| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations General Tattooed Chef, Inc. was originally incorporated
in Delaware on May 4, 2018 under the name of Forum Merger II Corporation (“Forum”), as a special purpose acquisition company
(“SPAC”) for the purpose of effecting a merger, capital stock exchange, asset acquisitions, stock purchase, reorganization
or similar business combination with one or more business. On October 15, 2020 (the “Closing Date”),
Forum consummated the transactions contemplated within the Agreement and Plan of Merger dated June 11, 2020 as amended on August 10, 2020
(the “Merger Agreement”), by and among Forum, Myjojo, Inc., a Delaware corporation (“Myjojo (Delaware)”), Sprout
Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Forum (“Merger Sub”), and Salvatore Galletti, in
his capacity as the holder representative (the “Holder Representative”). The transactions contemplated by the Merger Agreement
are referred to herein as the “Transaction”. Upon the consummation of the Transaction, Merger
Sub merged with and into Myjojo (Delaware) (the “Merger”), with Myjojo (Delaware) surviving the merger. Immediately upon the
completion of the Transaction, Myjojo (Delaware) became a direct wholly owned subsidiary of Forum. Following the Closing Date, Forum changed
its name to Tattooed Chef, Inc. (“Tattooed Chef”). Tattooed Chef’s common stock began trading on the Nasdaq under the
symbol “TTCF” on October 16, 2020. Tattooed Chef, Inc. and its subsidiaries, (collectively,
the “Company”) are principally engaged in the manufacturing of plant-based foods including, but not limited to, acai and smoothie
bowls, zucchini spirals, riced cauliflower, vegetable bowls and cauliflower crust pizza primarily in the United States and Italy. About the Subsidiaries Myjojo, Inc. was an S corporation formed under
the laws of California (“Myjojo (California)”) on February 26, 2019 to facilitate a corporate reorganization of Ittella International
Inc. On March 27, 2019, Salvatore Galletti, the sole stockholder of Ittella International, Inc. contributed all of his share ownership
of Ittella International, Inc. to Myjojo (California) in exchange for 100% interest in the latter, becoming Myjojo (California)’s
sole stockholder. On May 21, 2020, Myjojo (Delaware) was formed
with Salvatore Galletti owning all of the shares of common stock. On May 27, 2020, Myjojo, Inc. (California) merged into Myjojo, Inc.,
(Delaware) with Myjojo, Inc. (Delaware) issuing shares of common stock to Salvatore Galletti, the sole stockholder of Myjojo (California). Ittella International, Inc. was formed in California
as a tax pass-through entity and subsequently converted on April 10, 2019 to a limited liability company, Ittella International, LLC (“Ittella
International”). On April 15, 2019, UMB Capital Corporation (“UMB”), a financial institution, acquired a 12.50% non-controlling
interest in Ittella International (Note 3). Ittella’s Chef, Inc. was incorporated under
the laws of the State of California on July 20, 2017 as a qualified Subchapter S subsidiary and a wholly owned subsidiary of Ittella International.
Ittella’s Chef, Inc. was formed as a tax passthrough entity for purposes of holding Ittella International’s 70% ownership
interest in Ittella Italy, S.R.L. (“Ittella Italy”). On March 15, 2019, Ittella’s Chef, Inc. was converted to a limited
liability company, Ittella’s Chef, LLC (“Ittella’s Chef”). In connection with the Transaction and as a condition
to the Closing, Myjojo (Delaware) entered into a Contribution Agreement with the minority members of Ittella International and the minority
shareholders of Ittella Italy. Under the Contribution Agreement, the minority holders contributed all of their equity interests in Ittella
International to Myjojo (Delaware) and Ittella Italy to Ittella’s Chef in exchange for Myjojo (Delaware) stock (the “Restructuring”).
The Restructuring was consummated prior to the Transaction. The shares of Myjojo (Delaware) were exchanged for shares of Forum’s
common stock upon consummation of the Transaction. On May 14, 2021, Tattooed Chef acquired New Mexico
Food Distributors, Inc. (“NMFD”) and Karsten Tortilla Factory, LLC (“Karsten”) in an all-cash transaction for
approximately $34.09 million (collectively, the “NMFD Transaction”). NMFD and Karsten were privately held companies based
in Albuquerque, New Mexico. NMFD produces and sells frozen and ready-to-eat New Mexican food products to retail and food service customers
through its network of distributors in the United States. NMFD processes its products in two leased facilities located in New Mexico.
