UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q/A~~10-Q

~~(Amendment No. 1)~~

(Mark One)

~~(Mark One)~~

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

For the quarterly period ended ~~March 31, 2021~~June 30, 2022

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

For the transition period from to

Commission File No. 001-38615

TATTOOED CHEF, INC.

(Exact name of registrant as specified in its charter)

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

6305 Alondra Blvd., Paramount, CA 90723

(Address of Principal Executive Offices, including zip code)

(562) 602-0822

(Registrant’s telephone number, including area code)

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on

which registered

Common stock, par value $0.0001 per share

TTCF

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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.

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

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

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

As of ~~May 12, 2021,~~August 3, 2022, there were ~~81,110,199~~82,459,803 shares of common stock, par value $0.0001, issued and outstanding.

~~Explanatory Note~~TATTOOED CHEF, INC.

~~This Amendment No. 1 to Quarterly Report on Form 10-Q/A (this “Form 10-Q/A”) amends and restates certain items noted below in the~~ Quarterly Report on Form 10-Q of Tattooed Chef, Inc. (the “Company”) for the quarter ended March 31, 2021, as originally filed with the Securities and Exchange Commission (the “SEC”) on May 18, 2021 (the “Original Filing”). This Form 10-Q/A amends the Original Filing to reflect (1) the correction of errors related to (i) deferred tax assets resulting from the reverse recapitalization transaction that occurred in 2020; (ii) classification among accounts receivable, inventory, accounts payable and deferred revenue; and (iii) other immaterial previously uncorrected adjustments and (2) the retrospective adoption of ASC 842, Leases, to the quarter ended March 31, 2021 because the Company adopted ASC 842 in the fourth quarter of 2021 with an effective date of January 1, 2021.

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

~~Items Amended in this Filing~~

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

~~-Part I, Item 1 – Financial Statements~~

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

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

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

~~TATTOOED CHEF, INC.~~

~~Quarterly Report on Form 10-Q/A~~

For the Quarter Ended ~~March 31, 2021~~June 30, 2022

TABLE OF CONTENTS

		Page

PART I – FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of ~~March 31, 2021 (As Restated) (Unaudited)~~June 30, 2022 and December 31, ~~2020~~2021 (unaudited)	1

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021 ~~(As Restated) (Unaudited) and 2020 (Unaudited)~~(unaudited)	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended ~~March 31, 2021 (As Restated) (Unaudited)~~June 30, 2022 and ~~2020 (Unaudited~~2021(unaudited))	3

	Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months ~~March 31,~~Ended June 30, 2022 and 2021 ~~(As Restated) (Unaudited) and 2020 (Unaudited~~(unaudited))	54

	Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~(unaudited)	65

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3428

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3934

Item 4.	Control and Procedures	3936

PART II – OTHER INFORMATION		37

Item 1.	Legal Proceedings	4137

Item 1A.	Risk Factors	4137

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4137

Item 3.	Defaults Upon Senior Securities	4137

Item 4.	Mine Safety Disclosures	4137

Item 5.	Other Information	4137

Item 6.	Exhibits	4238

SIGNATURES		4339

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

TATTOOED CHEF, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS ~~(Unaudited)~~(unaudited)

(in thousands, except for ~~par value and~~ share information)

					June 30,			December 31,
	March 31, 2021		December 31, 2020		2022			2021
ASSETS	(As Restated)
CURRENT ASSETS
Cash	$	185,161	$	131,579	$	27,729		$	92,351
Accounts receivable		29,171		16,281
Accounts receivable, net						32,316			25,117
Inventory		38,981		38,002		62,622			54,562
Prepaid expenses and other current assets		11,712		18,416		10,824			7,027
TOTAL CURRENT ASSETS		265,025		204,278		133,491			179,057

Property, plant and equipment, net		19,312		16,083		57,687			46,476
Operating lease right-of-use asset, net		3,968		-		16,883			8,039
Deferred taxes		49,297		47,549
Finance lease right-of-use asset, net						5,554			5,639
Intangible assets, net						96			151
Deferred income taxes, net						259			266
Goodwill						26,705			26,924
Other assets		923		605		175			649
TOTAL ASSETS	$	338,525	$	268,515	$	240,850		$	267,201

