SEC Filing - Tattooed Chef, Inc.

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ttcf-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38615

TATTOOED CHEF, INC.

(Exact name of registrant as specified in its charter)


Delaware						82-5457906
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

6305 Alondra Blvd., Paramount, CA 90723

(Address of Principal Executive Offices, including zip code)

(562) 602-0822

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

TTCF

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No x

As of August 3, 2022, there were 82,459,803 shares of common stock, par value $0.0001, issued and outstanding.

Explanatory Note

This Amendment No. 1 to Quarterly Report on Form 10-Q/A (this “Form 10-Q/A”) amends and restates certain items noted below in the Quarterly Report on Form 10-Q of Tattooed Chef, Inc. (the “Company”) for the quarter ended June 30, 2022, as originally filed with the Securities and Exchange Commission (the “SEC”) on August 9, 2022 (the “Original Filing”).

See Note 1, under the caption “Restatement of Previously Issued Financial Statements”, to the Condensed Consolidated Financial Statements included in Item 1 of this Form 10-Q/A for additional information and a reconciliation of the previously reported amounts to the restated amounts.

The Company had previously identified material weaknesses in its internal control over financial reporting as of December 31, 2021 and its disclosure controls and procedures were not effective. For additional information about the nature of the Company’s material weaknesses which contributed to the financial statement restatement described herein, see Part II, Item 9A “Controls and Procedures” of Form 10-K/A for the year ended December 31, 2021 as filed with the SEC on November 16, 2022.

Items Amended in this Filing

For the convenience of the reader, this Form 10-Q/A sets forth the Original Filing, as amended, in its entirety; however, this Form 10-Q/A amends and restates the following Items of the Original Filing to the extent necessary to reflect the adjustments discussed above and to make corresponding revisions to the Company’s financial data cited elsewhere in this Form 10-Q/A.

-Part I, Item 1 – Financial Statements

-Part I, Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

-Part I, Item 4 – Controls and procedures

In addition, the Company’s Chief Executive Officer and Chief Financial Officer have provided new certifications dated as of the date of this filing (Exhibits 31.1, 31.2, 32.1 and 32.2), and the Company has provided its restated condensed consolidated financial statements formatted in Extensible Business Reporting Language (XBRL) in Exhibit 101.

Except as described above, no other changes have been made to the Original Filing. This Form 10-Q/A speaks as of the date of the Original Filing and does not reflect events that may have occurred after the date of the Original Filing or modify or update any disclosures that may have been affected by subsequent events.

TATTOOED CHEF, INC.

Quarterly Report on Form 10-Q/A

For the Quarter Ended June 30, 2022

TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION		1

Item 1.	Financial Statements (u naudited)	1

	Condensed Consolidated Balance Sheets as of June 30, 2022 (As Restated) and December 31, 2021	1

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2022 (As Re stated) and 2021 (As R estated )	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity f or the Three and Six Months Ended June 30, 2022 (As Restated) and 2021 (As Restated )	3

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 (As Restated) and 2021 (As Restated )	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Control and Procedures	38

PART II – OTHER INFORMATION		40

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 3.	Defaults Upon Senior Securities	40

Item 4.	Mine Safety Disclosures	40

Item 5.	Other Information	40

Item 6.	Exhibits	41

SIGNATURES		42

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

TATTOOED CHEF, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except for share information)


	June 30, 2022		December 31, 2021
	(As Restated)
ASSETS
CURRENT ASSETS
Cash	$	27,729	$	92,351
Accounts receivable, net	32,981		25,117
Inventory	62,356		56,256
Prepaid expenses and other current assets	8,234		7,027
TOTAL CURRENT ASSETS	131,300		180,751
Property, plant and equipment, net	57,687		46,476
Operating lease right-of-use asset, net	16,883		8,039
Finance lease right-of-use asset, net	5,554		5,639
Intangible assets, net	96		151
Deferred income taxes, net	259		266
Goodwill	26,705		26,924
Other assets	175		649
TOTAL ASSETS	$	238,659	$	268,895

