’s condensed consolidated financial statements for the period ended March 31, 2021.
In June 2016, the FASB issued ASU No. 2016-13
(“ASU 2016-13”) regarding ASC Topic 326, Financial Instruments - Credit Losses, which modifies the measurement of expected
credit losses of certain financial instruments. The Company will be required to use a forward-looking expected credit loss model for accounts
receivables, loans, and other financial instruments. The amendments will become effective for the Company for periods beginning after
December 15, 2022. Adoption of the standard will be applied using a modified retrospective approach. The Company is currently evaluating
the impact the adoption of ASU 2016-13 will have on its condensed consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Facilitation
of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides guidance for contract modifications
and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. Interest on
borrowings under the Company’s revolving credit facility is calculated based upon LIBOR. ASU 2020-04. was issued on March 12, 2020
and may be applied prospectively through December 31, 2022. This guidance has had no material effect on the Company for the period ended
March 31, 2021. The Company will continue to evaluate the impact this guidance may have on its condensed consolidated financial statements.
In August 2020, the FASB issued ASU No. 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”), which simplifies the accounting for convertible instruments. ASU 2020-06 removes certain accounting models that separate
the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt
feature qualifies as a derivative under ASC 815 or for convertible debt issued at a substantial premium. ASU 2020-06 is effective for
fiscal years beginning after December 15, 2023, including interim periods within those fiscal years and early adoption is permitted in
annual reporting periods ending after December 15, 2020. The Company is currently evaluating the impact this guidance may have on its
condensed consolidated financial statements and related disclosures.
In February 2016, the FASB issued ASU
2016-02, Leases (Topic 842) (“ASU 2016-02” or “Topic 842”). The purpose of ASU 2016-02 is to provide financial
statement users a better understanding of the amount, timing, and uncertainty of cash flows arising from leases. The adoption of ASU 2016-02
resulted in the recognition of a right-of-use asset and a lease liability for all leases. New disclosure requirements included qualitative
and quantitative information about the amounts recorded in the financial statements. The original guidance required application on a modified
retrospective basis with adjustments to the earliest comparative period presented. In August 2018, the FASB issued ASU No. 2018-11, “Targeted
Improvements to ASC 842,” which included an option to not restate comparative periods in transition and elect to use the effective
date of ASU No. 2016-02 as the date of initial application, which the Company elected. As the Company will lose EGC status as of December
31, 2021, the Company was required to apply the provisions of ASU 2016-02 beginning with the annual reporting period ended December 31,
2021 with an effective date as of January 1, 2021. Accordingly, these financial statements have been adjusted to reflect the adoption
of Topic 842. See Note 11.
3. REDEEMABLE NONCONTROLLING INTEREST
On April 15, 2019, UMB contributed $6.00
million to acquire 6,000 units for a 12.5% ownership interest in Ittella International. The Company incurred issuance costs of $0.13 million
resulting in net consideration received of $5.87 million.
Per the terms of Ittella International’s
operating agreement, UMB was provided with a put right which may cause Ittella International to purchase all, but not less than all of
UMB units upon notice (“Put Notice”). UMB could have provided the Put Notice to Ittella International at any time for any
reason after April 15, 2024. If Ittella International did not accept the price proposed in the Put Notice, the consideration to be paid
by Ittella International to UMB for the units that were the subject of the Put Notice will be the fair market value of the units as established
by a third party appraisal, subject to a floor for the fair value at 85%. If the fair value was less than 85% of the consideration proposed
by UMB in their Put Notice, UMB may have chosen to abandon the transfer. The put right constituted a redemption feature and therefore
UMB’s noncontrolling interest (the “Redeemable Noncontrolling Interest”) was classified as temporary equity (mezzanine)
in the accompanying condensed consolidated financial statements.
The Redeemable Noncontrolling Interest was initially
measured at fair value, which has been determined by the Company to equal the consideration received from UMB, net of transaction costs.
The Redeemable Noncontrolling Interest was not
redeemable until April 2024; however, it was probable of becoming redeemable with the passage of time. Therefore, the subsequent measurement
of the Redeemable Noncontrolling Interest at each reporting date was determined as the higher of (1) the initial carrying amount, increased
or decreased for the redeemable noncontrolling interest’s share of net income and other comprehensive income, or (2) the redemption
value, which was determined to be fair value per the terms of Ittella International’s operating agreement above. In determining
the measurement method of redemption value, the Company elected to accrete changes in the redemption value over the period from the date
of issuance to the earliest redemption date (i.e. April 2024) of the instrument using the effective interest method. Changes in the redemption
value are considered to be changes in accounting estimates. Redemption value was determined using a combination of the market approach
and income approach. Under the market approach, the Company estimated fair value based on market multiples of EBITDA of comparable companies.
Under the income approach, the Company measured fair value based on a projected cash flow method using a discount rate determined by its
Management which is commensurate with the risk inherent in its current business model.
There were no Redeemable Noncontrolling Interest for the three months
ended March 31, 2021. Changes in the carrying value of the Redeemable Noncontrolling Interest were as follows for the three months ended
March 31, 2020:
| |
Amount | |
Redeemable Noncontrolling Interest as of January 1, 2020 | |
$ | 6,900 | |
Net income attributable to redeemable noncontrolling interest | |
| 414 | |
Accretion to redeemable noncontrolling interest | |
| 4,431 | |
Redeemable Noncontrolling Interest as of March 31, 2020 | |
$ | 11,745 | |
All redeemable noncontrolling interest classified
as mezzanine equity were reclassified to permanent equity in connection with the contribution of UMB’s 12.5% equity interests in
Ittella International to Myjojo (Delaware) in exchange for Myjojo’s (Delaware)’s common stock and were subsequently exchanged
for Forum Class A common stock upon consummation of the Transaction.
4. REVENUE RECOGNITION
Nature of Revenues
Substantially all of the Company’s revenue
from contracts with customers consist of the sale of plant-based foods including, but not limited to, acai and smoothie bowls, zucchini
spirals, riced cauliflower, vegetable bowls and cauliflower crust pizza in the United States and is recognized at a point in time in an
amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. Each unit of food product sold
to the customer is the performance obligation. Revenue from the sale of frozen food products is recognized upon the transfer of control
to the customer, which is upon shipment to the customer.
The Company disaggregates revenue based on the
type of products sold to its customers – private label, Tattooed Chef and other. The other revenue stream constitutes sale of similar
food products directly to customers through third-party vendors and the Company acts as a principal in these transactions. All sales are
recorded within revenue on the accompanying condensed consolidated statements of operations and comprehensive income (loss). The Company
does not have any contract assets or contract liabilities as of March 31, 2021 and 2020.