See Note 10 Business combination and asset purchases. Basis of Consolidation. Basis of Presentation. The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31,
2020 as filed with the SEC on March 19, 2021, which contains the audited financial statements and notes thereto. The financial information
as of December 31, 2020 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2020. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative
of the results to be expected for the year ending December 31, 2021 or for any future interim periods. The Transaction was accounted for as a reverse
recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method, Forum was treated as the “acquired”
company (“Accounting Acquiree”) and Myjojo (Delaware), the accounting acquirer, was assumed to have issued stock for the net
assets of Forum, accompanied by a recapitalization. The net assets of Forum were stated at historical
cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the
reverse recapitalization were those of Myjojo (Delaware). The shares and corresponding capital amounts and earnings per share available
for common stockholders, prior to the reverse recapitalization, have been retroactively restated. Revision of Previously Issued Financial Statements for Correction
of Immaterial Errors. The Company identified errors in its previously
issued annual financial statements that were determined to be individually, and in the aggregate, quantitatively and qualitatively immaterial
based on its analysis of Staff Accounting Bulletin (“SAB”) No. 99, “ Materiality Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
● In further consideration of the guidance in Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity Fair Value Measurement ● The Company revised the accompanying consolidated balance sheet and statement of stockholders’ equity as of December 31, 2020 to reflect the correction of an immaterial error related to the presentation of 81,087 treasury shares. The treasury shares are now presented separately from common stock shares. This revision has an immaterial impact on the Company’s previously reported net income, earnings per share, or stockholders’ equity. ● The Company revised the accompanying consolidated statements of equity and operations and comprehensive income for the year ended December 31, 2020 to reflect the correction of an immaterial error related to the grant of 825,000 stock awards to Harrison Co. (“Harrison”) on October 15, 2020 as consideration for advisory services provided by Harrison to facilitate the successful completion of the Transaction (see Note 18). The stock awards were fully vested on grant date, and therefore a weighted average 174,041 shares should have been included in basic and diluted outstanding shares when calculating earnings per share for the year ended December 31, 2020. In addition, the fair value of the stock awards issued in the amount of $20.54 million should have been included as a reduction to the “Reverse Recapitalization” line item and an increase by the same amount to the “Transaction costs, net of tax” line item. Both items are included within the Company’s additional paid-in capital for the year ended December 31, 2020. The Company also identified a $4.0 million deferred tax asset (with the corresponding offset to additional paid-in capital) that should have been recorded in connection with this grant. The revision has no impact on the Company’s previously reported net income but reduced the earnings per share for the year ended December 31, 2020. The impact of the tax consequences associated with the grant have been reflected in the balance sheet and statement of stockholders’ equity. ● The Company revised the accompanying condensed consolidated statements of operations and comprehensive income for the period ended September 30, 2020 to reflect the correction