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

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

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The registrant had ~~97,720,103~~136,788,047 shares of its ~~common stock,~~Common Stock, $0.001 par value per share, outstanding as of August 6, ~~2020.~~2021.

Effective July 28, 2020, New Age Beverages Corporation amended its Articles of Incorporation to change its name to NewAge, Inc. Accordingly, all references herein have been changed to reflect the new name.

					2021			2020
	June 30,		December 31,		June 30,			December 31,
	2020		2019		2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	40,672	$	60,842	$	80,922		$	43,711
Accounts receivable, net of allowance of $634 and $535, respectively		13,189		11,012
Trade accounts receivable, net of allowance of $590 and $582, respectively						10,470			12,341
Inventories		33,972		36,718		44,219			48,051
Assets held for sale						7,088			-
Current portion of restricted cash						5,568			10,000
Prepaid expenses and other		5,540		4,384		13,086			13,032

Total current assets		93,373		112,956		161,353			127,135

Long-term assets:
Identifiable intangible assets, net		41,649		43,443
Identifiable intangible assets, net of accumulated amortization						164,093			169,611
Goodwill						55,281			54,993
Right-of-use lease assets		37,718		38,458		29,741			38,764
Property and equipment, net		28,223		28,443
Property and equipment, net of accumulated depreciation						23,771			28,076
Restricted cash, net of current portion		16,873		3,729		5,969			11,524
Goodwill		10,284		10,284
Deferred income taxes		9,452		9,128		7,476			7,782
Deposits and other		4,440		4,689		4,771			5,297

Total assets	$	242,012	$	251,130	$	452,455		$	443,182

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,708	$	13,259	$	17,111		$	22,774
Accrued liabilities		40,125		49,451		65,009			70,007
Operating lease liability related to right-of-use assets held for sale						4,707			-
Current portion of business combination liabilities		5,437		5,508		1,140			11,750
Current maturities of long-term debt		1,505		11,208		19,440			18,016

Total current liabilities		59,775		79,426		107,407			122,547

Long-term liabilities:
Business combination liabilities, net of current portion						49,013			95,826
Long-term debt, net of current maturities		18,792		12,802		12,063			16,181
Operating lease liabilities, net of current portion:
Lease liability		34,695		35,513		26,745			34,788
Deferred lease financing obligation		16,214		16,541		15,543			15,882
Warrant derivative liability						5,695			-
Deferred income taxes		5,554		5,441		5,091			5,391
Accrued employee benefits and other		9,467		9,132
Other						8,295			8,313

Total liabilities		144,497		158,855		229,852			298,928

Contingencies (Note 10)
Commitments and contingencies (Note 10)						-

Redeemable Common Stock, 800 shares as of December 31, 2020						-			2,101

Stockholders’ equity:
Common Stock; $0.001 par value. Authorized 200,000 shares; issued and outstanding 98,442 and 81,873 shares as of June 30, 2020 and December 31, 2019, respectively		98		82
Preferred stock, $0.001 par value per share. Authorized 1,000 shares; 0 shares issued						-			-
Common Stock, $0.001 par value per share. Authorized 400,000 and 200,000 shares as of June 30, 2021 and December 31, 2020, respectively; issued and outstanding 136,606 and 99,146 shares as of June 30, 2021 and December 31, 2020, respectively						137			99
Additional paid-in capital		231,201		203,862		340,937			236,732
Accumulated other comprehensive income (loss)		(141)		802
Obligation to issue 14,551 and 19,704 shares of Common Stock as of June 30, 2021 and December 31, 2020, respectively						30,263			54,186
Note receivable for stock subscription						-			(1,250	)
Accumulated other comprehensive income						3,478			4,201
Accumulated deficit		(133,643)		(112,471)		(152,212	)		(151,815	)
Total stockholders’ equity		97,515		92,275		222,603			142,153
Total liabilities and stockholders’ equity	$	242,012	$	251,130
Total liabilities, redeemable Common Stock, and stockholders’ equity					$	452,455		$	443,182

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

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

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

~~Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss~~

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

NOTE 1 —BASIS OF PRESENTATION AND ~~SIGNFICANT~~SIGNIFICANT ACCOUNTING POLICIES

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

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

The Company’s chief operating decision maker (the “CODM”), who is the Company’s Chief Executive Officer, allocates resources and assesses performance based on financial information of the Company. The CODM reviews financial information presented for each reportable segment for purposes of making operating decisions and assessing financial performance. The Company’s CODM assesses performance and allocates resources based on the financial information of 2 operating segments, the ~~Noni by NewAge~~Direct / Social Selling segment and the ~~NewAge~~Direct Store segment. These two reportable segments focus on the sale of distinctly different products and are managed separately because they have different marketing strategies, customer bases, and economic characteristics. Please refer to Note 13 for additional information about the Company’s operating segments.

The unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly-owned subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by U.S. GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. These unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021 and 2020 should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended December 31, ~~2019,~~2020, included in the Company’s ~~2019~~2020 Annual Report on Form 10-K filed with the SEC on March ~~16, 2020 and as amended on April 28, 2020~~18, 2021 (the ~~“2019~~“2020 Form 10-K”).

The accompanying condensed consolidated balance sheet and related disclosures as of December 31, ~~2019~~2020 have been derived from the Company’s audited financial statements. The Company’s financial condition as of June 30, ~~2020~~2021 and its operating results for the three and six months ended June 30, ~~2020~~2021 are not necessarily indicative of the financial condition and results of operations that may be expected for any future interim period or for the year ending December 31, ~~2020.~~2021.

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

The following accounting ~~standards were~~standard was adopted ~~during the six months ended June 30, 2020:~~effective January 1, 2021:

In ~~June 2016,~~August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2016-13,~~2020-06, ~~Financial~~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 ~~- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.~~and Contracts in an Entity’s Own Equity). ASU ~~2016-13 amends~~2020-06 reduces the ~~guidance on~~number of accounting models for convertible debt instruments and convertible preferred stock, which results in fewer embedded conversion features being separately recognized from the ~~impairment~~host contract as compared with current GAAP. Additionally, ASU 2020-06 affects the diluted earnings per share calculation for instruments that may be settled in cash or shares and for convertible instruments and requires enhanced disclosures about the terms of ~~financial instruments. This update adds~~convertible instruments and contracts in an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. In November 2018, ASU 2016-13 was amended by ASU 2018-19, ~~Codification Improvements to Topic 326, Financial Instruments – Credit Losses.~~ ASU 2018-19 clarifies that operating lease receivables are not within the scope of Accounting Standards Codification (“ASC”) 326-20 and should instead be accounted for under the new leasing standard, ASC 842. ASU 2016-13 and ASU 2018-19 were effective forentity’s own equity. Effective January 1, 2021, the Company ~~beginning in~~elected to adopt ASU 2020-06 using the ~~first quarter of 2020. The adoption of ASU 2016-13 and ASU 2018-19~~modified retrospective transition method which did not ~~have a material impact on~~result in any changes to the Company’s ~~results of operations or~~ financial ~~position.~~

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurements (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.~~ ASU 2018-13 modifies the disclosure requirements on fair value measurements. The adoption of ASU 2018-13 did not have a material impact on the Company’s results of operations, financial position, or related disclosures.statements upon adoption.

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

For the six months ended June 30, 2021, the Company incurred an operating loss of $13.2 million and cash used in operating activities was $5.6 million. For the year ended December 31, 2020, the Company incurred an operating loss of $34.9 million and cash used in operating activities was $34.3 million. As of June 30, ~~2020,~~2021, the Company had an accumulated deficit of $~~133.6~~152.2 ~~million and the Company incurred a net loss of $21.2~~ ~~million for the six months ended June 30, 2020. Net cash used in operating activities amounted to $23.6~~ ~~million for the six months ended June 30, 2020, of which approximately $13.1~~ ~~million was attributable to income tax payments paid in March 2020 related to the sale leaseback discussed in Note 5.~~million.

~~As discussed in Notes 6 and 14,~~In February 2021, the Company entered into a securities purchase agreement in connection with a private placement of units that consisted of an aggregate of approximately 14.6 million shares of Common Stock and warrants to purchase an aggregate of 7.3 million shares of Common Stock. At the ~~third amendment~~closing, the Company received net proceeds of approximately $53.8 million. As of June 30, 2021, the Company had cash and ~~waiver (the “Third Amendment”) to the EWB Credit Facility (as defined below) in March 2020~~cash equivalents of $80.9 million and the ~~fourth amendment (the “Fourth Amendment”) to~~current portion of restricted cash was $5.6 million, for a total of $86.5 million. As of June 30, 2021, the ~~EWB Credit Facility in July 2020. The Third Amendment is expected to have a significant impact on the Company’s liquidity and~~Company had working capital ~~resources for~~of $53.9 million.

During the 12-month period ending on June 30, ~~2021. The Third Amendment~~2022, cash payments will be required ~~the Company~~ to ~~deposit an initial amount~~settle certain obligations, including operating lease payments of $~~15.1~~9.1 million, ~~in restricted cash balances with East West Bank (“EWB”) in March 2020, and requires the Company~~deferred consideration related to ~~obtain gross equity infusions~~business combinations of $~~30.0~~1.1 million, ~~through December 2020. In addition, for any future amounts borrowed~~and up to $25.1 million of principal and interest under the ~~EWB Revolver (as defined below), the Company is required to increase restricted cash deposits by the corresponding amount of the borrowings. Partially due to the restricted cash deposits,~~8.00% Original Issue Discount Senior Secured Notes discussed in Note 6. Management believes the Company’s ~~available~~existing cash and cash equivalents ~~decreased from~~ of $~~60.8~~80.9 million asand the current portion of ~~December 31, 2019 to~~ restricted cash of $~~40.7~~5.6 million ~~as of June 30, 2020.~~ ~~The Fourth Amendment permitted the Company~~will be sufficient to repurchase shares of its common stock, par value $0.001 per share (“Common Stock”) up to $1.2 million with a corresponding increase in the requirement for equity infusions from $30.0 million to approximately $31.2 million.fund contractual obligations and working capital requirements at least through August 2022. ~~During the six months ended June~~

On September 30, 2020, the Company ~~received gross proceeds~~entered into an Amended and Restated Agreement and Plan of $~~25.8~~ ~~million under~~Ariix Merger (the “Ariix Merger Agreement”), by and among Ariix, LLC (“Ariix”), Ariel Merger Sub, LLC (“Ariix Merger Sub”), Ariel Merger Sub 2, LLC (“Ariix Merger Sub 2”), certain Members of Ariix (the “Sellers”), and Dr. Frederick W. Cooper, the ~~ATM~~principal member of Ariix who serves as sellers’ agent (the “Sellers’ Agent”), pursuant to which the Company agreed to acquire 100% of the equity interests of Ariix, subject to customary representations, warranties, covenants and indemnities and closing conditions. The Company entered into the Ariix Merger Agreement ~~(as defined below). As a result, the Company’s commitment for additional equity infusions by December 31, 2020 has been reduced~~ to $~~5.4~~accelerate organic growth with its direct-to-consumer business model and to expand its portfolio of healthy products. ~~million.~~

~~Since March 2020, the Company has been experiencing reduced sales as a result of the COVID-19 pandemic as discussed in Note 10. In April~~On November 16, 2020, the Company entered into a ~~loan~~letter agreement (the “Waiver Letter”), with ~~EWB~~Ariix and the Sellers’ Agent that resulted in ~~an aggregate principal amount~~closing of ~~approximately~~the Ariix Merger on November 16, 2020 (the “Ariix Closing Date”) and the Sellers’ Agent was appointed as a member of the Company’s Board of Directors. On the Ariix Closing Date, Ariix merged with Ariix Merger Sub, with Ariix as the surviving entity and a wholly owned subsidiary of the Company. Subsequently, Ariix Merger Sub was merged with and into Ariix Merger Sub 2 and remains a wholly owned subsidiary of the Company. Ariix Merger Sub 2 was subsequently renamed “Ariix, LLC”. The preliminary purchase consideration to acquire Ariix amounted to $~~6.9~~155.1 million, ~~under~~consisting of (i) an obligation to issue 19.7 million shares of Common Stock with a fair value of $54.2 million, (ii) an obligation to pay $10.0 million in cash, and (iii) the Paycheck Protection Program (the “PPP Loan”) pursuant to the recently enacted U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). As discussed in Note 6, the PPP Loan is unsecured, and the Company may apply to EWB for forgivenessfair value of the ~~loan in accordance with the terms~~aggregate derivative liability of ~~the CARES Act. No principal payments are required under the PPP Loan until the maturity date in April 2022.~~

The Company has begun a new product and marketing strategy to increase demand for the Company’s products. The Company is also actively pursuing strategic alternatives relating to the U.S retail brands and the BWR division (as defined below), which could significantly improve its overall financial performance and reduce cash flow needs. As million as discussed ~~in Note 4, the Company has implemented a restructuring plan that is designed to achieve future annualized selling, general and administrative cost reductions of approximately~~ ~~$5.8~~ ~~million.~~below.

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

~~NOTE 3 —~~Pursuant to the Ariix Merger Agreement as modified by the Waiver Letter and the Clarification Letter (the “Amended Ariix Merger Agreement”), the Company was obligated to issue ~~BUSINESS COMBINATIONS~~19.7 million shares of Common Stock on the Ariix Closing Date, and to pay $10.0 million to the Sellers after certain post-closing conditions were satisfied. As of December 31, 2020, the obligation to issue the 19.7 million shares of Common Stock with a fair value of $54.2 million was included within stockholders’ equity and the obligation to pay $10.0 million to the Sellers was reflected as a current liability. During the first quarter of 2021, the 19.7 million shares of Common Stock were issued, and the post-closing conditions were satisfied whereby $10.0 million was paid to the Sellers.

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

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

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

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

On June 1, 2021 (the “Aliven Closing Date”), the Company entered into an Asset Purchase Agreement (“APA”) with ~~Brands Within Reach, LLC~~Aliven, Inc. (“~~BWR”~~Aliven”) ~~in July 2019~~ that was accounted for using the acquisition method of accounting under ASC 805, Business Combinations, and using the fair value concepts set forth in ASC 820, Fair Value Measurement. AsAliven is a ~~result~~Japan-based direct selling company. The Company entered into the APA to accelerate growth with its direct-to-consumer business model in Japan and to expand its portfolio of healthy products. Pursuant to the ~~business combination with BWR,~~APA, the Company acquired ~~certain key licensing~~the assets and ~~distribution rights in~~assumed the ~~United States for some~~liabilities of Aliven on the ~~world’s leading beverage brands.~~Aliven Closing Date. The total purchase consideration issued by the Company consisted of ~~cash payments of $~~approximately ~~1.5~~ ~~million and the issuance of~~ ~~107,602~~1,072,000 shares of the Company’s Common Stock with ~~an estimated~~a fair value of approximately $~~453~~2,588,000~~,000.~~. The preliminary purchase price allocation is presented below (dollars in thousands):

~~For the three and six months ended June 30, 2020, the accompanying condensed consolidated statements of operations include net revenue related to the post-acquisition results of operations of BWR of $2.8~~ ~~million and $4.9~~ million, respectively. For the three and six months ended June 30, 2020, the accompanying condensed consolidated statements of operations include net losses related to the post-acquisition results of operations of BWR of $~~0.3~~ ~~million and $2.6~~ ~~million, respectively.~~

The following table summarizes the results of operations for the Company after giving effect to the pre-acquisition results of Ariix and Aliven on an unaudited pro forma basis ~~the Company’s results of operations for the three and six months ended June 30, 2019 giving effect to the BWR business combination as if it had occurred on January 1, 2019~~ (in thousands, except ~~loss~~ per share ~~amount)~~amounts):

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

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

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

~~Business Combination Liabilities~~Disposition of BWR and U.S. Retail Brands

~~On December 21, 2018,~~In September 2020, the Company ~~entered into~~sold Brands Within Reach, LLC (“BWR”) and substantially all of the Company’s legacy U.S. retail brands (collectively, the “Divested Business”). Zachert Private Equity GmbH (the “Buyer”) issued to the Company an unsecured promissory note payable by BWR with a ~~business combination with Morinda Holdings, Inc. (“Morinda”). The purchase consideration included~~principal balance of $2.5 million that was issued in exchange for the Company’s $1.25 million cash payment and the issuance of shares of Common Stock with a fair value of $~~43,804~~1.25 million. This promissory note bears interest at 10% per annum, matures in September 2023, and is fully guaranteed by the Buyer until the earlier of such time that (i) the promissory note is repaid in full, (ii) the Buyer makes equity contributions to BWR of at least $2.5 million, or (iii) BWR recognizes net income of at least $2.5 million for any 12-month period following the BWR closing date (the “Guaranty Note”). A portion of the consideration for the Guaranty Note was the issuance of approximately 692,000 shares of ~~Series D Preferred~~the Company’s Common Stock ~~(the “Preferred Stock”) providing for~~issued to the ~~potential payment~~Buyer with an estimated fair value of ~~up to~~ $~~15.0~~1.25 million. Accordingly, $1.25 million of the Guaranty Note was reflected as a reduction of stockholders’ equity and $1.25 million ~~(the “Milestone Dividend”) if~~was included under the ~~Adjusted EBITDA~~caption “Deposits and other” in the accompanying consolidated balance sheets as of ~~Morinda was at least $20.0~~ ~~million for the year ended~~ December 31, ~~2019.~~ If the Adjusted EBITDA of Morinda was less than $20.0 million, the Milestone Dividend was reduced whereby no Milestone Dividend was payable if actual Adjusted EBITDA was $17.0 million or lower. Adjusted EBITDA of Morinda for the year ended December 31, 2019 was less than $17.0 million and, accordingly, no Milestone Dividend was payable to the holders of the Preferred Stock. ~~The Preferred Stock also provided for dividends at a rate of 1.5% per annum of the Milestone Dividend amount. The Preferred Stock terminated on~~ ~~April 15, 2020, and the Company paid accumulated cash dividends of approximately $0.3~~ ~~million in May~~ 2020.

AsBased on recent communications with the Buyer, the Company determined that collection of the $2.5 million note receivable and accrued interest of $0.2 million is unlikely whereby a reserve for the entire balance was recognized as of June 30, ~~2020 and December 31, 2019,~~2021. Additionally, the ~~following is~~Company recorded a ~~summary~~liability for approximately $1.6 million of ~~purchase consideration payable~~former supplier obligations. Accordingly, aggregate losses related to the ~~former stockholders~~Divested Business of ~~Morinda,~~$4.3 million were recognized for the three and ~~outstanding earnout obligations related to business combinations with Morinda in December 2018 (in thousands):~~six months ended June 30, 2021.

For the three months ended June 30, 2020, the operating results related to the Divested Business were included in the Direct Store segment and accounted for net revenue of $5.9

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

~~Inventories~~As of June 30, 2021 and December 31, 2020, inventories consisted of the following ~~as of June 30, 2020 and December 31, 2019~~ (in thousands):

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, other accrued liabilities consisted of the following (in thousands):

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

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

For the three and six months ended June 30, 2021 and 2020, ~~and 2019~~gain (loss) from changes in fair value of derivatives is comprised of the following (in thousands):

SCHEDULE OF ~~DEPRECIATION AND AMORTIZATION EXPENSE~~LOSS FROM CHANGES IN FAIR VALUE OF DERIVATIVES

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

~~Restructuring~~Notes to Unaudited Condensed Consolidated Financial Statements

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

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

For the ~~severance costs related to the Noni by NewAge segment,~~three and ~~the related restructuring costs were incurred and paid during the three~~six months ended June 30, ~~2020. No assurance can~~2021 and 2020, activity affecting the accrued liability for severance benefits for all employees is summarized as follows (in thousands):

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

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

~~On March 22, 2019, the Company entered into an agreement with a major Japanese real estate company resulting in the sale for approximately $57.1~~ million of the land and building in Tokyo that serves as the corporate headquarters of the Company’s Japanese subsidiary. Concurrently with the sale, the Company entered into a lease of this property for a term of 27 ~~years with the option to terminate the lease any time after seven years. The monthly lease cost is ¥20.0~~ ~~million (approximately $186~~,000 based on the exchange rate as of June 30, 2020) for the initial seven-year period of the lease term. Presented below is a summary of the selling price and resulting gain on sale calculation for the six months ended June 30, 2019 (in thousands):

~~The Company determined that $17.6~~ ~~million of the $24.1~~ ~~million gain on the sale of this property was the result of above-market rent inherent in the leaseback arrangement. The remainder of the gain of $6.4~~ million was attributable to the highly competitive process among the entities that bid to purchase the property, and is included in gain from sale of property and equipment in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2019.

~~The $17.6~~million portion of the gain related to above-market rent is being accounted for as a deferred lease financing obligation. Accordingly, the operating lease payments are allocated to (i) reduce the operating lease liability, (ii) reduce the principal portion of the deferred lease financing obligation, and (iii) recognize imputed interest expense at an incremental borrowing rate of ~~3.5% on the deferred lease financing obligation over the~~ 20~~-year lease term. The present value of the future lease payments amounted to a gross operating lease liability of $31.9~~ ~~million. After deducting the $17.6~~ ~~million deferred lease financing obligations, the Company recognized an initial right-of-use (“ROU”) asset and operating lease liability of approximately $14.3~~ ~~million.~~

The Company leases various office and warehouse facilities, vehicles and equipment under non-cancellable operating lease agreements that expire between July ~~2020~~2021 and March 2039. The Company has made accounting policy elections (i) to not apply the recognition requirements for short-term leases and (ii) for facility leases, when there are lease and non-lease components, such as common area maintenance charges, to account for the lease and non-lease components as a single lease ~~component.~~component. For the three and six months ended June 30, 2021 and 2020, the Company did not incur any material amounts for variable and short-term lease expense. For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company ~~had~~incurred operating lease expense of $~~2.6~~ 2.8million and $~~2.9~~ 2.6million, respectively. For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company ~~had~~incurred operating lease expense of $~~5.1~~ 5.8million and $~~5.2~~5.1 million, respectively.

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the weighted average remaining lease term under operating leases was ~~12.0~~11.0 years and ~~12.5~~ 11.5years, respectively. As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the weighted average discount rate for operating lease liabilities was 5.6% and 5.5%., respectively.

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

As of June 30, ~~2020,~~2021, future payments under operating lease agreements, including a lease for the Company’s facility in American Fork, Utah that is discussed in Note 4 under the caption Assets Held for Sale, are as follows (in thousands):

Year Ending December 31,
Remainder of 2020	$	3,991
2021		7,401
Years Ending December 31,

Remainder of 2021				$	4,736
2022		5,863			7,147
2023		5,334			5,940
2024		5,011			5,472
2025					5,346
Thereafter		29,191			23,139

Total operating lease payments		56,791			51,780
Less imputed interest		(16,039)	⁽¹⁾		(14,612	)⁽¹⁾

Present value of operating lease payments	$	40,752		$	37,168

In June 2019, the Company began attempting to sublease a portion of its ROU assets previously used for warehouse space that are no longer needed for current operations. As a result, an impairment evaluation was completed that resulted in recognition of an impairment charge of $~~1.5~~ million for the three and six months ended June 30, 2019. This evaluation was based on the expected time to obtain a suitable subtenant and current market rates for similar commercial properties. As of December 31, 2019, an updated impairment evaluation was performed that resulted in an additional impairment charge of $~~0.8~~ million. As of June 30, 2020, the Company was continuing its efforts to obtain a subtenant for this space. Due to longer than expected timing to obtain a subtenant, an updated impairment evaluation was completed that resulted in recognition of an additional impairment charge of $~~0.4~~ ~~million for the three and six months ended June 30, 2020.~~

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company’s debt consisted of the following ~~(in~~(dollars in thousands):

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

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

~~On March 29, 2019,~~For the months of February 2021 through April 2021, the holders of the Senior Notes were entitled to request that the Company ~~entered into~~make principal payments up to $1.0 million per month and these payments were made on a ~~Loan~~timely basis. Beginning in May 2021 and ~~Security Agreement (the “EWB Credit Facility”) with EWB.~~continuing for each subsequent month, the holders of the Senior Notes are entitled to request that the Company make principal payments up to $2.0 million per month. The ~~EWB Credit Facility matures~~holders of the Senior Notes requested principal payments of $1.0 million in May 2021 and $2.0 million in June 2021, and these payments were made on ~~March 29, 2023~~ ~~and provides for~~ ~~(i)~~ a ~~term loan~~timely basis. The maturity date of the Senior Notes is on December 1, 2022. However, if the holders of the Senior Notes exercise their rights to demand the maximum principal payments permitted in each future month, the ~~aggregate~~Senior Notes will be repaid in full by August 2022. The Company may prepay all or a portion of the outstanding principal amount of ~~$15.0~~ ~~million, which may be increased to~~ ~~$25.0~~ ~~million~~the Senior Notes at any time, subject to ~~the satisfaction~~a prepayment fee of ~~certain conditions (the “EWB Term Loan”) and (ii) a~~ ~~$10.0~~ ~~million revolving loan facility (the “EWB Revolver”).The obligations~~3.0% of the ~~Company under the EWB Credit Facility are secured by substantially all assets of the Company and guaranteed by certain subsidiaries of the Company~~outstanding stated principal balance through December 1, 2021.