Revenue streams for the three months ended March 31, 2021 (As Restated)
and 2020 were as follows:
| |
2021 | | |
2020 | |
Revenue Streams (in thousands) | |
Revenue | | |
% Total | | |
Revenue | | |
% Total | |
| |
(As Restated) | | |
| | |
| |
Tattooed Chef | |
$ | 35,847 | | |
| 68 | % | |
$ | 17,651 | | |
| 53 | % |
Private Label | |
| 16,305 | | |
| 31 | % | |
| 15,102 | | |
| 46 | % |
Other revenues | |
| 317 | | |
| 1 | % | |
| 419 | | |
| 1 | % |
Total | |
$ | 52,469 | | |
| | | |
$ | 33,172 | | |
| | |
Significant Judgments
Generally, the Company’s contracts with
customers comprise a written quote and customer purchase order or statement of work and are governed by the Company’s trade terms
and conditions. In certain instances, it may be further supplemented by separate pricing agreements. All products are sold on a standalone
basis; therefore, when more than one product is included in a purchase order, the Company has observable evidence of stand-alone selling
price. Contracts do not contain a significant financing component as payment terms on invoiced amounts are typically between 7 to 45 days,
based on the Company’s credit assessment of individual customers, as well as industry expectations. Product returns are not significant.
The contracts with customers do not include any additional performance obligations related to warranties and material rights.
From time to time, the Company may offer incentives
to its customers considered to be variable consideration including discounts and demonstration costs. Customer incentives considered to
be variable consideration are recorded as a reduction to revenue as part of the transaction price based on the agreement at the time of
the transaction. Customer incentives are allocated entirely to the single performance obligation of transferring product to the customer.
5. ACCOUNTS RECEIVABLE, NET
Accounts receivables are reduced by an allowance
for an estimate of amounts that are uncollectible. All of the Company’s receivables are due from customers in the United States.
The Company extends credit to its customers based upon its evaluation of the following factors: (i) the customer’s financial condition,
(ii) the amount of credit the customer requests, and (iii) the customer’s actual payment history (which includes disputed invoice
resolution). The Company does not require its customers to post a deposit or supply collateral. The Company’s allowance for doubtful
receivables is based on an analysis that estimates the amount of its total customer receivable balance that is not collectible. This analysis
includes assessing a default probability to customers’ receivable balances, which is influenced by several factors, including (i)
current market conditions, (ii) periodic review of customer credit worthiness, and (iii) review of customer receivable aging and payment
trends.
The Company evaluates the creditworthiness of
its customers regularly and based on its analysis, the Company has determined an allowance for doubtful receivables is not necessary as
of the three months ended March 31, 2021 and December 31, 2020. The Company writes off accounts receivable whenever they become uncollectible,
and any payments subsequently received on such receivables are recorded as bad debt recoveries in the period the payment is received.
Credit losses from continuing operations have consistently been within management’s expectations.
6. INVENTORY
Inventory consists of the following (in thousands):
| |
March 31, | | |
December 31, | |
| |
2021 | | |
2020 | |
| |
(As Restated) | | |
| |
Raw materials | |
$ | 14,845 | | |
$ | 16,534 | |
Work-in-process | |
| 5,134 | | |
| 5,040 | |
Finished goods | |
| 16,194 | | |
| 13,424 | |
Packaging | |
| 2,808 | | |
| 3,004 | |
Total | |
$ | 38,981 | | |
$ | 38,002 | |
7. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The following table provides additional information related to the
Company’s prepaid expenses and other current assets (in thousands):
| |
March 31, | | |
December 31, | |
| |
2021 | | |
2020 | |
| |
(As Restated) | | |
| |
Prepaid advertising expenses | |
$ | 7,458 | | |
$ | - | |
Prepaid other expenses | |
| 2,300 | | |
| 1,897 | |
Tax credits | |
| 1,903 | | |
| 1,884 | |
Warrants receivable (see Note 15) | |
| 0 | | |
| 13,542 | |
Other current assets | |
| 51 | | |
| 1,093 | |
Total | |
$ | 11,712 | | |
$ | 18,416 | |
8. PROPERTY, PLANT, AND EQUIPMENT - NET
Property, plant and equipment consists of the following (in thousands):
| |
March 31, | | |
December 31, | |
| |
2021 | | |
2020 | |
Buildings | |
$ | 2,827 | | |
$ | 2,574 | |
Leasehold improvements | |
| 2,114 | | |
| 2,106 | |
Machinery and equipment | |
| 14,387 | | |
| 12,526 | |
Computer equipment | |
| 187 | | |
| 187 | |
Furniture and fixtures | |
| 111 | | |
| 109 | |
Construction in progress | |
| 3,032 | | |
| 1,533 | |
| |
| 22,658 | | |
| 19,035 | |
Less: accumulated depreciation | |
| (3,346 | ) | |
| (2,952 | ) |
| |
| | | |
| | |
Net | |
$ | 19,312 | | |
$ | 16,083 | |
The Company recorded depreciation expense for the periods ended March
31, 2021 and 2020 of $0.55 million and $0.19 million, respectively.
9. DERIVATIVE INSTRUMENTS
The Company enters into foreign currency exchange
forward contracts to reduce the short-term effects of foreign currency fluctuations on assets and liabilities such as foreign currency
inventory purchases, receivables and payables. The Company’s primary objective in holding derivatives is to reduce the volatility
of earnings and cash flows associated with changes in foreign currency exchange rates. The Company’s derivatives expose the Company
to credit risk to the extent that the counterparties may be unable to meet the terms of the arrangement. The Company does, however, seek
to mitigate such risks by limiting its counterparties to major financial institutions. Management does not expect material losses as a
result of defaults by counterparties.
The fair values of the Company’s derivative
instruments classified as Level 2 financial instruments and the line items within the accompanying condensed consolidated balance sheets
to which they were recorded are summarized as follows (in thousands):
| |
| |
As of | |
| |
| |
March 31, | |
| |
Balance Sheet Line Item | |
2021 | |
Derivatives not designated as hedging instruments: | |
| |
(As Restated) | |
Foreign currency derivatives | |
Forward contract derivative liability | |
$ | 1,958 | |
Total | |
| |
$ | 1,958 | |
The effect on the accompanying condensed consolidated
statements of operations and comprehensive income (loss) of derivative instruments not designated as hedges is summarized as follows (in
thousands)
| |
| |
Three months | |
| |
| |
ended | |
| |
| |
March 31, | |
| |
Line Item in Statements of Operations | |
2021 | |
Derivatives not designated as hedging instruments: | |
| |
(As Restated) | |
Foreign currency derivatives | |
Other income (expense) | |
$ | (3,001 | ) |
Total | |
| |
$ | (3,001 | ) |
Unrealized and realized losses on forward currency
derivatives for the three months ended March 31, 2021 were $2.18 million and $0.73 million, respectively. The Company has notional amounts
of $55.00 million and $45.60 million on outstanding derivatives as of March 31, 2021 and December 31, 2020, respectively.