of an immaterial error for amounts previously not reflected in the comprehensive income attributable to noncontrolling interest. This revision has no impact on the Company’s net income, retained earnings, or earnings per share. ● The Company identified errors related to inventoriable costs and the classification of certain expense accounts that primarily impacted revenue, cost of goods sold and operating expenses. ● The Company identified a classification error between accounts receivable and deferred revenue, which affected the balance sheet as of December 31, 2020. The following table summarizes the effect of the revision on each financial
statement line item as of the dates, and for the periods ended, indicated:
(In thousands) Consolidated Balance Sheet
As of December 31, 2020 As Originally Revisions Re- As Revised
Accounts receivable $ 17,991 $ (1,710 ) $ - $ 16,281
Inventory 38,660 (658 ) - 38,002
Prepaid expenses and other current assets 18,240 176 - 18,416
TOTAL CURRENT ASSETS 206,470 (2,192 ) - 204,278
Deferred income taxes, net 43,525 4,024 - 47,549
TOTAL ASSETS 266,683 1,832 - 268,515
Accounts payable 25,391 - (1,316 ) 24,075
Accrued expenses 2,961 649 - 3,610
Deferred revenue 1,711 (1,711 ) - -
Other current liabilities 87 - 1,316 1,403
TOTAL CURRENT LIABILITIES 30,349 (1,062 ) - 29,287
Warrant liabilities - 5,184 - 5,184
TOTAL LIABILITIES 32,339 4,122 - 36,461
Additional paid-in capital 170,799 (2,351 ) - 168,448
Retained earnings 63,537 61 - 63,598
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 234,344 (2,290 ) - 232,054
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 266,683 1,832 - 268,515
Condensed Consolidated Statements of
(In thousands, except EPS) Operations and Comprehensive Income
As Originally
For the three months ended September 30, 2020 Reported Revisions As Revised
Revenue $ 40,962 $ 2 $ 40,964
Cost of goods sold 37,180 (447 ) 36,733
Gross profit 3,782 449 4,231
Operating expense 7,187 433 7,620
Loss from operations (3,405 ) 16 (3,389 )
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (2,768 ) 16 (2,752 )
INCOME TAX BENEFIT (EXPENSE) (492 ) (1 ) (493 )
Net income (loss) (3,260 ) 15 (3,245 )
LESS: INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (160 ) 2 (158 )
NET INCOME (LOSS) ATTRIBUTABLE TO TATTOOED CHEF, INC. (3,100 ) 13 (3,087 )
Basic net loss per share (0.11 ) - (0.11 )
Diluted net loss per share (0.11 ) - (0.11 )
Comprehensive income (3,844 ) 15 (3,829 )
Less: income (loss) attributable to the noncontrolling interest 57 (158 ) (101 )
Comprehensive income attributable to Tattooed Chef, Inc. stockholders (3,901 ) 173 (3,728 )
Condensed Consolidated Statements of
(In thousands, except EPS) Operations and Comprehensive Income
As Originally
For the nine months ended September 30, 2020 Reported Revisions As Revised
Revenue $ 108,896 $ 7 $ 108,903
Cost of goods sold 92,126 (507 ) 91,619
Gross profit 16,770 514 17,284
Operating expense 11,645 945 12,590
Income from operations 5,125 (431 ) 4,694
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 5,669 (431 ) 5,238
Net income (loss) 3,894 (432 ) 3,462
LESS: INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 1,201 (53 ) 1,148
NET INCOME (LOSS) ATTRIBUTABLE TO TATTOOED CHEF, INC. 2,693 (379 ) 2,314
Basic net income per share 0.10 (0.02 ) 0.08
Diluted net income per share 0.10 (0.02 ) 0.08
Comprehensive income 3,693 (432 ) 3,261
Less: income (loss) attributable to the noncontrolling interest 91 1,148 1,239
Comprehensive income attributable to Tattooed Chef, Inc. stockholders 3,602 (1,580 ) 2,022
(In thousands) Condensed Consolidated Statements of
For the three months ended September 30, 2020 As originally Revisions As revised
Redeemable noncontrolling interest beginning balance $ 43,900 (85 ) $ 43,815
Net income in redeemable noncontrolling interest (442 ) 2 (440 )
Redeemable noncontrolling interest ending balance 43,900 (83 ) 43,817