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	30,579	$	28,334
Accrued expenses	6,913		3,767
Line of credit	1,510		1,200
Notes payable, current portion	5,028		5,019
Forward contract derivative liability	2,988		1,804
Operating lease liabilities, current portion	2,190		1,523
Other current liabilities	386		122
TOTAL CURRENT LIABILITIES	49,594		41,769
Warrant liability	146		814
Operating lease liabilities, net of current portion	14,910		6,599
Notes payable, net of current portion	1,432		716
TOTAL LIABILITIES	66,082		49,898

COMMITMENTS AND CONTINGENCIES (See Note 18)

STOCKHOLDERS’ EQUITY
Preferred stock - $0.0001 par value; 10,000,000 shares authorized, none issued and outstanding at June 30, 2022 and December 31, 2021	—		—
Common stock- $0.0001 par value; 1,000,000,000 shares authorized; 82,459,803 shares and 82,237,813 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	8		8
Additional paid in capital	245,064		242,362
Accumulated other comprehensive loss	(1,814)		(953)
Accumulated deficit	(70,681)		(22,420)
TOTAL STOCKHOLDERS’ EQUITY	172,577		218,997
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	238,659	$	268,895

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

TATTOOED CHEF, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS (unaudited)

(in thousands, except for share and per share information)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(As Restated)		(As Restated)		(As Restated)		(As Restated)
NET REVENUE	$	57,733	$	47,260	$	125,421	$	97,675
COST OF GOODS SOLD	58,581		41,131		122,202		86,539
GROSS (LOSS) PROFIT	(848)		6,129		3,219		11,136
OPERATING EXPENSES	24,409		16,846		47,741		28,017
LOSS FROM OPERATIONS	(25,257)		(10,717)		(44,522)		(16,881)
Interest expense	(42)		(94)		(83)		(114)
Other (expense) income	(2,334)		733		(2,945)		(1,948)
LOSS BEFORE INCOME TAX EXPENSE	(27,633)		(10,078)		(47,550)		(18,943)
INCOME TAX EXPENSE	(455)		(49,285)		(711)		(48,049)
NET LOSS	$	(28,088)	$	(59,363)	$	(48,261)	$	(66,992)

NET LOSS PER SHARE
Basic	$	(0.34)	$	(0.72)	$	(0.59)	$	(0.83)
Diluted	$	(0.34)	$	(0.72)	$	(0.59)	$	(0.83)

WEIGHTED AVERAGE COMMON SHARES
Basic	82,284,005		81,981,428		82,261,079		81,121,795
Diluted	82,284,005		81,981,428		82,261,079		81,258,427

OTHER COMPREHENSIVE LOSS, NET OF TAX
Foreign currency translation adjustments	(431)		(210)		(861)		(101)
COMPREHENSIVE LOSS	$	(28,519)	$	(59,573)	$	(49,122)	$	(67,093)

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

TATTOOED CHEF, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

(in thousands, except for share information)


	Common Stock			Additional Paid-In Capital		Accumulated Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount
								(As Restated)		(As Restated)
Balance as of January 1, 2022	82,237,813	$	8	$	242,362	$	(953)	$	(22,420)	$	218,997
Foreign currency translation adjustment	—	—				(430)		—		(430)
Stock-based compensation	—	—		1,287		—		—		1,287
Issuance of restricted stock awards	203,828	—		—		—		—		—
Net loss	—	—		—		—		(20,173)		(20,173)
Balance as of March 31, 2022	82,441,641	$	8	$	243,649	$	(1,383)	$	(42,593)	$	199,681
Foreign currency translation adjustment	—	—		—		(431)		—		(431)
Stock-based compensation	—	—		1,415		—		—		1,415
Issuance of restricted stock awards	18,162	—		—		—		—		—
Net loss	—	—		—		—		(28,088)		(28,088)
Balance as of June 30, 2022	82,459,803	$	8	$	245,064	$	(1,814)	$	(70,681)	$	172,577


	Common Stock			Treasury Shares	Additional Paid-In Capital		Accumulated Comprehensive Income (Loss)		Retained Earnings (Deficit)		Total
	Shares	Amount
									(As Restated)		(As Restated)
Balance as of January 1, 2021	71,551,067	$	7	(81,087)	$	168,448	$	1	$	64,846	$	233,302
Foreign currency translation adjustment	—	—		—	—		109		—		109
Distributions	—	—		—	—		—		(308)		(308)
Stock-based compensation	15,216	—		—	3,185		—		—		3,185
Forfeiture of stock-based awards	(95,084)	—		—	—		—		—		—
Cancellation of treasury shares	(81,087)	—		81,087	—		—		—		—
Exercise of warrants	10,010,087	1		—	63,361		—		—		63,362
Net loss	—	—		—	—		—		(7,629)		(7,629)
Balance as of March 31, 2021	81,400,199	$	8	—	$	234,994	$	110	$	56,909	$	292,021
Foreign currency translation adjustment	—	—		—	—		(210)		—		(210)
Stock-based compensation	835,000	—		—	763		—		—		763