10. FAIR VALUE MEASUREMENTS
Contingent Consideration Liabilities – Holdback Shares
The Company recognized and measured a contingent
consideration liability associated with Holdback Shares at a fair value of $120.35 million, determined using a probability-weighted discounted
cash flow model. Significant inputs used in the model includes certain financial metric growth rates, volatility rates, projections associated
with the applicable contingency, the interest rate, and the related probabilities and payment structure in the Merger Agreement, which
are not observable in the market and are therefore considered to be Level 3 inputs.
On November 16, 2020, the contingencies were met
and accordingly the Holdback Shares were released. The remeasured fair value of the liability was $83.15 million based on the public share
price on release date and was charged against additional paid-in capital. The change in fair value during the period resulted in a gain
on settlement of the contingent consideration derivative of $37.20 million and was recorded within “other income” in the condensed
consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2020.
There were no changes in the estimated fair value
of the Company’s liabilities measured on a recurring basis using significant unobservable inputs (Level 3) during the three months
ended March 31, 2021 and 2020, respectively.
Sponsor Earnout Shares Subject to Transfer Restrictions
The Company recognized and measured an asset associated
with the Sponsor Earnout Shares at its fair value of $0 at the Closing date, determined using a probability-weighted discounted cash flow
model. Significant inputs used in the models includes certain financial metric growth rates, volatility rates, projections associated
with the applicable contingency, the interest rate, and the related probabilities and payment structure in the contingent consideration
arrangement, which are not observable in the market and are therefore considered to be Level 3 inputs.
The Sponsor Earnout Shares were released on November
16, 2020 based on the remeasured fair value on the release date of $0, as none of the Sponsor Earnout Shares were forfeited on that date.
No gain or loss was recorded by the Company in connection with the Sponsor Earnout Shares.
Warrant Liabilities
The Private Placement Warrants are accounted for
as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the condensed consolidated balance sheets.
The warrant liabilities are measured at fair value at inception (“initial measurement”), which is at the Closing date, and
on a recurring basis (“subsequent remeasurement”), with changes in fair value presented within change in fair value of warrant
liabilities in the condensed consolidated statements of operations and comprehensive income (loss).
Initial Measurement
The fair value of the Private Placement Warrants were initially measured
at fair value on October 15, 2020, the Closing date.
Subsequent Measurement
At each reporting period or upon exercise of the
Warrants, the Company remeasures the Private Placement Warrants at their fair values with the change in fair value reported to current
operations within the statements of operations and other comprehensive income (loss). During the three months ended March 31, 2021, 223,041
Private Placement Warrants were settled, resulting in an aggregate loss on settlements of $0.15 million.
For the three months ended March 31, 2021, change in the fair value
of the warrant liabilities charged to current operations amounted to $0.47 million.
Fair Value Measurement
The fair value of the Private Placement Warrants
was determined to be $10.16 per Warrant as of March 31, 2021 using Monte Carlo simulations and using Level 3 inputs. Inherent in a Monte
Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield.
The Company estimates the volatility of its common stock warrants based on implied volatility from its traded warrants and historical
volatility of select peers’ common stock with similar expected term of the Warrants. The risk-free interest rate is based on the
U.S. Treasury zero-coupon yield on the grant date with a maturity similar to the expected remaining term of the warrants. The expected
term of the Warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate,
which the Company estimated to remain at zero.
The following table provides quantitative
information regarding the inputs to the fair value measurement of the Private Placement Warrants as of each measurement date:
| |
October 15,
2020 | | |
| | |
| |
| |
(Initial | | |
December 31, | | |
March 31, | |
Input | |
Measurement) | | |
2020 | | |
2021 | |
Risk-free interest rate | |
| 0.32 | % | |
| 0.34 | % | |
| 0.79 | % |
Expected term (years) | |
| 5 | | |
| 4.79 | | |
| 4.55 | |
Expected volatility | |
| 35.00 | % | |
| 35.00 | % | |
| 40.00 | % |
Exercise price | |
$ | 11.50 | | |
| 11.50 | | |
| 11.50 | |
Fair value of Units | |
$ | 13.85 | | |
| 12.72 | | |
| 10.16 | |
On October 15, 2020, the fair value of the Private
Placement Warrants was determined to be $13.85 per warrant, or an aggregate value of $9.07 million for 655,000 outstanding warrants. On
December 31, 2020, the fair value of the Private Placement Warrants was determined to be $12.72 per warrant, or an aggregate value of
$5.18 million for 407,577 outstanding warrants.
As of March 31, 2021, the aggregate fair value
of the Private Placement Warrants was determined to be $1.87 million, based on the estimated fair value per Private Placement Warrant
on that date of $10.16 for 184,536 outstanding warrants.
The following table presents the changes in the fair value of warrant
liabilities:
| |
Private | |
| |
Placement | |
Fair value at initial measurement on October 15, 2020 | |
$ | 9,071,750 | |
Exercise of Private Placement Warrants | |
| (2,695,806 | ) |
Change in fair value(1) | |
| (1,191,565 | ) |
Fair value as of December 31, 2020 | |
$ | 5,184,379 | |
Exercise of Private Placement Warrants | |
| (2,989,639 | ) |
Change in fair value(1) | |
| (319,854 | ) |
Fair value as of March 31, 2021 | |
$ | 1,874,886 | |
| (1) | Changes in fair value are recognized in change in fair value of warrant liabilities in the consolidated statements of operations and
comprehensive income (loss). |
11. LEASES
As of March 31, 2021, the Company’s primary
leasing activities were related to office space, production and storage facilities and certain Company vehicles and equipment.
Significant assumptions and judgments were made
in the application of GAAP for leases, including those related to the lease discount rate. The interest rate used to determine the present
value of the future lease payments is the Company’s incremental borrowing rate, when the interest rate implicit in the Company’s
leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis
with similar terms of the lease payments at commencement date, and in similar economic environments.
Upon adoption, ASC 842, Leases had an impact in
the Company’s consolidated balance sheet and in its consolidated statement of operations. As part of the transition, the Company
elected the following practical expedients:
| ● | Package of practical expedients which eliminates the need
to reassess (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing
leases; and (3) the initial direct costs for any existing leases. |
| ● | The practical expedient whereby the lease and non-lease components
will not be separated for all classes of assets. |
| ● | Not to recognize ROU assets and corresponding lease liabilities
with a lease term of 12 months or less from the lease commencement date for all class of assets. |
For existing leases, the Company did not elect
the use of hindsight and did not reassess lease term upon adoption. The Company leases office and manufacturing facilities, equipment
and vehicles under various operating arrangements. Certain of the leases are subject to escalation clauses and renewal periods. The Company
recognizes lease expense, including predetermined fixed escalations, on a straight-line basis over the initial term of the lease from
the time that the Company controls the leased property.
The Company adjusted the adoption date opening ROU asset balance by
$0.04 million and $0.03 million previously recorded as deferred rent liabilities and prepaid expenses, respectively. On January 1, 2021,
the Company recorded $4.16 million in operating lease ROU assets and $4.17 million in operating lease liabilities. The adoption of ASC
842 had no significant impact on the Company’s statement of operations.