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable		30,710		24,075	$	30,579		$	28,334
Accrued expenses		6,558		3,610		6,525			3,767
Line of credit		26		22		1,510			1,200
Notes payable to related parties, current portion		42		66
Notes payable, current portion		111		111		5,028			5,019
Forward contract derivative liability		1,958		-		2,988			1,804
Operating lease liabilities, current		651		-
Operating lease liabilities, current portion						2,190			1,523
Other current liabilities		1,187		1,403		386			122
TOTAL CURRENT LIABILITIES		41,243		29,287		49,206			41,769

Warrant liability		1,875		5,184		146			814
Operating lease, net of current portion		3,344		-
Operating lease liabilities, net of current portion						14,910			6,599
Notes payable, net of current portion		1,903		1,990		1,432			716
TOTAL LIABILITIES	$	48,365	$	36,461		65,694			49,898

COMMITMENTS AND CONTINGENCIES (See Note 18)

STOCKHOLDERS’ EQUITY
Preferred stock -$0.0001 par value; 10,000,000 shares authorized, none issued and outstanding at March 31, 2021 and December 31, 2020		-		-
Common shares-$0.0001 par value; 1,000,000,000 shares authorized; 81,400,199 shares issued and outstanding at March 31, 2021, 71,551,067 shares issued and 71,469,980 shares outstanding at December 31, 2020		8		7
Treasury stock- 0 shares at March 31, 2021, 81,087 shares at December 31, 2020		-		-
Preferred stock - $0.0001 par value; 10,000,000 shares authorized, none issued and outstanding at June 30, 2022 and December 31, 2021						-			-
Common stock- $0.0001 par value; 1,000,000,000 shares authorized; 82,459,803 shares and 82,237,813 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively						8			8
Additional paid in capital		234,994		168,448		245,064			242,362
Accumulated other comprehensive income		110		1
Retained earnings		55,048		63,598
Accumulated other comprehensive loss						(1,814	)		(953	)
Accumulated deficit						(68,102	)		(24,114	)
TOTAL STOCKHOLDERS’ EQUITY		290,160		232,054		175,156			217,303
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	338,525	$	268,515	$	240,850		$	267,201

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

TATTOOED CHEF, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE ~~INCOME (LOSS) (Unaudited)~~LOSS (unaudited)

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

Three Months Ended
March 31, 2021 March 31, 2020
(As Restated)

NET REVENUE $ 52,469 $ 33,172
COST OF GOODS SOLD 45,289 24,036
GROSS PROFIT 7,180 9,136
OPERATING EXPENSES 14,196 2,360
INCOME (LOSS) FROM OPERATIONS (7,016 ) 6,776
Interest expense (20 ) (224 )
Other income (expense) (2,681 ) -
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (9,717 ) 6,552
INCOME TAX BENEFIT (EXPENSE) 1,475 (730 )
NET (LOSS) INCOME (8,242 ) 5,822
LESS: INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS - 1,012
NET (LOSS) INCOME ATTRIBUTABLE TO TATTOOED CHEF, INC. $ (8,242 ) $ 4,810

NET (LOSS) INCOME PER SHARE
Basic $ (0.10 ) $ 0.17
Diluted $ (0.11 ) $ 0.17
WEIGHTED AVERAGE COMMON SHARES
Basic 80,240,105 28,324,038
Diluted 80,544,129 28,324,038

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Foreign currency translation adjustments 109 (352 )
Total other comprehensive income (loss), net of tax 109 (352 )

Comprehensive (loss) income (8,133 ) 5,470
Less: comprehensive (loss) income attributable to the noncontrolling interest - 1,001
Comprehensive (loss) income attributable to Tattooed Chef, Inc. stockholders $ (8,133 ) $ 4,469