Retained earnings beginning balance (28,853 ) (603 ) (29,456 )
Net income in retained earnings (3,100 ) 13 (3,087 )
Retained earnings ending balance (36,675 ) (590 ) (37,265 )
Total Stockholders’ equity beginning balance (27,882 ) (601 ) (28,483 )
Total Stockholders’ equity ending balance (36,006 ) (588 ) (36,594 )
(In thousands) Condensed Consolidated Statements of
For the nine months ended September 30, 2020 As originally reported Revisions As revised
Redeemable noncontrolling interest beginning balance $ 6,930 (30 ) $ 6,900
Net income in redeemable noncontrolling interest 251 (53 ) 198
Redeemable noncontrolling interest ending balance 43,900 (83 ) 43,817
Retained earnings beginning balance 1,265 (209 ) 1,056
Net income in retained earnings 2,693 (379 ) 2,314
Retained earnings ending balance (36,675 ) (590 ) (37,265 )
Total Stockholders’ equity beginning balance 3,146 (209 ) 2,937
Total Stockholders’ equity ending balance (36,006 ) (588 ) (36,594 )
(In thousands) Condensed Consolidated Statements of
As Originally
For the nine months ended September 30, 2020 Reported Revisions As revised
Cash Flows from Operating Activities:
Net income $ 3,894 $ (432 ) $ 3,462
Changes in operating assets and liabilities:
Inventory (9,934 ) 432 (9,502 )
Net cash provided by operating activities 1,820 - 1,820 Restatement of Previously Issued Financial
Statements In connection with the preparation of the consolidated
financial statements as of and for the year ended December 31, 2021 included in the Form 10-K filed with the Securities and Exchange Commission
(the “SEC”) on March 16, 2022, the Company identified errors related to (i) deferred tax assets resulting from the reverse
recapitalization transaction that occurred in 2020 and related valuation allowance; (ii) classification among accounts receivable and
deferred revenue; and (iii) other immaterial previously uncorrected adjustments. Amounts depicted as “As Restated” throughout
the accompanying condensed consolidated financial statements and footnotes include the impact of the restatement, as well as the impact
of the adoption of ASC 842, Leases as of January 1, 2021 to the quarter and nine months ended September 30, 2021. See Note 24 to the consolidated
financial statements and Item 8 of the Form 10-K as aforementioned. The table below sets forth the condensed consolidated
financial statements, including as originally reported, the impacts resulting from ASC 842 adoption, the adjustments from the restatement,
the reclassification, and the as restated balances for the quarterly period ended September 30, 2021 (in thousands):
Condensed consolidated balance sheet
As of September 30, 2021 As Reported Adoption of Adjustments As Restated
Accounts receivable, net $ 24,469 - (1,314 ) $ 23,155
Prepaid expenses and other current assets 8,256 (39 ) - 8,217
TOTAL CURRENT ASSETS 207,472 (39 ) (1,314 ) 206,119
Property, plant and equipment, net 39,669 (2,900 ) - 36,769
Operating lease right-of-use asset, net - 5,766 - 5,766
Finance lease right-of-use asset, net - 5,683 - 5,683
Goodwill 19,351 (1,378 ) - 17,973
Other assets 1,731 (1,444 ) - 287
TOTAL ASSETS $ 268,402 5,688 (1,314 ) $ 272,776
Notes payable, current portion 400 - 2,863 3,263
Deferred revenue 634 - (634 ) -
Forward contract derivative liability 1,788 - (136 ) 1,652
Finance lease liabilities, current 2,863 - (2,863 ) -
Operating lease liabilities, current - 1,203 - 1,203
Other current liabilities 911 (67 ) - 844
TOTAL CURRENT LIABILITIES 38,441 1,136 (770 ) 38,807
Operating lease, net of current portion - 4,622 - 4,622
TOTAL LIABILITIES 42,411 5,758 (770 ) 47,399
Additional paid in capital 233,223 - 4,024 237,247
Retained earnings (6,332 ) (70 ) (4,568 ) (10,970 )
Total equity 225,991 (70 ) (544 ) 225,377
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 268,402 5,688 (1,314 ) $ 272,776