The components of lease costs are as follows:
| |
| |
Three
months ended | |
(in thousands) | |
Statement of Operations Location | |
March 31, 2021 | |
Operating leases: | |
| |
| |
Lease cost | |
Cost of goods sold | |
$ | 154 | |
Lease cost | |
Operating expenses | |
| 67 | |
Operating lease cost | |
| |
| 221 | |
Other: | |
| |
| | |
Variable lease cost | |
Cost of goods sold | |
| 461 | |
Variable lease cost | |
Operating expenses | |
| - | |
Variable lease cost* | |
| |
| 461 | |
Total lease cost | |
| |
$ | 682 | |
* | Variable lease cost primarily consists of month to month rent, charges based on usage and maintenance. |
The Company’s rent expense for the three months ended March 31,
2020 totaled $0.50 million.
Supplemental balance sheet information as of March 31, 2021 related
to leases are as follows:
| |
| |
March 31 | |
(in thousands) | |
Balance Sheet Location | |
2021 | |
Assets | |
| |
| |
ROU assets-Operating lease | |
Operating lease right-of-use assets | |
| 4,141 | |
Less: accumulated amortization | |
Operating lease right-of-use assets | |
| (173 | ) |
Operating lease right-of-use assets, net | |
Operating lease right-of-use assets | |
| 3,968 | |
Total Lease ROU assets | |
| |
$ | 3,968 | |
Liabilities | |
| |
| | |
Current: | |
| |
| | |
Operating lease liabilities, current | |
Operating lease liabilities, current | |
$ | (651 | ) |
Long term: | |
| |
| | |
Operating lease liabilities, noncurrent | |
Operating lease liabilities, noncurrent | |
| (3,344 | ) |
Total Lease liabilities | |
| |
$ | (3,995 | ) |
Supplemental cash flow information related to
leases was as follows:
(in thousands) | |
March 31, 2021 | |
Operating cash flows paid for operating leases | |
$ | (177 | ) |
The following table represents the weighted-average
remaining lease term and discount rates for operating lease as of March 31, 2021:
| |
Operating
Leases | |
Weighted-average remaining lease term (years) | |
| 9.59 | |
Weighted-average discount rate | |
| 4.0%-5.3% | |
The following table reconciles the undiscounted
future lease payments for operating leases to the operating leases recorded in the condensed consolidated balance sheet at March 31, 2021:
(in thousands) | |
Operating
Leases | |
Nine months ended December 31, 2021 | |
$ | 624 | |
2022 | |
| 790 | |
2023 | |
| 634 | |
2024 | |
| 374 | |
2025 | |
| 347 | |
2026 and thereafter | |
| 2,413 | |
Total lease payments | |
$ | 5,182 | |
Less imputed interest | |
| 1,187 | |
Present value of future lease payments | |
$ | 3,995 | |
Current Lease liabilities | |
| 651 | |
Noncurrent Lease liabilities | |
| 3,344 | |
12. ACCRUED EXPENSES
The following table provides additional information related to the
Company’s accrued expenses (in thousands):
| |
March 31, | | |
December 31, | |
| |
2021 | | |
2020 | |
| |
(As Restated) | | |
| |
Accrued customer incentives | |
$ | 4,170 | | |
$ | 1,524 | |
Accrued payroll | |
| 1,334 | | |
| 1,471 | |
Accrued commission | |
| 631 | | |
| 108 | |
Other accrued expenses | |
| 423 | | |
| 507 | |
Total | |
$ | 6,558 | | |
$ | 3,610 | |
13. INCOME TAXES
The following table presents the provision
for income taxes and the effective tax rate for the three months ended March 31, 2021 and March 31, 2020 in thousand:
| |
March 31, | | |
March 31, | |
| |
2021 | | |
2020 | |
Income tax (benefit) expense | |
| (1,475 | ) | |
| 730 | |
Effective tax rate | |
| 15 | % | |
| 11 | % |
The income tax (benefit) expense for the three
months ended March 31, 2021 was primarily attributable to federal, state and foreign income tax expenses attributable to federal and state
tax benefits on the Company’s U.S. loss as a C-corporation, offset by foreign income tax expenses on the Company’s foreign
income in Italy.
The income tax (benefit) expense for the three months ended March 31,
2020 was primarily attributable to state and foreign income taxes.
The Company also believes that quarterly effective
tax rates will vary from the fiscal 2021 effective tax rate as a result of recognizing the income tax effects of items that the Company
cannot anticipate such as the changes in tax laws, tax amounts associated with foreign earnings at rates different from the United States
federal statutory rate, the tax impact of stock-based compensation. The Company’s foreign earnings on Italian operations are subject
to foreign taxes applicable to its income derived in Italy. These taxes include income tax.
As of December 31, 2020, and 2019, the Company
had no open tax examinations by any taxing jurisdiction in which it operates. The taxing authorities of the most significant jurisdictions
are the United States Internal Revenue Service and the California Franchise Tax Board and the Agenzia delle Entrate. The statute of limitations
for which the Company’s tax returns are subject to examination are as follows: Federal 2017-2020, California 2016-2020, and Italy
2016-2020.
14. INDEBTEDNESS
Debt consisted of the following as of (in thousands):
| |
March 31, | | |
December 31, | |
| |
2021 | | |
2020 | |
| |
| | |
| |
Notes payable | |
$ | 2,014 | | |
$ | 2,101 | |
Notes payable to related parties (Note 17) | |
| 42 | | |
| 66 | |
Revolving credit facility | |
| 26 | | |
| 22 | |
Total debt | |
| 2,082 | | |
| 2,189 | |
Less current debt | |
| (179 | ) | |
| (199 | ) |
Total | |
$ | 1,903 | | |
$ | 1,990 | |
Revolving credit facility
The Company is party to a revolving line of credit
agreement, which has been amended from time to time, pursuant to which a credit facility has been extended to the Company until May 25,
2021 (the “Credit Facility”). The Credit Facility provides the Company with up to $25.00 million in revolving credit. Under
the Credit Facility, the Company may borrow up to (a) 90% of the net amount of eligible accounts receivable; plus, (b) the lower of: (i)
sum of: (1) 50% of the net amount of eligible inventory; plus (2) 45% of the net amount of eligible in-transit inventory; (ii) $10.00
million; or (iii) 50% of the aggregate amount of revolving loans outstanding, minus (c) the sum of all reserves. Under the Credit Facility:
(i) the Company’s fixed charge coverage ratio may not be less than 1.10:1.00, and (ii) the Company may make dividends or distributions
in shares of stock of the same class and also distributions for the payment of taxes. As of March 31, 2021 and December 31, 2020, the
Company was in compliance with all terms and conditions of its Credit Facility.
The revolving line of credit bears interest at the sum of (i) the greater
of (a) the daily Prime Rate, or (b) LIBOR plus 2%; and (ii) 1%.