~~Borrowings outstanding~~As a post-closing deliverable, the Company was required to provide certain historical financial statements of Ariix to the lenders by January 4, 2021. The required financial statements were not available by the deadline, which would have resulted in a default under the ~~EWB Credit Facility initially provided~~November 2020 SPA. The lenders agreed to amend the Senior Notes to extend the deadline in exchange for ~~interest at~~ the ~~prime rate plus~~issuance of ~~0.50%~~400,000~~. As~~ shares of ~~December 31, 2019,~~Common Stock with a fair value of approximately $1.1 million as of the ~~prime rate was~~ ~~4.75%~~ ~~and the contractual rate applicable to outstanding borrowings under the EWB Credit Facility was~~ ~~5.25%. Pursuant~~issuance date. These shares were subject to the ~~Third Amendment~~same redemption rights as the Commitment Shares discussed ~~below,~~in Note 7. The amendment fee was accounted for as a modification that resulted in an additional discount of $1.1 million related to the ~~interest rate applicable to outstanding borrowings under~~Senior Notes. This amendment fee and other lender-initiated changes that affect the ~~EWB Credit Facility increased from~~ ~~0.5%~~ to ~~2.0%~~ ~~in excess~~timing and amount of principal payments are accounted for prospectively as a revision of the ~~prime rate beginning on March 13, 2020. As~~effective interest rate. Accordingly, as of June 30, ~~2020,~~2021, the ~~prime~~overall effective interest rate was approximately ~~3.25%~~46.8 ~~and~~%, including the ~~contractual rate applicable to outstanding borrowings under the EWB Credit Facility was~~ ~~5.25%~~8.0~~. Payments under the EWB Term Loan were interest-only through September 30, 2019, followed by monthly principal payments of~~ ~~$125,000~~ ~~plus interest through the~~% stated ~~maturity date of the EWB Term Loan.~~rate.

The ~~EWB Credit Facility requires compliance with certain financial and restrictive covenants and includes customary events~~Company was required to maintain restricted cash balances of ~~default. Key financial covenants include maintenance~~$18.0 million as of ~~minimum Adjusted EBITDA and a maximum Total Leverage Ratio (all as defined and set forth~~December 31, 2020. Beginning in February 2021, the ~~EWB Credit Facility). On March 13, 2020,~~requirement to maintain restricted cash balances was reduced to $8.0 million until such time that the ~~Company entered into~~outstanding principal balance of the ~~Third Amendment~~Senior Notes is reduced below $8.0 million without regard to the ~~EWB Credit Facility.~~unaccreted discount, which is expected to occur during the second quarter of 2022. As of June 30, ~~2020,~~2021, approximately $5.6 million of this restricted cash balance is classified as a current asset since those funds may be utilized to make principal payments that are classified within current maturities of long-term debt.

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

~~The Company evaluated the terms of the Third Amendment and determined it should be accounted for as a modification, whereby additional debt discount and issuance costs of approximately~~ ~~$0.2~~ ~~million were incurred.~~

~~On April 14, 2020, the Company entered into the PPP Loan pursuant~~Pursuant to the Paycheck Protection Program (“PPP”) under the ~~CARES~~Coronavirus Aid, Relief, and Economic Security Act ~~with EWB~~(the “CARES Act”), the Company obtained a PPP loan (the “NewAge PPP Loan”) in ~~an aggregate principal amount of~~April 2020 for approximately $$6.9 million. In May 2020, Ariix obtained a PPP loan (the “Ariix PPP Loan”) for approximately $2.8 million, and the Company assumed this obligation in connection with the business combination discussed in Note 3. The PPP ~~Loan bears~~Loans are unsecured and guaranteed by the SBA, bear interest at a fixed rate of ~~1.0%~~1.0% per annum and provide for maturity dates on the second anniversary of the respective loan agreements. The Company and Ariix applied to their lenders to request forgiveness of their PPP Loans, with the first six months of interest deferred, has a term of two years, and is unsecured and guaranteed by the U.S. Small Business Administration (“SBA”). The Company intends to apply to the lender for forgiveness of the PPP Loan, with the amount whichamounts that may be forgiven equal to the sum of payroll costs, covered rent and mortgage obligations, and covered utility payments incurred ~~by the Company~~ during the permitted period ~~beginning on April 10, 2020,~~as calculated in accordance with the terms of the CARES Act. The ~~Company’s~~ eligibility for the PPP ~~Loan,~~Loans, expenditures that qualify toward forgiveness, and the final balance of the PPP ~~Loan~~Loans that may be forgiven are subject to audit and final approval by the SBA. ~~To the extent that all or part of the PPP Loan is not forgiven,~~ As discussed in Note 14, the Company ~~will be required to pay~~was informed in July 2021 that forgiveness of its PPP Loans was approved by the SBA for an aggregate of approximately $9.7 million including accrued interest ~~at 1.0% and, commencing in October 2020, interest payments will be required~~ through ~~the maturity date in April 2022.~~June 30, 2021. The terms of the PPP ~~Loan~~Loans provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events. The PPP ~~Loan~~Loans may be accelerated upon the occurrence of an event of default, including if the SBA subsequently reaches an audit determination that the ~~Company does~~eligibility criteria were not ~~meet the eligibility criteria.~~met.

The PPP ~~Loan is~~Loans are being accounted for under ~~ASC~~Accounting Standards Codification (“ASC”) 470, Debt whereby interest expense ~~is being~~was accrued at the contractual rate ~~and future debt maturities are based on the assumption that none~~of 1.0% per annum. The Company will recognize forgiveness of the ~~principal balance will be forgiven. Forgiveness, if any, will be recognized as a gain on extinguishment if~~PPP Loans during the ~~lender legally releases~~third quarter of 2021 when the Company ~~based on~~was released of its obligation to repay the ~~criteria set forth in the debt agreement and the CARES Act.~~PPP Loans.

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

Changes in stockholders’ equity for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows (in thousands):

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

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

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

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

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

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

On April 30, 2019, the Company entered into an At the Market Offering Agreement (“ATM Agreement”) with Roth Capital Partners, LLC (the “Agent”), pursuant to which the Company ~~may~~could offer and sell from time to time up to an aggregate of $$100 million in shares of the Company’s Common Stock (the ~~“Placement~~“2019 Placement Shares”) through the Agent. The Agent is acting as sales agent and is required to use commercially reasonable efforts to sell on the Company’s behalf all of the Placement Shares requested to be sold by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the Agent and the Company. On May 8, 2020, the amended ATM Agreement was ~~amended and restated~~scheduled to ~~eliminate the previous termination date of~~ ~~April 30, 2020. As amended and restated, the ATM Agreement will~~ terminate when all of the 2019 Placement Shares ~~have~~had been sold, or earlier if elected by ~~the Company upon five business days’ notice to the Agent, at any time by the Agent, or by the mutual agreement of the parties.~~

The Company has no obligation to sell any of the Placement Shares under the ATM Agreement. The Company intends to use the net proceeds from the offering for general corporate purposes, including working capital. Under the terms of the ATM Agreement, the Company agreed to pay the Agent a commission equal to ~~3.0%~~ ~~of the gross proceeds from the gross sales price of the Placement Shares up to~~ ~~$30~~ ~~million, and~~ ~~2.5%~~ ~~of the gross proceeds from the gross sales price of the Placement Shares in excess of~~ ~~$30~~ ~~million. In addition, the Company has agreed to pay certain expenses incurred by the Agent in connection with the offering. Through June 30, 2020, an aggregate of approximately~~ ~~22.1~~ ~~million shares of Common Stock were sold for gross proceeds of approximately~~ ~~$46.5~~ ~~million. For the six months ended June 30, 2020, an aggregate of~~ ~~16.1~~ ~~million shares were sold for gross proceeds of~~ ~~$25.8~~ ~~million. Total commissions and fees of~~ ~~$0.8 million were deducted from the gross proceeds for the six months ended June 30, 2020.~~either party. Presented below is a summary of Common Stock issued pursuant to the ATM Agreement for the three and six months ended June 30, 2020 ~~and 2019~~ (in thousands, except per share amounts):

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

The following table sets forth stock option activity under the Company’s stock option plans for the six months ended June 30, ~~2020~~2021 (shares in thousands):

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

For the six months ended June 30, ~~2020,~~2021, the valuation assumptions for newly-granted stock options ~~granted to employees~~ and ~~non-employees~~modifications under the Company’s ~~equity incentive~~stock option plans were estimated on the respective date of grant or modification using the BSM option-pricing model with the following weighted-average assumptions:

~~Based~~Using the BSM option-pricing model based on the ~~assumptions~~valuation inputs set forth above, the weighted-average grant date fair value was $2.00per share for newly-granted stock options ~~granted~~and $2.35 per share for modified stock options for the six months ended June 30, ~~2020 and 2019 was~~ ~~$1.43~~ ~~and~~ ~~$4.65~~, respectively. The BSM model requires various subjective assumptions that represent management’s best estimates of the fair value of the Company’s Common Stock, volatility, risk-free interest rates, expected term, and dividend yield. The expected term represents the weighted-average period that options granted are expected to be outstanding giving consideration to vesting schedules. Because the Company does not have an extended history of actual exercises, the Company has estimated the expected term using a simplified method which calculates the expected term as the average of the time-to-vesting and the contractual life of the awards. The Company has never declared or paid cash dividends and does not plan to pay cash dividends in the foreseeable future; therefore, the Company used an expected dividend yield of zero. The risk-free interest rate is based on U.S. Treasury rates in effect for maturities based on the expected term of the grant. The expected volatility is based on the historical volatility of the Company’s Common Stock for the period beginning in August 2016 when its shares were first publicly traded through the grant date of the respective stock options.2021.

The following table sets forth share activity related to grants of restricted stock under the Company’s stock option plans for the six months ended June 30, ~~2020~~2021 (in thousands):

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

Substantially all stock-based compensation expense is included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. The table below summarizes stock-based compensation expense related to stock options and restricted stock awards for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, and the unrecognized compensation expense as of June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands):

	Stock-based Compensation Expense (Recovery)								Unrecognized Expense				Three Months Ended				Six Months Ended				Unrecognized Expense
	Three Months Ended June 30,				Six Months Ended June 30,				as of June 30,				June 30:				June 30:				as of June 30:
	2020		2019		2020		2019		2020		2019		2021		2020		2021		2020		2021			2020

Plan-based stock options awards	$	471	$	(377)	$	1,096	$	938	$	3,680	$	3,860
Plan-based stock option awards													$	871	$	471	$	1,721	$	1,096	$	3,398	⁽¹⁾	$	3,680
Plan-based restricted stock awards:
Equity-classified		614		920		1,340		2,273		4,188		2,281		1,309		614		2,409		1,340		5,104	⁽²⁾		4,188
Liability-classified		7		447		13		1,012		41		1,194		7		7		19		13		19			41
Non-plan equity-classified
restricted stock awards		-		10		-		64		-		-

Total	$	1,092	$	1,000	$	2,449	$	4,287	$	7,909	$	7,335	$	2,187	$	1,092	$	4,149	$	2,449	$	8,521		$	7,909

As of June 30, ~~2020,~~2021, unrecognized stock-based compensation expense related to service-based awards is expected to be recognized on a straight-line basis over a weighted-average period of approximately ~~2.0~~2.1 years for stock options, ~~1.8~~1.9 years for equity-classified restricted stock awards, and ~~1.5~~0.5 years for liability-classified restricted stock awards. For awards with performance-based vesting, compensation expense is recognized over the period that the performance criteria are expected to be achieved as discussed above under the caption Restricted Stock Activity.

~~As of June 30, 2020 and 2019,~~The following table sets forth changes in outstanding warrants for the ~~Company had warrants outstanding for~~ ~~0.3~~ ~~million shares of Common Stock. For the three and~~ six months ended June 30, ~~2020 and 2019, no warrants were granted, exercised or expired.~~2021 (shares in thousands):

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

The Company’s provision for income taxes for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 resulted in income tax expense of $~~0.6~~0.7 million and $~~$7.8~~0.6 million, respectively. The effective tax rate as a percentage of ~~pre-tax losses~~income (loss) before income taxes for the three months ended June 30, 2021 and 2020 was 4%and ~~2019 was~~ negative 66%~~% and negative~~ ~~201%, respectively,~~ compared to the U.S. federal statutory rate of 2121%%. The ~~negative~~difference between the lower effective tax rate and the statutory rate for the three months ended June 30, 2021 and 2020 was primarily due to foreign income tax expense on profitable foreign operations and the impact of the domestic valuation allowance offsetting domestic income tax ~~benefits. The difference between the negative effective tax rate of~~ ~~201%~~ ~~for the three months ended June 30, 2019~~benefits and the ~~U.S. federal statutory rate was primarily attributable to~~impact of the ~~establishment~~gain (loss) from change in fair value of ~~a valuation allowance applied to the Company’s domestic net deferred~~derivatives which has no income tax ~~assets.~~effect.

The Company’s provision for income taxes for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 resulted in income tax expense of $~~1.3~~ 1.9million and $~~6.1~~ 1.3million, respectively. The effective tax rate as a percentage of ~~pre-tax losses~~income (loss) before income taxes for the six months ended June 30, 2021 and 2020 ~~and 2019~~ was ~~negative~~ 6127%% and negative 856%~~%, respectively,~~ compared to the U.S. federal statutory rate of 21%. The ~~negative~~difference between the effective tax rate and the statutory tax rate for the six months ended June 30, 2021 and 2020 was primarily due to foreign income tax expense on profitable foreign operations and the impact of the domestic valuation allowance offsetting domestic income tax ~~benefits. The difference between the negative effective tax rate of~~ ~~85%~~ ~~for the six months ended June 30, 2019~~benefits and the ~~U.S. federal statutory rate was primarily attributable to~~impact of the ~~establishment~~gain (loss) from change in fair value of ~~a valuation allowance.~~derivatives which has no income tax effect.

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

~~The total outstanding balance for~~As of June 30, 2021 and December 31, 2020, $1.1 million of unrecognized income tax benefits is included in other long-term liabilities ~~related to~~with the remainder of $4.3 million being offset with other deferred tax assets. As of June 30, 2021 and December 31, 2020, unrecognized tax benefits ~~was~~ ~~$1.5~~ ~~million as~~that are classified in other long-term liabilities, would result in changes to the Company’s effective tax rate if recognized. As of June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, unrecognized tax benefits that were offset against other deferred tax assets, if recognized, would not affect the Company’s effective tax rate since the tax benefits would increase a deferred tax asset that would be offset by a valuation allowance. The Company does not anticipate that unrecognized tax benefits will significantly increase or decrease within the next twelve months.

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

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

The Company has various non-income tax contingencies in several countries. Such ~~exposure~~exposures could be material depending upon the ultimate resolution of each situation. As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company has recorded a current ~~liability under ASC 450,~~ ~~Contingencies~~,liabilities for non-income tax contingencies of approximately $~~$1.9~~1.2 ~~million~~million.

On November 19, 2020, Ariix’s subsidiary in Japan (the “Japanese Subsidiary”) received an order from the Japan Consumer Affairs Agency notifying it of a nine-month suspension from recruiting new Brand Partners in Japan. In comparison to pre-acquisition levels of net revenue generated by the Japanese subsidiary, the suspension of recruiting is resulting in a reduction in net revenue for the nine-month suspension period. According to the order, the Japanese Subsidiary may continue to sell products to customers through existing Brand Partners and ~~$0.9~~ ~~million, respectively.~~may continue to attract new customers. Accordingly, the Japanese Subsidiary has refocused its efforts to attract new customers by introducing new products and a new customer program. The Japanese Subsidiary has terminated non-compliant distributors whose actions led to the sanction, and many other distributors have elected to terminate their relationship with the Japanese Subsidiary.

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

The Company is unable at this time to ~~time,~~predict when the government agencies’ review of these matters will be completed or what regulatory or other consequences may result. The ultimate outcome of this investigation, including potential claims that may arise from the matters under investigation, is uncertain and the Company ~~may be a party to litigation and subject to claims incident to~~cannot reasonably estimate the ~~ordinary course~~amount of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effectany potential loss on its ~~business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.~~financial statements at this time.

In December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of the virus resulted in a world-wide pandemic. By March 2020, the U.S. economy had been largely shut down by mass quarantines and government mandated stay-in-place orders (the “Orders”) to halt the spread of the virus. ~~While~~Many of these Orders ~~were~~have been relaxed or lifted in ~~different~~ jurisdictions ~~at various times during~~where large portions of the ~~three months ended June 30, 2020,~~population have been vaccinated, but there is considerable uncertainty about whether the Orders will need to be reinstated due to the ongoing spread of new variants of COVID-19. A significant portion of the worldwide population remains unvaccinated, and uncertainty also exists about whether existing vaccines will be effective as new variants of COVID-19 emerge. Accordingly, the overall impact of COVID-19 continues to have an adverse impact on global business ~~activities across the world.~~activities. The Orders required some of the Company’s employees to work from home when possible, and other employees were entirely prevented from performing their job duties at times. These Orders have adversely impacted the Company’s customers such as restaurants, hotels, stadiums and airports in the United States, whereby average monthly revenue for that line of the Company’s distribution business decreased by approximately 48% for the four months ended June 30, 2020 compared to the first two months of 2020. The world-wide response to the pandemic has resulted in a significant downturn in economic activity and there is no assurance that government stimulus programs will successfully restore the economy to the levels that existed before the pandemic. If an economic recession or depression is sustained, it could have a material adverse effect on the Company’s business as consumer demand for its products could decrease.

Foreign jurisdictions accounted for approximately ~~64%~~78% and 68% of the Company’s net revenue for the ~~three~~six months ended June 30, ~~2020.~~2021 and the year ended December 31, 2020, respectively. The impact of COVID-19 was a significant contributing factor for much of the ~~three months~~year ended ~~June 30,~~December 31, 2020 that resulted in decreases in net revenue ~~by 17%~~ in ~~China, 10% in Japan, and 18% in all other~~ foreign countries as a group. While the Company’s direct-to-consumer selling model typically relies heavily on the use of its ~~IPC~~Brand Partner sales force in close contact with customers, the pandemic has required alternative selling approaches such as through social media. Until ~~a vaccine~~vaccines or other successful mitigation of COVID-19 ~~is developed,~~have been widely administered throughout the population, no assurance can be provided that the Company will be able to avoid future reductions in net revenue using alternative selling approaches that avoid direct contact with customers.

~~In most jurisdictions, the Orders have been relaxed or lifted but considerable uncertainty remains about whether the Orders will need to be reinstated as the spread of COVID-19 continues.~~ While the current disruption to the Company’s business is expected to be temporary, the long-term financial impact on the Company’s business cannot be reasonably estimated at this time.

On May 8, 2020, the Company entered into employment agreements with three executive officers, Brent Willis, Gregory Gould, and David Vanderveen. The employment agreements provide for aggregate annual base compensation of $~~650,000, $500,000, and $550,000~~ ~~plus target annual performance bonuses of~~ ~~100~~%, 50~~%, and~~ 50% of annual base compensation for Mr. Willis, Mr. Gould, and Mr. Vanderveen, respectively. The agreements expire on January 1, 2023 and provide for annual renewal periods thereafter. If the employment agreements are terminated by the Company for Cause (as defined in the employment agreements) or officer resigns without Good Reason (as defined in the employment agreements), becomes disabled, or dies before the expiration date, the Company is required to pay base salary through the termination date plus reimbursement of business expenses and unused vacation. If the Company terminates the employment agreements with Messrs. Willis or Gould without Cause or they resign for Good Reason, the Company will be required to make severance payments of 18 months and 12 months of base compensation and health insurance benefits, for Mr. Willis and Mr. Gould, respectively, plus the target performance bonus that would have been otherwise payable for the year in which termination occurs. If the Company terminates the employment agreement with Mr. Vanderveen without Cause, the Company will be required to pay the remaining amounts due under the employment agreement, including severance payments of nine months of base compensation with one additional month for every full year of service up to 12 months total, plus the target performance bonus that would have been otherwise payable for the year in which the termination occurs. If Mr. Vanderveen resigns for Good Reason, the Company will be required to make severance payments of nine months of base compensation with one additional month for every full year of service up to 12 months total, plus the target performance bonus that would have been otherwise payable for the year in which the termination occurs. If termination of any of the three executive officers occurs in connection with a change of control, the Company is required to make (i) severance payments of between 150% and 200% of annual base compensation plus the target bonus applicable in the year in which termination occurs, and (ii) payments for up to 18 months of health insurance benefits.

~~Net loss~~Basic and diluted net income (loss) per share (“EPS”) is computed by dividing (i) net ~~loss~~income (loss), as adjusted for certain gains and losses related to contingently issuable shares and the two-class method allocation of earnings (the “Numerator”), by (ii) the weighted average number of common shares outstanding during the ~~period.~~period, as adjusted to give effect to certain contingently issuable shares (the “Denominator”). The calculation of diluted ~~net loss per share~~EPS also includes the dilutive effect, if any, of stock options, unvested restricted stock awards, and other Common Stock equivalents computed using the treasury stock method, in order to compute the weighted average number of shares outstanding. For the three and six months ended June 30, ~~2020~~2021 and ~~2019, basic and diluted net loss per share were the same since~~2020, all Common Stock equivalents were anti-dilutive. Presented below are the calculations of the Numerators and the Denominators for basic and diluted EPS (in thousands, except per share amounts):

As of June 30, ~~2020~~2021 and ~~2019,~~2020, the following potential Common Stock equivalents were excluded from the computation of diluted net ~~loss~~income (loss) per share since the impact of inclusion was anti-dilutive (in thousands):

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

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

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

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

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the fair value of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximated their carrying values due to the short-term nature of these instruments. Cash equivalents consist of short-term certificates of deposit that are classified as Level 2. The estimated fair value of the Senior Notes discussed in Note 6 is classified as Level 2 and amounted to approximately $24.4 million as of June 30, 2021 and $28.9 million as of December 31, 2020. The recorded amounts for short-term debts payable related to the Ariix Clarification Letter and the Zennoa business combination ~~obligations~~discussed in Note 3 ~~and the debt obligations in Note 6 also~~ approximated fair value due to the short-term maturities and lack of changes in the ~~business combination liabilities, and the variable nature of the interest rates under the EWB Credit Facility.~~Company’s credit risk. Due to the U.S. government guarantee and the otherwise unique terms of the PPP ~~Loan~~Loans discussed in Note 6, it was not possible to determine fair value of ~~this~~these debt ~~instrument.~~instruments. As discussed in Note 14, the Company was informed in July 2021 that forgiveness of its PPP Loans of approximately $9.7 million was approved.

Recurring measurements of the fair value of ~~assets and~~ liabilities as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were as ~~follows:~~

~~Valuation assumptions for~~As of June 30, 2021 and December 31, 2020, the ~~earnout under the Series D preferred stock are set forth in Note 3. The interest rate swap agreement provides for a total notional amount of~~ ~~$10.0~~ ~~million~~Company did not have any assets carried at ~~a fixed interest rate of approximately 5.4% through May 1, 2023, in exchange for a floating rate indexed to the prime rate plus 0.50%, and is classified within Level 2 of the~~ fair value ~~hierarchy.~~on a recurring basis. The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the six months ended June 30, ~~2020 and 2019,~~2021, the Company ~~had no~~did not have any transfers of its assets or liabilities between levels of the fair value hierarchy.

A significant portion of the ~~Noni by NewAge~~ business of the Direct / Social Selling segment is conducted in foreign markets, exposing the Company to the risks of trade or foreign exchange restrictions, increased tariffs, foreign currency fluctuations and similar risks associated with foreign operations. As set forth in Note 13, for the three ~~and six~~ months ended June 30, ~~2020~~2021 and ~~2019,~~2020, a significant portion of the Company’s consolidated net revenue was generated outside the United ~~States, primarily in the Asia Pacific market.~~States. Most of the ~~Noni by NewAge’s~~Direct / Social Selling segment’s products have a component of the Noni plant, Morinda Citrifolia (“Noni”) as a common element. Tahitian ~~Noni~~^®Noni® Juice, MAX and other noni-based beverage products ~~comprise~~comprised over ~~80%~~31% and 86% of the net revenue of the ~~Noni by NewAge segment.~~Direct / Social Selling segment for the three months ended June 30, 2021 and 2020, respectively. Tahitian Noni® Juice, MAX and other noni-based beverage products comprised over 33% and 86% of the net revenue of the Direct / Social Selling segment for the six months ended June 30, 2021 and 2020, respectively. However, if consumer demand for these products decreases significantly or if the Company ceases to offer these products without a suitable replacement, the Company’s consolidated financial condition and operating results would be adversely affected. The Company purchases fruit and other Noni-based raw materials from French Polynesia, but these purchases of materials are from a wide variety of individual suppliers with no single supplier accounting for more than ~~10%~~10% of its raw material purchases during the three ~~and six~~ months ended June 30, 2021 and 2020. However, as the majority of the raw materials are consolidated and processed at the Company’s plant in Tahiti, the Company could be negatively affected by certain governmental actions or natural disasters if they occurred in that region of the world. For the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, no single customer accounted for ~~10%~~10% or more of the Company’s consolidated net revenue.

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and accounts receivable. The Company maintains its cash, cash equivalents and restricted cash at high-quality financial institutions. Cash deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. As of June 30, ~~2020,~~2021, the Company had cash and cash equivalents with ~~three~~a financial ~~institutions~~institution in the United States with balances of $~~$13.9~~ ~~million,~~ ~~$11.9~~ ~~million and~~ ~~$3.5~~46.5 million, and two financial institutions in China with balances of $~~$8.7~~7.0 million and $~~$7.5~~6.6 million. As of December 31, ~~2019,~~2020, the Company had cash and cash equivalents with two financial institutions in the United States with balances of $~~$22.2~~8.2 million and $~~$1.4~~23.7 million, and two financial institutions in China with balances of $~~$6.6~~6.3 million and $~~$3.6~~7.3 million. The Company has never experienced any losses related to its investments in cash, cash equivalents and restricted cash.

Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company’s customer base and their dispersion across different geographies and industries. The Company performs ongoing credit evaluations on certain customers and generally does not require collateral on accounts receivable. The Company maintains reserves for potential bad debts.

