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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 March 31, 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)
Delaware82-5457906
(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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0001 per shareTTCFThe 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.
xLarge accelerated fileroAccelerated filer
oNon-accelerated fileroSmaller reporting company
oEmerging 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 April 29, 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 March 31, 2022, as originally filed with the Securities and Exchange Commission (the “SEC”) on May 10, 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 March 31, 2022
TABLE OF CONTENTS
Page
i


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
TATTOOED CHEF, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except for share information)
March 31,
2022
December 31,
2021
(As Restated)
ASSETS
CURRENT ASSETS
Cash$57,417 $92,351 
Accounts receivable, net45,692 25,117 
Inventory59,486 56,256 
Prepaid expenses and other current assets2,640 7,027 
TOTAL CURRENT ASSETS165,235 180,751 
Property, plant and equipment, net54,217 46,476 
Operating lease right-of-use assets, net7,573 8,039 
Finance lease right-of-use assets, net5,597 5,639 
Intangible assets, net124 151 
Deferred income taxes, net555 266 
Goodwill26,924 26,924 
Other assets771 649 
TOTAL ASSETS$260,996 $268,895 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable$36,528 $28,334 
Accrued expenses6,610 3,767 
Line of credit1,583 1,200 
Notes payable, current portion4,962 5,019 
Forward contract derivative liability1,960 1,804 
Operating lease liabilities, current portion1,529 1,523 
Other current liabilities736 122 
TOTAL CURRENT LIABILITIES53,908 41,769 
Warrant liability607 814 
Operating lease liabilities, net of current portion6,171 6,599 
Notes payable, net of current portion629 716 
TOTAL LIABILITIES61,315 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 March 31, 2022 and December 31, 2021
--
Common shares- $0.0001 par value; 1,000,000,000 shares authorized; 82,441,641 shares and 82,237,813 shares issued and outstanding at March 31, 2022, and December 31, 2021, respectively
8 8 
Additional paid in capital243,649 242,362 
Accumulated other comprehensive loss(1,383)(953)
Accumulated deficit(42,593)(22,420)
TOTAL STOCKHOLDERS’ EQUITY199,681 218,997 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$260,996 $268,895 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
1


TATTOOED CHEF, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS (unaudited)
(in thousands, except for share and per share information)
Three Months Ended
March 31,
20222021
(As Restated)
NET REVENUE$67,688 $50,415 
COST OF GOODS SOLD63,621 45,408 
GROSS PROFIT4,067 5,007 
OPERATING EXPENSES23,332 11,171 
LOSS FROM OPERATIONS(19,265)(6,164)
Interest income (expense)(41)(20)
Other income (expense)(611)(2,681)
LOSS BEFORE INCOME TAX (EXPENSE) BENEFIT(19,917)(8,865)
INCOME TAX (EXPENSE) BENEFIT(256)1,236 
NET LOSS$(20,173)$(7,629)
NET LOSS PER SHARE
Basic$(0.25)$(0.10)
Diluted$(0.25)$(0.10)
WEIGHTED AVERAGE COMMON SHARES
Basic82,237,89880,240,105
Diluted82,237,89880,544,129
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX
Foreign currency translation adjustments(430)109 
COMPREHENSIVE LOSS$(20,603)$(7,520)
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2


TATTOOED CHEF, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)
(in thousands, except for share information)

Common
Stock
Shares
Common
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Comprehensive
Loss
Accumulated
Deficit
Total
(As Restated)(As Restated)
BALANCE AS OF JANUARY 1, 202282,237,813$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 AWARDS203,828- - - - - 
NET LOSS- - - (20,173)(20,173)
BALANCE AS OF MARCH 31, 202282,441,641$8 $243,649 $(1,383)$(42,593)$199,681 

Common
Stock
Shares
Common
Shares
Amount
Treasury
Shares
Additional
Paid-In
Capital
Accumulated
Comprehensive
Income
Retained
Earnings
Total
BALANCE AS OF JANUARY 1, 202171,551,067$7 (81,087)$168,448 $1 $64,846 $233,302 
FOREIGN CURRENCY TRANSLATION ADJUSTMENT- - - 109 - 109 
DISTRIBUTIONS- - - - - (308)(308)
STOCK-BASED COMPENSATION15,216 - - 3,185 - - 3,185 
FORFEITURE OF STOCK-BASED AWARDS(95,084)- - - - - - 
CANCELLATION OF TREASURY SHARES(81,087)- 81,087 - - - - 
EXERCISE OF WARRANTS10,010,0871 - 63,361 - - 63,362 
NET LOSS- - - - (7,629)(7,629)
BALANCE AS OF MARCH 31, 202181,400,199$8 - $234,994 $110 $56,909 $292,021 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3