The revolving line of credit has an arrangement
associated with it wherein all collections from collateralized receivables are deposited into a collection account and applied to the
outstanding balance of the line of credit on a daily basis. The funds in the collection account are earmarked for payment towards the
outstanding line of credit and given the Company’s obligation to pay off the outstanding balance on a daily basis, the balance is
classified as a current liability on the Company’s condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020.
Capital expenditure loan, term loan, and notes payable
The Credit Facility includes a capital expenditure
loan (“Capex Loan”) in the amount of up to $0.50 million that functions to reimburse the Company for certain qualified expenses
related to the Company’s purchase of capital equipment. All borrowings against this loan are payable on a straight-line basis over
5 years and accrue interest at the greater of (a) the daily Prime Rate or (b) the daily LIBOR Rate plus 4%. The loan was paid off in full
with the proceeds from the Transaction. The balance on the Capex Loan was $0 million and $0 million as of March 31, 2021 and December
31, 2020, respectively, of which $0 million and $0 million is classified as current as of March 31, 2021 and December 31, 2020, respectively.
In September 2018, the Company amended the Credit
Facility to include a term loan in the amount of $1.00 million (the “Term Loan”). The Term Loan accrues interest at the sum
of the (i) the greater of (a) the daily Prime Rate, or (b) LIBOR plus 2%; and (ii) 1.5% and has a maturity date of May 25, 2021. The Credit
Facility is secured by substantially all of the Company’s assets. The balance on the Term Loan was $0 million and $0 million as
of March 31, 2021 and December 31, 2020, respectively.
In April 2019, Ittella Italy entered into a promissory
note with a financial institution in the amount of 0.40 million Euros. The note accrues interest at 2.5% and has a maturity date of April
15, 2021, when the full principal and interest are due. The balance on the promissory note was 0.02 million Euros and 0.08 million Euros
as of March 31, 2021 and December 31, 2020, respectively.
On June 19, 2015, Ittella Properties, LLC, a variable
interest entity (“VIE”) (See Note 19), executed a promissory note with a financial institution in the amount of $1.30 million
(the “CB Loan”). The CB Loan accrues interest at an initial rate of 4.99% and is variable on an annual basis in accordance
with the United States Treasury Note Index Rate plus 2.66% and subject to a minimum rate of 4.65%. The CB Loan had a maturity date of
July 1, 2040 and was collateralized by the Alondra Building (Note 19) and was guaranteed by Ittella International. The loan was paid off
in full through a refinancing on January 6, 2020. The outstanding balance on the CB Loan was $0 million and $0.00 million as of March
31, 2021 and December 31, 2020, respectively.
On August 12, 2015, Ittella Properties, LLC, the VIE, executed a note
payable with a financial institution in the amount of $1.06 million (the “CDC Loan”). The CDC Loan accrued interest at 2.88%
and had a maturity date of August 1, 2035. The CDC Loan was secured by the Alondra Building (Note 19 and was guaranteed by Ittella International.
The loan was paid off in full through a refinancing on January 6, 2020. The outstanding balance on the CDC Loan was $0 million and $0
million as of March 31, 2021 and December 31, 2020, respectively.
On January 6, 2020, Ittella Properties, LLC, the
VIE, refinanced all of its existing debt with a financial institution in the amount of $2.10 million (the “Note”). The Note
accrues interest at 3.60% and has a maturity date of January 31, 2035. Financial covenants of the Note include a minimum fixed charge
coverage ratio of 1.20 to 1.00. As of March 31, 2021, the Company was in compliance with all terms and conditions of the Note. The outstanding
balance on the Note was $1.99 million and $2.02 as of March 31, 2021 and December 31, 2020, respectively.
Future minimum principal payments due on the notes
payable, including notes payable to related parties, for periods subsequent to March 31, 2021 are as follows (in thousands):
Nine months ended December 31, 2021 | |
$ | 151 | |
2022 | |
| 134 | |
2023 | |
| 119 | |
2024 | |
| 123 | |
2025 | |
| 128 | |
Thereafter | |
| 1,427 | |
| |
| | |
Total | |
$ | 2,082 | |
15. STOCKHOLDERS’ EQUITY
The condensed consolidated statements of changes
in equity reflect the Reverse Recapitalization as of October 15, 2020. Since Myjojo (Delaware) was determined to be the accounting acquirer
in the Reverse Recapitalization, all periods prior to the consummation of the Transaction reflect the balances and activity of Myjojo
(Delaware) (other than shares which were retroactively restated in connection with the Transaction).
Further, the Company issued awards to certain
officers and all of the directors pursuant to the Tattooed Chef, Inc. 2020 Incentive Award Plan (“Director Awards”) on December
17, 2020 (see Note 16). Salvatore Galletti received 4,935 shares of common stock of the Company as part of the Director Awards. Such shares
together with the shares that Salvatore Galletti received as a result of the Transaction and the release of the Holdback Shares from escrow,
allowed Salvatore Galletti to have approximately 39.4% (separate from the shares assigned to Project Lily) of the voting power of the
capital stock of the Company as of March 31, 2021.
Preferred Stock
The Company is authorized to issue 10,000,000
shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may
be determined from time to time by the Company’s board of directors. As of March 31, 2021, there were no shares of preferred stock
issued or outstanding.
Common Stock
The Company is authorized to issue 1,000,000,000
shares of common stock with a par value of $0.0001 per share. Holders of common stock are entitled to one vote for each share. As of March
31, 2021, there were 81,400,199 shares issued and outstanding.
Noncontrolling Interest
Prior to the consummation of the Transaction,
noncontrolling interest in Ittella Italy was included as a component of stockholders’ equity on the accompanying condensed consolidated
balance sheets. Noncontrolling interest in Ittella International contains a redemption feature and was included as mezzanine equity on
the accompanying condensed consolidated balance sheets (Notes 3). The share of income attributable to noncontrolling interest were included
as a component of net income in the accompanying consolidation statements of operations and comprehensive income prior to the Transaction.
The following schedule discloses the components of the Company’s
changes in other comprehensive income attributable to noncontrolling interest for the three months ended March 31, 2020 (in thousands):
Net income attributable to noncontrolling interest in Ittella Italy | |
$ | 598 | |
Net income attributable to noncontrolling interest in Ittella International | |
| 414 | |
Increase in noncontrolling interest due to foreign currency translation | |
| (11 | ) |
| |
| | |
Change in net comprehensive income attributable to noncontrolling interest for the three months ended March 31, 2020 | |
$ | 1,001 | |
As discussed in Note 3, all noncontrolling interest
were converted into Myjojo (Delaware)’s common shares which were subsequently exchanged for the Company’s common shares in
the Transaction.