Condensed consolidated statements of operations and comprehensive income (loss)
For Three Months Ended September 30, 2021 As Reported Adoption of Adjustments As Restated
REVENUE $ 58,780 - (425 ) $ 58,355
GROSS PROFIT 5,944 - (425 ) 5,519
OPERATING EXPENSES 13,604 41 42 13,687
(LOSS) INCOME FROM OPERATIONS (7,660 ) (41 ) (467 ) (8,168 )
Other (expense) income (724 ) - 136 (588 )
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES (8,429 ) (41 ) (331 ) (8,801 )
NET (LOSS) INCOME (8,174 ) (41 ) (331 ) (8,546 )
NET (LOSS) INCOME ATTRIBUTABLE TO TATTOOED CHEF, INC. $ (8,174 ) (41 ) (331 ) $ (8,546 )
NET (LOSS) INCOME PER SHARE
Basic (0.10 ) - - (0.10 )
Diluted (0.10 ) - - (0.10 )
Comprehensive (loss) income (8,982 ) (41 ) (331 ) (9,354 )
Comprehensive (loss) income attributable to Tattooed Chef, Inc. stockholders $ (8,982 ) (41 ) (331 ) $ (9,354 )
Condensed consolidated statements of operations and comprehensive income (loss)
For Nine Months Ended September 30, 2021 As Reported Adoption of Adjustments As Restated
REVENUE $ 161,972 - (878 ) $ 161,094
COST OF GOODS SOLD 140,304 - (226 ) 140,078
GROSS PROFIT 21,668 - (652 ) 21,016
OPERATING EXPENSES 44,853 70 (621 ) 44,302
(LOSS) INCOME FROM OPERATIONS (23,185 ) (70 ) (31 ) (23,286 )
Other (expense) income (2,496 ) - (40 ) (2,536 )
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES (25,840 ) (70 ) (71 ) (25,981 )
INCOME TAX EXPENSE (44,255 ) - (4,024 ) (48,279 )
NET (LOSS) INCOME (70,095 ) (70 ) (4,095 ) (74,260 )
(LOSS) INCOME ATTRIBUTABLE TO TATTOOED CHEF, INC. $ (70,095 ) (70 ) (4,095 ) $ (74,260 )
NET (LOSS) INCOME PER SHARE
Basic (0.86 ) - (0.05 ) (0.91 )
Diluted (0.86 ) - (0.05 ) (0.91 )
Comprehensive (loss) income (71,004 ) (70 ) (4,095 ) (75,169 )
Comprehensive (loss) income attributable to Tattooed Chef, Inc. stockholders $ (71,004 ) (70 ) (4,095 ) $ (75,169 )
For Three Months Ended September 30, 2021 Condensed consolidated statements of stockholders’ equity
(in thousands, Unaudited) As Reported Adjustments As Restated
Additional Paid-In Capital beginning balance $ 231,359 4,024 $ 235,383
Additional Paid-In Capital ending balance 233,223 4,024 237,247
Retained earnings (Deficit) beginning balance 1,842 (4,266 ) (2,424 )
Net loss in retained earnings (Deficit) (8,174 ) (372 ) (8,546 )
Retained earnings (Deficit) ending balance (6,332 ) (4,638 ) (10,970 )
Total Stockholders’ equity beginning balance 233,109 (242 ) 232,867
Total Stockholders’ equity ending balance 225,991 (614 ) 225,377
For Nine Months Ended September 30, 2021 Condensed consolidated statements
(in thousands, Unaudited) As Reported Adjustments As Restated
Additional Paid-In Capital beginning balance $ 164,424 4,024 $ 168,448
Additional Paid-In Capital ending balance 233,223 4,024 237,247
Retained earnings (Deficit) beginning balance 64,071 (473 ) 63,598
Net loss in retained earnings (Deficit) (70,095 ) (4,165 ) (74,260 )
Retained earnings (Deficit) ending balance (6,332 ) (4,638 ) (10,970 )
Total Stockholders’ equity beginning balance 228,503 3,551 232,054
Total Stockholders’ equity ending balance 225,991 (614 ) 225,377
Condensed consolidated statements of cash flows
For Nine Months Ended September 30, 2021 As Reported Adoption of Adjustments As Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (70,095 ) (70 ) (4,095 ) $ (74,260 )
Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation and amortization 2,514 39 - 2,553
Deferred taxes, net 43,525 - 4,024 47,549
Non-cash lease cost - 59 - 59
Changes in operating assets and liabilities:
Accounts receivable (3,450 ) - (397 ) (3,847 )
Prepaid expenses and other assets (3,090 ) 39 - (3,051 )
Accrued expenses 1,841 - (649 ) 1,192
Deferred revenue (1,077 ) - 1,077 -
Other current liabilities 289 (67 ) 40 262
Net cash used in operating activities (33,125 ) - - (33,125 ) Reclassifications. Fair Value of Financial Instruments.