The Company follows segment reporting in accordance with ASC Topic 280, Segment Reporting. ~~The~~Since the consummation of the business combination with Morinda Holdings, Inc. (“Morinda”) in December 2018, the Company’s operating segments ~~consist~~have consisted of the Noni by NewAge segment and the NewAge segment. Upon completion of the business combination with Ariix, which comprised a portion of the Noni by NewAge segment, the Company renamed this segment as the Direct / Social Selling segment to better reflect the overall characteristics shared by the business units that comprise this segment. Also, as a result of the divestiture of the BWR reporting unit and substantially all of the Company’s legacy brands in September 2020, the Company has renamed the NewAge segment as the Direct Store segment.

The ~~Noni by NewAge~~Direct / Social Selling segment is engaged in the development, manufacturing, and marketing of ~~Tahitian Noni® Juice, MAX~~a portfolio of healthy products in three core category platforms including health and ~~other noni beverages as well as other~~wellness, healthy appearance, and nutritional ~~cosmetic~~performance all sold primarily via e-commerce and ~~personal care products.~~through a direct route to market. The ~~Noni by NewAge~~Direct / Social Selling segment has manufacturing operations in Tahiti, Germany, Japan, the United States, and China. The ~~Noni by NewAge~~Direct / Social Selling segment’s products are sold and distributed in more than 6050 countries using ~~IPCs through~~ its ~~direct to consumer selling network~~group of more than 400,000 Brand Partners and ~~ecommerce business model.~~customers. Approximately 8087% of the net revenue of the ~~Noni by NewAge~~Direct / Social Selling segment iswas generated ininternationally for each of the ~~key Asia Pacific markets of Japan, China, Korea, Taiwan,~~three and ~~Indonesia.~~

The ~~NewAge~~Direct Store segment ~~markets~~is a direct-store-distribution (“DSD”) business servicing Colorado and ~~sells~~surrounding markets. Until September 24, 2020 when the Company disposed of the Divested Business discussed in Note 3, the segment also marketed and sold a portfolio of healthy beverage brands including XingTea, Búcha® Live Kombucha, Coco-Libre, Evian, Nestea, Illy Coffee and Volvic. ~~These~~In connection with the disposition of the Divested Business, the Company entered into a Distributor Agreement, pursuant to which BWR appointed the Company as its exclusive distributor of certain beverage products ~~are distributed through the Company’s Direct Store Distribution (“DSD”) network and a hybrid of other routes to market throughout~~in selected territories in the United States and in a few countries around the world. The NewAge segment brands are sold in all channels of distribution including hypermarkets, supermarkets, pharmacies, convenience, gas and other outlets. The NewAge segment distributes beverages to retail customers and sells beverages to wholesale distributors, key account owned warehouses and international accounts using several distribution channels.States.

Net revenue by reporting segment for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
Segment	2020		2019		2020		2019		2021		2020		2021		2020

Noni by NewAge	$	46,861	$	52,060	$	96,971	$	100,282
NewAge		15,776		14,288		29,359		24,373
Direct / Social Selling									$	109,752	$	46,861	$	224,214	$	96,971
Direct Store										14,288		15,776		25,344		29,359

Net revenue	$	62,637	$	66,348	$	126,330	$	124,655	$	124,040	$	62,637	$	249,558	$	126,330

Gross profit by reporting segment for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, was as follows (in thousands):

Assets by reporting segment as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, were as follows (in thousands):

Segment	2020		2019		2021		2020

Noni by NewAge	$	186,304	$	201,600
NewAge		55,708		49,530
Direct / Social Selling					$	385,963	$	396,174
Direct Store						66,492		47,008

Total assets	$	242,012	$	251,130	$	452,455	$	443,182

Depreciation and amortization expense by reporting segment, including amounts charged to cost of goods sold for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
Segment	2020		2019		2020		2019		2021		2020		2021		2020

Noni by NewAge	$	1,725	$	1,671	$	3,444	$	3,366
NewAge		148		534		308		1,075
Direct / Social Selling									$	4,721	$	1,725	$	9,396	$	3,444
Direct Store										101		148		200		308

Total depreciation and amortization	$	1,873	$	2,205	$	3,752	$	4,441	$	4,822	$	1,873	$	9,596	$	3,752

~~Capital~~Cash payments for capital expenditures for property and equipment and identifiable intangible assets by reporting segment for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, were as follows (in thousands):

The Company attributes net revenue to geographic regions based on the location of its customers’ contracting entity. The following table presents net revenue ~~by geographic region~~for each country that exceeded 10% of consolidated net revenue for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020

United States of America	$	22,531	$	19,965	$	41,916	$	36,420	$	28,729	$	22,531	$	53,776	$	41,916
Japan		20,940		23,238		41,807		43,938		24,238		20,940		49,472		41,807
China		11,181		13,407		26,156		26,562		23,916		11,181		50,036		26,156
Other countries		7,985		9,738		16,451		17,735
Italy										13,279		69		31,009		155
France										14,349		81		28,796		175
Rest of World										19,529		7,835		36,469		16,121

Net revenue	$	62,637	$	66,348	$	126,330	$	124,655	$	124,040	$	62,637	$	249,558	$	126,330

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the net carrying value of property and equipment located outside of the United States amounted to approximately $~~22.6~~21.8 million and $~~22.1~~23.6 million, respectively.

OnIn July ~~6, 2020,~~2021, the Company ~~entered into~~was informed that forgiveness of its PPP Loans was approved by the ~~Fourth Amendment to~~SBA for an aggregate of approximately $9.7 million, including accrued interest through June 30, 2021. The forgiveness of this PPP Loan will be recognized in July 2021 when the EWB Credit Facility discussed in Note 6. The Fourth Amendment reduced the amount of restricted cash in China with a corresponding increase in restricted cash in the United States. The Fourth Amendment also permittedlender legally released the Company ~~to repurchase up to $1.2~~ ~~million of shares~~ of its ~~Common Stock with a corresponding increase in~~obligation to repay the ~~requirement of cash equity infusions from $30.0~~ ~~million to approximately $31.2~~ ~~million for the year ending December 31, 2020.~~

~~On July 6, 2020, the Company purchased from the Company’s Chief Executive Officer a total of~~ ~~780,000~~ ~~shares of Common Stock based on the closing market price of $1.53~~ ~~per share. The total purchase price of approximately $1.2~~ million will be accounted for as a reduction of stockholders’ equity for the three months ending September 30, 2020. The shares were immediately canceled and returned to the Company’s authorized but unissued shares of Common Stock.

OnIn July ~~20, 2020,~~2021, the Company entered into an ~~Agreement~~employment agreement with Kevin Manion to serve as the Company’s Chief Financial Officer through January 1, 2024. Under the terms of the employment agreement, Mr. Manion will be paid an annual base salary of $550,000, and ~~Plan~~will be eligible to receive annual cash bonuses ranging from 80% to 160% of ~~Merger (the “Merger Agreement”), by and among~~his annual base salary, based upon the ~~Company, Ariel Merger Sub, LLC (“Merger Sub”), Ariix, LLC (“Ariix”),~~attainment of certain members of Ariix (the “Sellers”) and Frederick Cooper, as primary shareholder and Sellers Agent (the “Sellers Agent”), pursuant to which the Company agreed to acquire Ariix, which owns five brands in the e-commerce and direct selling channels (the “Acquisition”). The Merger Agreement contains customary representations, warranties, covenants and indemnitiesperformance metrics established by the ~~parties~~Company’s Board of Directors. For 2021, Mr. Manion is entitled to ~~such agreement~~a minimum guaranteed cash bonus of $440,000 with additional bonus potential awarded if certain performance metrics are exceeded. As a sign-on bonus, Mr. Manion was paid $200,000 in cash in July 2021 and ~~is subject to customary closing conditions, including, among other things, (i) the receipt~~received a restricted stock award for approximately 214,000 shares with a fair value of ~~regulatory approvals, including applicable antitrust approvals, (ii) the accuracy~~$400,000. This restricted stock award vests for 50% of the ~~respective parties’ representations~~shares in July 2022 and ~~warranties, subject~~50% in July 2023. In January 2022, Mr. Manion will be eligible to ~~customary qualifications,~~receive annual restricted stock awards that will vest in three years to the extent that targets and ~~(iii) material compliance~~performance metrics established by the parties with their respective covenants and obligations. In addition, the Merger Agreement contains certain termination rights, including by the Company or the Sellers Agent in the event the closing has not occurred by September 30, 2020 (the “Outside Date”). Pursuant to the Merger Agreement, on the closing date (the “Closing Date”), Ariix will merge with Merger Sub, with Ariix as the surviving entity and becoming a wholly-owned subsidiaryBoard of ~~the Company.~~

~~On the Closing Date,~~If Mr. Manion’s employment is subsequently terminated by the Company without Cause (as defined in the employment agreement) or he resigns with Good Reason (as defined in the employment agreement), vesting for certain equity awards will be ~~required~~accelerated and he is entitled to ~~pay the Sellers $~~severance payments consisting of base compensation, target performance bonus at ~~25.0~~80 ~~million~~% of base compensation, and health insurance benefits for a period up to 18 months. If Mr. Manion’s employment is terminated in ~~cash and issue (i)~~ ~~18.0~~ ~~million shares~~connection with a change of ~~Common Stock, (ii) a convertible promissory note~~control, vesting for $~~10.0~~ ~~million that matures six months from the Closing Date (the “Six-Month Convertible Note”), and (iii) a convertible promissory note for $141.3~~ ~~million that~~ ~~matures 24 months from the Closing Date~~ ~~(the “Two-Year Convertible Note” and jointly with the Six-Month Convertible Note, the “Convertible Notes”). The original principal balance of the Convertible Notes~~certain equity awards will be ~~subject~~accelerated and he is entitled to ~~adjustment based on the working capital~~severance payments consisting of ~~Ariix at the Closing Date. In connection with the Acquisition~~annual base compensation for 2 years, performance bonuses equal to 360% of annual base compensation, and ~~subject to approval by the Company’s stockholders, the Company will issue to Frederick Cooper or his designees~~ ~~7.0~~ ~~million shares~~health insurance benefits for a period of Common Stock in consideration of a three year non-competition, non-solicitation, invention assignment, and right of first refusal agreement to buy or license any intellectual property developed during the term of the agreement.18 months.

The Convertible Notes will be subordinated to the EWC Credit Facility and bear no interest if paid in full within six months of the Closing Date. If the Two-Year Convertible Note is not paid in full within six months of the Closing Date, it will retroactively bear interest at ~~7.0% per annum through the maturity date. Subject to approval by the Company’s stockholders and solely at the election of the Company,~~ ~~the Convertible Notes and any accrued interest will be convertible into Common Stock with a conversion price floor of $2.00~~ ~~per share of Common Stock, a conversion price cap of $6.00 per share of Common Stock, and the automatic conversion into Common Stock if the market price of the Common Stock reaches $6.00 per share~~.

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

In December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of the virus ~~had~~ resulted in a world-wide pandemic. ~~The~~By March 2020, the U.S. economy ~~was~~had been largely shut down by mass quarantines and government mandated ~~stay-at-home~~stay-in-place orders (the “Orders”) to halt the spread of the virus. ~~These~~Many of these Orders have been relaxed or lifted in jurisdictions where large portions of the population have been vaccinated, but there is considerable uncertainty about whether the Orders will need to be reinstated due to the ongoing spread of new variants of COVID-19. A significant portion of the worldwide population remains unvaccinated, and uncertainty also exists about whether existing vaccines will be effective as new variants of COVID-19 emerge. Accordingly, the overall impact of COVID-19 continues to have an adverse impact on global business activities. The Orders required some of ~~our~~the Company’s employees to work from home when possible, and other employees ~~have been~~were entirely prevented from performing their job duties until the Orders are relaxed or lifted. These Orders have adversely impacted our customers such as restaurants, hotels, stadiums and airports in the United States, whereby average monthly revenue for that line of our distribution business decreased by approximately 48% for the four months ended June 30, 2020 compared to the first two months of 2020. We expect these lower sales levels for this line of business in our NewAge segment to continue until the COVID-19 Orders are lifted and consumers resume visiting restaurants, attending stadium events, and traveling. In foreign jurisdictions, which accounted for approximately 64% of our net revenue for the three months ended June 30, 2020, our direct-to-consumer selling model typically relies heavily on the use of our IPC sales force in close contact with our customers. The COVID-19 pandemic has required alternative selling approaches such as through social media. During the three months ended June 30, 2020, we saw reductions in our direct-to-consumer segment, and we may be unable to avoid future reductions in net revenue using these alternative selling approaches that avoid direct contact with our customers.at times. The world-wide response to the pandemic ~~has~~ resulted in a significant downturn in economic activity and there is no assurance that government stimulus programs will successfully restore the economy to the levels that existed before the pandemic. If an economic recession or depression is sustained, it could have a material adverse effect on ~~our~~the Company’s business as consumer demand for ~~our~~its products could decrease.

~~While these Orders were relaxed or lifted in different~~Foreign jurisdictions ~~at various times during~~accounted for approximately 78% and 68% of the ~~three~~Company’s net revenue for the six months ended June 30, 2021 and the year ended December 31, 2020, ~~the overall~~respectively. The impact of COVID-19 ~~continues to~~was a significant contributing factor for the year ended December 31, 2020, which resulted in decreases in net revenue in foreign countries as a group. While the Company’s direct-to-consumer selling model typically relies heavily on the use of its Brand Partner sales force in close contact with customers, the pandemic has required alternative selling approaches such as through social media. Until vaccines or other successful mitigation of COVID-19 have ~~an adverse impact on business activities across~~been widely administered throughout the ~~world. There is~~global population, no assurance can be provided that ~~Orders~~the Company will be able to avoid future reductions in net revenue using alternative selling approaches that ~~were previously relaxed or lifted will not~~avoid direct contact with customers. While the current disruption to the Company’s business is expected to be ~~reinstated as~~temporary, the spread of COVID-19 continues. For example, many jurisdictions reinstated masking orders in July 2020 after test results showed a resurgence of the pandemic. Resurgence of the pandemic in some markets has slowed the reopening process. If COVID-19 infection trends continue to reverse and the pandemic intensifies and expands geographically, its negative impacts on our sales could be more prolonged and may become more severe. The long-term financial impact on ~~our~~the Company’s business cannot be reasonably estimated at this time.

This Quarterly Report on Form 10-Q (this “Report”) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Report, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, but are not limited to, information concerning:

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Item 1A. “Risk Factors” of our ~~2019~~2020 Annual Report on Form 10-K as filed with the SEC on March ~~16, 2020~~18, 2021 (the ~~“2019~~“2020 Form 10-K”)~~, and additional Risk Factors discussed in Part II, Item 1A of this Report.~~. Moreover, we operate in very competitive and rapidly changing markets. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements in this Report are made as of the date of the filing, and except as required by law, we disclaim and do not undertake any obligation to update or revise publicly any forward-looking statements in this Report. You should read this Report and the documents that we reference in this Report and have filed with the Securities and Exchange Commission (“SEC”) with the understanding that our actual future results, levels of activity and performance, as well as other events and circumstances, may be materially different from what we expect.

You should read the following discussion and analysis of our financial condition and results of operations together with (i) our financial statements and related notes included in Part I, Item 1 of this Report, (ii) our audited financial statements for the years ended December 31, ~~2019~~2020 and ~~2018~~2019 set forth in Item 8 of ~~our 2019~~the 2020 Form 10-K, and (iii) the related Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 7 of ~~our 2019~~the 2020 Form 10-K.

Certain figures, such as interest rates and other percentages included in this section, have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage and dollar amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

~~Our mission~~We are an organic and healthy products company intending to become the world’s leading social selling and distribution company. NewAge, Inc. is a purpose-driven firm dedicated to ~~inspire~~providing healthy products to consumers and ~~educate~~inspiring them to “Live Healthy.” We commercialize our portfolio of products across more than 50 countries worldwide and strive to disrupt with industry leading social selling tools and technologies. More than 72% of the ~~planet~~Company’s revenue is ordered and fulfilled online including auto-delivery subscriptions, and more than 85% of our products are delivered directly to ~~“live healthy,” and we support this mission~~consumers’ homes.

We compete in ~~part, by providing healthier, better-for-you products, that support improvement in people’s lives and health. Our goal is to lead in healthy hydration~~three major category platforms including health and wellness, healthy appearance, and nutritional ~~performance~~performance. Within the category platforms, ~~differentiating across the platforms with plant-based ingredients, Noni, CBD,~~we develop and ~~micro~~market a portfolio of science-based, functionally differentiated, and ~~phytonutrients.~~superior performing products and brands. We ~~are focused on improving the~~ ~~lives~~ ofdifferentiate our ~~consumers,~~products utilizing our patents, proprietary formulas and ~~the~~ ~~livelihoods~~ ofproduction process and trade secrets and focus our ~~independent product consultants, representatives and affiliates, while delivering sustainable profitable growth and enhanced shareholder value by focusing on doing well by doing good.~~functional differentiation utilizing different combinations of:

We are a healthy consumer products and lifestyles purpose-driven company engaged in the development and commercialization of a portfolio of organic, natural and other better-for-you products. Those products are grouped into three category platforms, health & wellness, healthy appearance, and nutritional performance. We focus on the development and commercialization of healthy, functionally-differentiated brands within those platforms utilizing Noni, cannabidiol (“CBD”), plant-based ingredients, or phytonutrients as points of difference across the portfolio. We also are one of a few companies in our industry that commercializes its business across multiple channels, employing an omni-channel distinctive route to market, including products sold in traditional retail, ecommerce, direct to consumer, and via our Direct-Store-Distribution (“DSD”) Network. NewAge is building its omni-channel route to market in the 60 countries in which the Company operates, including leverage of its independent product consultants (“IPCs”), a peer-to-peer selling group of approximately 260,000 independent contractor IPCs and customers worldwide.

We believe consumer awareness of the benefits of healthier lifestyles and the availability of healthier products is rapidly accelerating worldwide, and we are seeking to capitalize on that shift. We also believe consumer purchasing behavior is shifting with significantly greater purchases made via ecommerce and alternatives to traditional retail channels, with increasing demand for delivery direct to consumers’ homes.

~~To address the changes~~Utilizing these functionally differentiated ingredients, we intend to build ‘hundred-million dollar’ focus brands in consumer behaviors and opportunities presented by those shifts, NewAge implements a range of marketing and sales initiatives to capitalize on those shifts and build our brands with consumers. We intend for each of our respective platforms. For example, Tahitian Noni already meets this standard, is our largest brand, and has sold more than $7.0 billion since its inception, including approximately $400 million cumulatively recognized by us since our acquisition of Morinda in December 2018. We have multiple studies and human trials validating Tahitian Noni’s efficacy and benefits for reducing inflammation and strengthening the body’s protection against viruses. Also, within the health and wellness platform is our LIMU brand, a fucoidan-rich beverage sourced from seaweed. We have two core brands ~~to have superior functionality~~within the healthy appearance platform including TeMana, a unique skin care portfolio that is infused with Tahitian Noni, and ~~efficacy versus their competitors,~~Lucim, a line of clean skin care products expanding worldwide that was launched in 2020. In the nutritional performance platform, we commercialize a full line of weight management and atother products including nutritional supplements and nutraceuticals and are building out our core brands within the same time, connect emotionally with their respective target audiences. We believe that building emotional connections with consumers, supported by functional points of difference, is critical to building brand loyalty.

~~Our brand~~We believe that the major trend in consumer goods is direct delivery, e-commerce ordering and fulfillment, with purchase intent being driven by social media and friends and family. According to Euromonitor International’s 2019 Lifestyles Survey, the largest driver of purchase intent in every major region of the world was friends and family recommendations and related social media posts. We further believe that these fundamental trends negate the historic advantage of traditional manufacturers geared toward sale of their products, utilizing traditional media, merchandized in traditional retail outlets.

We believe one of NewAge’s competitive advantages is its network of more than 400,000 Brand Partners and customers around the world, and its own DSD system that provides near captive distribution in our respective market areas. We have developed a robust infrastructure and set of execution capabilities across more than 50 countries, with a primary focus on our core markets of Japan, Greater China, Western Europe, and North America.

NewAge has the scale and infrastructure underpinning what we believe to be a differentiated and disruptive business strategy. NewAge believes that what, where, when and how consumers are buying consumable products is transforming. Commercializing our portfolio ~~consists~~ of healthy brands through primarily a ~~range~~direct-route-to-market, utilizing proprietary and industry-leading social selling technology, and connecting with consumers on their terms with our team of ~~owned brands~~more than 400,000 Brand Partners and ~~licensed brands that we commercialize through our omni-channel route~~customers enables us to market. The owned brands include Tahitian Noni Juice, Te Mana, Hiro, Xing, Búcha Live Kombucha, Coco Libre, Aspen Pure and ‘Nhanced. The licensed brands include Nestea, Volvic, Evian, Illy and a rangetake advantage of ~~specialty brands sold primarily~~the fundamental disintermediation happening in ~~specialty outlets and the natural channel and retailers.~~consumer product goods.

Since the consummation of the business combination with Morinda in December 2018, our operating segments have consisted of the Noni by NewAge segment and the NewAge segment. Upon completion of the business combination with Ariix, which comprised a portion of the Noni by NewAge segment, we renamed this segment as the Direct / Social Selling segment to better reflect the overall characteristics shared by the business units that comprise this segment.

The ~~direct to consumer~~net revenue and total assets of the Direct / Social Selling segment increased significantly with the closing of our ~~business acquired from Morinda Holdings, Inc. (“Morinda”) is now rebranded Noni by NewAge.~~acquisition of Ariix on November 16, 2020. The ~~Noni by NewAge~~Direct / Social Selling segment is engaged in the development, manufacturing, and marketing of ~~Tahitian Noni® Juice, a range of other noni-based beverages, the Te Mana portfolio of Healthy Appearance~~ products ~~as well as various other~~in three core category platforms including health and wellness, healthy appearance, and nutritional ~~cosmetic and personal care products.~~performance. The ~~Noni by NewAge~~Direct / Social Selling segment has manufacturing operations in Tahiti, Germany, Japan, the United States, and China. The Direct / Social Selling segment’s products ~~of the Noni by NewAge segment~~ are sold and distributed in more than 6050 countries using ~~IPCs~~Brand Partners through our ~~direct to consumer~~direct-to-consumer selling network and e-commerce business model. ~~Asia Pacific represents~~For the three and six months ended June 30, 2021, approximately ~~77%~~87% of ~~this business, followed by North America at approximately 14%, with~~ the ~~Latin America, Europe, Africa, Australia/ New Zealand and Delivery division comprising~~net revenue of the ~~remainder of 9%.~~Direct / Social Selling segment was generated outside the Unites States.

~~The NewAge~~With the changing economics in the retail brand beverage sector exacerbated by COVID-19, on September 24, 2020, we sold our Brands Within Reach, LLC (“BWR”) subsidiary and the rights to substantially all of our U.S. retail brands to focus on the more profitable, larger scale, higher potential Direct / Social Selling segment ~~manufactures, markets~~of our business. BWR and ~~sells a portfolio~~the U.S. retail brands were included in the Direct Store segment through the disposal date and are referred to herein as the “Divested Business”. For periods after disposal of ~~healthy beverage brands including Nestea, Illy, Xing, Búcha Live Kombucha, Aspen Pure, Coco-Libre, Evian, Volvic, and a range~~the Divested Business, the Direct Store segment is primarily comprised of ~~other imported specialty brands. These products are distributed through~~ our DSD network and a hybrid of other routes to market throughout the United States. The NewAge brands are sold in all channels of distribution including hypermarkets, supermarkets, pharmacies, convenience, restaurants, hotels, airports, gasthat distributes snacks, beverages, and other ~~outlets.~~products direct to stores in Colorado and surrounding states, to wholesale distributors, key account owned warehouses and international accounts using several distribution channels.

~~Reference is made~~On May 14, 2021, our shareholders approved the issuance of shares of Common Stock to ~~Notes 4, 6, 7 and 14~~settle the remaining merger consideration related to our ~~condensed consolidated financial statements included~~November 2020 business combination with Ariix. By obtaining approval to issue shares of Common Stock, we eliminated the possibility of being required to pay $163.3 million in Part I, Item 1 of this Report for a discussion of recent developments since January 1, 2020, including implementation of a restructuring plan designed to achieve selling, general and administrative cost reductions, proceeds from the PPP Loan with EWB in an aggregate principal amount of approximately $6.9cash. We will issue 11.7 million ~~pursuant to the recently-enacted U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an amendment to the EWB Credit Facility in March 2020, and sales~~shares of our ~~common stock under~~Common Stock as soon as the ~~ATM Agreement that resulted in gross proceeds~~Sellers provide detailed issuance instructions, and 2.9 million shares are issuable by January 16, 2022. We are also obligated to issue 20.1 million shares of ~~$25.8 million for the six months ended June 30, 2020. In addition, reference is made to Note 14 to~~ our ~~condensed consolidated financial statements for discussion of the Fourth Amendment to the EWB Credit Facility, repurchase and retirement~~Common Stock on November 16, 2021. However, this number of shares ~~for $1.2 million, and the Merger Agreement with Ariix, LLC which we intend~~is subject to ~~acquire for total consideration in excess of $200 million~~subsequent adjustments based on the ~~current~~outcome of potential indemnification claims by either party. Under the Amended Ariix Merger Agreement, indemnification claims awarded to either party will be settled by increasing or decreasing the number of shares based on a fixed conversion price of $5.53 per share. Accordingly, we are required to continue to account for the shares issuable on November 16, 2021 as a derivative liability until the number of shares is fixed.

On May 14, 2021, our shareholders approved an increase in authorized shares of Common Stock and the Reincorporation in Delaware. On May 24, 2021, we reincorporated to the State of Delaware under a plan of conversion, dated May 14, 2021. Pursuant to the plan of conversion, we also adopted new bylaws. As a result of the reincorporation, each outstanding share of our Common Stock as a Washington corporation automatically converted into an outstanding share of our Common Stock as a Delaware corporation. In addition, each outstanding stock option and warrant, or right to acquire shares of our Common Stock as a Washington corporation converted into an equivalent stock option, warrant, or right to acquire, upon the same terms and conditions for the same number of shares of our Common Stock as a Delaware corporation. As a Delaware corporation, we have the authority to issue up to 400.0 million shares of Common Stock and up to 1.0 million shares of Preferred Stock.