Warrants
In connection with Forum’s IPO and issuance
of Private Placement Units in August 2018, Forum issued Units consisting of Common Stock with attached warrants as follows:
| 1. | Public Warrants – Forum issued 20,000,000 Units at a price of $10.00 per Unit, each Unit consisting
of one share of Common Stock of Forum and one redeemable warrant. |
| 2. | Private Placement Warrants – Forum issued 655,000 Private Placement Units, each consisting of one share of Common Stock and
one warrant to the Sponsor, Jefferies LLC and EarlyBirdCapital, Inc. |
Each Public Warrant and Private Placement Warrant
(together, the “Warrants”) entitles the holder to purchase one share of Common Stock at an exercise price of $11.50.
The Public Warrants contain a redemption feature
that provides the Company the option to call the Public Warrants for redemption 30 days after notice to the holder when any of conditions
described in the following paragraph is met, and to require that any Public Warrant holder who desires to exercise his, her or its Public
Warrant prior to the redemption date do so on a “cashless basis,” by converting each Public Warrant for an equivalent number
of shares of Common Stock, determined by dividing (i) the product of the number of shares of Common Stock underlying the Warrants, multiplied
by the difference between the Warrant Price and the “Fair Market Value”, and (ii) the Fair Market Value (defined as the average
last sale price of the Common Stock for the ten trading days ending on the third trading day prior to the date on which the notice of
redemption is sent to the holders of the Public Warrants).
The Public Warrants become exercisable upon occurrence
of certain events (trigger events), including the completion of the Transaction. Once the Public Warrants become exercisable, the Company
may redeem the Public Warrants in whole, at a price of $0.01 per warrant within 30 days after a written notice of redemption, and if,
and only if, the reported last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading days
within a 30-trading day period ending three business days before the Company sends the notice of redemption to the holder.
The Private Placement Warrants are identical to
the Public Warrants, except that so long as they are held by the Sponsor, an Underwriter, or any of their Permitted Transferees, the Private
Placement Warrants: (i) may be exercised for cash or on a cashless basis; (ii) may not be transferred, assigned, or sold 30 days after
the completion of a defined Business Combination except to a Permitted Transferee who enters into a written agreement with the Company
agreeing to be bound by the transfer restrictions, and (iii) are not redeemable by the Company.
A Warrant may be exercised only during the “Exercise
Period” commencing on the later of: (i) the date that is 30 days after the first date on which Forum completes its initial business
combination; or (ii) 12 months from the date of the closing of the IPO, and terminating on the earlier to occur (x) five years after Forum
completes its initial business combination; (y) the liquidation of the Company or, the Redemption Date (as that term is defined in the
Warrant Agreement), subject to any applicable conditions as set forth in the Warrant Agreement. The Company in its sole discretion may
extend the duration of the Warrants by delaying the expiration date, provided it give at least 20 days prior written notice of any such
extension to the registered holders of the Warrants.
Forum completed a business combination, which is one of the trigger events for exercisability of the Warrants.
Warrant
activity is as follows:
| |
Public Warrants | | |
Private
Placement
Warrants | |
Issued and outstanding as of October 15, 2020 | |
| 20,000,000 | | |
| 655,000 | |
Exercised | |
| (5,540,316 | ) | |
| (247,423 | ) |
Issued and outstanding as of December 31, 2020 | |
| 14,459,684 | | |
| 407,577 | |
Exercised | |
| (14,459,684 | ) | |
| (223,041 | ) |
Issued and outstanding as of March 31, 2021 | |
| - | | |
| 184,536 | |
The Public Warrants are considered freestanding
equity-classified instruments due to their detachable and separately exercisable features. Accordingly, the Public Warrants are presented
as a component of Stockholders’ Equity in accordance with ASC 815-40-25.
As discussed in Note 10, the Private Placement Warrants are considered
freestanding liability-classified instruments under ASC 815-40-25.
The Company did not receive payment from the transfer
agent for 1,177,602 of the 5,793,611 warrants exercised during the period ended December 31, 2020 and, accordingly, a Warrant Receivable
of $13.54 million was recognized as part of Prepaid Expenses and Other Current Assets on the condensed consolidated balance sheet as of
December 31, 2020.
During the three-month period ended March 31,
2021, the Company recognized aggregate cash and cashless exercises of 5,234,017 and 9,368,925, respectively, in relation to the Public
Warrants. During the three-month period ended March 31, 2021, 223,041 Private Placement Warrants were exercised. The Company issued 10,025,303
common stock shares in connection with all exercises occurred in the three-month period ended March 31, 2021. During the same period,
the Company recognized transfers of 143,258 of the Public Warrants from Private Placement Warrants that ceased to meet contractual criteria
and became Public Warrants as a result.
On January 14, 2021, the Company announced that
it would redeem all Public Warrants that had not been exercised as of 5:00 p.m. EST on February 16, 2021 and sent the required redemption
notice to Public Warrant holders. As of that time and date, all but 132,580 of the Public Warrants had been exercised, and those remaining
Public Warrants were redeemed for $0.01 per Public Warrant.
Appropriated Retained Earnings
In accordance with Italian Company law,
the Company’s subsidiary Ittella Italy maintains an appropriated retained earnings account for 5% of the total profit for the prior
year until the appropriated retained earnings balance reaches 20% of share capital.
The appropriated retained earnings amount included
in retained earnings was $0.07 million and $0.07 million as of March 31, 2021 and December 31, 2020, respectively.
16. EQUITY INCENTIVE PLAN (As Restated)
On October 15, 2020, the Company’s Tattooed
Chef, Inc. 2020 Incentive Plan (the “Plan”) became effective and permits the granting of equity awards of up to 5,200,000
common shares to executives, employees and non-employee directors, with the maximum number of common shares to be granted in a single
fiscal year, when taken together with any cash fees paid to the non-employee director during that year in respect of his or her service
as a non-employee director, not exceeding $100,000 in total value to any non-employee director. Awards available for grant under the Plan
include Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Other
Share-based Awards, Other Cash-based Awards and Dividend Equivalents. Shares issued under the Plan may be newly issued shares or reissued
treasury shares.
Options maybe granted at a price per share not
less than 100% of the fair market value at the date of grant. Options granted generally vest over a period of three to five years, subject
to the grantee’s continued service with the Company through the scheduled vested date and expire no later than 10 years from the
grant date.
Stock Options
Stock options under the Plan are generally granted
with a strike price equal to 100% of the fair market value of the stock on the date of grant, with a three-year vesting period and a grant
life of 10 years. The strike price may be higher than the fair value of the stock on the date of the grant but cannot be lower.
The table below summarizes the share-based activity in the Plan:
| |
| | |
| | |
Weighted | | |
| |
| |
| | |
| | |
Average | | |
| |
| |
| | |
Weighted | | |
Remaining | | |
| |
| |
Number of | | |
Average | | |
Contractual | | |
Intrinsic | |
| |
Awards | | |
Exercise | | |
Terms | | |
Value | |
| |
Outstanding | | |
Price | | |
(Years) | | |
(in thousands) | |
Balance at December 31, 2020 | |
| 756,300 | | |
$ | 24.69 | | |
| 9.98 | | |
$ | - | |
Granted | |
| - | | |
| - | | |
| - | | |
| - | |
Cancelled and forfeited | |
| (1,500 | ) | |
| 24.69 | | |
| 9.82 | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
Balance at March 31, 2021 | |
| 754,800 | | |
$ | 24.69 | | |
| 9.73 | | |
$ | - | |
Exercisable at March 31, 2021 | |
| - | | |
$ | - | | |
| - | | |
$ | - | |
There were no options exercised during the three months ended March
31, 2021.