TATTOOED CHEF, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
Three Months Ended
March 31,
20222021
(As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(20,173)$(7,629)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization1,507 552 
Bad debt expense226  
Revaluation of warrant liability(207)(320)
Unrealized forward contract loss156 2,181 
Non-cash lease cost45 27 
Stock compensation expense1,287 3,185 
Deferred taxes, net(300)(1,510)
Changes in operating assets and liabilities:
Accounts receivable(20,806)(12,890)
Inventory(3,450)160 
Prepaid expenses and other assets4,209 (9,323)
Accounts payable7,607 5,308 
Accrued expenses2,873 2,947 
Other current liabilities633 (262)
Net cash used in operating activities(26,393)(17,574)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment(8,807)(2,852)
Net cash used in investing activities(8,807)(2,852)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in line of credit2 4 
Repayments of notes payable to related parties- (24)
Borrowings of notes payable575 - 
Repayments of notes payable(277)(87)
Proceeds from the exercise of warrants- 73,917 
Payment of distributions- (308)
Net cash provided by financing activities300 73,502 
NET (DECREASE) INCREASE IN CASH(34,900)53,076 
EFFECT OF EXCHANGE RATE ON CASH(34)506 
CASH AT BEGINNING OF PERIOD$92,351 $131,579 
CASH AT END OF PERIOD$57,417 $185,161 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid$47 $1 
Income tax refund$(351)$- 
Noncash investing and financing activities:
Capital expenditures included in accounts payable$1,299 $1,328 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4


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 of plant-based foods including, but not limited to, ready-to-cook bowls, zucchini spirals, riced cauliflower, acai and smoothie bowls, cauliflower crust pizza, handheld burritos, 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 9 Business Combinations.
On September 28, 2021, Tattooed Chef formed BCI Acquisition, Inc. (“BCI”). On December 21, 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 $17.0 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 9 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
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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 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 months ended March 31, 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 March 31, 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 overstated by $1.0 million for the three months ended March 31, 2021.
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, both operating expenses and revenue were overstated by $1.9 million for the three months ended March 31, 2021.
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 $0.1 million for the three months ended March 31, 2021.
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 understated by $0.1 million from net realizable value write-downs for the three months ended March 31, 2021.
The income tax impact of the errors identified above resulted in an increase of income tax expense of $0.2 million for the three months ended March 31, 2021.
The Company identified 15,216 shares of RSAs granted to non-employee directors was incorrectly included in the number of shares from warrants exercised on the condensed consolidated statements of changes in stockholders' equity for the three months ended March 31, 2021. This presentation error has no impact on other condensed consolidated financial statements as of and for the three months ended March 31, 2021.
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 March 31, 2021 (in thousands):



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($ in thousands, except per share amounts)Condensed Consolidated
Statements of Operations and
Comprehensive Income
For the three months ended March 31, 2021As ReportedAdjustmentsAs Restated
REVENUE52,469 (2,054)50,415 
COST OF GOODS SOLD45,289 119 45,408 
GROSS PROFIT7,180 (2,173)5,007 
OPERATING EXPENSES14,196 (3,025)11,171 
LOSS FROM OPERATIONS(7,016)852 (6,164)
LOSS BEFORE PROVISION FOR INCOME TAXES(9,717)852 (8,865)
INCOME TAX BENEFIT (EXPENSE)1,475 (239)1,236 
NET LOSS(8,242)613 (7,629)
NET LOSS PER SHARE
Basic(0.10) (0.10)
Diluted(0.11)0.01 (0.10)
COMPREHENSIVE LOSS(8,133)613 (7,520)