On June 1, 2021, we entered into an Asset Purchase Agreement (“APA”) with Aliven, Inc. (“Aliven”) that was accounted for as a business combination. Aliven is a Japan-based direct selling company that we acquired to accelerate growth with our direct-to-consumer business model in Japan and to expand our portfolio of healthy products. The total purchase consideration consisted of approximately 1.1 million shares of our Common Stock with a fair value of approximately $2.6 million.

In July 2021, we were informed that forgiveness of our PPP Loans was approved by the SBA for approximately $9.7 million, including accrued interest through June 30, 2021. The forgiveness of these PPP Loans will be recognized in the third quarter of 2021 when the lender legally released us of our obligations to repay the debts.

These recent developments are ~~also~~ discussed ~~below~~further under the caption Liquidity and Capital Resources.

In March 2020, we initiated a strategic review of our U.S. retail brands and the BWR division. This review is currently in process and is expected to be completed by the end of the third quarter of 2020. We have not entered into any agreements or understandings with any potential strategic partners in connection with such review.

For a description of the key components of our condensed consolidated statements of operations, please refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in ~~our 2019~~the 2020 Form 10-K.

For a discussion of our critical accounting policies, please refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in ~~our 2019~~the 2020 Form 10-K.

Our unaudited condensed consolidated statements of operations for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 are presented below (dollars in thousands):

	2020		2019		Change		Percent		2021			2020			Change			Percent

Net revenue	$	62,637	$	66,348	$	(3,711)		-6%	$	124,040		$	62,637		$	61,403			98	%
Cost of goods sold		24,559		24,699		(140)		-1%		40,241			24,559			15,682			64	%

Gross profit		38,078		41,649		(3,571)		-9%		83,799			38,078			45,721			120	%
Gross margin		61%		63%						68	%		61	%

Operating expenses:
Commissions		18,405		19,607		(1,202)		-6%		43,320			18,405			24,915			135	%
Selling, general and administrative		26,277		28,175		(1,898)		-7%		41,042			26,277			14,765			56	%
Gain from change in fair value of earnout obligations		-		(6,665)		6,665		-100%
Depreciation and amortization expense										4,723			1,761			2,962			168	%
Loss on disposal of Divested Business										4,339			-			4,339			n/a
Impairment of right-of-use assets		400		1,500		(1,100)		-73%		-			400			(400	)		(100	)%
Depreciation and amortization expense		1,761		2,017		(256)		-13%

Total operating expenses		46,843		44,634		2,209		5%		93,424			46,843			46,581			99	%

Operating loss		(8,765)		(2,985)		(5,780)		194%		(9,625	)		(8,765	)		(860	)		10	%

Non-operating income (expense):
Gain (loss) from sale of property and equipment		14		-		14		n/a
Interest expense		(600)		(756)		156		-21%		(3,040	)		(600	)		(2,440	)		407	%
Gain (loss) from change in fair value of derivatives		20		-		20		n/a
Gain from change in fair value of derivatives										30,829			20			30,809			154045	%
Interest and other income (expense), net		328		(143)		471		-329%		(53	)		342			(395	)		(115	)%

Loss before income taxes		(9,003)		(3,884)		(5,119)		132%
Income (loss) before income taxes										18,111			(9,003	)		27,114			(301	)%
Income tax expense		(551)		(7,797)		7,246		-93%		(740	)		(551	)		(189	)		34	%

Net loss	$	(9,554)	$	(11,681)	$	2,127		-18%
Net income (loss)									$	17,371		$	(9,554	)	$	26,925			(282	)%

Presented below is our net revenue, cost of goods sold, gross profit and gross margin by segment for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 (dollars in thousands):

	Noni by NewAge Segment								NewAge Segment								Direct / Social Selling Segment											Direct Store Segment
	2020		2019		Change		Percent		2020		2019		Change		Percent		2021			2020			Change		Percent			2021			2020			Change			Percent

Net revenue	$	46,861	$	52,060	$	(5,199)		-10%	$	15,776	$	14,288	$	1,488		10%	$	109,752		$	46,861		$	62,891		134	%	$	14,288		$	15,776		$	(1,488	)		(9	)%
Cost of goods sold		10,958		11,591		(633)		-5%		13,601		13,108		493		4%		29,272			10,958			18,314		167	%		10,969			13,601			(2,632	)		(19	)%

Gross profit	$	35,903	$	40,469	$	(4,566)		-11%	$	2,175	$	1,180	$	995		84%	$	80,480		$	35,903		$	44,577		124	%	$	3,319		$	2,175		$	1,144			53	%
Gross margin		77%		78%						14%		8%						73	%		77	%							23	%		14	%

As discussed above under the caption Operating Segment Overview, on September 24, 2020, we sold the Divested Business, which was a component of our Direct Store segment and included in our consolidated statements of operations through the disposal date. Accordingly, the Divested Business is excluded from our results of operations for the three months ended June 30, 2021. However, for the three months ended June 30, 2021, we did recognize an additional loss on disposal of the Divested Business of $4.3 million related to a note receivable we no longer expect to collect and certain disputed payables. Presented below is a summary of the operating loss of the Divested Business that is included in our historical results for the three months ended June 30, 2020 (in thousands):

Since September 25, 2020, the Direct Store segment is primarily comprised of our legacy DSD and e-commerce lines of business (the “Retained Business”). Please refer to the captions below for further discussion with respect to our net revenue, cost of goods sold, gross profit and gross margin by segment, including the results of operations of the Divested Business and the Retained Business of the Direct Store segment for the three months ended June 30, 2021 and 2020.

Net Revenue. Net revenue ~~decreased~~increased from ~~$66.3 million for the three months ended June 30, 2019 to~~ $62.6 million for the three months ended June 30, 2020 ~~a decrease~~to $124.0 million for the three months ended June 30, 2021, an increase of ~~$3.7~~$61.4 million or 6%98%. For the three months ended June 30, ~~2020, this decrease consisted of decreases~~2021, the increase in net revenue ~~of $5.2~~was attributable to net revenue generated by Ariix for $65.7 million and Aliven for ~~the Noni by NewAge segment,~~$1.6 million, partially offset by ~~an increase~~reductions in net revenue for our legacy businesses of ~~$1.5 million for the NewAge segment.~~$4.5 million.

Net revenue for the ~~Noni~~Direct / Social Selling segment increased by ~~NewAge segment decreased by $5.2~~$62.9 million from ~~$52.1 million for the three months ended June 30, 2019 to~~ $46.9 million for the three months ended June 30, ~~2020. We believe~~2020 to $109.8 million for the three months ended June 30, 2021. This increase was attributable to net revenue from our newly acquired businesses of $65.7 million for Ariix and $1.6 million for Aliven, for a total of $67.3 million. This increase due to our newly acquired businesses was partially offset by a reduction in net revenue of $4.5 million for the legacy portion of the Direct / Social Selling segment. The decrease in net revenue for the ~~Noni by NewAge~~legacy portion of the Direct / Social Selling segment was ~~primarily caused by decreased purchasing~~a result of (i) closure and/or consolidation of a number of smaller, non-core, unprofitable markets on a standalone basis, and (ii) lower quantities of products purchased by consumers during the COVID-19 pandemic and the related ~~Orders~~mass quarantines and government mandated stay-in-place orders that ~~were~~have been in effect ~~during~~in varying degrees since March 2020.

Net revenue for the three months ended June 30, 2020. Our direct-to-consumer selling model typically relies heavily on the use of our IPC sales force in close contact with our customers. However, the COVID-19 pandemic required alternative selling approaches, such as through social media which we believe are improving but still currently less effective than in-person selling in certain regions. The impact of the pandemic was a significant contributing factorDirect Store segment decreased by $1.5 million from $15.8 million for the three months ended June 30, 2020 that resulted in decreases in net revenue of 17% in China, 10% in Japan, and 18% in all other foreign countries as a group. However, Noni by NewAge’s net revenue in the United States increased by 13% for the three months ended June 30, 2020. We expect our consolidated sales levels will continue to be impacted by COVID-19 until a vaccine or other successful mitigation is developed. In addition to the impact of COVID-19, we believe our net revenue in China was negatively impacted by the introduction in May 2020 of a new compensation plan for our IPCs, which typically results in tentative buying patterns until the mechanics of the new plan are fully understood.

~~Net revenue for the NewAge segment increased by $1.5 million from~~ $14.3 million for the three months ended June 30, ~~2019~~2021. This decrease was attributable to ~~$15.8~~a reduction in net revenue of $5.9 million ~~for~~due to our disposal of the ~~three months ended June 30, 2020. The~~Divested Business in September 2020, partially offset by an increase in net revenue for the ~~NewAge~~Retained Business of the Direct Store segment ~~for the three months ended June 30, 2020 was attributable to $2.3~~of $4.5 million ~~of net revenue related to BWR, which was acquired in July 2019, partially offset by a decrease~~or 45%. This increase in net revenue for ~~our U.S. retail brands business of $0.8 million. The COVID-19 Orders have adversely impacted~~ the ~~Company’s customers such as restaurants, hotels, stadiums and airports in the United States, whereby average monthly revenue for that line~~Retained Business of the ~~Company’s distribution business decreased by approximately 48% for the four months ended June 30, 2020 compared~~Direct Store segment was attributable to ~~the first two months of 2020. We were able to partially mitigate the reductions in sales as a result of increased sales of personal protective equipment~~new customers and ~~hand sanitizer by the DSD division. We are currently evaluating our strategic alternatives with our U.S. retail brands and the BWR division which accounted for a combined $3.4 million~~expansion of the ~~net revenue of the NewAge segment~~product portfolio for ~~the three months ended June 30, 2020.~~our DSD business.

Cost of goods sold. Cost of goods sold ~~decreased~~increased from ~~$24.7 million for the three months ended June 30, 2019 to~~ $24.6 million for the three months ended June 30, 2020 ~~a decrease of $0.1 million. For~~to $40.2 million for the three months ended June 30, ~~2020, a decrease~~2021, an increase of ~~$0.6~~$15.7 million. Cost of goods sold for the Direct / Social Selling segment increased by $18.3 million, ~~was attributable to the Noni by NewAge segment,~~ partially offset by ~~an increase of $0.5 million attributable to the NewAge segment.~~

~~The $0.6 million reduction~~a decrease in cost of goods sold of $2.6 million for the ~~Noni by NewAge segment represents~~Direct Store segment. Cost of goods sold as a ~~reduction~~percent of 5%net revenue improved to 32% for the three months ended June 30, 2021 as compared to 39% for the three months ended June 30, 2020. This seven-percentage point improvement was driven by a shift in segment product mix and target cost synergies associated with the merger with Ariix.

The increase in cost of goods sold for the Direct / Social Selling segment of $18.3 million was primarily attributable to the cost of products sold by Ariix for $19.1 million and Aliven for $0.2 million. Cost of goods sold for the legacy business of the Direct / Social Selling segment decreased ~~primarily due~~by $1.1 million or 10% which was identical to ~~lower product shipments associated with~~ the 10% reduction in ~~sales,~~net revenue for the legacy business of the Direct / Social Selling segment as discussed above. In order to partially ~~offset by~~mitigate the ~~elimination~~effects of ~~a charge of $0.8 million~~COVID-19 for the three months ended June 30, ~~2019~~2021 and 2020, we offered additional discounts and promotions to the customers of the legacy business of the Direct / Social Selling Segment that are reflected in cost of goods sold.

For the three months ended June 30, 2021, the Direct / Social Selling segment also had a non-recurring charge to cost of goods sold of $0.2 million that related to the ~~Morinda~~sale of inventories acquired as part of the Ariix business ~~combination that closed on December 21, 2018.~~combination. The fair value of work-in-process and finished goods inventories on the closing date of the ~~Morinda~~Ariix business combination exceeded the historical carrying value, which represented an element of built-in profit on the closing date that was charged to cost of goods sold as a portion of the related inventories were sold ~~in 2019. For~~for the three months ended June 30, 2019, a portion of the closing date inventories was sold, which resulted in a charge to cost of goods sold of approximately $0.8 million. The elimination of this $0.8 million charge in 2020 was partially offset by an increase in inventory-related charges of $0.2 million.2021.

Cost of goods sold for the ~~NewAge~~Direct Store segment ~~increased~~decreased by ~~4% or $0.5~~$2.6 million from $13.6 million for the three months ended June 30, 2020 to $11.0 million for the three months ended June 30, 2021. The decrease in cost of goods sold for the Direct Store segment was due to the elimination of cost of goods sold related to the Divested Business which amounted to $6.3 million for the three months ended June 30, 2020. This decrease was partially offset by an increase ~~was attributable to~~in cost of goods sold ~~of $1.7 million related to BWR that was acquired in July 2019, partially offset by a reduction in write-offs related to excess and obsolete inventories and lower product costs~~ for the ~~DSD and U.S. retail brands division~~Retained Business of $3.6 million or 50%, from $7.3 million for the three months ended June 30, ~~2020.~~2020 to $11.0 million for the three months ended June 30, 2021. The increase in cost of goods sold for the Retained Business was primarily attributable to higher product costs associated with a 45% increase in net revenue.

Gross profit. Gross profit ~~decreased~~increased from ~~$41.6 million for the three months ended June 30, 2019 to~~ $38.1 million for the three months ended June 30, 2020 ~~a decrease~~to $83.8 million for the three months ended June 30, 2021, an increase of ~~$3.5~~$45.7 million or 9%120%. The ~~decrease~~increase in gross profit ~~was due~~consisted of $44.6 million attributable to the ~~Noni~~Direct / Social Selling segment and $1.1 million attributable to the Direct Store segment. The improvement in gross profit for the Direct / Social Selling segment was attributable to gross profit generated by ~~NewAge segment which decreased by $4.6~~Ariix for $46.6 million ~~due~~and $1.4 million for Aliven for a total of $48.0 million for the three months ended June 30, 2021. These increases attributable to ~~net revenue that decreased by 10%,~~our newly acquired businesses were partially offset by ~~cost~~a reduction in gross profit of ~~goods sold~~$3.4 million related to the legacy business of the Direct / Social Selling segment that ~~decreased~~resulted from lower sales caused by ~~5% as discussed above.~~ the COVID-19 pandemic. For each of the three months ended June 30, 2021 and 2020, gross margin for the legacy business of the Direct / Social Selling segment was 77%. For the three months ended June 30, 2021, the aggregate gross margin for the businesses acquired from Ariix and Aliven was 71%.

The ~~NewAge~~Direct Store segment accounted for an increase in gross profit of ~~$1.0~~$1.1 million driven by net revenue that increased by 10% whereas cost of goods sold only increased by 4%. We are currently evaluating our strategic alternatives with our U.S. retail brands and the BWR division, which generated approximately break-even gross profit during the three months ended June 30, 2020.

~~Consolidated gross margin decreased from 63%~~ for the three months ended June 30, ~~2019~~2021, driven by cost of goods sold that decreased by 19% whereas net revenue decreased by only 9%. The Divested Business accounted for approximately $0.3 million of negative gross profit for the three months ended June 30, 2020, whereas the Retained Business generated an additional $0.8 million of gross profit for the three months ended June 30, 2021. The Retained Business generated gross profit of approximately $2.5 million and gross margin of 25% for the three months ended June 30, 2020, compared to gross profit of $3.3 million and gross margin of 23% for the three months ended June 30, 2021.

Consolidated gross margin increased from 61% for the three months ended June 30, ~~2020. For~~2020 to 68% for the three months ended June 30, 2021. Gross margin for the Direct / Social Selling segment decreased from 77% for the three months ended June 30, 2020 ~~gross margin~~to 73% for ~~our Noni by NewAge segment decreased by 1% whereas gross~~the three months ended June 30, 2021. Gross margin for the ~~NewAge~~Direct Store segment increased from 8%14% for the three months ended June 30, 2020 to ~~14%.~~23% for the three months ended June 30, 2021.

Commissions. Commissions were ~~$19.6~~$43.3 million for the three months ended June 30, ~~2019~~2021 compared to $18.4 million for the three months ended June 30, 2020, ~~a decrease~~an increase of ~~$1.2~~$24.9 million. ~~Substantially all of this reduction was attributable to the Noni by NewAge segment which decreased from $19.2 million for~~For the three months ended June 30, ~~2019 to $17.9 million~~2021, commissions for the ~~three months ended June 30, 2020. The~~Direct / Social Selling segment included an aggregate of $27.5 million related to the businesses acquired from Ariix and Aliven, partially offset by a reduction in commissions for our legacy businesses of $2.6 million. Commissions for our legacy businesses decreased by 14%, primarily due to the decrease in ~~commissions of $1.3 million for the Noni by NewAge segment was primarily attributable to lower~~ net revenue for the ~~three months ended June 30, 2020. Under Noni by NewAge’s business model,~~legacy portion of the Direct / Social Selling segment of 10% and the elimination of commissions ~~typically range between 37% and 39% of net revenue whereas commissions for~~related to the ~~NewAge segment are typically about 3% of net revenue.~~Divested Business.

Selling, general and administrative expenses. ~~Selling, general and administrative (“~~SG~~&A”)~~&A expenses ~~decreased~~increased from ~~$28.2~~$26.3 million ~~for the three months ended June 30, 2019 to $26.3 million~~or 42% of net revenue for the three months ended June 30, 2020 to $41.0 million or 33% of net revenue for the three months ended June 30, 2021, an increase of $14.8 million that was partially offset by a ~~decrease~~reduction of ~~$1.9 million.~~$2.1 million related to the Divested Business. The ~~primary cost reductions consisted~~reduction in SG&A as a percent of net revenue reflects the leverage of a consolidated growing business. The net increase in SG&A of $14.8 million was comprised of increases in compensation and benefits expense of $7.8 million, professional fees of $3.2 million, transaction fees related to the sale of products of $1.1 million, communications expenses of $1.0 million, market costs of $0.7 million, travel and other business expenses of $0.7 million, and occupancy costs of ~~$1.5~~$0.3 million.

For the three months ended June 30, 2021, approximately $15.5 million ~~marketing~~of our SG&A expenses related to the businesses acquired from Ariix and Aliven, including compensation and benefits costs of $8.7 million, professional fees of $1.7 million, transaction fees related to the sale of products of $1.2 million, communications expenses of $0.8 million, ~~travel~~and occupancy costs of ~~$0.3 million, and credit card transaction fees of $0.1 million. These decreases in SG&A expense totaled $2.7 million and were partially offset by increases in professional fees of~~ $0.6 ~~million, general business expenses of $0.1 million that was driven by higher director and officer insurance costs in 2020, and stock-based compensation of $0.1~~ million. For the three months ended June 30, ~~2020,~~2021, SG&A expenses ~~include $0.3 million for due diligence and other costs~~ related to ~~potential acquisition candidates~~corporate overhead activities and ~~$0.3~~our legacy businesses decreased by $0.7 million ~~for additional professional fees.~~which was primarily due to a reduction in compensation and benefits and marketing costs.

In April 2020, we initiated a restructuring plan that is designed to achieve selling, general and administrative cost reductions. This restructuring plan is primarily focused on reductions in marketing and other personnel whereby we terminated approximately 100 employees in May and June 2020. We incurred severance costs of $0.9 million for the three months ended June 30, 2020. For the three months ended June 30, 2020, our cash-based compensation was reduced by approximately $0.9 million due to the initial results of the restructuring plan, but this savings was completely offset by the severance payments, whereby cash-based compensation was unchanged compared to the three months ended June 30, 2019. As a result of our implementation of the restructuring plan, we expect to achieve annualized cost savings of approximately $5.8 million related to the terminated employees, but no assurance can be provided that this restructuring plan will be successful in achieving the intended cost reductions.

~~Change in fair value of earnout obligations.~~ In connection with the Morinda business combination, we were obligated to make an earnout payment referred to as a Milestone Dividend up to an aggregate of $15.0 million if the Adjusted EBITDA of Morinda was at least $20.0 million for the year ended December 31, 2019. The estimated fair value of the Milestone Dividend decreased by approximately $6.7 million from $13.2 million as of March 31, 2019 to approximately $6.5 million as of June 30, 2019. This reduction in the fair value of the Milestone Dividend resulted in an unrealized gain of approximately $6.7 million for the three months ended June 30, 2019. For the three months ended June 30, 2020, we did not have any gain or loss on the change in fair value of earnout obligations.

~~Impairment expense.~~ Impairment expense related to right-of-use assets (“ROU”) decreased from $1.5 million for the three months ended June 30, 2019 to $0.4 million for the three months ended June 30, 2020, a decrease of $1.1 million. In June 2019, we began attempting to sublease a portion of our ROU assets previously used for warehouse space that were no longer needed for current operations. As a result, an impairment evaluation was completed that resulted in recognition of an impairment charge of $1.5 million for the three months ended June 30, 2019. This evaluation was based on the expected time to obtain a suitable subtenant and current market rates for similar commercial properties. As of June 30, 2020, we are continuing our efforts to obtain a subtenant for this space. Due to longer than expected timing to obtain a subtenant that we believe was at least partially attributable to the economic shut down related to COVID-19, we completed an updated impairment evaluation that resulted in an additional impairment charge of $0.4 million for the three months ended June 30, 2020. It is possible that further impairment charges will be incurred if we are not able to locate a subtenant in the next six to eight months, or if the sublease terms are less favorable than our current expectations.

Depreciation and amortization expense. Depreciation and amortization expense included in operating expenses ~~decreased~~increased from ~~$2.0 million for the three months ended June 30, 2019 to $1.8~~$1.7 million for the three months ended June 30, 2020 ~~a decrease~~to $4.7 million for the three months ended June 30, 2021, an increase of ~~$0.2~~$3.0 million. This ~~decrease~~increase was primarily attributable to ~~impairment charges~~amortization expense of ~~$21.7~~$2.9 million ~~recorded in December 2019 that eliminated the net carrying value of substantially all of the~~related to identifiable intangible assets of ~~the NewAge segment.~~$131.8 million acquired in our business combination with Ariix in November 2020.

Loss on disposal of Divested Business. In September 2020, we sold our BWR subsidiary and substantially all U.S. retail brands and recognized a loss of $3.4 million. Based on recent communications with the Buyer, we determined that collection of a $2.5 million note receivable and accrued interest of $0.2 million is unlikely. Additionally, we were informed that BWR refuses to pay approximately $1.6 million of supplier obligations that we may ultimately be responsible to settle. Accordingly, we recognized additional losses related to the disposal of the Divested Business of $4.3 million for the three months ended June 30, 2021.

Interest expense. Interest expense ~~decreased~~increased from ~~$0.8 million for the three months ended June 30, 2019 to~~ $0.6 million for the three months ended June 30, 2020 ~~a decrease~~to $3.0 million for the three months ended June 30, 2021, an increase of $2.4 million. For the three months ended June 30, 2021, interest expense of $3.0 million includes (i) interest expense paid in cash of $0.6 million based on the contractual rate of 8.0% under the Senior Notes entered into in December 2020, (ii) accretion of discount of $2.1 million related to the Senior Notes, and (iii) imputed interest expense of $0.2 ~~million.~~ million related to our deferred lease financing obligation and business combination obligations. As of June 30, 2021, the overall effective interest rate for the Senior Notes was approximately 46.8%, including the 8.0% stated rate.

For the three months ended June 30, 2020, interest expense was primarily attributable to (i) interest expense of $0.2 million based on the contractual rates under ~~the EWB~~our former credit facility with East West Bank (the “EWB Credit ~~Facility of $0.2 million~~Facility”) based on a weighted average interest rate of 5.3% and weighted average borrowings outstanding of $14.3 million, (ii) accretion of discount ~~and amortization of debt issuance costs~~ for a total of $0.2 million, ~~related to the Morinda business combination liabilities and the EWB Credit Facility,~~ (iii) imputed interest expense of $0.1 million related to our deferred lease financing obligation, and (iv) cash settlements under our interest rate swap agreement, unused line fees and other interest charges of $0.1 million. ~~Based on the 1.0% contractual rate, interest expense related to our PPP Loan amounted to approximately $14,000 for the six months ended June 30, 2020.~~

Gain from change in fair value of derivatives.For the three months ended June 30, ~~2019, interest expense~~2021, we recognized a gain from changes in fair value of derivatives of $30.8 million. This gain consisted of (i) $24.1 million related to the Ariix business combination derivative liabilities discussed in Note 3 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report, and (ii) $6.7 million related to warrants issued in the February 2021 Private Placement as discussed in Note 7 to our unaudited condensed consolidated financial statements.

The fair value of derivative liabilities can be extremely volatile from period to period since the related valuations are heavily influenced by the then current market price of our Common Stock. The closing price for shares of our Common Stock decreased by 26% from $3.03 per share as of March 31, 2021 to $2.23 per share as of June 30, 2021. This decrease in the value of our shares was ~~primarily attributable to (i) interest expense based on~~ the ~~contractual rates under~~principal factor that reduced fair value and resulted in the ~~EWB Credit Facility~~aggregate gains from changes in fair value of ~~$0.2 million based on a weighted average interest rate~~derivatives of ~~6.0% and weighted average borrowings outstanding of $15.6~~$30.8 million for the three months ended June 30, 2019, (ii) accretion of discount for a total of $0.5 million related to the Morinda business combination liabilities and the EWB Credit Facility, and (iii) imputed interest expense of $0.1 million related to our deferred lease financing obligation.2021.