Forfeiture of stock-based awards	(300,000)	—		—	(445)		—		—		(445)
Exercise of warrants	3,469	—		—	71		—		—		71
Net loss	—	—		—	—		—		(59,363)		(59,363)
Balance as of June 30, 2021	81,938,668	$	8	—	$	235,383	$	(100)	$	(2,454)	$	232,837

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

TATTOOED CHEF, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)


	Six Months Ended June 30,
	2022		2021
	(As Restated)		(As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(48,261)	$	(66,992)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	3,043		1,462
Bad debt expense	117		122
Accretion of debt financing costs	—		3
Unrealized foreign currency losses	626		—
Revaluation of warrant liability	(668)		51
Unrealized forward contract loss	1,184		1,074
Non-cash lease cost	138		44
Stock compensation expense	2,702		3,502
Deferred taxes, net	(14)		47,064
Changes in operating assets and liabilities:
Accounts receivable	(7,753)		(2,131)
Inventory	(6,743)		(8,098)
Prepaid expenses and other assets	(881)		(2,167)
Accounts payable	2,930		(664)
Accrued expenses	3,227		1,922
Other current liabilities	289		436
Net cash used in operating activities	(50,064)		(24,372)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(15,568)		(10,140)
Acquisition of subsidiaries, net of cash acquired	(42)		(33,918)
Net cash used in investing activities	(15,610)		(44,058)

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings in credit facility	31		2,093
Borrowings on line of credit	702		—
Repayments on line of credit	(314)		—
Repayments of notes payable to related parties	—		(42)
Borrowings of notes payable	1,109		1,168
Repayments of notes payable	(267)		(140)
Proceeds from the exercise of warrants	—		73,957
Payment of distributions	—		(308)
Net cash provided by financing activities	1,261		76,728
NET (DECREASE) INCREASE IN CASH	(64,413)		8,298
EFFECT OF EXCHANGE RATE ON CASH	(209)		305
CASH AT BEGINNING OF PERIOD	$	92,351	$	131,579
CASH AT END OF PERIOD	$	27,729	$	140,182
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	88	$	100
Income taxes	$	165	$	249
Noncash investing and financing activities:
Capital expenditures included in accounts payable	$	1,415	$	776

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

TATTOOED CHEF, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. THE COMPANY

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 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”), 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 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 (the “Merger”), with Myjojo surviving the merger in accordance with the Delaware General Corporation Law. Immediately upon the completion of the Transaction, Myjojo 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 and its subsidiaries (collectively, the “Company”) are principally engaged in the manufacturing and sale of plant-based foods including, but not limited to, ready-to-cook bowls, zucchini spirals, riced cauliflower, acai and smoothie bowls, cauliflower crust pizza, wood-fired plant based pizzas, handheld burritos, tortillas, chips, bars and quesadillas primarily in the United States and Italy.

Ittella Properties LLC (“Ittella Properties”), the Company’s variable interest entity (“VIE”), owns a building located on Alondra Blvd., Paramount, California (“Alondra Building”), which is leased by Ittella International, LLC (“Ittella International”), a wholly owned subsidiary of Tattooed Chef, for 10 years from August 1, 2015 through August 1, 2025. Ittella Properties is wholly owned by Salvatore Galletti. The construction and acquisition of the Alondra building by Ittella 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. Accordingly, Ittella Properties is determined to be a consolidated VIE.

On May 14, 2021, the Company acquired New Mexico Food Distributors, Inc. (“NMFD”) and Karsten Tortilla Factory, LLC (“Karsten”) in an all-cash transaction for approximately $34.1 million (collectively, the “NMFD Transaction”). NMFD and Karsten were privately held companies based in Albuquerque, New Mexico. NMFD produces and sells frozen and ready-to-eat Mexican food products to retail and food service customers through its network of distributors in the United States. NMFD processes its products in two leased facilities located in New Mexico. See Note 8 Business Combinations.