($ in thousands, except share amounts)Condensed Consolidated
Statements of Stockholders’ Equity
For the three months ended March 31, 2021As ReportedAdjustmentsAs Restated
Net loss in retained earnings (deficit)(8,242)613 (7,629)
Retained earnings (deficit) ending balance55,048 1,861 56,909 
Total stockholders’ equity ending balance290,160 1,861 292,021 
Common Stock Shares from stock-based compensation 15,216 15,216
Common Stock Shares from exercise of warrants10,025,303 (15,216)10,010,087
($ in thousands)Condensed Consolidated
Statements of Cash Flows
For the three months ended March 31, 2021As ReportedAdjustmentsAs Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss(8,242)613 (7,629)
Adjustments to reconcile net loss to net cash from operating activities:
Bad debt expense122 (122) 
Deferred taxes, net(1,749)239 (1,510)
Changes in operating assets and liabilities:— 
Accounts receivable(13,012)122 (12,890)
Inventory(979)1,139 160 
Prepaid expenses and other assets(7,332)(1,991)(9,323)
Subsequent to the issuance of the condensed consolidated financial statements as of and for the quarter ended March 31, 2022, included in the Form 10-Q filed with the SEC on May 10, 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 expense was understated by $1.1 million for the three months ended March 31, 2022, and the prepaid expense was overstated by $1.1 million for the three months ended March 31, 2022.
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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 the reductions were recognized in the second quarter instead of during the first quarter when the revenue was recognized. As a result, the operating expenses were overstated by $2.9 million for the three months ended March 31, 2022 and the revenue was overstated by $4.4 million and the account receivable was overstated by $1.5 million for the three months ended March 31, 2022.
The Company under accrued marketing expense for one marketing service firm for the services rendered. The marketing expense and accrued expense were each understated by $0.4 million for the three months ended March 31, 2022.
The Company identified errors related to the underlying data used in the inventory capitalization and inventory net realizable value assessment. As a result, the Company understated inventory and overstated cost of goods sold by $0.3 million for the three months ended March 31, 2022. Inventory was understated by $2.0 million as of March 31, 2022.
The Company identified 10,516 weighted average shares of warrants as antidilutive and has corrected the dilutive effect in loss.
The Company identified $0.9 million in realized forward contract loss that was included as unrealized forward contract loss in the condensed consolidated statement of cash flows as an adjustment to reconcile net loss to net cash from operating activities for the three months ended March 31, 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 $0.8 million as of March 31, 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 March 31, 2022 (in thousands):

($ in thousands)CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2022As ReportedAdjustmentAs Restated
Accounts receivable46,324 (632)45,692 
Inventory58,339 1,147 59,486 
Prepaid expenses and other current assets3,695 (1,055)2,640 
TOTAL CURRENT ASSETS165,775 (540)165,235 
TOTAL ASSETS261,536 (540)260,996 
Accrued expenses6,222 388 6,610 
TOTAL CURRENT LIABILITIES53,520 388 53,908 
TOTAL LIABILITIES60,927 388 61,315 
Accumulated deficit(41,665)(928)(42,593)
TOTAL STOCKHOLDERS’ EQUITY200,609 (928)199,681 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY261,536 (540)260,996 

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($ in thousands, except share amounts and per share amounts)CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the three months ended March 31, 2022As ReportedAdjustmentAs Restated
REVENUE72,064 (4,376)67,688 
COST OF GOODS SOLD63,914 (293)63,621 
GROSS PROFIT8,150 (4,083)4,067 
OPERATING EXPENSES24,793 (1,461)23,332 
LOSS FROM OPERATIONS(16,643)(2,622)(19,265)
LOSS BEFORE INCOME TAX (EXPENSE) BENEFIT(17,295)(2,622)(19,917)
NET LOSS(17,551)(2,622)(20,173)
NET LOSS PER SHARE
Basic(0.21)(0.04)(0.25)
Diluted(0.22)(0.03)(0.25)
WEIGHTED AVERAGE COMMON SHARES
Diluted82,248,414 (10,516)82,237,898 
COMPREHENSIVE LOSS(17,981)(2,622)(20,603)

($ in thousands)CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For the three months ended March 31, 2022As ReportedAdjustmentAs Restated
Net loss in accumulated deficit(17,551)(2,622)(20,173)
Accumulated deficit ending balance(41,665)(928)(42,593)
Total stockholders’ equity ending balance200,609 (928)199,681 