Interest and other income (expense), net. ~~For the three months ended June 30, 2020, we had interest~~Interest and other income (expense), net ~~that resulted in income of $0.3 million compared~~amounted to ~~expense~~a loss of $0.1 million for the three months ended June 30, ~~2019.~~2021 and income of $0.3 million for the three months ended June 30, 2020. For the three months ended June 30, 2021, interest and other income (expense), net of $0.1 million was primarily comprised of foreign exchange losses of $0.1 million and a loss on the sale of property and equipment of $0.1 million, partially offset by interest income of $0.1 million. Interest and other income (expense), net for the three months ended June 30, 2020 consisted of foreign exchange gains of $0.2 million and interest income of $0.1 million. ~~Interest and other income (expense), net for the three months ended June 30, 2019 consisted of other non-operating expenses of $0.2 million, partially offset by interest income of $0.1 million.~~

Income tax expense. For the three months ended June 30, 2021 and 2020, we recognized income tax expense of $0.7 million and $0.6 million, ~~which~~respectively. Income tax expense primarily consisted of foreign income taxes associated with profitable foreign markets. ~~Due to the establishment of a valuation allowance applied against our domestic net deferred tax assets, we did not recognize a domestic income tax benefit for the three months ended June 30, 2019.~~

Inflation and changing prices. For the three months ended June 30, ~~2019, we recognized income tax expense~~2021 and 2020, the impact of ~~$7.8 million, which consisted~~inflation and changing prices have not had a significant impact on our net revenue, cost of ~~a $3.3 million valuation allowance, reversal of a domestic tax benefit of $4.1 million that was recognized for the quarter ended March 31, 2019 that was no longer expected to be realized,~~goods sold and ~~foreign tax expense of $0.4 million.~~operating expenses.

Our unaudited condensed consolidated statements of operations for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 are presented below (dollars in thousands):

Presented below is our net revenue, cost of goods sold, gross profit and gross margin by segment for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (dollars in thousands):

As discussed above, the Divested Business is excluded from our results of operations for the six months ended June 30, 2021 except for an additional loss on disposal of the Divested Business of $4.3 million related to a note receivable we no longer expect to collect and certain disputed payables. Presented below is a summary of the operating loss of the Divested Business that is included in our historical results for the six months ended June 30, 2020 (in thousands):

	Noni by NewAge Segment								NewAge Segment
	2020		2019		Change		Percent		2020		2019		Change		Percent

Net revenue	$	96,971	$	100,282	$	(3,311)		-3%	$	29,359	$	24,373	$	4,986		20%	$	10,722
Cost of goods sold		21,462		22,108		(646)		-3%		25,266		22,322		2,944		13%		11,342
Gross loss																		(620	)

Gross profit	$	75,509	$	78,174	$	(2,665)		-3%	$	4,093	$	2,051	$	2,042		100%
Gross margin		78%		78%						14%		8%
Operating expenses:
Selling, general and administrative																		(4,426	)
Commissions																		(105	)
Depreciation and amortization expense																		(62	)

Operating loss																	$	(5,213	)

Please refer to the captions below for further discussion with respect to our net revenue, cost of goods sold, gross profit and gross margin by segment, including the results of operations of the Divested Business and the Retained Business of the Direct Store segment for the six months ended June 30, 2021 and 2020.

Net Revenue. Net revenue increased from ~~$124.7 million for the six months ended June 30, 2019 to~~ $126.3 million for the six months ended June 30, 2020 to $249.6 million for the six months ended June 30, 2021, an increase of ~~$1.7~~$123.2 million or 1%98%. For the six months ended June 30, ~~2020, higher revenues resulted from an~~2021, the increase in net revenue was attributable to net revenue generated by Ariix for $133.9 million and Aliven for $1.6 million, partially offset by a reduction in net revenue for our legacy businesses of ~~$5.0~~$8.2 million.

Net revenue for the Direct / Social Selling segment increased by $127.2 million from $97.0 million for the ~~NewAge segment,~~six months ended June 30, 2020 to $224.2 million for the six months ended June 30, 2021. This increase was attributable to net revenue from our newly acquired businesses of $133.9 million for Ariix and $1.6 million for Aliven, for a total of $135.5 million. This increase due to our newly acquired businesses was partially offset by a reduction in net revenue of ~~$3.3~~$8.2 million for the ~~Noni by NewAge~~legacy portion of the Direct / Social Selling segment.

~~Net revenue for the Noni by NewAge segment decreased by $3.3 million from $100.3 million for the six months ended June 30, 2019 to $97.0 million for the six months ended June 30, 2020. We believe the~~ The decrease in net revenue for the ~~Noni by NewAge~~legacy portion of the Direct / Social Selling segment was ~~primarily caused by decreased purchasing~~a result of (i) closure and/or consolidation of a number of smaller, non-core, unprofitable markets on a standalone basis, and (ii) lower quantities of products purchased by consumers during the COVID-19 pandemic and the related ~~Orders~~mass quarantines and government mandated stay-in-place orders that ~~were~~have been in effect ~~beginning~~ in varying degrees since March 2020. Our direct-to-consumer selling model typically relies heavily on the use of our IPC sales force in close contact with our customers. However, the COVID-19 pandemic required alternative selling approaches, such as through social media, which we believe are improving but still currently less effective than in-person selling in certain regions. As a result, Noni by NewAge’s net revenue decreased by 2% in China, 4% in Japan, and 8% in all other foreign countries as a group. However, Noni by NewAge’s net revenue in the United States increased by 4% for the six months ended June 30, 2020. In addition to the impact of COVID-19, we believe our net revenue in China was negatively impacted by the introduction in May 2020 of a new compensation plan for our IPCs, which typically results in tentative buying patterns until the mechanics of the new plan are fully understood.

Net revenue for the ~~NewAge~~Direct Store segment ~~increased~~decreased by ~~$5.0~~$4.0 million from ~~$24.4~~$29.3 million for the six months ended June 30, ~~2019~~2020 to ~~$29.4~~$25.3 million for the six months ended June 30, ~~2020. The~~2021. This decrease was attributable to a reduction in net revenue of $10.7 million due to our disposal of the Divested Business in September 2020, partially offset by an increase in net revenue for the ~~NewAge~~Retained Business of the Direct Store segment ~~for the six months ended June 30, 2020 was primarily attributable to $4.9~~of $6.7 million ~~of net revenue related to BWR that was acquired in July 2019, and an~~or 36%. This increase of $1.3 million in net revenue related to the DSD division, primarily as a result of sales of personal protective equipment and hand sanitizer. These increases in net revenue total $6.2 million and were partially offset by a decrease in net revenue for ~~our U.S. retail brands business of $1.2 million. The COVID-19 Orders have adversely impacted~~ the ~~Company’s customers such as restaurants, hotels, stadiums and airports in the United States, whereby average monthly revenue for that line~~Retained Business of the ~~Company’s distribution business decreased by approximately 48% for the four months ended June 30, 2020 compared~~Direct Store segment was attributable to ~~the first two months of 2020. We are currently evaluating our strategic alternatives with our U.S. retail brands~~new customers and ~~the BWR division which accounted for a combined $6.7 million~~expansion of the ~~net revenue of the NewAge segment~~product portfolio for ~~the six months ended June 30, 2020.~~our DSD business.

Cost of goods sold. Cost of goods sold increased from ~~$44.4 million for the six months ended June 30, 2019 to~~ $46.7 million for the six months ended June 30, 2020 ~~an increase of $2.3 million. For~~to $78.3 million for the six months ended June 30, ~~2020, $2.9 million~~2021, an increase of ~~this increase was attributable to the NewAge segment, partially offset by a decrease of $0.6 million for the Noni by NewAge segment.~~

$31.6 million. Cost of goods sold for the ~~NewAge~~Direct / Social Selling segment increased by ~~13% or $2.9~~$37.4 million, partially offset by a decrease in cost of goods sold of $5.7 million for the Direct Store segment. Cost of goods sold as a percent of net revenue improved to 31% for the six months ended June 30, 2021 as compared to 37% for the six months ended June 30, 2020. This ~~increase~~six-percentage point improvement was ~~attributable to cost of goods sold of $4.1 million related to BWR that was acquired in July 2019, partially offset~~driven by a ~~reduction~~shift in ~~write-offs related to excess~~segment product mix and ~~obsolete inventories and lower product costs for~~target cost synergies associated with the ~~DSD and U.S. retail brands division for the six months ended June 30, 2020.~~merger with Ariix.

The ~~$0.6 million reduction~~increase in cost of goods sold for the ~~Noni~~Direct / Social Selling segment of $37.4 million was primarily attributable to the cost of products sold by ~~NewAge segment represents a reduction of 3%~~Ariix for ~~the six months ended June 30, 2020, which is consistent with the reduction in net revenue.~~$38.1 million and Aliven for $0.2 million. Cost of goods sold for ~~each~~the legacy business of the ~~six months ended June 30,~~Direct / Social Selling segment decreased by $1.0 million or 5% in comparison to an 8% reduction in net revenue for the legacy business of the Direct / Social Selling segment as discussed above. In order to partially mitigate the effects of COVID-19, since March 2020 we have been offering additional discounts and ~~2019 included total charges~~promotions to the customers of ~~$1.6 million.~~ the legacy business of the Direct / Social Selling Segment that are reflected in cost of goods sold.

For the six months ended June 30, ~~2020,~~2021, the ~~Noni by NewAge~~Direct / Social Selling segment had increased expense of $0.7 million for sales promotion costs and $0.9 million for excess and obsolete and other inventory variances, for a total of $1.6 million. For the six months ended June 30, 2019, the Noni by NewAge segmentalso had a non-recurring charge to cost of goods sold of ~~$1.6~~$0.7 million that related to the sale of inventories acquired as part of the ~~Morinda~~Ariix business ~~combination that closed in December 2018.~~combination. The fair value of work-in-process and finished goods inventories on the closing date of the ~~Morinda~~Ariix business combination exceeded the historical carrying value, which represented an element of built-in profit on the closing date that was charged to cost of goods sold as a portion of the related inventories were sold for the six months ended June 30, ~~2019.~~2021.

Cost of goods sold for the Direct Store segment decreased by $5.7 million from $25.3 million for the six months ended June 30, 2020 to $19.5 million for the six months ended June 30, 2021. The decrease in cost of goods sold for the Direct Store segment was due to the elimination of cost of goods sold related to the Divested Business which amounted to $11.3 million for the six months ended June 30, 2020. This decrease was partially offset by an increase in cost of goods sold for the Retained Business of $5.6 million or 40%, from $13.9 million for the six months ended June 30, 2020 to $19.5 million for the six months ended June 30, 2021. The increase in cost of goods sold for the Retained Business was primarily attributable to higher product costs associated with the 36% increase in net revenue discussed above.

Gross profit. Gross profit ~~decreased~~increased from ~~$80.2 million for the six months ended June 30, 2019 to~~ $79.6 million for the six months ended June 30, 2020 ~~a decrease~~to $171.2 million for the six months ended June 30, 2021, an increase of ~~$0.6~~$91.6 million or 1%115%. The ~~decrease~~increase in gross profit ~~was due~~consisted of $89.9 million attributable to the ~~Noni by NewAge~~Direct / Social Selling segment ~~that decreased by $2.7~~and $1.7 million ~~or 3%, partially offset by an~~attributable to the Direct Store segment. The improvement in gross profit for the ~~NewAge~~Direct / Social Selling segment was attributable to gross profit generated by Ariix for $95.8 million and $1.4 million for Aliven, for a total of ~~$2.1 million. The~~$97.2 million for the six months ended June 30, 2021. These increases attributable to our newly acquired businesses were partially offset by a reduction in gross profit ~~for~~of $7.3 million related to the ~~Noni~~legacy business of the Direct / Social Selling segment that resulted from lower sales caused by ~~NewAge segment was primarily attributable to a $3.3 million reduction in net revenue due to~~ the COVID-19 pandemic. Gross margin for the legacy business of the Direct / Social Selling segment was 77% for the six months ended June 30, 2021 and 78% for the six months ended June 30, 2020. For the six months ended June 30, 2021, the aggregate gross margin for the businesses acquired from Ariix and Aliven was 72%.

The ~~NewAge~~Direct Store segment accounted for an increase in gross profit of ~~$2.0~~$1.7 million driven by net revenue that increased by 20% whereas cost of goods sold only increased by 13%. We are currently evaluating our strategic alternatives with our U.S. retail brands and the BWR division, which incurred a loss of $0.1 million of gross profit duringfor the six months ended June 30, ~~2020.~~

~~For~~2021, driven by cost of goods sold that decreased by 23% whereas net revenue decreased by only 14%. The Divested Business accounted for approximately $0.6 million of negative gross profit for the six months ended June 30, 2020, ~~consolidated~~whereas the Retained Business generated an additional $1.1 million of gross ~~margin decreased from 64% to 63%. Gross margin for our Noni by NewAge segment declined by less than 1%, whereas gross margin for the NewAge segment increased from 8%~~profit for the six months ended June 30, ~~2019~~2021. The Retained Business generated gross profit of approximately $4.7 million and gross margin of 25% for the six months ended June 30, 2020, compared to gross profit of $5.8 million and gross margin of 23% for the six months ended June 30, 2021.

Consolidated gross margin increased from 63% for the six months ended June 30, 2020 to 69% for the six months ended June 30, 2021. Gross margin for the Direct / Social Selling segment decreased from 78% for the six months ended June 30, 2020 to 74% for the six months ended June 30, 2021. Gross margin for the Direct Store segment increased from 14% for the six months ended June 30, ~~2020.~~2020 to 23% for the six months ended June 30, 2021.

Commissions. Commissions were ~~$37.6~~$90.7 million for the six months ended June 30, ~~2019~~2021 compared to $37.9 million for the six months ended June 30, 2020, an increase of ~~$0.3~~$52.8 million. ~~Commissions for the Noni by NewAge segment were unchanged at $36.9 million for~~For the six months ended June 30, ~~2020 and 2019. Commissions~~2021, commissions for the Direct / Social Selling segment included an aggregate of $57.3 million related to the ~~NewAge segment increased~~businesses acquired from Ariix and Aliven, partially offset by ~~$0.3 million~~a reduction in commissions for our legacy businesses of $4.5 million. Commissions for our legacy businesses decreased by 12%, primarily due to ~~net revenue from~~ the ~~BWR reporting unit that was acquired~~decrease in ~~July 2019 and increased~~ net revenue for the ~~remainder~~legacy portion of the ~~NewAge segment.~~Direct / Social Selling segment of 8% and the elimination of commissions related to the Divested Business.

Selling, general and administrative expenses. SG&A expenses increased from ~~$55.0~~$56.9 million ~~for the six months ended June 30, 2019 to $56.9 million~~or 45% of net revenue for the six months ended June 30, 2020 ~~an increase~~to $79.9 million or 32% of ~~$1.9 million. This increase was comprised of (i) cash-based compensation and benefit costs of $2.2 million, primarily due to an increase in the number of employees~~net revenue for ~~most of~~ the six months ended June 30, ~~2020, (ii) professional fees of $2.5 million that was driven by higher auditing, consulting costs and legal fees in 2020, and (iii)~~2021, an increase ~~in general business expenses~~ of ~~$1.2~~$23.0 million that was partially ~~driven~~offset by ~~higher director and officer insurance costs~~a reduction of $4.4 million related to the Divested Business. The reduction in ~~2020. These~~SG&A as a percent of net revenue reflects the leverage of a consolidated growing business. The net increase in SG&A of $23.0 million was comprised of increases in ~~SG&A expense totaled $5.9 million~~compensation and ~~were partially offset by reductions in stock-based compensation~~benefits expense of ~~$1.9~~$14.0 million, professional fees of $5.0 million, transaction fees related to the sale of products of $2.2 million, communications expenses of $1.7 million, occupancy costs of ~~$1.7~~$1.1 million, ~~marketing costs~~and travel and other business expenses of $0.4 million, and ~~travel~~is net of a reduction in marketing costs of ~~$0.2~~$1.4 million. ~~The increase in cash-based compensation and benefits of $2.2 million included severance costs of $0.9 million incurred in connection with the restructuring plan that we initiated in April 2020.~~

For the six months ended June 30, ~~2020,~~2021, approximately $28.9 million of our SG&A expenses ~~include $0.4 million for due diligence and other costs~~ related to ~~potential acquisition candidates~~the businesses acquired from Ariix and ~~$0.9~~Aliven, including compensation and benefits costs of $16.5 million, ~~for additional~~ professional ~~fees.~~

~~Change in fair value~~fees of ~~earnout obligations.~~ ~~In connection with~~$3.3 million, transaction fees related to the ~~Morinda business combination, we were obligated to make an earnout payment referred to as a Milestone Dividend up to an aggregate~~sale of ~~$15.0~~products of $2.3 million, ~~if the Adjusted EBITDA~~occupancy costs of ~~Morinda was at least $20.0~~$1.5 million, ~~for the year ended December 31, 2019. The estimated fair value~~and communications expenses of the Milestone Dividend decreased by approximately $6.7 million from $13.2 million as of December 31, 2018 to approximately $6.5 million as of June 30, 2019. This reduction in the fair value of the Milestone Dividend resulted in an unrealized gain of approximately $6.7 million for the six months ended June 30, 2019.$1.6 million. For the six months ended June 30, ~~2020, we did not have any gain or loss on the change~~2021, SG&A expenses related to corporate overhead activities and our legacy businesses decreased by $5.8 million which was primarily due to a reduction in ~~fair value of earnout obligations.~~marketing costs and compensation and benefits.

~~Impairment expense.~~ Impairment expense related to ROU assets decreased from $1.5 million for the six months ended June 30, 2019 to $0.4 million for the six months ended June 30, 2020, a decrease of $1.1 million. In June 2019, we began attempting to sublease a portion of ROU assets previously used for warehouse space that were no longer needed for current operations. As a result, an impairment evaluation was completed that resulted in an impairment charge of $1.5 million for the six months ended June 30, 2019. This evaluation was based on the expected time to obtain a suitable subtenant and current market rates for similar commercial properties. As of June 30, 2020, we are continuing our efforts to obtain a subtenant for this space. Due to longer than expected timing to obtain a subtenant that we believe was at least partially attributable to the economic shut down related to COVID-19, we completed an updated impairment evaluation that resulted in an additional impairment charge of $0.4 million for the six months ended June 30, 2020. It is possible that further impairment charges will be incurred if we are not able to locate a subtenant in the next six to eight months, or if the sublease terms are less favorable than our current expectations.

Depreciation and amortization expense. Depreciation and amortization expense included in operating expenses ~~decreased~~increased from ~~$4.3 million for the six months ended June 30, 2019 to~~ $3.5 million for the six months ended June 30, 2020 ~~a decrease of $0.7 million. This decrease was primarily attributable~~ to ~~impairment charges of $21.7~~$9.4 million ~~recorded in December 2019 that eliminated the net carrying value of substantially all of the intangible assets of the NewAge segment.~~

~~Gain (loss) from sale of property and equipment.~~ On March 22, 2019, we entered into an agreement with a major Japanese real estate company resulting in the sale for approximately $57.0 million of the land and building in Tokyo that serves as the corporate headquarters of our Japanese subsidiary. Concurrently with the sale, we entered into a lease of this property for an expected term of 20 years with an extension option for an additional seven years. The sale of this property resulted in a gain of $24.1 million. We determined that $17.6 million of the gain was the result of above-market rent inherent in the leaseback arrangement. This portion of the gain is being accounted for as a lease financing obligation whereby the gain will result in a reduction of rent expense of approximately $0.9 million per year over the 20-year lease term. The remainder of the gain of $6.4 million was attributable to the highly competitive process among the entities that bid to purchase the property and, accordingly, was recognized as a gain in our condensed consolidated statements of operations for the six months ended June 30, ~~2019. For~~2021, an increase of $5.9 million. This increase was primarily attributable to amortization expense of $5.7 million related to identifiable intangible assets of $131.8 million acquired in our business combination with Ariix in November 2020.

Interest expense. Interest expense ~~decreased~~increased from ~~$2.4 million for the six months ended June 30, 2019 to~~ $1.2 million for the six months ended June 30, 2020 ~~a decrease~~to $6.2 million for the six months ended June 30, 2021, an increase of $5.0 million. For the six months ended June 30, 2021, interest expense of $6.2 million includes (i) interest expense paid in cash of $1.2 million based on the contractual rate of 8.0% under our Senior Notes, (ii) accretion of discount of $4.4 million related to the Senior Notes, and (iii) imputed interest expense of $0.5 million related to our deferred lease financing obligation and business combination obligations.

As of December 31, 2020, the overall effective interest rate on the Senior Notes was approximately 42.3%, including the 8.0% stated rate. On January 4, 2021, the lenders agreed to amend the Senior Notes in exchange for the issuance of 400,000 shares of Common Stock with a fair value of approximately $1.1 million as of the issuance date. This amount was accounted for as a modification of the Senior Notes that resulted in an additional discount of $1.1 million. This amendment fee and other lender-initiated changes that affect the timing and amount of principal payments are accounted for prospectively as a revision of the effective interest rate. Accordingly, as of June 30, 2021, the overall effective interest rate was approximately 46.8%, including the 8.0% stated rate.

For the six months ended June 30, 2020, interest expense was primarily attributable to (i) interest expense of $0.2 million based on the contractual rates under our former EWB Credit Facility based on a weighted average interest rate of 5.3% and weighted average borrowings outstanding of $14.3 million, (ii) accretion of discount for a total of $0.2 million, (iii) imputed interest expense of $0.1 million related to our deferred lease financing obligation and (iv) cash settlements under our interest rate swap agreement, unused line fees and other interest charges of $0.1 million.

For the six months ended June 30, 2020, interest expense was primarily attributable to (i) interest expense based on the contractual rates under the EWB Credit Facility of $0.4 million based on a weighted average interest rate of 5.3% and weighted average borrowings outstanding of $14.5 million, ~~for the six months ended June 30, 2020,~~ (ii) accretion of discount for a total of $0.3 million related to the Morinda business combination liabilities and the EWB Credit Facility, (iii) imputed interest expense of $0.3 million related to our deferred lease financing obligation, (iv) cash settlements under our interest rate swap agreement of $0.1 million, and (v) unused line fees and other interest charges of $0.1 million. ~~Based on the 1.0% contractual rate, interest expense related to our PPP Loan amounted to approximately $14,000 for the six months ended June 30, 2020.~~

For the six months ended June 30, 2019, interest expense was primarily attributable to (i) termination of the revolving credit facility with Siena Lending Group LLC (the “Siena Revolver”) which resulted in a make-whole prepayment penalty of $0.5 million, (ii) accretion of discount and write-off of debt issuance costs of $0.5 million related to the Siena Revolver, (iii) accretion of discount of $1.1 million related to the Morinda business combination liabilities and the EWB Credit Facility, and (iv) interest expense based on the contractual rates under the EWB Credit Facility of $0.3 million based on a weighted average interest rate of 6.0% and weighted average borrowings outstanding of $8.3 million for the six months ended June 30, 2019.

Gain ~~(loss) on~~from change in fair value of derivatives. For the six months ended June 30, ~~2020,~~2021, we recognized a ~~loss~~gain from ~~the change~~changes in fair value of derivatives of $21.2 million compared to a loss of $0.3 million ~~whereas we recognized a~~for the three months ended June 30, 2020. This gain of ~~$0.5~~$21.2 million consisted of (i) $12.8 million related to the Ariix business combination derivative liabilities discussed in Note 3 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report, and (ii) $8.4 million related to warrants issued on February 16, 2021, as discussed in Note 7 to our unaudited condensed consolidated financial statements.

The fair value of derivative liabilities can be extremely volatile from period to period since the related valuations are heavily influenced by the current market price of our Common Stock. The closing price for shares of our Common Stock decreased by 15% from $2.63 per share as of December 31, 2020, to $2.23 per share as of June 30, 2021. This 15% decrease in the value of our shares was the principal factor that reduced fair value and resulted in the $12.8 million gain related to the Ariix business combination derivative liabilities for the six months ended June 30, ~~2019. In July 2019,~~2021. The closing price for shares of our Common Stock decreased by 37% from $3.52 per share as of February 16, 2021 when the warrants were issued, to $2.23 per share as of June 30, 2021. This 37% decrease in the value of our shares was the principal factor that resulted in the $8.4 million gain related to the warrant derivative liability for the six months ended June 30, 2021.

For the six months ended June 30, 2020, we ~~entered into~~were subject to an interest rate swap agreement entered into in connection with ~~EWB. This~~our former EWB Credit Facility. The fair value of this derivative liability increased by $0.3 million due to a decline in interest rates which resulted in our recognition of a loss for $0.3 million. The swap agreement ~~provides~~provided for a total notional amount of $10.0 million at a fixed interest rate of approximately 5.4% through May 1, 2023, in exchange for a floating rate indexed to the prime rate plus 0.5%. ~~For the six months ended June 30, 2020, we had an unrealized loss of $0.3 million from~~We terminated this ~~interest rate~~ swap agreement ~~due to a decline~~when we terminated the EWB Credit Facility in interest rates. For the six months ended June 30, 2019, we recognized a gain of $0.5 million from the change in fair value of embedded derivatives related to the Siena Revolver that was terminated in March 2019.December 2020.

Interest and other income (expense), net. Interest and other income (expense), net amounted to ~~income~~a loss of ~~$0.8~~$0.4 million for the six months ended June 30, ~~2020~~2021 and ~~a net expense~~income of ~~$0.2~~$0.7 million for the six months ended June 30, ~~2019.~~2020. For the six months ended June 30, ~~2020,~~2021, interest and other income (expense), net was primarily comprised of foreign exchange losses of $0.7 million, and a loss of $0.1 million related to the sale of property and equipment, partially offset by interest income of $0.3 million. Interest and other income (expense), net for the six months ended June 30, 2020 consisted of foreign exchange gains of ~~$0.5~~$0.6 million and interest income of $0.1 ~~million. For the six months ended June 30, 2019, we incurred other debt financing expenses~~million, partially offset by a loss of $0.1 million related to the ~~Siena Revolver~~sale of ~~$0.2 million.~~property and equipment.