On September 28, 2021, Tattooed Chef formed BCI Acquisition, Inc. (“BCI”). On December 31, 2021, BCI acquired substantially all of the assets, and assumed certain specified liabilities, from Belmont Confections, Inc. (“Belmont”) for an aggregate purchase price of approximately $16.7 million. Belmont was a privately held company based in Youngstown, Ohio, and specialized in the development and manufacturing of private label nutritional bars. See Note 8 Business Combinations.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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 Regulation S-X of the Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed 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/A for the year ended December 31, 2021 as filed with the SEC on November 16, 2022, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2021 included in the accompanying unaudited condensed consolidated financial statements is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2021. The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 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, 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. The shares and corresponding capital amounts and earnings per share available for common stockholders, prior to the Reverse Recapitalization, have been retroactively restated.

Restatement of Previously Issued Financial Statements

Subsequent to the issuance of the condensed consolidated financial statements as of and for the quarter ended June 30, 2021, included in the Form 10-Q/A filed with the SEC on May 2, 2022, the following errors were identified:

–The Company incorrectly recorded expenses for advertising placement by a marketing services firm on a straight-line basis over the life of the contract rather than when the services were actually rendered. As a result, marketing expenses were understated by $3.4 million and $2.5 million for the three months and six months ended June 30, 2021, respectively.

–The Company incorrectly recorded expenses related to a multi-vendor mailer program with a customer as operating expenses rather than as a reduction of revenue. As a result, revenue was overstated by $2.8 million and $4.8 million for the three and six months ended June 30, 2021, respectively. Operating expenses were overstated by $2.8 million and $4.8 million for the three and six months ended June 30, 2021, respectively.

–The Company incorrectly recorded certain payments to customers as promotional and bad debt expenses within operating expenses rather than a reduction of revenue. As a result, both revenue and operating expenses were overstated by $0.2 million and $0.3 million for the three and six months ended June 30, 2021, respectively.

–The Company identified errors related to the underlying data used in the inventory capitalization and inventory net realizable value assessment. As a result, cost of goods sold was overstated by $0.8 million and $0.7 million for the three and six months ended June 30, 2021, respectively.

–The income tax impact of the errors identified above resulted in a decrease of deferred tax assets by $0.7 million as of June 30, 2021 and the $0.7 million was fully reserved during the three months ended June 30, 2021 due to the Company established a full valuation allowance starting the second quarter of 2021. As a result, the income tax expense was decreased by $0.7 million and $0.5 million for the three months and six months ended June 30, 2021, respectively.

The table below sets forth the condensed consolidated financial statements, including as reported, and the impacts resulting from the restatement, and the as restated balances for the quarterly period ended June 30, 2021 (in thousands):


($ in thousands except per share amounts)	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the three months ended June 30, 2021	As Reported	Adjustment	As Restated
REVENUE	50,270	(3,010)	47,260
COST OF GOODS SOLD	41,953	(822)	41,131
GROSS PROFIT	8,317	(2,188)	6,129
OPERATING EXPENSES	16,419	427	16,846
LOSS FROM OPERATIONS	(8,102)	(2,615)	(10,717)


LOSS BEFORE PROVISION FOR INCOME TAXES	(7,463)	(2,615)	(10,078)
INCOME TAX EXPENSE	(50,009)	724	(49,285)
NET LOSS	(57,472)	(1,891)	(59,363)

NET LOSS PER SHARE
Basic	(0.70)	(0.02)	(0.72)
Diluted	(0.70)	(0.02)	(0.72)







COMPREHENSIVE LOSS	(57,682)	(1,891)	(59,573)


($ in thousands except per share amounts)	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the six months ended June 30, 2021	As Reported	Adjustment	As Restated
REVENUE	102,739	(5,064)	97,675
COST OF GOODS SOLD	87,242	(703)	86,539
GROSS PROFIT	15,497	(4,361)	11,136
OPERATING EXPENSES	30,615	(2,598)	28,017
LOSS FROM OPERATIONS	(15,118)	(1,763)	(16,881)