Compensation expense is recorded on a straight-line
basis over the vesting period, which is the requisite service period, beginning on the grant date. The compensation expense is based on
the fair value of each option grant using the Black-Scholes option pricing model. During the three ended March 31, 2021, the Company recorded
in the aggregate $0.47 million of share-based compensation expense related to stock options, which is included in SG&A expenses in
the Company’s consolidated statements of operations. As of March 31, 2021, the Company had stock-based compensation of $5.17 million
related to unvested stock options not yet recognized that are expected to be recognized over an estimated weighted average period of approximately
three years.
The
fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:
Equity volatility | |
| 25.89 | % |
Risk-free interest rate | |
| 0.67 | % |
Expected term (in years) | |
| 6 | |
Expected dividend | |
| - | |
Expected term—This represents the
weighted-average period the stock options are expected to remain outstanding based upon expected exercise and expected post-vesting termination.
Risk-free interest rate—The assumption is based upon the observed
U.S. treasury rate appropriate for the expected life of the employee stock options.
Expected volatility—The expected volatility
assumption is based upon the weighted-average historical daily price changes of our common stock over the most recent period equal to
the expected option life of the grant based on the contractual term of the awards, adjusted for activity which is not expected to occur
in the future. Dividend yield—The dividend yield assumption is based on our history and expectation of dividend payouts.
Any option granted under the Plan may
include tandem Stock Appreciation Rights (“SAR”). SAR may also be awarded to eligible persons independent of any option. The
strike price for common share for each SAR shall not be less than 100% of the fair value of the shares determined as of the date of grant.
Restricted Stock and Restricted Stock Units
Restricted Stock Units (“RSUs”) are
convertible into shares of Company common stock upon vesting on a one-to-one basis. Restricted stock has the same rights as other issued
and outstanding shares of Company common stock except they are not entitled to dividends until the awards vest. Restrictions also limit
the sale or transfer of the same during the vesting period. Any unvested portion of the Restricted Stock and RSUs shall be terminated
and forfeited upon termination of employment or service of the grantee.
Director restricted stock activity under the Plan for the three months
ended March 31, 2021 is as follows:
| |
| | |
| | |
Non-Employee Director | |
| |
Employee Director Awards | | |
Awards | |
| |
| | |
Weighted- | | |
| | |
Weighted- | |
| |
Number of | | |
Average | | |
Number of | | |
Average | |
| |
Shares | | |
Fair Value | | |
Shares | | |
Fair Value | |
Balance at December 31, 2020 | |
| - | | |
$ | - | | |
| - | | |
$ | - | |
Granted | |
| - | | |
| - | | |
| 15,216 | | |
| 18.93 | |
Vested | |
| - | | |
| - | | |
| (15,216 | ) | |
| 18.93 | |
Forfeited | |
| - | | |
| - | | |
| - | | |
| - | |
Non-vested restricted stock at March 31, 2021 | |
| - | | |
$ | - | | |
| - | | |
$ | - | |
Non-director employee and consultant restricted stock activity under
the Plan for the three months ended March 31, 2021 is as follows:
| |
| | |
| | |
Consultant (Non-Employee) | |
| |
Employee Awards | | |
Awards | |
| |
| | |
Weighted- | | |
| | |
Weighted- | |
| |
Number of | | |
Average | | |
Number of | | |
Average | |
| |
Shares | | |
Fair Value | | |
Shares | | |
Fair Value | |
Balance at December 31, 2020 | |
| 400,000 | | |
$ | 24.28 | | |
| 100,000 | | |
$ | 24.69 | |
Granted | |
| 30,416 | | |
| 23.65 | | |
| 100,000 | | |
| 18.96 | |
Vested | |
| (4,916 | ) | |
| 24.28 | | |
| (100,000 | ) | |
| 18.96 | |
Forfeited | |
| (100,000 | ) | |
| 24.69 | | |
| (100,000 | ) | |
| 24.69 | |
Non-vested restricted stock at March 31, 2021 | |
| 325,500 | | |
$ | 24.10 | | |
| | | |
$ | - | |
The fair value of the consultant (non-employee)
performance shares vested for the three months ended March 31, 2021 was approximately $1.90 million. The fair value of employee restricted
stock awards vested was approximately $0.53 million for the three months ended March 31, 2021. The fair value of non-employee restricted
stock awards vested was approximately $0.29 million for the three months ended March 31, 2021.
As of March 31, 2021, unrecognized compensation
costs related to the employee restricted stock awards was $7.4 million and is expected to be recognized over the weighted average period
of four years.
In addition, non-employee consultant share-based
compensation expense for the three months ended March 31, 2021 was approximately $1.90 million as a result of an accelerated equity grant.
The amount recognized vested immediately and had no restrictions or performance conditions.
Employee Performance Shares and Performance Units
This award may be granted to certain executive
officers of the Company and vest if the performance goals and/or other vesting criteria as stated in the relevant Award Agreement are
achieved or the awards otherwise vest, which generally is for a period of three to five years from the grant date. Vesting of this award
applies if the grantee remains employed by the Company through the applicable vesting date.
The fair value of the award is equal to the average
market price of the Company’s common stock at the grant date, adjusted for dividends over the vesting period. Compensation expense
is recorded ratably over the period beginning on the grant date until the shares become unrestricted based on the amount of the award
that is expected to be earned, adjusted each reporting period based on current information.
Under the Plan, an executive of the Company was
granted restricted stock of 300,000 shares of the Company’s common stock (included within the restricted stock grants described
above), to be vested 60,000 shares on each anniversary of the closing of the Transaction, provided certain target share prices are met,
and conditioned on his continued employment with the Company. If the applicable target share price is not met, the 60,000 shares eligible
for vesting will carry over and will be eligible for vesting in the full amount in the following vesting period. Any unvested shares will
continue to carry over into the next vesting period. Any unvested shares as of October 15, 2025 will be forfeited.
17. RELATED PARTY TRANSACTIONS (As Restated)
The Company leases office property in San Pedro,
California from Deluna Properties, Inc., a company owned by Salvatore Galletti. Rent expense was $0.04 million and $0.02 million for the
three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, under the adoption of ASC 842, the Company recorded $2.12
million of operating lease right-of-use asset and $2.14 million of operating lease liabilities in relation to this lease.
In January 2009, the Company entered into
a promissory note with Salvatore Galletti as the lender in the amount of $0.05 million, which matured on December 31, 2020. The note bore
interest at 4.75% over the Prime Rate. The promissory note was paid off in full on January 6, 2020.