Income tax expense. For the six months ended June 30, 2021 and 2020, we recognized income tax expense of $1.9 million and $1.3 million, ~~which~~respectively. Income tax expense primarily consisted of foreign income taxes associated with profitable foreign markets. ~~Due to the establishment of a valuation allowance applied against our domestic net deferred tax assets, we did not recognize a domestic income tax benefit for the six months ended June 30, 2020.~~

Inflation and changing prices. For the six months ended June 30, ~~2019, we recognized income tax expense~~2021 and 2020, the impact of ~~$6.1 million, which consisted~~inflation and changing prices have not had a significant impact on our net revenue, cost of ~~a $3.3 million valuation allowance~~goods sold and ~~foreign tax expense of $2.8 million.~~operating expenses.

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

In February 2021, we entered into a securities purchase agreement in connection with a private placement of units that consisted of an aggregate of approximately 14.6 million shares of Common Stock and warrants to purchase an aggregate of 7.3 million shares of Common Stock. At the closing, we received net proceeds of approximately $53.8 million. As of June 30, 2021, we had cash and cash equivalents of ~~$40.7~~$80.9 million and ~~working capital~~the current portion of ~~$33.6~~restricted cash was $5.6 million, for a total of $86.5 million. For the six months ended June 30, 2020, we incurred a net loss of $21.2 million and we used cash in our operating activities of $23.6 million. For the six months ended June 30, 2020, approximately $13.1 million of our cash used in operating activities was attributable to March 2020 income tax payments related to the sale leaseback of our Tokyo, Japan land and building. As of June 30, ~~2020,~~2021, we ~~have debt and lease obligations due during~~had working capital of $53.9 million.

During the ~~12-months~~12-month period ending on June 30, ~~2021 that will require (i)~~2022, cash payments will be required to ~~the former stockholders~~settle certain obligations, including up to $25.1 million of ~~Morinda of $5.5 million, (ii)~~principal and interest under our Senior Notes discussed below, operating lease payments of ~~$8.6~~$9.1 million, and ~~(iii) principal payments under the EWB Credit Facility~~deferred consideration related to business combinations of ~~$1.5 million (which will be paid from our restricted cash deposits).~~

We entered into the third amendment and waiver (the “Third Amendment”) to the EWB Credit Facility on March 13, 2020. The Third Amendment is expected to have a significant impact on our liquidity and capital resources for the 12-month period ending June 30, 2021. Beginning in March 2020, the Third Amendment required us to deposit an initial amount of $15.1 million in restricted cash balances with EWB, which was reduced to $14.7 million as of June 30, 2020. In addition, for any future amounts borrowed under the EWB Revolver, we are required to increase restricted cash deposits by the corresponding amount of the borrowings. The Third Amendment required equity infusions of at least $15.0 million for the first six months of 2020. We complied with this requirement through the issuance and sale of 16.1 million shares of Common Stock for gross proceeds of $25.8 million through June 30, 2020 under our ATM Agreement.

On July 6, 2020, we entered into the Fourth Amendment (the “Fourth Amendment”) to the EWB Credit Facility. The Fourth Amendment reduced the amount of restricted cash that we are required to maintain in China with a corresponding increase in restricted cash in the United States. The Fourth Amendment also permitted our repurchase of shares of our Common Stock valued at approximately $1.2 million in July 2020, with a corresponding increase in required cash equity infusions from $30.0 million to approximately $31.2 million by December 31, 2020. After deducting gross proceeds of $25.8 million received for the six months ended June 30, 2020, remaining gross equity infusions of $5.4 million are required by December 31, 2020.

On April 14, 2020, we entered into a loan pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act with EWB in an aggregate principal amount of approximately $6.9 million (the “PPP Loan”). We may apply to EWB for forgiveness of the loan based on our actual expenditures for payroll, rent, interest and utilities during the permitted period following the funding of the loan. To the extent that all or part of the loan is not forgiven, we are required to pay interest at 1.0% through the maturity date in April 2022.

On July 20, 2020, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among us, Ariel Merger Sub, LLC (“Merger Sub”), Ariix, LLC (“Ariix”), certain members of Ariix (the “Sellers”) and Frederick Cooper, as primary shareholder and Sellers Agent (the “Sellers Agent”), pursuant to which we agreed to acquire Ariix, which owns five brands in the e-commerce and direct selling channels (the “Acquisition”). Under the Merger Agreement, which is discussed further below, we are required to make a cash payment of $25.0 million on the closing date, which is expected to occur during the third quarter of 2020. In addition, on the closing date, we will be required to issue short-term and long-term convertible notes that provide for future principal payments up to $10.0 million and $141.3 million, respectively. Subject to approval by our stockholders, we may be able to settle all or part of the convertible notes by issuing shares of our Common Stock. Otherwise, the principal balance of the long-term convertible notes plus interest at 7.0% per annum will be payable in cash two years after the closing date. In order to fund the required cash payments under the Merger agreement, we are currently evaluating various alternatives including an equity offering and the refinancing of our EWB Credit Facility.

$1.1 million. We believe our existing cash and cash equivalents of ~~$40.7~~$80.9 million ~~combined with expected future equity net offering proceeds under~~and the ~~ATM Agreement, the potential refinancing~~current portion of ~~our EWB Credit Facility, and future~~restricted cash ~~expected to be generated from operations,~~of $5.6 million will be sufficient to fund ~~business combination payments, debt and lease~~our contractual obligations and working capital requirements ~~for the next 12 months. There are no assurances that we will be able to obtain additional financing~~at least through refinancing the EWB Credit Facility, equity offerings, including under the ATM Agreement, and debt financings in the future. Even if these financing sources are available, they may be on terms that are not acceptable to our board of directors and stockholders.August 2022.

Please refer to the ~~following~~ sections below for further discussion ~~of the terms of the EWB Credit Facility, the ATM Agreement, the Acquisition,~~about our recent financing activities and ~~the PPP Loan.~~

On ~~March 29, 2019,~~February 16, 2021, we entered into a ~~credit facility~~securities purchase agreement in connection with ~~East West Bank~~a private placement for the issuance of an aggregate of approximately 14.6 million shares of Common Stock and warrants to purchase an aggregate of 7.3 million shares (the ~~“EWB Credit Facility”~~“Warrant Shares”). of Common Stock. At the closing on February 19, 2021, we received gross proceeds of approximately $58.0 million. Roth Capital Partners, LLC acted as the exclusive placement agent in exchange for a fee equal to 7% of the gross proceeds. After deducting the placement agent fees, the net proceeds were approximately $53.8 million.

The ~~EWB Credit Facility matures~~warrants have an initial exercise price of $5.00 per share, subject to adjustment in certain circumstances. The warrants are exercisable until March 29, 2024. In the event of certain fundamental transactions, the holders of the warrants could be entitled to a net cash settlement whereby the warrants are not considered to be indexed to our shares of Common Stock. Accordingly, the warrants are required to be recorded at fair value and classified as derivative liabilities. The net proceeds from the private placement of approximately $53.8 million were allocated to the initial fair value of the warrants for $14.1 million and the remainder of $39.7 million was allocated to the shares of Common Stock.

Pursuant to the registration rights agreement, we filed a registration statement covering the resale of the shares of Common Stock and the Warrant Shares that was declared effective by the SEC on March 29, ~~2023~~2021 and that has continued to remain effective since that date. If we fail to maintain the effectiveness of the registration statement, the investors would be entitled to liquidated damages equal to 2.0% of the aggregate subscription amount on each 30-day anniversary of such failure.

On November 30, 2020, we entered into a securities purchase agreement for a private placement of (i) 8.00% Original Issue Discount Senior Secured Notes with an initial principal balance of $32.4 million (the ~~“Maturity Date”~~“Senior Notes”), (ii) 800,000 shares of Common Stock referred to as Commitment Shares, (iii) Class A Warrants to purchase 750,000 shares of Common Stock exercisable at $3.75 per share, and ~~provides~~(iv) Class B Warrants to purchase 750,000 shares of Common Stock exercisable at $5.75 per share. The Senior Notes bear interest at an annual rate of 8.0% applied to the contractual principal balance with such accrued interest payable in cash monthly.

For the months of February 2021 through April 2021, the holders of the Senior Notes requested that we make principal payments up to $1.0 million per month which were paid timely. Beginning in May 2021 and continuing for ~~(i)~~each subsequent month, the holders of the Senior Notes are entitled to request that we make principal payments of up to $2.0 million per month. The holders of the Senior Notes requested principal payments of $1.0 million in May 2021 and $2.0 million in June 2021 that we paid timely. The maturity date of the Senior Notes is on December 1, 2022. However, if the holders of the Senior Notes exercise their rights to demand the maximum principal payments permitted in each future month, the Senior Notes would be repaid in full by August 2022. We may prepay all or a ~~term loan in~~portion of the ~~initial~~outstanding principal amount of ~~$15.0~~the Senior Notes at any time, subject to a prepayment fee of 3.0% of the outstanding principal balance through December 1, 2021.

We were required to maintain restricted cash balances of $18.0 million ~~(the “EWB Term Loan”)~~until February 2021. Beginning in February 2021, the requirement to maintain restricted cash balances was reduced to $8.0 million until such time and ~~(ii) a $10.0~~to the extent that the outstanding stated principal balance of the Senior Notes is reduced below $8.0 million. Assuming the holders of the Senior Notes continue to exercise their rights to demand the maximum principal payments permitted in each month, the stated principal balance is expected to exceed $8.0 million ~~revolving loan agreement (the “EWB Revolver”).~~until April 2022. As of June 30, ~~2020, we had outstanding borrowings~~2021, approximately $5.6 million of ~~$14.0 million under the EWB Term Loan and no borrowings were outstanding under the EWB Revolver.~~ this restricted cash balance is classified as a current asset since those funds may be utilized to make principal payments that are classified within current maturities of long-term debt.

Our obligations under the ~~EWB Credit Facility~~Senior Notes are secured by substantially all of our assets, including all personal property and ~~guaranteed by~~all proceeds and products thereof, goods, contract rights and other general intangibles, accounts receivable, intellectual property, equipment, and deposit accounts and a lien on certain real estate. The Senior Notes contain certain restrictions and covenants, which restrict our ability to incur additional debt or make guarantees, sell assets, make investments or loans, make distributions or create liens or other encumbrances. The Senior Notes also require that we comply with certain financial covenants, including maintaining minimum cash, minimum adjusted EBITDA, minimum revenue, and a maximum ratio of ~~our subsidiaries.~~

~~Borrowings outstanding under the EWB Credit Facility initially provided for interest at the prime rate plus 0.50%. As of December 31, 2019, the prime rate was 4.75% and the contractual rate applicable~~cash in foreign bank accounts to ~~outstanding borrowings under the EWB Credit Facility was 5.25%. Pursuant~~cash in U.S. deposit accounts subject to ~~the Third Amendment, the interest rate applicable to outstanding borrowings under the EWB Credit Facility increased from 0.5% to 2.0% in excess of the prime rate beginning on March 13, 2020.~~account control agreements. As of June 30, 2020, the prime rate was 3.25% and the contractual rate applicable to outstanding borrowings under the EWB Credit Facility was 5.25%. Payments under the EWB Term Loan were interest-only through September 30, 2019, followed by monthly principal payments of $125,000 plus interest through the stated maturity date of the EWB Term Loan. We may elect to prepay the EWB Term Loan before the Maturity Date on 10 business days’ notice to EWB subject to a prepayment fee of 1.0% of the principal balance of the EWB Term Loan for any prepayment through March 29, 2021. In the event the EWB Revolver is terminated prior to the Maturity Date, we would be required to pay an early termination fee in the amount of 0.50% of the revolving line. The EWB Revolver also provides for an unused line fee equal to 0.50% per annum of the undrawn portion.

The EWB Credit Facility requires compliance with certain financial and restrictive covenants and includes customary events of default. Key financial covenants include maintenance of minimum Adjusted EBITDA and a maximum Total Leverage Ratio (all as defined and set forth in the EWB Credit Facility). Under the Third Amendment, EWB waived all financial covenants for the 12-month period ended December 31, 2019, and as of June 30, 20202021, we were in compliance with all covenants under the EWB Credit Facility. In addition, less stringent requirements will be applicable for future compliance with the minimum adjusted EBITDA covenant, the maximum total leverage ratio, and the fixed charge coverage ratio. Additionally, compliance with the maximum total leverage ratio and the fixed charge coverage ratio have been delayed until June 30, 2021. Finally, the existing provisions related to ~~“equity cures” that may be employed to maintain compliance with financial covenants were increased from $5.0 million to $15.0 million for~~ the ~~year ending December 31, 2020, and $10.0 million per year for each calendar year thereafter.~~

On April 30, 2019, we entered into an At the Market Offering Agreement (the “ATM Agreement”) with Roth Capital Partners, LLC (the “Agent”), under which we may offer and sell from time to time up to an aggregateSenior Notes. The Senior Notes contain customary events of $100 million in shares of our Common Stock (the “Placement Shares”), through the Agent. We have no obligation to sell any of the Placement Shares under the ATM Agreement. We intend to use the net proceeds from the offering for general corporate purposes,default, including working capital. For the six months ended June 30, 2020, we sold an aggregate of approximately 16.1 million shares of Common Stock for gross proceeds of approximately $25.8 million. Total commissions and other offering costs deducted from the proceeds were $0.8 million resulting in net proceeds of $25.0 million.

~~Under the ATM Agreement, we agreed~~failure to pay ~~the Agent a commission equal~~any principal or interest when due, failure to 3%perform or observe covenants, breaches of the gross proceeds from the gross sales price of the Placement Shares up to $30.0 million, and 2.5% of the gross proceeds from the gross sales price of the Placement Shares in excess of $30.0 million. Through June 30, 2020, the cumulative gross proceeds totaled $46.5 million and all future commissions are at 2.5% of the gross proceeds. On May 8, 2020, the ATM Agreement was amended and restated to eliminate the previous termination date of April 30, 2020. As amended and restated, the ATM Agreement will terminate (i) when all of the Placement Shares have been sold, (ii) if we elect to terminate upon five business days’ notice to the Agent, (iii) at any time by the Agent, or (iv) by the mutual agreement of the parties.

On July 20, 2020, we entered into the Merger Agreement, pursuant to which we agreed to acquire Ariix, which owns five brands in the e-commerce and direct selling channels. The Merger Agreement contains customary representations, warranties, covenants and indemnities by the parties to such agreement and is subject to customary closing conditions, including, among other things, (i) the receipt of regulatory approvals, including applicable antitrust approvals, (ii) the accuracy of the respective parties’ representations and warranties, ~~subject to customary qualifications,~~certain cross defaults, certain bankruptcy related events, monetary judgments defaults, material adverse effect defaults, change of management defaults, and ~~(iii) material compliance by~~a change in control. Upon the ~~parties with their respective covenants~~occurrence of an event of default, the outstanding obligations may be accelerated and obligations. In addition, the Merger Agreement contains certain termination rights, including by us or the Sellers Agent in the event the closing has not occurred by September 30, 2020 (the “Outside Date”). Pursuant to the Merger Agreement,become immediately due and payable and interest on the ~~closing date (the “Closing Date”), Ariix will merge with Merger Sub, with Ariix as the surviving entity and becoming one~~obligations increases to an annual rate of ~~our wholly-owned subsidiaries.~~12.0%.

On the Closing Date, we will be required to pay the Sellers $25.0 million in cash and issue (i) 18.0 million shares of Common Stock, (ii) a convertible promissory note for $10.0 million that matures six months from the Closing Date (the “Six-Month Convertible Note”), and (iii) a convertible promissory note for $141.25 million that matures 24 months from the Closing Date (the “Two-Year Convertible Note” and jointly with the Six-Month Convertible Note, the “Convertible Notes”). The original principal balance of the Convertible Notes will be subject to adjustment based on the working capital of Ariix at the Closing Date. In connection with the Acquisition and subject to approval by our stockholders, we will issue to Frederick Cooper or his designees 7.0 million shares of Common Stock in consideration of a three year non-competition, non-solicitation, invention assignment, and right of first refusal agreement to buy or license any intellectual property developed during the term of the agreement.

The Convertible Notes will be subordinated to the EWC Credit Facility and bear no interest if paid in full within six months of the Closing Date. If the Two-Year Convertible Note is not paid in full within six months of the Closing Date, it will retroactively bear interest at 7.0% per annum through the maturity date. Subject to approval by our stockholders and solely at our election, the Convertible Notes and any accrued interest will be convertible into Common Stock with a conversion price floor of $2.00 per share of Common Stock, a conversion price cap of $6.00 per share of Common Stock, and the automatic conversion into Common Stock if the market price of our Common Stock reaches $6.00 per share.

~~On April 14, 2020,~~Pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), we ~~entered into the~~obtained a PPP Loan ~~with EWB~~ in ~~an aggregate principal amount of~~April 2020 for approximately $6.9 million. ~~The~~In May 2020, Ariix obtained a PPP ~~Loan bears~~loan for approximately $2.8 million, and we assumed this obligation in connection with the business combination. These PPP Loans are unsecured and guaranteed by the SBA, bear interest at a fixed rate of 1.0% per annum and ~~provides~~provide for ~~no principal payments until~~maturity dates on the ~~maturity date in April 2022. The PPP Loan is unsecured and guaranteed by~~second anniversary of the ~~U.S. Small Business Administration.~~respective loan agreements. We ~~intend to apply~~applied to the ~~lender for~~respective lenders to request forgiveness of ~~the~~both PPP ~~Loan,~~Loans, with the ~~amount which~~amounts that may be forgiven equal to the sum of payroll costs, covered rent and mortgage obligations, and covered utility payments incurred ~~by us~~ during the permitted period ~~beginning on April 10, 2020,~~as calculated in accordance with the terms of the CARES Act. ~~Our~~The eligibility for the PPP ~~Loan,~~Loans, expenditures that qualify toward forgiveness, and the final balance of the PPP ~~Loan~~Loans that ~~the lender~~ may ~~approve for forgiveness~~be forgiven are subject to audit and final approval by the SBA. To

In July 2021, we were informed that forgiveness of both PPP Loans was approved by the ~~extent that all or part~~SBA for approximately $9.7 million including accrued interest through June 30, 2021. We will recognize forgiveness of the PPP ~~Loan~~Loans during the third quarter of 2021 when the lender legally released us of our obligation to repay the PPP Loans.

On November 16, 2020 (the “Ariix Closing Date”), we completed a business combination with Ariix, LLC (“Ariix”) for total purchase consideration of $155.1 million that consisted of (i) 19.7 million shares of Common Stock with a fair value of $54.2 million, (ii) $10.0 million payable in cash, (iii) fair value of $37.0 million related to 14.5 million shares of Common Stock that were subject to shareholder approval (the “Fixed Shares”), and (iv) fair value of $53.9 million related to up to 25.5 million shares of Common Stock that are subject to variation based on the outcome of working capital adjustments and potential indemnification claims (the “Variable Shares”). If our shareholders had failed to approve the issuance of the Fixed Shares and the Variable Shares, we would have been required to make cash payments of $163.3 million to the sellers (the “Sellers”) of Ariix. Accordingly, we accounted for the obligations to issue the Fixed Shares and the Variable Shares or pay $163.3 million of cash as derivative liabilities with an aggregate fair value of $90.9 million on the Ariix Closing Date. During the first quarter of 2021, we issued the 19.7 million shares of Common Stock and made the $10.0 million cash payment.

In January 2021, we entered into a letter of clarification (the “Clarification Letter”) that explained the intent of the parties, whereby a cash account of Ariix with a Chinese bank that had a balance of $3.1 million remained an asset of the Sellers, and the number of shares of our Common Stock issuable to the Sellers was reduced by 0.5 million shares. Based on the terms of the Clarification Letter, a $29.0 million working capital shortfall on the opening balance sheet of Ariix, and the failure of Ariix to repay $5.0 million of business combination liabilities prior to the closing date, the number of Variable Shares issuable to the Sellers has been reduced from 25.5 million shares to approximately 20.1 million shares. In addition, we were obligated to pay up to $10.0 million of interim merger consideration on May 16, 2021, but this payment was eliminated as a result of the working capital shortfall.

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

The Variable Shares are issuable on November 16, 2021. However, the number of shares is ~~not forgiven,~~subject to subsequent adjustments based on the outcome of potential indemnification claims by either party, whereby indemnification claims awarded to either party through November 16, 2021 will be settled by increasing or decreasing the number of Variable Shares based on a fixed conversion price of $5.53 per share. Accordingly, we ~~will~~are required to continue to account for the Variable Shares as a derivative liability until the number of shares becomes fixed. As of June 30, 2021, the fair value of the Variable Shares derivative liability amounted to $44.8 million. While the Variable Shares are accounted for as a derivative liability, there are no circumstances under which we could be required to pay ~~interest at 1.0%~~cash to the Sellers to settle this liability. As of June 30, 2021 and ~~commencing in October~~December 31, 2020, ~~interest payments will be required through the maturity date. The terms~~our business combination liabilities consisted of the PPP Loan provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events. The PPP Loan may be accelerated upon the occurrence of an event of default, including if the SBA subsequently reaches an audit determination that we do not meet the eligibility criteria.following (in thousands):

On June 1, 2021 (the “Aliven Closing Date”) we entered into an Asset Purchase Agreement (“APA”) with Aliven, Inc. (“Aliven”) that was accounted for using the acquisition method of accounting under ASC 805, Business Combinations, and using the fair value concepts set forth in ASC 820, Fair Value Measurement. Aliven is a Japan-based direct selling company. We entered into the APA to accelerate growth with its direct-to-consumer business model in Japan and to expand its portfolio of healthy products. Pursuant to the APA, we acquired the assets and assumed the liabilities of Aliven for total purchase consideration that consisted of approximately 1.1 million shares of our Common Stock with a fair value of approximately $2.6 million.

Presented below is a summary of our operating, investing and financing cash flows for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands):

For the six months ended June 30, ~~2020 and 2019,~~2021, we recognized a net ~~cash used in operating activities amounted~~loss of $0.4 million compared to ~~$23.6~~a net loss of $21.2 million ~~and $14.7 million, respectively.~~for the six months ended June 30, 2020. The ~~key components in the calculation of~~following adjustments are taken into account to reconcile our net loss to net cash used in operating activities for the six months ended June 30, ~~2020~~2021 and ~~2019, are as follows~~2020 (in thousands):

For the six months ended June 30, 2021 and 2020, ~~our~~we incurred net ~~loss was $21.2~~non-cash expenses of $27.1 million ~~compared to a net loss~~and $9.7 million, respectively. Significant non-cash expenses include depreciation and amortization expense, non-cash lease expense, accretion of ~~$13.3 million for the six months ended June 30, 2019. Please refer to~~ ~~Results of Operations~~ ~~above for a discussion of the factors that resulted in our net loss for the six months ended June 30, 2020~~debt discount, and ~~2019.~~

stock-based compensation expense. For the six months ended June 30, ~~2020,~~2021, non-cash expenses ~~partially mitigated the impact~~include $9.6 million of ~~our net loss by $9.8 million. These non-cash expenses consisted primarily of (i)~~ depreciation and amortization expense, ~~of $3.8~~$6.2 million ~~(ii)~~of non-cash lease expense, $4.4 million of ~~$2.8 million, (iii)~~accretion of debt discount related to the Senior Notes, stock-based compensation expense of ~~$2.5 million, (iv) impairment of right-of-use lease assets of $0.4~~$4.2 million, and ~~(v) accretion and amortization~~a loss related to an uncollectible note receivable of ~~debt discount and issuance costs of $0.3~~$2.7 million. For the six months ended June 30, ~~2020,~~2021, we ~~also had an unrealized loss on~~recognized a non-cash gain from changes in the ~~change in~~ fair value of ~~derivatives~~derivative liabilities of ~~$0.3~~$21.2 million.

Net changes in our operating assets and liabilities can have a significant impact on operating cash flow. For the six months ended June 30, 2021, changes in operating assets and liabilities used $11.0 million of operating cash flows. This amount consisted of (i) reductions in accounts payable of $5.8 million primarily due to payments to Ariix’s suppliers and service providers, (ii) a reduction in accrued liabilities of $11.5 million, including cash payments related to operating lease liabilities of $5.2 million, a reduction in deferred revenue of $4.4 million, and a ~~loss from~~reduction in accrued commissions of $1.4 million. The total reduction in accounts payable and accrued liabilities was $17.3 million, which was partially offset by reductions in (i) inventories of $4.7 million that were primarily due to the ~~sale~~integration of ~~property~~Ariix where we adjusted purchasing activity based on product demand planning, and ~~equipment~~(ii) prepaid expenses and other assets of ~~$0.1 million.~~$1.6 million, to arrive at $11.0 million of net cash outflows due to changes in operating assets and liabilities.

For the six months ended June 30, 2020, changes in operating assets and liabilities used $12.4 million of operating cash flows. The primary ~~use~~uses of operating cash flows for the six months ended June 30, 2020 ~~was due to~~were from (i) a reduction in other accrued liabilities of $12.9 million, (ii) an increase in accounts receivable of $2.3 million, and (iii) a decrease in accounts payable of $0.6 million. These changes that used operating cash flow totaled $15.8 million and were partially offset by changes in operating assets and liabilities that increased our operating cash flows, including a decrease in inventories of $2.8 million, and a reduction in prepaid expenses, deposits and other assets of $0.5 million. The $13.2 million decrease in accrued liabilities was primarily attributable to payment of income tax liabilities of $13.1 million in March 2020 that arose from the sale of ~~our land and building~~real estate in Tokyo, Japan in March ~~2019 as discussed below.~~2019.