LOSS INCOME BEFORE PROVISION FOR INCOME TAXES	(17,180)	(1,763)	(18,943)
INCOME TAX EXPENSE	(48,534)	485	(48,049)
NET LOSS	(65,714)	(1,278)	(66,992)

NET LOSS PER SHARE
Basic	(0.81)	(0.02)	(0.83)
Diluted	(0.81)	(0.02)	(0.83)







COMPREHENSIVE LOSS	(65,815)	(1,278)	(67,093)


($ in thousands)	Condensed Consolidated Statements of Stockholders’ Equity
For the three months ended June 30, 2021	As Reported	Adjustment	As Restated




Net loss in accumulated deficit for the three months ended June 30, 2021	(57,472)	(1,891)	(59,363)
Retained earnings (Deficit) ending balance	(2,424)	(30)	(2,454)
Total Stockholders’ equity ending balance	232,867	(30)	232,837


($ in thousands)	Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2021	As Reported	Adjustment		As Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	(65,714)	$	(1,278)	(66,992)
Adjustments to reconcile net loss to net cash from operating activities:

Bad debt expense	311	(189)		122
Deferred taxes, net	47,549	(485)		47,064

Changes in operating assets and liabilities:
Accounts receivable	(2,320)	189		(2,131)
Inventory	(8,415)	317		(8,098)
Prepaid expenses and other assets	(3,613)	1,446		(2,167)

Subsequent to the issuance of the condensed consolidated financial statements as of and for the three and six months ended June 30, 2022, included in the Form 10-Q filed with the SEC on August 9, 2022, the following errors were identified:

–The Company incorrectly recorded expenses for advertising placement by a marketing services firm on a straight-line basis over the life of the contract rather than when the services were actually rendered. As a result, the marketing expenses were understated by $1.1 million and $2.2 million for the three and six months ended June 30, 2022, respectively. Prepaid expense was overstated by $2.2 million as of June 30 , 2022.

–The Company incorrectly recorded expenses related to a multi-vendor mailer program with a large customer as operating expenses rather than as a reduction of revenue, and some of reductions were recognized during the second quarter instead of during the first quarter when the revenue was recognized. As a result, the operating expenses were overstated by $1.5 million and $4.4 million for the three and six months ended June 30, 2022, respectively, and revenue was overstated by $0 and $4.4 million for the three and six months ended June 30, 2022, respectively.

–The Company under accrued marketing expense for one marketing service firm for the services rendered. The marketing expenses were understated by $0.4 million and $0.8 million for the three and six months ended June 30, 2022, respectively. Prepaid expense was overstated by $0.4 million and accrued expense was understated by $0.4 million as of June 30, 2022.

–The Company incorrectly recognized twice for several orders which have been shipped but not invoiced. As a result, revenue was overstated for $0.4 million and $0.4 million for the three and six months ended June 30, 2022. Accounts receivable was overstated by $0.4 million as of June 30, 2022.

–Due to unit measurement error for several inventory items, the Company understated cost of good sold for $0.9 million and $0.9 million for the three and six months ended June 30, 2022, respectively. Inventory was overstated by $0.9 million as of June 30, 2022.

–The Company identified errors during the inventory capitalization process and inventory net realizable value assessment. As a result, the Company understated cost of goods sold by $0.4 million and $0.1 million for the three months and six months ended June 30, 2022. Inventory was understated by $1.6 million as of June 30, 2022.

–The Company identified errors due to an improper general ledger account grouping and mapping process. As a result, the Company understated accounts receivable and overstated inventory by $1.0 million as of June 30, 2022.

The table below sets forth the condensed consolidated financial statements, including as originally reported, the impacts resulting from the restatement, and the as restated balances for the quarterly period ended June 30, 2022 (in thousands):


($ in thousands)	CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 2022	As Reported	Adjustments	As Restated
Accounts receivable	32,316	665	32,981
Inventory	62,622	(266)	62,356
Prepaid expenses and other current assets	10,824	(2,590)	8,234
TOTAL CURRENT ASSETS	133,491	(2,191)	131,300
TOTAL ASSETS	240,850	(2,191)	238,659
Accrued expenses	6,525	388	6,913
TOTAL CURRENT LIABILITIES	49,206	388	49,594
TOTAL LIABILITIES	65,694	388	66,082
Accumulated deficit	(68,102)	(2,579)	(70,681)
TOTAL STOCKHOLDERS’ EQUITY	175,156	(2,579)	172,577
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	240,850	(2,191)	238,659