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
NET REVENUE	$	58,110		$	50,270		$	130,174		$	102,739
COST OF GOODS SOLD		57,370			41,953			121,284			87,242
GROSS PROFIT		740			8,317			8,890			15,497
OPERATING EXPENSES		24,346			16,419			49,139			30,615
LOSS FROM OPERATIONS		(23,606	)		(8,102	)		(40,249	)		(15,118	)
Interest expense		(42	)		(94	)		(83	)		(114	)
Other (expense) income		(2,334	)		733			(2,945	)		(1,948	)
LOSS BEFORE INCOME TAX EXPENSE		(25,982	)		(7,463	)		(43,277	)		(17,180	)
INCOME TAX EXPENSE		(455	)		(50,009	)		(711	)		(48,534	)
NET LOSS	$	(26,437	)	$	(57,472	)	$	(43,988	)	$	(65,714	)

NET LOSS PER SHARE
Basic	$	(0.32	)	$	(0.70	)	$	(0.53	)	$	(0.81	)
Diluted	$	(0.32	)	$	(0.70	)	$	(0.53	)	$	(0.81	)

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

OTHER COMPREHENSIVE LOSS, NET OF TAX
Foreign currency translation adjustments		(431	)		(210	)		(861	)		(101	)
COMPREHENSIVE LOSS	$	(26,868	)	$	(57,682	)	$	(44,849	)	$	(65,815	)

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

TATTOOED CHEF, INC.

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

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

~~For the three months ended March 31, 2021~~

	Common Stock				Additional Paid-In		Accumulated Comprehensive			Accumulated
	Shares		Amount		Capital		Loss			Deficit			Total
Balance as of January 1, 2022		82,237,813	$	8	$	242,362	$	(953	)	$	(24,114	)	$	217,303
Foreign currency translation adjustment		-		-				(430	)		-			(430	)
Stock-based compensation		-		-		1,287		-			-			1,287
Issuance of restricted stock awards		203,828		-		-		-			-			-
Net loss		-		-		-		-			(17,551	)		(17,551	)
Balance as of March 31, 2022		82,441,641	$	8	$	243,649	$	(1,383	)	$	(41,665	)	$	200,609
Foreign currency translation adjustment		-		-		-		(431	)		-			(431	)
Stock-based compensation		-		-		1,415		-			-			1,415
Issuance of restricted stock awards		18,162		-		-		-			-			-
Net loss		-		-		-		-			(26,437	)		(26,437	)
Balance as of June 30, 2022		82,459,803	$	8	$	245,064	$	(1,814	)	$	(68,102	)	$	175,156

Common Common Additional Accumulated Retained
Stock Treasury Shares Paid-In Comprehensive Earnings Noncontrolling
Shares Shares Amount Capital Income (Loss) (Deficit) Interests Total
(As Restated) (As Restated) (As restated)
BALANCE AS OF JANUARY 1, 2021 71,551,067 (81,087 ) $ 7 $ 168,448 $ 1 $ 63,598 $ - $ 232,054

FOREIGN CURRENCY TRANSLATION ADJUSTMENT - - - - 109 - - 109

DISTRIBUTIONS - - - - - (308 ) - (308 )

STOCK-BASED COMPENSATION - - - 3,185 - - - 3,185

FORFEITURE OF STOCK- BASED AWARDS (95,084 ) - - - - - - -

CANCELLATION OF TREASURY SHARES (81,087 ) 81,087 - - - - -
-
EXERCISE OF WARRANTS 10,025,303 - 1 63,361 - - - 63,362

NET LOSS - - $ - $ - $ - $ (8,242 ) $ - $ (8,242 )