For the six months ended June 30, 2019, our net loss of $13.3 million, a deferred income tax benefit of $8.5 million, the change in fair value of earnout obligations of $6.7 million, a gain of $6.4 million due to the sale of our land and building in Tokyo in March 2019, and a non-cash gain of $0.5 million from the change in fair value of derivatives, resulted in combined negative operating cash flow of $35.4 million. These amounts were partially offset by non-cash expenses of $15.3 million, and favorable changes in operating assets and liabilities of $5.3 million to arrive at net2021, cash used in ~~operating~~investing activities ~~of $14.7~~was $10.8 million. For the six months ended June 30, 2019, non-cash expenses of $15.3 million included stock-based compensation expense of $4.3 million, depreciation and amortization expense of $4.4 million, non-cash lease expense of $3.0 million, accretion and amortization of debt discount and issuance costs of $1.6 million, impairment of right-of-use assets of $1.5 million, and a cash expense for make-whole applicable premium of $0.5 million that was classified as a financing cash outflow since it related to the prepayment of debt.

~~For the six months ended June 30, 2019, the net changes in operating assets and liabilities provided $5.3 million of operating cash flows.~~ This amount was ~~primarily~~ attributable to ~~an increase in accounts payable~~a cash payment for merger consideration of $10.0 million pursuant to our business combination with Ariix, and ~~accrued liabilities~~(ii) purchases of ~~$14.2~~equipment of $0.8 million and a reduction in inventories of $0.2 million. These increases in operating cash flow totaled $14.4 million and were partially offset by a decrease in accounts receivable of $5.3 million as cash collections lagged behindprimarily for the increase in our trade receivables, and we spent $3.7 million for increased prepaid expenses, deposits and other assets. The increase in accrued liabilities was primarily driven by an increase in accrued income taxes payable of $13.6 million which was primarily related to the sale of our land and building in Japan.

For the six months ended June 30, 2020, our investing cash flows consisted of cash payments for capital expenditures of $2.0 million, partially offset by proceeds from the sale of equipment of $0.2 million. Our capital expenditures consisted of $1.8 million in our ~~Noni by NewAge~~Direct / Social Selling segment and $0.2 million in our ~~NewAge~~Direct Store segment.

For the six months ended June 30, 2019, cash provided by investing activities of $33.5 million was primarily driven by the sale leaseback of our land and building in Tokyo. The gross selling price was $57.1 million. After deducting commissions and other selling expenses of $1.9 million, the net proceeds amounted to $55.2 million. The net proceeds attributable to investing activities included $35.9 million that was attributable to the sale of the property, and $1.7 million that was designated to fund future repair obligations for a total of $37.5 million. The remainder of the net proceeds of $17.6 million was a financial inducement to enter into a 20-year operating lease as discussed under ~~Cash Flows from Financing Activities.~~

Investing cash outflows for the six months ended June 30, 2019 included (i) capital expenditures for property and equipment of $1.2 million, (ii) a security deposit of $1.8 million withheld by the purchaser in the sale leaseback, and (iii) a loan receivable related to our July 2019 business combination with BWR for $1.0 million. Our capital expenditures for the six months ended June 30, 2019 included leasehold improvements related to our distribution facility in Aurora, Colorado of $0.3 million, transportation equipment of $0.3 million, and computer and other equipment primarily related to our facilities in Colorado for a total of $0.4 million.

Our financing activities generated ~~positive~~ net cash ~~flows~~proceeds of $43.5 million and $20.7 million for the six months ended June 30, 2021 and 2020, ~~as compared to $21.5 million~~respectively. The principal sources of cash from our financing activities for the six months ended June 30, ~~2019.~~ 2021 consisted of (i) net proceeds of $53.8 million from our February 2021 private placement that resulted in the issuance of an aggregate of approximately 14.6 million shares of Common Stock and warrants to purchase an aggregate of 7.3 million shares, and (ii) proceeds of $0.5 million from the exercise of stock options that resulted in the issuance of approximately 288,000 shares of Common Stock. These sources of cash flow from financing activities totaled $54.3 million and were partially offset by cash outflows for (i) principal payments under the Senior Notes of $6.0 million, (ii) a $4.5 million payment of business combination liabilities primarily related to our acquisition of Ariix, and (iii) an aggregate of $0.4 million of payments for offering costs and reductions in our deferred lease financing obligation.

For the six months ended June 30, 2020, the principal source of cash from our financing activities consisted of net cash proceeds of $25.1 million from the issuance of approximately 16.1 million shares of Common Stock pursuant to our former At the ~~ATM~~Market Offering Agreement (the “ATM Agreement”) with Roth Capital Partners, LLC, and cash proceeds of $6.9 million under ~~the~~a PPP ~~Loan.~~Loan obtained in April 2020. For the six months ended June 30, 2020, our cash outflows primarily consisted of principal repayments under ~~the~~our former EWB Credit Facility of $10.5 million, payments of $0.3 million related to the deferred lease financing obligation, payments of $0.3 million related to business combination obligations, and total payments of $0.2 million for debt issuance costs and offering costs related to the ATM Agreement. For the six months ended June 30, 2020, our principal payments under our former EWB Credit Facility included $0.8 million under the ~~EWB Term Loan~~term loan and $9.7 million to repay the ~~EWB Revolver.~~

For the six months ended June 30, 2019, the principal sources of cash from our financing activities consisted of (i) $46.3 million of borrowings, including $35.0 million under the EWB Credit Facility and $11.3 million under the Siena Revolver that was terminated in March 2019, (ii) proceeds from the deferred lease financing obligation of $17.6 million, (iii) net proceeds of $11.4 million from the issuance of approximately 2.2 million shares of Common Stock issued pursuant to the ATM Agreement, and (iv) proceeds from the exercise of stock option of $0.4 million. These financing cash proceeds totaled $75.7 million and were partially offset by (i) principal payments under debt agreements of $26.2 million, including $10.0 million under the EWB Revolver and $16.2 million under the Siena Revolver, (ii) payment of Morinda business combination liabilities of $26.0 million, (iii) payments for debt issuance costs of $0.9 million to obtain the EWB Credit Facility, (iv) payment of make-whole premium of $0.5 million to terminate the Siena Revolver, (v) payments under the deferred lease financing obligation of $0.4 million, and (vi) cash payments of $0.1 million for deferred offering costs under the ATM Agreement. The Siena Revolver was terminated in March 2019 and replaced with the EWB Credit Facility.

As discussed above, the net proceeds received from the buyer of our land and building in Tokyo included $17.6 million that represented an inducement to enter into the related leaseback financing arrangement. Since we agreed to pay above market lease payments for the 20-year lease term in exchange for an up-front cash payment included in the selling price, we have recognized a deferred lease financing obligation for this amount. For financial reporting purposes, a portion of the monthly operating lease payments is not being recognized as rent expense, but rather is allocated to reduce this financial liability and recognize imputed interest expense. For the six months ended June 30, 2020 and 2019, $0.3 million and $0.2 million, respectively, of our lease payments were allocated to reduce the financial liability.

During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed in Note 1 to our condensed consolidated financial statements included in Part I, Item 1 of this Report, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption. For additional information on recently issued accounting standards, ~~and our plans for adoption of those standards,~~ please refer to the section titled Recent Accounting Pronouncements under Note 1 to our condensed consolidated financial statements.

The primary purpose of using non-GAAP financial measures is to provide supplemental information that we believe may be useful to investors and to enable investors to evaluate our results in the same way we do. We also present the non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis, as well as comparing our results against the results of other companies, by excluding items that we do not believe are indicative of our core operating performance. Specifically, we use these non-GAAP measures as measures of operating performance; to prepare our annual operating budget; to allocate resources to enhance the financial performance of our business; to evaluate the effectiveness of our business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of our results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communications with our ~~board~~Board of ~~directors~~Directors concerning our financial performance. Investors should be aware however, that not all companies define these non-GAAP measures consistently.

We provide in the tables below a reconciliation from the most directly comparable GAAP financial measure to each non-GAAP financial measure presented. Due to a valuation allowance for our deferred tax assets, there were no income tax effects associated with any of our non-GAAP adjustments.

EBITDA and Adjusted EBITDA. The calculation of our EBITDA and Adjusted EBITDA is presented below for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended						Six Months Ended
	2020		2019		2020		2019		June 30,						June 30,
									2021			2020			2021			2020
Net loss	$	(9,554)	$	(11,681)	$	(21,172)	$	(13,297)

Net income (loss)									$	17,371		$	(9,554	)	$	(397	)	$	(21,172	)
EBITDA Non-GAAP adjustments:
Interest expense		600		756		1,172		2,402		3,040			600			6,163			1,172
Income tax expense		551		7,797		1,274		6,097		740			551			1,890			1,274
Depreciation and amortization expense		1,873		2,211		3,752		4,441		4,822			1,873			9,596			3,752

EBITDA		(6,530)		(917)		(14,974)		(357)		25,973			(6,530	)		17,252			(14,974	)
Adjusted EBITDA Non-GAAP adjustment:
Adjusted EBITDA Non-GAAP adjustments:
Stock-based compensation expense		1,092		1,000		2,449		4,287		2,187			1,092			4,149			2,449
Loss on disposal of Divested Business										4,339			-			4,339			-
Loss (gain) from change in fair value of derivatives										(30,829	)		(20	)		(21,216	)		306

Adjusted EBITDA	$	(5,438)	$	83	$	(12,525)	$	3,930	$	1,670		$	(5,458	)	$	4,524		$	(12,219	)

EBITDA is defined as net income (loss) adjusted to exclude amounts recorded under GAAP ~~amounts~~ for interest expense, income tax expense, and depreciation and amortization expense. For the calculation of Adjusted EBITDA, we also exclude the following ~~item~~items for the periods presented:

~~Stock-Based Compensation Expense~~Stock-based compensation expense: Our compensation strategy includes the use of stock-based compensation to attract and retain employees, directors and consultants. This strategy is principally aimed at aligning the employee interests with those of our ~~stockholders~~shareholders and to achieve long-term employee retention, rather than to motivate or reward operational performance for any particular period. As a result, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.

~~Included in our Adjusted EBITDA shown above for~~Loss on disposal of Divested Business: We have excluded the ~~three and six months ended June 30, 2020 is a~~ loss on disposal of ~~$2.3 million and $5.3 million, respectively,~~Divested Business that was primarily related to ~~our U.S. retail brands~~an uncollectible note receivable and ~~the BWR division for which we are currently evaluating our strategic alternatives.~~certain liabilities to former suppliers. As a result, this loss was unrelated to current operational decisions and performance.

Loss (gain) from change in fair value of derivatives: We have excluded derivative gains and losses since they can be highly volatile from period to period based on factors that are outside the control of our core business activities. Specifically, the variations that impact fair value heavily depend on the trading price of our Common Stock and global interest rates. As a result, gains and losses from changes in the fair value of derivatives vary for reasons that are generally unrelated to operational decisions and performance in any particular period.

~~Foreign Currency~~We are a smaller reporting company as defined by Rule 12b-2 of the Exchange ~~Risk~~Act and are not required to provide the information under this item.

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. Dollar, primarily the Japanese Yen, Chinese Yuan, and Euro. We generated approximately 67% and 73% of our revenue from our international business for the six months ended June 30, 2020 and 2019, respectively. Increases in the relative value of the U.S. Dollar to other currencies may negatively affect our revenue, partially offset by a positive impact to operating expenses in other currencies as expressed in U.S. Dollars. We have experienced and will continue to experience fluctuations in our net income (loss) as a result of transaction gains or losses related to revaluing certain current asset and current liability balances, including intercompany receivables and payables, which are denominated in currencies other than the functional currency of the entities in which they are recorded. While we have not engaged in the hedging of our foreign currency transactions to date, we are evaluating the costs and benefits of initiating such a program and we may in the future hedge selected significant transactions denominated in currencies other than the U.S. Dollar.

For the six months ended June 30, 2020 and 2019, after considering the net impact on our net revenue and operating expenses, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our condensed consolidated financial statements.

As of June 30, 2020, our EWB Credit Facility provided for total borrowings of up to $24.0 million. The interest rate applicable to outstanding borrowings under the EWB Credit Facility is currently 2.0% in excess of the prime rate. We have also entered into an interest rate swap agreement with EWB that provides for a total notional amount of $10.0 million at a fixed interest rate of approximately 5.4% through May 1, 2023, in exchange for a floating rate indexed to the prime rate plus 0.5%. Therefore, as interest rates fluctuate, we will experience changes in interest expense that will impact our financial results. Assuming outstanding borrowings of $24.0 million, as a result of the $10.0 million swap we would only be subject to market risk for borrowings up to $14.0 million. Accordingly, if interest rates were to increase or decrease by one percentage point, the result would be an increase or decrease in annual interest expense of approximately $140,000. Accordingly, significant increases in future interest rates could adversely impact our future interest expense.

As of June 30, 2020, we hold cash, cash equivalents and restricted cash of $59.0 million. The weighted average interest rate on these temporary investments is substantially less than 1.0% and we earned interest income of $0.1 million for the six months ended June 30, 2020. Assuming weighted average investments of $59.0 million, if interest rates were to increase by one percentage point, the result would be an increase in annual interest income of $590,000.

~~We do not believe that inflation currently has a material effect on our business.~~

~~The Company’s~~Our management, with the participation of ~~the Company’s Chief Executive Officer~~our chief executive officer (“CEO”) and ~~Chief Financial Officer,~~chief financial officer (“CFO”), evaluated the effectiveness of ~~the Company’s~~our disclosure controls and procedures ~~(as~~as of June 30, 2021 pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange ~~Act) as of June 30, 2020. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2020, the Company’s disclosure~~Act, means controls and other procedures ~~were effective~~of a company that are designed to ensure that information required to be disclosed by a company in the reports ~~the Company~~that it files or submits under the Exchange Act is ~~(i)~~ recorded, processed, summarized and reported within the time periods specified in ~~SEC~~the SEC’s rules and ~~forms,~~forms. Disclosure controls and ~~(ii)~~procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. ~~Any controls~~Based upon the evaluation completed as of June 30, 2021, our CEO and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In light of changes in business practices in response to the COVID-19 pandemic, management evaluated the Company’s disclosure controls and procedures and determinedCFO concluded that ~~no changes in such~~our disclosure controls and procedures were ~~necessary.~~not effective since the material weakness in internal controls over financial reporting discussed below has not yet been remediated.

In the course of preparing this Quarterly Report on Form 10-Q, our management completed additional procedures designed to mitigate the underlying conditions related to the material weakness discussed below. Based on these procedures and other remediation efforts to date, we believe that our unaudited condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with U.S. GAAP. Our CEO and CFO have certified that, based on their knowledge, the financial statements, and other financial information included in this Form 10-Q, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Form 10-Q.

As of June 30, 2021, a material weakness exists related to the Company’s failure to design and implement monitoring activities over the acquisition of Ariix that resulted in the inability to issue our consolidated financial statements for inclusion in the 2020 Form 10-K by the required due date. Specifically, due to the size and timing of the acquisition of Ariix, we did not have sufficient resources to adequately monitor the consolidation of the financial information and purchase allocation of Ariix in order to prevent or detect material misstatements.

In connection with the preparation of our unaudited condensed consolidated financial statements, we determined that this material weakness in internal control over financial reporting that was identified and reported in our 2020 Form 10-K still exists. Under standards established by the Public Company Accounting Oversight Board of the United States, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The Company has taken or will take the following steps to remediate the material weakness:

There were no changes in our internal control over financial reporting during our second fiscal quarter of ~~2020~~2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

The following additional risk factor ~~relating to COVID-19~~ should be read in conjunction with the risk factors set forth under “Item 1A. Risk Factors” in our ~~2019~~2020 Form ~~10-K and in Part II, Item 1A of our quarterly report for fiscal quarter ended March 31, 2020 (the “2020 First Quarter Report”).~~10-K. The developments described in this additional risk factor have heightened, or in some cases manifested, certain of the risks disclosed in the risk factor section of our ~~2019~~2020 Form ~~10-K, and such risk factors are further qualified by the information relating to COVID-19 that is described in this Report, including in the additional risk factor below.~~10-K. Except as described herein, there have been no material changes with respect to the risk factors disclosed in our ~~2019~~2020 Form ~~10-K and in our 2020 First Quarter Report.~~10-K.

You should carefully consider the risks described below and in our ~~2019~~2020 Form 10-K in addition to the other information set forth in this Report and in our ~~2019~~2020 Form 10-K, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations sections and the consolidated financial statements and related notes. These risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our business, financial condition, results of operations or the prices of our publicly traded securities. The risks described below and in our ~~2019~~2020 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may occur or become material in the future and adversely affect our business, reputation, financial condition, results of operations or the prices of our publicly traded securities. Therefore, historical operating results, financial and business performance, events and trends are often not a reliable indicator of future operating results, financial and business performance, events or trends.

~~The recent COVID-19 pandemic has negatively affected~~We are subject to the Foreign Corrupt Practices Act of 1977 (the “FCPA”) and ~~will continue to negatively affect~~other similar anti-corruption, anti-bribery and anti-kickback laws and regulations, and any noncompliance with those laws or regulations by us or others acting on our behalf could materially hurt our business, financial condition and results of operations.

The FCPA and other similar anti-corruption and anti-bribery laws and regulations in other jurisdictions generally prohibit companies and their intermediaries from offering or providing improper things of value to foreign officials for the purpose of obtaining or retaining business or securing regulatory benefits. Under these laws, we may become liable for the actions of employees, officers, directors, agents, representatives, consultants, or other intermediaries, or our strategic or local partners, including those over whom we may have little actual control. We are continuously engaged in transacting business, including in new locations, around the world. Because we will maintain and intend to grow our international sales and operations, we have contacts with foreign public officials, and therefore potential exposure to liability under laws such as the FCPA.

~~The public health crisis caused by~~If we are found liable for violations of the ~~COVID-19 pandemic and~~FCPA or other similar anti-corruption, anti-bribery, or anti-kickback laws or regulations, either due to our own acts or out of inadvertence, or due to the ~~measures that have been taken~~acts or ~~that may be taken in the future by governments, businesses,~~inadvertence of others, we could suffer criminal or civil fines or penalties or other repercussions, including ~~us, and the public at large to limit COVID-19's spread have had, and we expect will continue to~~reputational harm, which could materially ~~negatively affect~~hurt our business, financial condition, and results of operation. The extent of the impact of the COVID-19 pandemic on our business and financial results will depend on numerous evolving factors that we are not able to accurately predict and which all will vary by market, including the duration and scope of the pandemic, global economic conditions during and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic, and changes in consumer behavior in response to the pandemic, some of which may be more than just temporary.operations.

~~Our global operations expose us~~In December 2020, we engaged external counsel, accountants, and other advisors to ~~risks associated~~conduct an independent investigation of Ariix’s international business practices, during which the investigation team identified conduct that potentially was in violation of the FCPA. In August 2021, we made a voluntary self-disclosure to the U.S. Department of Justice (“DOJ”) and the SEC about these items and our investigation. Although our reporting to the DOJ and SEC is ongoing, we believe our investigation is substantially complete. We have initiated procedures to remediate such practices. These findings provide opportunity for targeted, enhanced controls and additional training and other remediation. We intend to fully cooperate with the ~~COVID-19 pandemic, which has resulted in challenging operating environments. COVID-19 has spread across~~DOJ and SEC, with the ~~globe~~assistance of legal counsel, to ~~almost all of~~conclude this matter. We are unable at this time to predict when the ~~countries in which our products are made, manufactured, distributed or sold. Authorities in many~~government agencies’ review of these markets have implemented numerous measures to stall the spread of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter in place orders, and business shutdowns. These measures have impacted andmatters will further impact us, our customers, consumers, employees, contract manufacturers, distributors, suppliers and other third parties with whom we do business. Due to these measures, we have experienced, and expect to continue to experience, a significant decrease in revenues associated with restaurants, hotels, airports, and stadiums. In addition, due to the pandemic, some retailers have opted to reducebe completed or stop carrying our products in favor of products from very large, well-established companies with large market share. In foreign jurisdictions, which account for approximately 67% of our net revenue for the six months ended June 30, 2020, our direct-to-consumer selling model typically relies heavily on the use of our IPC sales force in close contact with our customers.

Stay-at-home and social distancing orders have required some of our employees to work from home when possible, and other employees have been entirely prevented from performing their job duties until the orders are relaxed or lifted. The COVID-19 Orders have adversely impacted the Company’s customers such as restaurants, hotels, stadiums and airports in the United States, whereby average monthly revenue for that line of the Company’s distribution business decreased by approximately 48% for the four months ended June 30, 2020 compared to the first two months of 2020. We expect these lower sales levels for this line of business in our NewAge segment to continue until the COVID-19 orders are lifted and consumers resume visiting restaurants, attending stadium events, and traveling. In foreign jurisdictions, which account for approximately 67% of our net revenue for the first half of 2020, our direct-to-consumer selling model typically relies heavily on the use of our IPC sales force in close contact with our customers. The world-wide response to the pandemic has resulted in a significant downturn in economic activity and there is no assurance that government stimulus programs will successfully restore the economy to the levels that existed before the pandemic. If an economic recession or depression is sustained, it would likely have a material adverse effect on our business as consumer demand for our products would likely decrease.

In certain jurisdictions, the stay-at-home orders are beginning to be relaxed but considerable uncertainty remains about the ultimate impact on our business. Even if the orders are lifted, there is no assurance that they will not be reinstated if the spread of COVID-19 resumes. For example, many jurisdictions reinstated masking orders in July 2020 after test results show a resurgence of the pandemic. Resurgence of the pandemic in some markets has slowed the reopening process. If COVID-19 infection trends continue to reverse and the pandemic intensifies and expands geographically, its negative impacts on our sales could be more prolonged and may become more severe. While we have initially experienced increased sales in the Noni by NewAge segment during the crisis, such increased sales levels have not, and we expect will not, fully offset the sales pressures we have experienced, and we expect will continue to experience in the NewAge segment while social distancing mandates or recommendations are in effect. The long-term financial impact on our business cannot be reasonably estimated at this time.

The COVID-19 pandemic has required alternative selling approaches that may be less effective, such as through social media. We may be unable to avoid future reductions in net revenue using these alternative selling approaches that avoid direct contact with our customers.

There is considerable uncertainty regarding how these measures and future measures in response to the pandemic will impact our business, including whether they will result in further changes in demand for our products, further increases in operating costs (whether as a result of changes to our supply chain or increases in employee costs or otherwise), how they will further impact our supply chain and whether they will result in further reduced availability of airwhat regulatory or other commercial transport, port closures or border restrictions, each or all of which can impact our ability to make, manufacture, distribute and sell our products. In addition, measures that impact our ability to access our offices, plants, warehouses, distribution centers or other facilities, or that impact the ability of our customers, consumers, employees, contract manufacturers, distributors, suppliers and other third parties to do the same,consequences may impact the availability of our and their employees, many of whom are not able to perform their job functions remotely. If a significant percentage of our or our business partners’ workforce continues to be unable to work, including because of illness, facility closures, quarantine, curfews, shelter in place orders, travel restrictions or other governmental restrictions, our operations will be negatively impacted. Any sustained interruption in our or our business partners’ operations, distribution network or supply chain or any significant continuous shortage of raw materials or other supplies as a result of these measures, restrictions or disruptions can impair our ability to make, manufacture, distribute or sell our products. Compliance with governmental measures imposed in response to COVID-19 has caused and may continue to cause us to incur additional costs, and any inability to comply with such measures can subject us to restrictions on our business activities, fines, and other penalties, any of which can adversely affect our business. In addition, the increase in certain of our employees working remotely has amplified certain risks to our business, including increased demand on our information technology resources and systems, increased phishing and other cybersecurity attacks as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic, and an increase in the number of points of potential attack, such as laptops and mobile devices (both of which are now being used in increased numbers), to be secured, and any failure to effectively manage these risks, including to timely identify and appropriately respond to any cyberattacks, may adversely affect our business. Further, we experienced, and will continue to experience, costs associated with continuing to pay certain employees who are unable to work due to the travel bans and restrictions, quarantines, curfews, shelter in place orders and, therefore, do not generate any corresponding revenue.result.

Public concern regarding the risk of contracting COVID-19 impacts demand from consumers, including due to consumers not leaving their homes or otherwise shopping in a different manner than they historically have or because some of our consumers have lower discretionary income due to unemployment or reduced or limited work as a result of measures taken in response to the pandemic. As we sell a wide variety of products worldwide, the profile of the products we sell and the amount of revenue attributable to such products varies by jurisdiction and changes in demand as a result of COVID-19 will vary in scope and timing across these markets. Any reduced demand for our products or change in consumer purchasing and consumption patterns, as well as continued economic uncertainty, can adversely affect our customers’ and business partners’ financial condition, resulting in an inability to pay for our products, reduced or canceled orders of our products, closing of stores, restaurants, airports, hotels, entertainment or sports complexes or other venues where our products are sold, or our business partners’ inability to supply us with ingredients or other items necessary for us to make, manufacture, distribute or sell our products. Such adverse changes in our customers’ or business partners’ financial condition may also result in our recording additional impairment charges for our inability to recover or collect any accounts receivable, owned or leased assets, including certain equipment, or prepaid expenses. In addition, economic uncertainty associated with the COVID-19 pandemic has resulted in volatility in the global capital and credit markets which can impair our ability to access these markets on terms commercially acceptable to us, or at all.

There can be no assurance that we will be successful in our efforts to mitigate the negative impact of COVID-19, and as a result, our business, financial condition and results of operations and the prices of our publicly traded securities may be adversely affected.

~~There can be no assurance that we will complete the acquisition of Ariix.~~

On July 20, 2020, we signed a definitive merger agreement to acquire Ariix. We expect the Ariix acquisition to close in September 2020. The merger agreement is subject to a number of conditions that must be fulfilled in order to complete the Ariix acquisition. Those conditions include continued accuracy of the representations and warranties by both parties and the performance by both parties of their covenants and agreements, absence of orders prohibiting the completion of the acquisition and certain other conditions specified in the merger agreement. In order to fund the required cash payments under the Merger agreement, we are currently evaluating various alternatives including an equity offering and the refinancing of our EWB Credit Facility. There are no assurances that we will be able to obtain additional financing through refinancing the EWB Credit Facility, equity offerings, including under the ATM Agreement, and debt financings in the future. In addition, both we and Ariix have rights to terminate the Merger Agreement under certain circumstances specified in the merger agreement. We cannot assure you that the Ariix acquisition will be completed.