($ in thousands)CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the three months ended March 31, 2022As ReportedAdjustmentAs Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss(17,551)(2,622)(20,173)
Unrealized forward contract loss1,023 (867)156 
Changes in operating assets and liabilities:
Accounts receivable(21,438)632 (20,806)
Inventory(3,997)547 (3,450)
Prepaid expenses and other assets3,154 1,055 4,209 
Accrued expenses2,485 388 2,873 
Other current liabilities(234)867 633 
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. In addition to the significant accounting policies in the Company’s most recently filed Annual Report on Form 10-K/A, the Company has the following updates to significant accounting policies.
Sales and Marketing Expenses. The Company expenses costs associated with sales and marketing as incurred. Sales and marketing expenses were $11.2 million and $3.7 million for the three months ended March 31, 2022 and 2021, respectively, and are included in operating expenses in the condensed consolidated statements of operations and comprehensive loss.
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Concentrations of Credit 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 three month periods ended March 31, 2022 and 2021.
Two customers accounted for 51% of the Company’s revenue during the three months ended March 31, 2022. Three customers accounted for 90% of the Company’s revenue during the three months ended March 31, 2021.
Customer20222021
Customer A31 %36 %
Customer B*11 %
Customer C20 %43 %
___________________________________
*Customer B accounted for less than 10% of revenue for the quarter ended March 31, 2022.
Customers accounting for more than 10% of the Company’s accounts receivable as of March 31, 2022 and December 31, 2021 were:
CustomerMarch 31,
2022
December 31,
2021
Customer A18 %13 %
Customer C42 %38 %
Customer D10 %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 the 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 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.
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 result 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 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
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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 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 adoption of ASU 2016-02 resulted in the recognition of a right-of-use asset and a lease liability for all leases, except for short-term leases based on the practical expedient elected by the Company. 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 to 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.
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 March 2020, the FASB issued No. 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. The adoption of this guidance has had no material effect on the Company’s 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, 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.
Recently issued but not yet adopted accounting pronouncements
In October 2021, the FASB issued No. ASU 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. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of the ASU 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.
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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 including, but not limited to, ready-to-cook bowls, zucchini spirals, riced cauliflower, acai and smoothie bowls, cauliflower crust pizza, handheld burritos, and quesadillas 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.
The Company disaggregates revenue based on the type of products sold to its customers – private label, Tattooed Chef and other. 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 March 31, 2022 and December 31, 2021.
Revenue streams for the three months ended March 31, 2022 and 2021 were as follows:
20222021
Revenue Streams (in thousands)Revenue% Total Revenue% Total
Tattooed Chef$39,079 58 %$33,793 67 %
Private Label25,124 37 %16,305 32 %
Other revenues3,485 5 %317 1 %
Total$67,688  $50,415  
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
The Company evaluates the creditworthiness of its customers regularly and based on its analysis, the Company has recognized an allowance for credit losses of $0.2 million as of March 31, 2022 and $0.0 million as of December 31, 2021. 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.
In 2021, the Company began offering new promotional programs on sales of Tattooed Chef branded products to some new and existing customers. These programs constitute variable consideration which is expected to reduce the transaction price on sales. The Company estimates variable consideration expected to reduce the related accounts receivable. In developing that estimate, the Company uses either the expected value or most likely amount method to determine the variable consideration. As a result, an allowance for promotional programs of $1.9 million and $4.1 million was recorded and presented as a reduction of accounts receivable as of March 31, 2022 and December 31, 2021, respectively.
Additionally, the Company maintains product demonstration accruals with some of its customers. The product demonstration accruals represent variable consideration and are recorded as a reduction of revenue. The Company’s obligations to the customers are included within accrued expenses on the consolidated balance sheets. The outstanding balance for product demonstration accrual is included in accrued customer incentives in accrued expenses on the