($ in thousands except per share amounts)	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended June 30, 2022	As Reported	Adjustments	As Restated
REVENUE	58,110	(377)	57,733
COST OF GOODS SOLD	57,370	1,211	58,581
GROSS PROFIT (LOSS)	740	(1,588)	(848)
OPERATING EXPENSES	24,346	63	24,409
LOSS FROM OPERATIONS	(23,606)	(1,651)	(25,257)
LOSS BEFORE INCOME TAX EXPENSE	(25,982)	(1,651)	(27,633)
NET LOSS	(26,437)	(1,651)	(28,088)

NET LOSS PER SHARE
Basic	(0.32)	(0.02)	(0.34)
Diluted	(0.32)	(0.02)	(0.34)
COMPREHENSIVE LOSS	(26,868)	(1,651)	(28,519)


($ in thousands except per share amounts)	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Six Months Ended June 30, 2022	As Reported	Adjustments	As Restated
REVENUE	130,174	(4,753)	125,421
COST OF GOODS SOLD	121,284	918	122,202
GROSS PROFIT	8,890	(5,671)	3,219
OPERATING EXPENSES	49,139	(1,398)	47,741
LOSS FROM OPERATIONS	(40,249)	(4,273)	(44,522)
LOSS BEFORE INCOME TAX EXPENSE	(43,277)	(4,273)	(47,550)
NET LOSS	(43,988)	(4,273)	(48,261)

NET LOSS PER SHARE
Basic	(0.53)	(0.06)	(0.59)
Diluted	(0.53)	(0.06)	(0.59)
COMPREHENSIVE LOSS	(44,849)	(4,273)	(49,122)


($ in thousands)	CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For the Three Months Ended June 30, 2022	As Reported	Adjustments	As Restated

Net loss in accumulated deficit for the three months ended June 30, 2022	(26,437)	(1,651)	(28,088)
Accumulated deficit ending balance	(68,102)	(2,579)	(70,681)
Total stockholders’ equity ending balance	175,156	(2,579)	172,577


($ in thousands)	CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2022	As Reported	Adjustments	As Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	(43,988)	(4,273)	(48,261)
Changes in operating assets and liabilities:
Accounts receivable	(7,088)	(665)	(7,753)
Inventory	(8,703)	1,960	(6,743)
Prepaid expenses and other assets	(3,471)	2,590	(881)
Accrued expenses	2,839	388	3,227

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.

Significant Accounting Policies. There have been no material changes to the Company’s significant accounting policies from its Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021.

Sales and Marketing Expenses. The Company expenses costs associated with sales and marketing as incurred. Sales and marketing expenses were $12.3 million and $8.7 million for the three months ended June 30, 2022 and 2021, respectively, and $23.5 million and $12.4 million for the six months ended June 30, 2022 and 2021, respectively. Sales and marketing expenses are included in operating expenses in the condensed consolidated statements of operations and comprehensive loss.

Leases. In April 2022, the Company commenced one operating lease for a facility in Vernon, California, for 10 years with option to extend two additional five years. Approximately $9.5 million of operating lease ROU asset and $9.4 million of operating lease liabilities were recognized on the Company’s consolidated balance sheet upon the commencement date.

Concentrations Risk. 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 single external suppliers accounted for more than 10% of the Company’s cost of goods sold during the periods ended June 30, 2022 and 2021. As such, the Company is not subject to significant concentration risk on suppliers.

Four customers accounted for 68% of the Company’s revenue during the three months ended June 30, 2022. Three customers accounted for 77% of the Company’s revenue during the three months ended June 30, 2021.


Customer	2022		2021

Customer A	32	%	34	%
Customer B	10	%	12	%
Customer C	14	%	31	%
Customer D	12	%	*

________________________________


*Customer accounted for less than 10% of revenue in the period.

Three customers accounted for 59% of the Company’s revenue during the six months ended June 30, 2022. Three customers accounted for more than 83% of the Company’s revenue during the six months ended June 30, 2021.


Customer	2022		2021

Customer A	32	%	35	%
Customer B	*		11	%
Customer C	17	%	37	%
Customer D	10	%	*

________________________________


*Customer accounted for less than 10% of revenue in the period.