Any failure to successfully integrate Ariix's business and operations or fully realize potential synergies from the Ariix acquisition in the expected time frame would adversely affect our business, operating results, and financial condition.

The success of the Ariix acquisition will depend, in part, on our ability to successfully integrate Ariix's business and operations and fully realize the anticipated benefits and potential synergies from combining our business with Ariix's business. To realize these anticipated benefits and potential synergies, we must successfully combine these businesses. If we are unable to achieve these objectives following the Ariix acquisition, the anticipated benefits and potential synergies of the Ariix acquisition may not be realized fully or at all, or may take longer to realize than expected. Any failure to timely realize these anticipated benefits would have a material adverse effect on our business, operating results and financial condition. We and Ariix have operated and, until the completion of the Ariix acquisition, will continue to operate independently. The integration process could result in the loss of key employees, loss of key customers, decreases in revenue and increases in operating costs, as well as the disruption of each company's ongoing businesses, any or all of which could limit our ability to achieve the anticipated benefits and synergies of the Ariix acquisition and have a material adverse effect on our business, operating results and financial condition.

~~We have made certain assumptions relating to the Ariix acquisition that may prove to be materially inaccurate.~~

We have made certain assumptions relating to the Ariix acquisition that may prove to be inaccurate, including as the result of the failure to realize the expected benefits of the Ariix acquisition, failure to realize expected revenue growth rates, higher than expected operating, transaction and integration costs, as well as general economic and business conditions that adversely affect the combined company following the Ariix acquisition. These assumptions relate to numerous matters, including:

~~We and Ariix may have difficulty attracting, motivating and retaining executives and other key employees in light of the Ariix acquisition.~~

Uncertainty about the effect of the Ariix acquisition on our and Ariix's employees may have an adverse effect on us or Ariix and, consequently, the combined business resulting from the Ariix acquisition. This uncertainty may impair our and Ariix's ability to attract, retain and motivate key personnel until the Ariix acquisition is completed, or longer for the combined entity. Employee retention may be particularly challenging during the pendency of the Ariix acquisition as our and Ariix's employees may experience uncertainty about their future roles with the combined business. Additionally, Ariix's officers and employees own Ariix membership interests. If the Ariix acquisition is completed, they will be entitled to receive a portion of the consideration for the Ariix acquisition, the payment of which could provide sufficient financial incentive for certain officers and employees to no longer pursue employment with the combined business. If key employees depart because of issues relating to the uncertainty and difficulty of integration, financial incentives, or a desire not to become employees of the combined business, we may incur significant costs in identifying, hiring and retaining replacements for departing employees, which could substantially reduce or delay our ability to realize the anticipated benefits of the Ariix acquisition.

~~Our and Ariix's business relationships, including customer and independent distributor relationships, may be subject to disruption due to uncertainty associated with the Ariix acquisition.~~

Parties with which we or Ariix do business may experience uncertainty associated with the Ariix acquisition, including with respect to current or future business relationships with us, Ariix or the combined business. These business relationships may be subject to disruption as customers, independent distributors, and others may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than us, Ariix or the combined business, including our competitors or those of Ariix. These disruptions could have a material adverse effect on the businesses, operating results and financial condition of the combined business. The adverse effect of such disruptions could be exacerbated by a delay in the completion of the Ariix acquisition or termination of the merger agreement.

~~We will incur significant transaction expenses and acquisition-related integration costs in connection with the Ariix acquisition and completion of this offering.~~

We have incurred, and expect to continue to incur, significant transaction costs relating to the negotiation and completion of the Ariix acquisition and this offering. Except in limited circumstances, we will have to bear these costs whether or not the Ariix acquisition is completed. Additionally, we are currently developing a plan to integrate the operations of Ariix with our own after the completion of the Ariix acquisition. In connection with that plan, we anticipate that we will incur certain non-recurring charges in connection with this integration; however, we cannot identify the timing, nature and amount of all such charges at this time. These transaction expenses and integration costs will be charged as an expense in the period incurred. The significant transaction costs and acquisition-related integration costs could materially affect our results of operations in the period in which such charges are recorded. Although we believe that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the business, will offset incremental transaction and acquisition-related costs over time, this net benefit may not be achieved in the near term, or at all.

On June 1, 2021, we issued 1,071,500 shares of Common Stock with a fair value of approximately $2,588,000 pursuant to an Asset Purchase Agreement that resulted in our acquisition of the assets of Aliven, Inc., a Japan-based direct selling company. For additional information, please refer to our Current Report on Form 8-K that we filed with the SEC on June 3, 2021.

These securities were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act. There were no other unregistered sales of our equity securities during the three months ended June 30, ~~2020.~~2021.

The following exhibits are incorporated by reference or filed as part of this Quarterly Report on Form 10-Q:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	For the Quarterly Period Ended June 30, 2021

☐	Transition report pursuant to section 13 or ~~15(d)~~15(d) of the Securities Exchange Act of 1934
	For the Transition Period from to

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

2420 17th Street, Suite 220 Denver, CO		80202
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:		(303) 566-3030

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common stock, par value $0.001 per share		NBEV		The Nasdaq Capital Market	~~NASDAQ~~

	Large accelerated filer ☐		Accelerated filer ☒
	Non-accelerated filer ☐		Smaller reporting company ☐☒
			Emerging growth company ☐

			Page

PART I. FINANCIAL INFORMATION

	ITEM 1.	Financial Statements	2

		Unaudited Condensed Consolidated Balance Sheets as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020	2

		Unaudited Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020	3

		Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020	4

		Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020	5

		Notes to Unaudited Condensed Consolidated Financial Statements	7

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	~~ITEM 3.~~ ~~Quantitative and Qualitative Disclosures About Market Risk~~		41
	~~ITEM 4.~~ ~~Controls and Procedures~~		4132

	~~PART II. OTHER INFORMATION~~ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	50

	ITEM 1. 4.~~Legal Proceedings~~	42Controls and Procedures	50
	~~ITEM 1A.~~ ~~Risk Factors~~	42
PART II. OTHER INFORMATION

	ITEM 1.	Legal Proceedings	51

	ITEM 1A.	Risk Factors	51

	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4551
	~~ITEM 3.~~ ~~Defaults Upon Senior Securities~~	45
	ITEM 4. 3.~~Mine Safety Disclosures~~	45Defaults Upon Senior Securities	51
	~~ITEM 5.~~ ~~Other Information~~	45
	ITEM 4.	Mine Safety Disclosures	51

	ITEM 5.	Other Information	51

	ITEM 6.~~Exhibits~~	46Exhibits	52

SIGNATURES
~~SIGNATURES~~			4753

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

	Shares		Amount		Capital			Stock			Subscription			Income (Loss)			Deficit			Total
								Obligation			Note			Accumulated
					Additional			to Issue			Receivable			Other
	Common Stock				Paid-in			Common			For Stock			Comprehensive			Accumulated
	Shares		Amount		Capital			Stock			Subscription			Income (Loss)			Deficit			Total

Six Months Ended June 30, 2021

Balances, December 31, 2020		99,146	$	99	$	236,732		$	54,186		$	(1,250	)	$	4,201		$	(151,815	)	$	142,153
Issuance of Common Stock:
In Ariix business combination		19,704		20		54,166			(54,186	)		-			-			-			-
In Aliven business combination		1,072		1		2,587			-			-			-			-			2,588
Private placement of Common Stock, net of issuance costs		14,636		15		39,635			-			-			-			-			39,650
Upon vesting of restricted stock awards		560		1		(1	)		-			-			-			-			-
For exercise of stock options		288		-		528			-			-			-			-			528
Reclassification of Redeemable Common Stock		1,200		1		3,160			-			-			-			-			3,161
Reclassification of Fixed Shares derivative liability		-		-		-			30,263			-			-			-			30,263
Stock-based compensation expense		-		-		4,130			-			-			-			-			4,130
Allowance for Divested Business stock subscription receivable		-		-		-			-			1,250			-			-			1,250
Net change in accumulated other comprehensive income (loss)		-		-		-			-			-			(723	)		-			(723	)
In ATM public offering, net of offering costs				-
In ATM public offering, net of offering costs, shares
Net loss		-		-		-			-			-			-			(397	)		(397	)

Balances, June 30, 2021		136,606	$	137	$	340,937		$	30,263		$	-		$	3,478		$	(152,212	)	$	222,603

Six Months Ended June 30, 2020

Balances, December 31, 2019		81,873	$	82	$	203,862		$	-		$	-		$	802		$	(112,471	)	$	92,275
Balances		81,873	$	82	$	203,862		$	-		$	-		$	802		$	(112,471	)	$	92,275
Issuance of Common Stock:
In ATM public offering, net of offering costs		16,130		16		25,012			-			-			-			-			25,028
For exercise of stock options		2		-		4			-			-			-			-			4
Upon vesting of restricted stock awards		437		-		-			-			-			-			-			-
Stock-based compensation expense		-		-		2,323			-			-			-			-			2,323
Net change in accumulated other comprehensive income (loss)		-		-		-			-			-			(943	)		-			(943	)
Net loss		-		-		-			-			-			-			(21,172	)		(21,172	)

Balances, June 30, 2020		98,442	$	98	$	231,201		$	-		$	-		$	(141	)	$	(133,643	)	$	97,515
Balances		98,442	$	98	$	231,201		$	-		$	-		$	(141	)	$	(133,643	)	$	97,515

	2021			2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(397	)	$	(21,172	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss (gain) from change in fair value of derivatives, net		(21,216	)		306
Depreciation and amortization		9,596			3,752
Non-cash lease expense		6,244			2,792
Accretion of debt discount		4,372			302
Stock-based compensation expense		4,149			2,449
Allowance for uncollectible note receivable and accrued interest from Divested Business		2,701			-
Impairment of right-of-use assets		-			400
Deferred income tax benefit		(149	)		(173	)
Loss from sale of property and equipment		60			66
Other		118			73
Changes in operating assets and liabilities, net of effects of business combination:
Accounts receivable		(37	)		(2,276	)
Inventories		4,681			2,819
Prepaid expenses, deposits and other		1,640			517
Accounts payable		(5,840	)		(551	)
Other accrued liabilities		(11,482	)		(12,900	)

Net cash used in operating activities		(5,560	)		(23,596	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash payments for Ariix business combination		(10,000	)		-
Proceeds from sale of equipment		-			159
Capital expenditures for property and equipment		(765	)		(1,980	)

Net cash used in investing activities		(10,765	)		(1,821	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placement of Units, net of placement fee:
Fair value of warrants to purchase 7,318 shares of Common Stock		14,128			-
Residual fair value of 14,636 shares of Common Stock		39,673			-
Proceeds from borrowings		-			6,868
Principal payments on borrowings		(6,000	)		(10,450	)
Debt issuance costs paid		(21	)		(85	)
Proceeds from issuance of common stock		-			25,122
Payments for deferred offering costs		(24	)		(94	)
Proceeds from exercise of stock options		528			4
Principal payments on business combination obligations		(4,496	)		(298	)
Payments under deferred lease financing obligation		(329	)		(319	)

Net cash provided by financing activities		43,459			20,748

Effect of foreign currency translation changes		90			(857	)

Net change in cash, cash equivalents and restricted cash		27,224			(5,526	)
Cash, cash equivalents and restricted cash at beginning of period		65,235			64,571

Cash, cash equivalents and restricted cash at end of period	$	92,459		$	59,045

	2021		2020

SUMMARY OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD:
Cash and cash equivalents	$	80,922	$	40,672
Current portion of restricted cash		5,568		1,500
Long-term portion of restricted cash		5,969		16,873

Total	$	92,459	$	59,045

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	1,092	$	506
Cash paid for income taxes	$	1,132	$	14,739
Cash paid for amounts included in the measurement of operating lease liabilities	$	5,235	$	4,031
Right-of-use assets acquired in exchange for operating lease liabilities	$	1,768	$	2,452

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of Common Stock in Ariix business combination	$	54,186	$	-
Reclassification of Fixed Shares derivative liability to equity	$	30,263	$	-
Reclassification of 1,200 shares of Redeemable Common Stock to equity	$	3,161	$	-
Clarification Letter obligation in exchange for reduction of shares issuable for derivative liability	$	3,056	$	-
Issuance of Common Stock in Aliven business combination	$	2,588	$	-
Issuance of 400 shares of Redeemable Common Stock for Senior Notes amendment fee	$	1,060	$	-
Increase in payables for debt issuance costs	$	-	$	150

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

Total purchase price allocation	$	2,588

	⁽¹⁾	Based in part on the preliminary report of an independent valuation specialist, the fair value of work-in-process and finished goods inventories on the Aliven Closing Date exceeded the historical carrying value by approximately $0.1 million. This amount represents an element of built-in profit that is being charged to cost of goods sold as the related inventories are subsequently sold. The fair value of inventories was determined using both the “cost approach” and the “market approach”.

	⁽²⁾	Based in part on the preliminary report of an independent valuation specialist, the fair value of identifiable intangible assets was determined primarily using variations of the “income approach,” which is based on the present value of the future after-tax cash flows attributable to each identifiable intangible asset. These intangible assets are being amortized over estimated useful lives of seven years for the distributor sales force and three years for the trade name, with an aggregate weighted average life of 6.2 years.

	⁽³⁾	Goodwill was recognized for the difference between the total purchase consideration transferred to consummate the business combination and the fair value of the net identifiable assets acquired. Goodwill primarily relates to expected synergies to be realized due to combining Aliven with the Company, and the value of the assembled workforce on the Aliven Closing Date. Goodwill is expected to be deductible for income tax purposes.

	Three		Six
	Months		Months
Net revenue	$	70,054	$	132,818
Net loss	$	(12,918)	$	(14,603)
Net loss per share- basic and diluted	$	(0.17)	$	(0.19)
Weighted average number of shares of common stock outstanding- basic and diluted		76,439		75,888

	2021			2020

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

	⁽¹⁾	As of December 31, 2020, the Company had an obligation under the Amended Ariix Merger Agreement to issue the Fixed Shares and the Variable Shares, or pay $163.3 million of cash. These obligations were accounted for as derivative liabilities with an aggregate estimated fair value of $90.9 million as of December 31, 2020. Key valuation assumptions as of December 31, 2020 are set forth in Note 12 under the caption Recurring Fair Value Measurements.

	⁽²⁾	The conditions that required accounting for the Fixed Shares as a derivative liability were eliminated upon receipt of shareholder approval on May 14, 2021. Therefore, the fair value of the Fixed Shares derivative liability as of May 14, 2021 was reclassified to equity.

	⁽³⁾	The Variable Shares derivative liability provides for ongoing adjustments in the number of shares based on the outcome of any potential indemnification claims by either party to the Amended Ariix Merger Agreement. Accordingly, the Variable Shares derivative liability is being adjusted to fair value at the end of each reporting period until the underlying shares are issued in November 2021. Key valuation assumptions as of June 30, 2021 are set forth in Note 12 under the caption Recurring Fair Value Measurements.

	⁽⁴⁾	On May 31, 2019, Ariix completed a business combination with The LIMU Company, LLC (“LIMU”) that provided for a cash payment of $3.0 million on the closing date and $5.0 million of deferred consideration payable based on 5.0% of monthly post-closing sales related to the LIMU business. Through June 30, 2021, payments of deferred consideration made by both Ariix and the Company amounted to a total of approximately $1.1 million, resulting in a remaining balance due to the former owners of LIMU of $3.9 million. This obligation is subject to a security agreement until the entire amount is paid in full. The net carrying value of $3.5 million represents the fair value of this obligation based on a discount rate of 4.5%. This discount is being accreted using the effective interest method.

	⁽⁵⁾	On November 27, 2019, Ariix completed a business combination with Zennoa, LLC (“Zennoa”) that provided for fixed cash payments of $2.25 million and deferred consideration of $2.5 million that is payable based on annualized sales from the Zennoa business for the latest completed month (the “Zennoa Sales Metric”). Payments related to the deferred consideration commenced in December 2020 and are computed using a variable percentage based on the Zennoa Sales Metric. No amounts are payable if the Zennoa Sales Metric is less than $6.0 million, and payments ranging from 3% to 5% of monthly sales are payable if the Zennoa Sales Metric exceeds $6.0 million. After the stated purchase price of $4.75 million is paid in full, the Company is obligated to begin making Growth Incentive Payments (“GI Payments”) through November 2026. The amount of GI Payments due for each month is based on varying percentages starting at 2.0% if the Zennoa Sales Metric is at least $25.0 million, up to a maximum of 3.0% if the Zennoa Sales Metric is $45.0 million or higher. The Company determined that the probability of the Zennoa Sales Metric exceeding $25.0 million is remote. The net carrying value of the Zennoa deferred consideration of $1.9 million represents the fair value of the Company’s obligations to pay the stated purchase price and the GI Payments based on a discount rate of 3.9%. This discount is being accreted using the effective interest method.

	Variable			Fixed			Total			Other			Total
	Derivative Liabilities
	Variable			Fixed			Total			Other			Total

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

Balances, June 30, 2021	$	44,773		$	-		$	44,773		$	5,380		$	50,153

	⁽¹⁾	Represents the allocable fair value associated with the Variable Shares and the Fixed Shares derivative liabilities as of December 31, 2020.

	⁽²⁾	Represents the impact of the Clarification Letter entered into on January 29, 2021, whereby the number of shares subject to shareholder approval was reduced and a payable was recognized.

	⁽³⁾	Represents the gain recognized from changes in fair value of the Variable Shares derivative liability for the six months ended June 30, 2021.

	⁽⁴⁾	Represents the gain recognized from changes in fair value of the Fixed Shares derivative liability for the period from January 1, 2021 through May 14, 2021 when this derivative liability was reclassified to equity.

	⁽⁵⁾	The fair value of the Fixed Shares derivative liability as of May 14, 2021 was reclassified as a component of equity since shareholder approval to issue the shares eliminated the conditions that previously required liability treatment.

	2020		2019
Payables to former Morinda stockholders:
Excess Working Capital (“EWC”) payable in July 2020, net of discount	$	5,437	$	5,283
Earnout under Series D preferred stock		-		225
Total	$	5,437	$	5,508

	2021		2020

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

	2021		2020

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

Total accrued liabilities	$	65,009	$	70,007

Description of Derivative	2021			2020		2021			2020
	Three Months Ended					Six Months Ended
	June 30,					June 30,
Description of Derivative	2021			2020		2021			2020

Ariix business combination consideration:
Fixed Shares derivative	$	11,380	⁽¹⁾	$	-	$	6,765	⁽¹⁾	$	-
Variable Shares derivative		12,743	⁽¹⁾		-		6,018	⁽¹⁾		-
Warrants issued in private placement		6,706	⁽²⁾		-		8,433	⁽²⁾		-
Interest rate swap		-			20		-			(306	)

Gain (loss) on change in fair value of derivatives	$	30,829		$	20	$	21,216		$	(306	)

	⁽¹⁾	For further discussion of the Ariix Fixed Shares and Variable Shares derivative liabilities, please refer to Note 3.

	⁽²⁾	For further discussion of the derivative liability for warrants, please refer to Note 7 under the caption Private Placement of Units.

Gross selling price	$	57,129
Less commissions and other expenses		(1,941)
Less repair obligations		(1,675)
Net selling price		53,513
Cost of land and building sold		(29,431)
Total gain on sale		24,082
Portion of gain related to above-market rent concession		(17,640)

Recognized gain on sale	$	6,442

	2021			2020

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

Long-term debt, less current maturities	$	12,063		$	16,181

	2020		2019
EWB Credit Facility:
Term loan, net of discount of $576 and $448 as of June 30, 2020 and December 31, 2019, respectively	$	13,424	$	14,302
Revolver		-		9,700
PPP Loan payable, interest at 1.0%, unsecured, due April 2022		6,868		-
Installment notes payable		5		8

Total		20,297		24,010
Less current maturities		(1,505)		(11,208)

Long-term debt, less current maturities	$	18,792	$	12,802

	⁽¹⁾	As discussed in Note 14, the PPP Loans were forgiven in July 2021. Accordingly, these loans are included as a debt obligation until the date of forgiveness when the obligation will be eliminated.

	⁽²⁾	Current maturities of long-term debt include the aggregate principal payments of $24.0 million due under the Senior Notes, net of accretion of debt discount of approximately $4.6 million, expected for the 12 months ending June 30, 2022. Due to forgiveness of the PPP Loans in July 2021, they are excluded from current debt maturities.

	●	~~In March 2020, the Company made an initial deposit of~~ ~~$15.1~~ million in restricted cash accounts designated by EWB. The future requirement to maintain restricted cash will be reduced by the amount of principal payments under the EWB Term Loan after the amendment date. ~~As of June 30, 2020, the restricted cash deposit amounted to~~ ~~$14.7~~ ~~million.~~
	●	~~For any future amounts borrowed under the EWB Revolver, the Company is required to increase restricted cash deposits by the corresponding amount of the borrowings.~~
	●	Less stringent requirements are applicable for future compliance with the minimum adjusted EBITDA covenant, the maximum total leverage ratio, and the fixed charge coverage ratio. Additionally, compliance with the maximum total leverage ratio and the fixed charge coverage ratio have been delayed until June 30, 2021.
	●	The existing provision related to “equity cures” that may be employed to maintain compliance with financial covenants was increased from $5.0 million to $15.0 million for the year ending December 31, 2020, and to $10.0 million per year for each calendar year thereafter.
	●	The Company was required to obtain equity infusions for at least $15.0 million for the six months ended June 30, 2020. As discussed in Note 7, the Company received gross proceeds of $25.8 million for the six months ended June 30, 2020.
	●	The Company was required to obtain equity infusions for gross proceeds of $30.0 million for the year ending December 31, 2020. Pursuant to the Fourth Amendment discussed in Note 14, this amount was increased by up to $1.2 million if the Company redeems shares of its Common Stock for the year ending December 31, 2020. The Company made stock repurchases for approximately $1.2 million in July 2020 whereby equity infusions for gross proceeds of $31.2 million are now required for the year ending December 31, 2020. After deducting gross proceeds of $25.8 million received for the six months ended June 30, 2020, additional equity infusions that result in gross proceeds of $5.4 million must be received by December 31, 2020.

				Common
Description	Warrants			Stock			Total

Fair value on issuance date	$	14,128	⁽¹⁾	$	46,105	⁽²⁾	$	60,233
Adjustment to reduce Common Stock to residual fair value		-			(6,455	)⁽³⁾		(6,455	)

Total	$	14,128	⁽¹⁾	$	39,650	⁽³⁾	$	53,778	⁽⁴⁾

	⁽²⁾	Represents fair value of 14.6 million shares of Common Stock based on the closing price of $3.15 per share for the Company’s Common Stock as of February 19, 2021.

	⁽³⁾	Adjustment required to record shares of Common Stock at residual fair value since the total fair value of the warrants and shares of Common Stock exceeded the net proceeds received in the private placement.

	⁽⁴⁾	Represents the net proceeds received in the private placement.

	Number of		Carrying
Description	Shares		Value

Balance, December 31, 2020		800	$	2,101
Amendment Fee		400		1,060

Total reclassified to permanent equity		1,200	$	3,161

	Number		Gross Proceeds				Offering Costs				Net
Description	Of Shares		Per Share		Amount		Commissions		Other		Proceeds

Six Months Ended June 30, 2020:
Three months ended March 31, 2020		4,939	$	1.73	$	8,545	$	(257)	$	(3)	$	8,285
Three months ended June 30, 2020		11,191	$	1.54		17,270		(436)		(91)		16,743

Total		16,130	$	1.60	$	25,815	$	(693)	$	(94)	$	25,028

Six Months Ended June 30, 2019:
Three months ended March 31, 2019		-	$	-	$	-	$	-	$	-	$	-
Three months ended June 30, 2019		2,225	$	5.27		11,733		(352)		(240)		11,141

Total		2,225	$	5.27	$	11,733	$	(352)	$	(240)	$	11,141

	Shares			Price ⁽¹⁾		Term ⁽²⁾

Outstanding, beginning of period		3,856		$	2.72		8.2
Grants		528			2.74
Forfeited		(190	)		3.10
Exercised		(288	)⁽³⁾		1.84

Outstanding, end of period		3,906	⁽⁴⁾		2.77		8.2

Vested, end of period		1,586	⁽⁴⁾		2.71		7.0

	Shares			Price ⁽¹⁾		Term ⁽²⁾

Outstanding, December 31, 2019		3,551		$	2.65		8.7
Grants		427		$	1.80
Forfeited		(290)		$	3.28
Exercised		(2)		$	1.79

Outstanding, June 30, 2020		3,686	⁽³⁾	$	2.50		8.0

Vested, June 30, 2020		1,372	⁽³⁾	$	2.41		6.1

	⁽¹⁾	Represents the weighted average exercise price.

	⁽²⁾	Represents the weighted average remaining contractual term until the stock options expire.

	⁽³⁾	On the respective exercise dates, the weighted average intrinsic value per share of Common Stock issued upon exercise of stock options amounted to $1.72 per share for a total of $0.5 million for the six months ended June 30, 2021.

	⁽⁴⁾	As of June 30, ~~2020,~~2021, based on the closing price of the Company’s Common Stock ~~was~~ of $~~$1.53~~2.23 per share, ~~resulting in no~~the intrinsic value ~~associated with any~~amounted to $0.6 million for outstanding stock options and $0.3 million for vested stock options.

Grant date closing price of Common Stock	$	1.79
Expected life (in years)		5.8
Volatility		104%
Dividend yield		0%
Risk-free interest rate		1.2%