Level 1 - Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company is able to access at the measurement date.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, and can reference interest rates, yield curves, implied volatilities and credit spreads.
Level 3 - Inputs are unobservable data points for the asset or liability, and include situations where there is limited, if any, market activity for the asset or liability. Cash. Foreign Currency. The accompanying condensed consolidated financial
statements are expressed in United States dollars. Assets and liabilities of foreign operations are translated at period-end rates of
exchange. Revenues, costs and expenses are translated at average rates of exchange prevailing during the period. Equity adjustments resulting
from translating foreign currency financial statements are accumulated as a separate component of stockholders’ equity. The Company conducts business globally and is
therefore exposed to adverse movements in foreign currency exchange rates, specifically the Euro to US dollar. To limit the exposure related
to foreign currency changes, the Company entered into foreign currency exchange forward contracts starting in 2020. The Company does not
enter into contracts for speculative purposes. In February 2020, the Company entered into a trading
facility for derivative forward contracts. Under this facility, the Company has access to open foreign exchange forward contract instruments
to purchase a specific amount of funds in Euros and to settle, on an agreed-upon future date, in a corresponding amount of funds in United
States dollars. During the nine months ended September 30, 2021 and 2020, the Company entered into foreign currency exchange forward contracts
to purchase 55.36 million Euros and 37.79 million Euros, respectively. The notional amounts of these derivatives are $66.80 million and
$42.81 million for the nine months ended September 30, 2021 and 2020, respectively. These derivatives are not designated as hedging
instruments. Gains and losses on the contracts are included in other income net, and substantially offset foreign exchange gains and losses
from the short-term effects of foreign currency fluctuations on assets and liabilities, such as purchases, receivables and payables, which
are denominated in currencies other than the functional currency of the reporting entity. These derivative instruments generally have
maturities of up to nine months. Accounts Receivable. Inventory. Overhead costs are allocated to the units produced
within the reporting period, while abnormal costs are charged to current operations as incurred. The Company monitors the remaining utility
of its inventory and writes down inventory for excess or obsolescence as appropriate. Property, Plant and Equipment Goodwill. Long-Lived and Intangible Assets. Warrants. Revenue Recognition (As Restated). Control generally transfers to the customer when
the product is shipped or delivered to the customer based upon applicable shipping terms. Customer contracts generally do include more
than one performance obligation and the performance obligations in the Company’s contracts are satisfied within one year. No payment
terms beyond one year are granted at contract inception. The Company disaggregates revenue based on the
type of products sold to its customers – private label, Tattooed Chef and other. The other revenue stream constitutes sale of similar
food products directly to customers through a third-party vendor and the Company acts as a principal in these transactions. Some contracts also include some form of variable
consideration. The most common forms of variable consideration include slotting fees, trade discounts, promotional programs, and demonstration
costs. Variable consideration is treated as a reduction in revenue when product revenue is recognized. Depending on the specific type
of variable consideration, the Company uses either the expected value or most likely amount method to determine the variable consideration.
The Company reviews and updates its estimates and related accruals of variable consideration each period based on the terms of the agreements,
historical experience, and any recent changes in the market. The Company generally does not have unbilled receivable
balances arising from transactions with customers. The Company does not capitalize contract inception costs as contracts are generally
one year or less and the Company does not incur significant fulfillment costs requiring capitalization. The Company recognizes shipping and handling costs related to products
transferred to the end customer as fulfillment cost and includes these costs in cost of goods sold upon delivery of the product to the
customer. The Company enters into certain arrangements with
its customers to provide inventory for promotional purposes (“Promotional Items”). Such arrangements are not tied to immediate
or future sales of any particular product. Instead, the Company will occasionally offer these Promotional Items in a targeted way to increase
product awareness. Since a Promotional Item does not provide a material right, it is not considered a distinct performance obligation.
As such, the cost of the Promotional Item is not presented within cost of goods sold and is instead treated as an operating expense. Cost of Sales. Operating Expenses. Sales and Marketing Expenses (As Restated).