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consolidated balance sheets was $1.3 million and $1.5 million as of March 31, 2022 and December 31, 2021, respectively (see Note 12. Accrued Expense).
6.    INVENTORY
Inventory consists of the following as of:
 (in thousands)March 31,
2022
December 31,
2021
Raw materials$25,750 $22,724 
Work-in-process7,535 5,545 
Finished goods21,872 24,450 
Packaging4,329 3,537 
Total$59,486 $56,256 
7.    PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment consists of the following as of:
 (in thousands)March 31,
2022
December 31,
2021
Land$719 $738 
Buildings4,776 4,766 
Leasehold improvements5,295 5,336 
Machinery and equipment34,406 33,975 
Computer equipment543 549 
Furniture and fixtures186 169 
Construction in progress16,564 7,986 
62,489 53,519 
Less: accumulated depreciation(8,272)(7,043)
Net$54,217 $46,476 
The Company recorded depreciation expense for the three months ended March 31, 2022 and 2021 of $1.5 million and $0.6 million, respectively.
8.     INTANGIBLE ASSETS, NET AND GOODWILL
Intangible assets consist of the following as of :
(in thousands)March 31,
2022
December 31,
2021
Amortizable Tradenames$220 $220 
Less: accumulated amortization(96)(69)
Intangible assets, net$124 $151 
The estimated useful lives of the identifiable definite-lived intangible assets, acquired in the NMFD Transaction (see Note 9 Business Combinations) in May 2021, were determined to be two years.
The Company recorded insignificant amortization expense for the three months ended March 31, 2022.
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Estimated future amortization expense for the definite-lived intangible assets is as follows (in thousands):
Nine months ending December 31, 2022$83 
202341 
Total$124 
The following table sets forth the change in the carrying amount of goodwill for the three months ended March 31, 2022 (in thousands):
Balance as of January 1, 2022$26,924 
Measurement period adjustment (change in consideration)- 
Balance as of March 31, 2022$26,924 
No goodwill impairment was recorded during the three months ended March 31, 2022.
9.    BUSINESS COMBINATIONS
New Mexico Food Distributors, Inc. (NMFD) and Karsten Acquisition
On May 14, 2021, the Company entered into a stock purchase agreement to acquire all outstanding stock of NMFD, a distributor and manufacturer of frozen and ready-to-eat Mexican food products for a total purchase price of $28.9 million. In addition, the Company entered into a membership interests purchase agreement to acquire all of the membership interest of Karsten for a total purchase price of $5.2 million. The primary reason for the purchase of NMFD and Karsten was to expand the Company’s manufacturing capacity and developing more ambient and refrigerated products. The NMFD Transaction met the definition of an acquisition of a business in accordance with ASC 805, Business Combinations, and is accounted for under the acquisition method of accounting. During the three months ended March 31, 2022, NMFD and Karsten contributed $9.5 million of revenue and $0.5 million of net loss.
Though the purchase agreements for each of NMFD and Karsten were executed as legally separate transactions, each was entered into contemporaneously and in contemplation of the other, and involved the same group of sellers. As such, the transactions noted above were accounted for on a combined basis and were viewed to represent a single integrated event.
Under the acquisition method of accounting, the assets acquired, and liabilities assumed, by the Company in connection with the NMFD Transaction were initially recorded at their respective fair values. The Company made an election under Section 338(h)(10) to treat the NMFD Transaction as an asset acquisition for income tax purposes, which allows for any goodwill recognized to be tax deductible and amortized over a 15-year statutory life. The Company considered the potential impact to the depreciation and amortization expense as a result of the fair values assigned to the acquired assets. The excess of the purchase price over the fair value of assets acquired and liabilities assumed of approximately $18.0 million was recorded as goodwill.
Transaction costs of $0.5 million were incurred in relation to the acquisition and were recorded to operating expense within the consolidated statement of operations for the year ended December 31, 2021.
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The following table summarizes the preliminary fair value of assets acquired and liabilities assumed in the NMFD Transaction as of the date of acquisition (in thousands):
Amount
Purchase consideration, net of cash acquired$33,946 
Assets acquired and liabilities assumed 
Accounts receivable3,567 
Inventory2,270 
Prepaid expenses and other current assets122 
Operating lease, ROU asset207 
Property, plant and equipment9,819 
Finance lease, ROU assets *5,749 
Other noncurrent assets29 
Intangible assets – tradenames220 
Accounts payable(2,834)
Accrued expenses(78)
Operating lease liability(207)
Note payable *(2,917)
Goodwill17,999 
Total assets acquired and liabilities assumed$33,946 
___________________________________
*