The Company entered into a credit agreement with
Salvatore Galletti for a $1.20 million revolving line of credit in January 2007. Monthly interest payments were accrued at 4.75% above
the Prime Rate on any outstanding balance. In addition, the Company agreed to pay Salvatore Galletti 0.67% per month of the full amount
of the revolving credit line, regardless of whether the Company has borrowed against the line of credit. For the three months ended March
31, 2021 and 2020, respectively, zero amount of the fees have been paid to the lender. This agreement originally expired on December 31,
2011, which was amended from time to time and extended to December 31, 2024. The outstanding balance of the line of credit was $0 million
at both of March 31, 2021 and December 31, 2020.
In June 2010, the Company entered into a promissory
note with the Salvatore Galletti as the lender in the amount of $0.15 million, which bears interest at 8.00% per annum. The promissory
note was paid off in full on June 2, 2020. It had a balance of $0.15 million as of December 31, 2019 and was recorded as notes payable
to related parties in the accompanying condensed consolidated balance sheets.
In May 2018, Ittella Italy entered into a promissory
note with Pizzo in the amount of 0.48 million Euros. The note bears interest at 8.00% per annum. The balance of the note was 0.04 million
Euros and 0.07 million Euros as of March 31, 2021 and December 31, 2020, respectively.
The Company is party to a revolving line of credit
with Marquette Business Credit as of March 31, 2021 and December 31, 2020 with borrowing capacity of $25.00 million and $25.00 million,
respectively (Note 14). The parent organization of Marquette Business Credit is UMB (Note 3).
18. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company
also enters into real property leases, which require the Company as lessee to indemnify the lessor from liabilities arising out of the
Company’s occupancy of the properties. The Company’s indemnification obligations are generally covered under the Company’s
general insurance policies.
From time to time, the Company is involved in
various litigation matters arising in the ordinary course of business. The Company does not believe the disposition of any current matter
will have a material adverse effect on its condensed consolidated financial position or results of operations.
A subsidiary of the Company, Ittella Italy, is
involved in certain litigation related to the death of an independent contractor who fell off of the roof of Ittella Italy’s premises
while performing pest control services. The case was brought by five relatives of the deceased worker. The five plaintiffs are seeking
collectively 1.87 million Euros from the defendants. In addition to Ittella Italy, the pest control company for which the deceased was
working at the time of the accident is co-defendant. Furthermore, under Italian law, the president of an Italian company is automatically
criminally charged if a workplace death occurs on site. Ittella Italy has engaged local counsel, and while local counsel does not believe
it is probable that Ittella Italy or its president will be found culpable, Ittella Italy cannot predict the ultimate outcome of the litigation.
Procedurally, the case remains in a very early stage of the litigation. Ultimately, a trial will be required to determine if the defendants
are liable, and if they are liable, a second separate proceeding will be required to establish the amount of damages owed by each of the
co-defendants. Ittella Italy believes any required payment could be covered by its insurance policy; however, it is not possible to determine
the amount at which the insurance company will reimburse Ittella Italy or whether any reimbursement will be received at all. Based on
information received from its Italian lawyers, Ittella Italy believes that the litigation may continue for a number of years before it
is finally resolved.
Based on the assessment by management together
with the independent assessment from its local legal counsel, the Company believes that a loss is currently not probable and an estimate
cannot be made. Therefore, no accrual has been made as of March 31, 2021 or December 31, 2020.
19. CONSOLIDATED VARIABLE INTEREST ENTITY
Ittella Properties LLC (“Properties”),
the Company’s consolidated VIE, owns the Alondra Building, which is leased by Ittella International for 10 years from August 1,
2015 through August 1, 2025. Properties is wholly owned by Salvatore Galletti. The construction and acquisition of the Alondra building
by Properties were funded by a loan agreement with unconditional guarantees by Ittella International and terms providing that 100% of
the Alondra building must be leased to Ittella International throughout the term of the loan agreement.
The Company concluded that it has a variable interest
in Properties on the basis that Ittella International guarantees the loan for Properties and substantially all of Properties’ transactions
occur with the Ittella International. Thus, Properties’ equity at risk is considered to be insufficient to finance its activities
without additional support from Ittella International, and, therefore, Properties is considered a VIE.
The results of operations and cash flows of Properties
are included in the Company’s condensed consolidated financial statements. For the three-month periods ended March 31, 2021 and
2020, 100% of the revenue of Properties is intercompany and thus was eliminated in consolidation. Properties contributed expenses of $0.05
million and $0.10 million for the periods ended March 31, 2021 and 2020, respectively.
20. EARNINGS PER SHARE
The following is the summary of basic and diluted EPS for the three-months ended March 31, 2021 (As Restated) and 2020 (in thousands):
| |
2021 | | |
2020 | |
Numerator | |
| (As Restated) | | |
| | |
Net Income (Loss) attributable to Tattooed Chef, Inc. | |
$ | (8,242 | ) | |
$ | 4,810 | |
Dilutive Net Income (Loss) attributable to Tattooed Chef, Inc. | |
| (8,714 | ) | |
| 4,810 | |
Denominator | |
| | | |
| | |
Weighted average common shares outstanding | |
| 80,240 | | |
| 28,324 | |
Effect of potentially dilutive securities related to Warrants | |
| 304 | | |
| - | |
Weighted average diluted shares outstanding | |
| 80,544 | | |
| 28,324 | |
Earnings per share | |
| | | |
| | |
Basic | |
$ | (0.10 | ) | |
$ | 0.17 | |
Diluted | |
$ | (0.11 | ) | |
$ | 0.17 | |
The following have been excluded from
the calculation of diluted earnings per share as the effect of including them would have been anti-dilutive for the three-months ended
March 31, 2021 and 2020 (in thousands):
| |
2021 | | |
2020 | |
Stock options | |
| 318 | | |
| - | |
Restricted stock awards | |
| 318 | | |
| - | |
Warrants | |
| - | | |
| - | |
Total | |
| 636 | | |
| - | |
21. SUBSEQUENT EVENTS
On May 2, 2021, the Company entered into an agreement
to acquire Food of New Mexico Distributors, Inc. (“NMFD”) and Karsten Tortilla Factory, LLC (“Karsten”) in an
all-cash transaction approximately $35.00 million. NMFD is a privately-held company based in Albuquerque, New Mexico. Together with Karsten,
NMFD produces and sells ready to eat New Mexican food products for retail and food service customers. The transaction closed on May 14,
2021. As of the date of issuance of these condensed consolidated financial statements, the initial acquisition and disclosures under ASC
805, Business Combinations, have not been prepared as the Company has not obtained all of the information necessary, nor has there
been sufficient time, to complete the related activities.
On April 13, 2021, Ittella Italy purchased
a manufacturing facility in Italy for 4.00 million Euros (or $4.69 million). The Company had previously been leasing this facility.