Interest Expense. Deferred Financing Costs. Stock-based Compensation. Compensation — Stock Compensation Under the provisions of ASC 718, Compensation—Stock
Compensation Income Taxes. ASC 740 prescribes a recognition threshold and
a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must first be determined to be more likely to be sustained based solely on
its technical merits, and if so, then measured to be the largest benefit that has a greater than 50% likelihood of being sustained upon
examination by taxing authorities. There were no unrecognized tax benefits as of September 30, 2021 and December 31, 2020, respectively.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued
for the payment of interest and penalties as of September 30, 2021 or December 31, 2020. The Company is currently not aware of any issues
under review that could result in significant payment, accruals, or material deviation from its tax position. The Company is subject to
income tax examinations by major taxing authorities since inception. See Note 15 for more information on the Company’s accounting
for income taxes. Accumulated Other Comprehensive Income (Loss).
Use of Estimates. Concentrations of Credit Risk (As Restated).
Three customers accounted for 64% and 87% of the Company’s revenue
during the three months ended September 30, 2021 (as restated) and 2020, respectively.
Customer 2021 2020
(As Restated)
Customer A 20 % 36 %
Customer C 33 % 30 %
Customer B 11 % 21 % Three customers accounted for 77% and 87% of the Company’s revenue
during the nine months ended September 30, 2021 (as restated) and 2020, respectively.
Customer 2021 2020
(As Restated)
Customer C 35 % 36 %
Customer A 31 % 34 %
Customer B 11 % 17 % Customers accounting for more than 10% of the Company’s accounts
receivable as of September 30, 2021 (as restated) and December 31, 2020 were:
September 30, December 31,
Customer 2021 2020
(As Restated)
Customer A 21 % 24 %
Customer B * 10 %
Customer C 28 % 53 %
Customer D 15 % **
* Customer B accounted for less than 10% of accounts receivable as of September 30, 2021. However, customer B accounted for 10% as of
December 31, 2020 and as such was included in the disclosure above for comparison purposes.
** Customer D is a new customer in 2021, accounted for 15% as of September 30, 2021 and as such was included in the disclosure above
for comparison purposes. Segment Information. Long-lived assets consist of property, plant and equipment, net of
depreciation, and are categorized based on geographic location as follows:
September 30, December 31,
Definite Lived Intangible Assets (in thousands) 2021 2020
Italy $ - $ -
United States - tradenames 179 -
Total $ 179 $ -
Remaining
Definite Lived Intangible Assets useful life
Description:
Tradenames 1.75
September 30, December 31,
Long Lived Assets (in thousands) 2021 2020
(As Restated)
Italy $ 15,744 $ 9,113
United States 21,025 6,970
Total $ 36,769 $ 16,083 COVID-19 Pandemic. Despite partial remote working conditions, the Company’s business
activities have continued to operate with minimal interruptions. However, the pandemic may adversely affect the
Company’s suppliers and could impair its ability to obtain raw material inventory in the quantities or of a quality the Company
desires. The Company currently sources a material amount of its raw materials from Italy. Though the Company is not dependent on any single
Italian grower for its supply of a certain crop, events (including the pandemic) generally affecting these growers could adversely affect
the Company’s business. If the Company is unable to manage its supply chain effectively and ensure that its products are available
to meet consumer demand, operating costs could increase, and sales and profit margins could decrease. On March 27, 2020, the Coronavirus Aid, Relief,
and Economic Security Act (“CARES Act”) was enacted. The CARES Act, among other things, includes provisions relating to refundable
payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax
credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions and
technical corrections to tax depreciation methods for qualified improvement property. It also appropriated funds for the Small Business
Administration’s Paycheck Protection Programs that are forgivable in certain situations to promote continued employment, as well
as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19. The Company has elected not to apply for
a Paycheck Protection Program loan. The Company has analyzed the provisions of the CARES Act and determined it did not have a material
impact on the Company’s financial condition, results of operations or cash flows for the periods presented. The extent to which this pandemic could adversely
impact the Company’s future business, financial condition and results of operations is dependent upon various factors, many of which
are highly uncertain and outside the control of the Company. Earnings per share. Emerging Growth Company (“EGC”). |