In December 2015 (prior to the NMFD Transaction), NMFD and Karsten entered into an agreement to purchase an industrial revenue bond (“IRB”) issued by Bernalillo County, New Mexico (“Bernalillo”) to be used to finance the costs of the constructing, renovating and equipping of the manufacturing plant and, concurrently, assigned ownership of the manufacturing plant including building and land (“Property”) to Bernalillo as consideration for the purchase of the IRB, as well as entered into a lease agreement to lease the Property from Bernalillo (“Lease”). The Lease provides NMFD the option to purchase the Property for $1 following the payoff of the Lease. The sale of the Property to Bernalillo and concurrent leaseback of the Property in December 2015 did not meet the sale-leaseback accounting requirements as a result of NMFD’s and Karsten’s continuous involvement with the Property and thus, the IRB was not recorded as a sale but as a financing obligation, with the Property remaining on NMFD’s financial statements. The Lease and the IRB have the same counterparty, therefore a right of offset exists so long as NMFD continues to make rent payments under the terms of the Lease.
On May 14, 2021, the balance of the IRB asset and the lease obligation to Bernalillo were $2.9 million and $2.9 million, respectively. Upon the acquisition of NMFD and Karsten, the Company received all rights and assumed obligations related to the IRB, the Property and the Lease. Under business combination accounting literature and prior to the adoption of ASC 842, the transaction involving the IRB and the Lease should not be reassessed and, therefore, the failed sale-leaseback accounting should be reflected in the Company’s purchase accounting. There were no changes to the right of offset as a result of the acquisition and, thus, the lease obligation was offset against the IRB asset and is presented net on the Company’s consolidated balance sheet with no impact to the consolidated operations of income or consolidated cash flow statements. The leased assets are accounted for as a right of use (“ROU”) asset under ASC 842 and the fair value of the ROU asset was determined to be $5.7 million. As such, the lease for the land and the building will be presented on the consolidated balance sheet as an ROU asset of $5.7 million. In connection with the NMFD Transaction in May 2021, the Company assumed a note payable in the amount of $2.9 million (see Note 14 Indebtedness). The note payable bears interest at 3.8% and has a maturity date of December 29, 2025. The note payable balance is reflected at the present value of future principal payments. The Company recognized the entire balance as a current liability due to noncompliance with certain financing covenants. See Note 14 Indebtedness.
The excess of purchase consideration over the fair value of the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributable to the assembled workforce and expanded market opportunities. Goodwill was assigned to the Company’s single reporting unit. The fair value assigned to the assets acquired and liabilities assumed are based on management’s estimates and assumptions, which are preliminary, are based on provisional amounts and may be
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subject to change as additional information is received. The Company expects to finalize the valuation of these assets not later than one year from the acquisition date.
The estimated useful lives of the identifiable definite-lived intangible assets acquired in the NMFD Transaction were determined to be two years.
Belmont Acquisition
On September 28, 2021, Tattooed Chef formed BCI as a wholly-owned subsidiary. On December 21, 2021, BCI acquired substantially all of the assets, and assumed certain specified liabilities, from Belmont for an aggregate purchase price of $17.0 million. Belmont was a privately held company based in Youngstown, Ohio, and specialized in the development and manufacturing of private label nutritional bars. The primary reason for the purchase of Belmont’s assets and assumption of liabilities was to expand the Company’s manufacturing capacity into a nutritional bars and other ambient products. Approximately $4.0 million of the purchase price was paid by issuing 241,546 shares of Tattooed Chef’s common stock to Belmont’s sole shareholder. The number of shares payable at closing was determined based on the average closing price of the Company’s common stock over the three days preceding the closing date of the acquisition (December 21, 2021). The closing price of Tattooed Chef’s common stock was $16.9 per share at the acquisition date. During the three months ended March 31, 2022, BCI contributed $8.0 million of revenue and $0.6 million of net loss.
Under the acquisition method of accounting, the assets acquired and liabilities assumed by the Company in connection with the Belmont Acquisition were initially recorded at their respective fair values. The Company considered the potential impact to the depreciation expense as a result of the fair values assigned to the acquired assets. The excess of the purchase price over the fair value of assets acquired and liabilities assumed of approximately $8.9 million was recorded as goodwill.
In relation to the acquisition, transaction costs of $0.2 million incurred by the Company were recorded to operating expense within the consolidated statement of operations for the year ended December 31, 2021. An immaterial amount of seller’s transaction costs were paid by the Company and included in the purchase price consideration. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed in the Belmont Acquisition as of the date of acquisition (in thousands):