Three customers accounting for more than 10% of the Company’s accounts receivable as of June 30, 2022 and December 31, 2021 were:


Customer	June 30, 2022		December 31, 2021
Customer A	17	%	13	%
Customer C	31	%	38	%
Customer D	11	%	12	%

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 overall working conditions. Despite partial remote working conditions, the Company’s business activities have continued to operate with minimal interruptions.

However, 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 a material amount 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 COVID-19) generally affecting these growers could adversely affect the Company’s business.

The Company has experienced and is experiencing varying levels of inflation resulting in part from increased shipping and transportation costs, increased raw material and labor costs caused by the COVID-19 pandemic and general global economic conditions. The inflationary impact on the Company’s cost structure has been considered in its product pricing adjustment, which will be beginning in the fourth quarter of 2022, despite a continued focus on reducing manufacturing costs where possible.

The rapid development and fluidity of this situation precludes any prediction as to the ultimate material adverse impact on the financial statements and presents material uncertainty and risk with respect to our business, operations, financial condition and liquidity.

Russia-Ukraine Conflict. Although the Company does not have direct exposure to Russia and Ukraine, the Company is monitoring the geopolitical situation following Russia’s invasion of Ukraine. The Company may experience shortages in materials and increased costs for transportation, energy, and raw materials due in part to the negative impact of the Russia-Ukraine military conflict on the global economy. To date, the conflict between Russia and Ukraine has not had a material negative impact on the Company’s business, financial condition, or results of operations. However, the full impact of the conflict on the Company’s business operations and financial performance remains uncertain and will depend largely on the nature and duration of uncertain and unpredictable events, such as the severity and duration of further military action and its impact on regional and global economic conditions.

3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently issued and adopted accounting pronouncements

In August 2020, Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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, 2021, including interim periods within those fiscal years. The Company adopted the new standard on January 1, 2022. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

In December 2019, the FASB issued 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. 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 a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal – Use Software (ASC Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 became effective for fiscal years beginning after December 15, 2020 and interim periods therein. Early adoption of ASU 2018-15 was permitted, including adoption in any interim period. The Company adopted this standard on January 1, 2021. The adoption of the new standard did not have a material impact on the Company’s condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, 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 Company adopted the new standard on January 1, 2022. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02” or “ASC 842”). The FASB has subsequently issued several related ASUs that clarified the implementation guidance for certain aspects of ASU 2016-02, which were effective upon the adoption of ASU 2016-02. 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 Company adopted ASU 2016-02 as of January 1, 2021, using the effective date transition method to recognize the cumulative effect of initially applying Topic 842, if any, as an adjustment to retained earnings. The adoption of ASU 2016-12 resulted in an increase of $4.2 million and $4.2 million to total assets and total liabilities from the recording of operating lease right-of-use (“ROU”) assets and operating lease liabilities, respectively, and did not have any impact on the Company’s retained earnings as of January 1, 2021. Finance leases were not impacted by the adoption of ASC 842. The adoption did not materially impact the Company’s condensed consolidated statements of operations or cash flows.

Recently issued but not yet adopted accounting pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805) (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. ASU 2021-08 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of ASU 2021-08 should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption. The Company is currently evaluating the impact of ASU 2021-08 on its condensed consolidated financial statements.

4. REVENUE RECOGNITION

Nature of Revenues

Substantially all of the Company’s revenue from contracts with customers consists of the sale of plant-based foods 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.

The Company disaggregates revenue based on the type of products sold to its customers – private label, Tattooed Chef and other. Other revenues primarily consist of burritos, enchiladas and quesadillas and other products by NMFD, acquired by the Company on May 2021 (see Note 8 Business Combinations), to its restaurant customers on an as-needed basis. All sales are recorded within revenue on the accompanying condensed consolidated statements of operations and comprehensive loss. The Company does not have any contract assets or contract liabilities as of June 30, 2022 and December 31, 2021.

Revenue streams for the three months ended June 30, 2022 and 2021 were as follows:


	2022				2021
Revenue Streams (in thousands)	Revenue		% Total		Revenue		% Total

Tattooed Chef	$	33,635	58	%	$	29,788	63	%
Private Label	20,878		36	%	17,136		36	%
Other revenues	3,220		6	%