 Amount
Cash consideration$13,000 
Equity consideration – common stock4,000 
Total purchase consideration$17,000 
Assets acquired and liabilities assumed 
Accounts receivable$1,630 
Inventory4,130 
Prepaid expenses and other current assets38 
Operating lease ROU asset870 
Property, plant and equipment6,477 
Accounts payable(3,477)
Accrued expenses(723)
Operating lease liability(870)
Goodwill8,925 
Total assets acquired and liabilities assumed$17,000 
The excess of purchase consideration over the fair value of the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributable to the assembled workforce and expanded market opportunities. Goodwill was assigned to the Company’s single reporting unit. The fair value assigned to the assets acquired and liabilities assumed are based on management’s estimates and assumptions, which are preliminary, are based on provisional amounts and may be subject to change as additional information is received. The Company expects to finalize the valuation of these assets not later than one year from the acquisition date.
The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and all 2021 acquisitions as if both the NMFD Acquisition and the Belmont Acquisition had occurred as of
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January 1, 2020. There were no acquisitions during the three months ended March 31, 2022. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had occurred on the dates indicated.
 Three-Months Ended
March 31,
(in thousands, except per share)20222021
Net Revenue$67,688 $66,707 
Net Loss(20,173)(7,975)
Net Loss per Share  
Basic$(0.25)$(0.10)
Diluted$(0.25)$(0.10)
10.    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.
Starting 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 US dollars. During the three months ended March 31, 2022, the Company did not enter into any new foreign currency exchange forward contracts. During the three months ended March 31, 2021, the Company entered into foreign currency exchange forward contracts to purchase 22.0 million Euros. The notional amounts of these derivatives were $26.9 million for the three-month period ended March 31, 2021.
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.
The fair values of the Company’s derivative instruments classified as Level 2 financial instruments (see Note 11 Fair Value Measurements) and the line items within the accompanying condensed consolidated balance sheets to which they were recorded are summarized as follows (in thousands):
Balance Sheet Line ItemAs of
March 31, 2022
As of
December 31, 2021
Derivatives not designated as hedging instruments:
Foreign currency derivativesForward contract derivative liability$1,960 $1,804 
Total $1,960 $1,804 
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The effect on the accompanying condensed consolidated statements of operations and comprehensive loss of derivative instruments not designated as hedges is summarized as follows (in thousands):
Three Months Ended March 31,
Line Item in Statements of Operations20222021
Derivatives not designated as hedging instruments:
Foreign currency derivativesOther income (expense)$(1,023)$(3,001)
Total $(1,023)$(3,001)
Unrealized losses on forward currency derivatives for the three months ended March 31, 2022 and 2021 were $0.2 million and $2.2 million, respectively. The Company has notional amounts of $31.8 million and $43.5 million on outstanding derivatives as of March 31, 2022 and December 31, 2021, respectively.
11.    FAIR VALUE MEASUREMENTS
In connection with Forum’s IPO and issuance of Private Placement Units in August 2018, Forum issued Units consisting of common stock with attached Public Warrants and Private Placement Warrants (together, the “Warrants”). All Public Warrants were exercised during 2020 and 2021.
Each Private Placement Warrant entitled or entitles the holder to purchase one share of the Company’s common stock at an exercise price of $11.50.
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 generally associated with these instruments. Long-term debt as of March 31, 2022 and December 31, 2021 approximates its fair value as the interest rates are indexed to market rates (Level 2 “inputs”). 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.
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 loss.
Initial Measurement
The value of the Private Placement Warrants was 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 condensed consolidated statements of operations and comprehensive loss. During the three months ended March 31, 2022, no Private Placement Warrants were settled.
For the three months ended March 31, 2022, change in the fair value of the warrant liabilities charged to current operations amounted to a gain of $0.2 million.
Fair Value Measurement
The fair value of the Private Placement Warrants was determined to be $5.27 per Warrant as of March 31, 2022 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
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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:
InputMarch 31,
2022
December 31,
2021
Risk-free interest rate2.44 %1.08 %
Expected term (years)3.553.79
Expected volatility50.00 %45.00 %
Exercise price$11.50 $11.50 
Fair value per Unit$5.27 $7.07 
As of March 31, 2022, the fair value of the Private Placement Warrants was determined to be $5.27 per warrant, or an aggregate value of $0.6 million for