BALANCE AS OF MARCH 31, 2021 81,400,199 - $ 8 $ 234,994 $ 110 $ 55,048 $ - $ 290,160

	Common Stock					Treasury			Additional Paid-In			Accumulated Comprehensive Income			Retained Earnings
	Shares			Amount		Shares			Capital			(Loss)			(Deficit)			Total
Balance as of January 1, 2021		71,551,067		$	7		(81,087	)	$	168,448		$	1		$	63,598		$	232,054
Foreign currency translation adjustment		-			-		-			-			109			-			109
Distribution		-			-		-			-			-			(308	)		(308	)
Stock-based compensation		-			-		-			3,185			-			-			3,185
Forfeiture of stock-based awards		(95,084	)		-		-			-			-			-			-
Cancellation of treasury shares		(81,087	)		-		81,087			-			-			-			-
Exercise of warrants		10,025,303			1		-			63,361			-			-			63,362
Net loss		-			-		-			-			-			(8,242	)		(8,242	)
Balance as of March 31, 2021		81,400,199		$	8		-		$	234,994		$	110		$	55,048		$	290,160
Foreign currency translation adjustment		-			-		-			-			(210	)		-			(210	)
Stock-based compensation		-			-		-			582			-			-			582
Non-employee stock-based compensation		835,000			-		-			181			-			-			181
Forfeiture of stock-based awards		(300,000	)		-		-			(445	)		-			-			(445	)
Exercise of warrants		3,469			-		-			71			-			-			71
Net loss		-			-		-			-			-			(57,472	)		(57,472	)
Balance as of June 30, 2021		81,938,668		$	8		-		$	235,383		$	(100	)	$	(2,424	)	$	232,867

~~TATTOOED CHEF, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (continue)~~

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

~~For the three months ended March 31, 2020~~

Redeemable
Noncontrolling
Common Common Additional Accumulated Retained
Interest Stock Treasury Shares Paid-In Comprehensive Earnings Noncontrolling
Amount Shares Shares Amount Capital Income (Loss) (Deficit) Interests Total

BALANCE AS OF JANUARY 1, 2020 $ 6,900 28,324,038 - $ 3 $ 2,314 $ (692 ) $ 1,056 $ 256 $ 2,937

CAPITAL CONTRIBUTIONS - - - - - - - 355 355

FOREIGN CURRENCY TRANSLATION ADJUSTMENT - - - - - (341 ) - (11 ) (352 )

DISTRIBUTIONS - - - - - - (1,438 ) - (1,438 )

ACCRETION OF REDEEMABLE NONCONTROLLING INTEREST TO REDEMPTION VALUE 4,431 - - - - - (4,431 ) - (4,431 )

NET INCOME $ 414 - - $ - $ - $ - $ 4,810 $ 598 $ 5,408

BALANCE AS OF MARCH 31, 2020 $ 11,745 28,324,038 - $ 3 $ 2,314 $ (1,033 ) $ (3 ) $ 1,198 $ 2,479

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

TATTOOED CHEF, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(Unaudited)~~(unaudited)

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

	Three Months Ended March 31,							Six Months Ended
	2021				2020			June 30,
	(As Restated)							2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(8,242	)		$	5,822
Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation		552				193
Net loss								$	(43,988	)	$	(65,714	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization									3,043			1,462
Bad debt expense		122				-			117			311
Accretion of debt financing costs		-				9			-			3
Unrealized foreign currency losses									626			-
Revaluation of warrant liability		(320	)			-			(668	)		51
Unrealized forward contract loss		2,181				-			1,184			1,074
Non-cash lease cost									138			44
Stock compensation expense		3,185				-			2,702			3,502
Deferred taxes, net		(1,749	)			-			(14	)		47,549
Non-cash lease cost		27				-
Changes in operating assets and liabilities:
Accounts receivable		(13,012	)			(5,621	)		(7,088	)		(2,320	)
Inventory		(979	)			(4,626	)		(8,703	)		(8,415	)
Prepaid expenses and other assets		(7,332	)			536			(3,471	)		(3,613	)
Accounts payable		5,308				2,120			2,930			(664	)
Accrued expenses		2,947				1,560			2,839			1,922
Other current liabilities		(262	)			6			289			436
Net cash used in operating activities		(17,574	)			(1	)		(50,064	)		(24,372	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(2,852	)	��		(1,686	)		(15,568	)		(10,140	)
Proceeds from sale of property, plant and equipment		-				36
Acquisition of subsidiaries, net of cash acquired									(42	)		(33,918	)
Net cash used in investing activities		(2,852	)			(1,650	)		(15,610	)		(44,058	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings in line of credit		4				4,302
Borrowings of notes payable to related parties		-				1
Net borrowings in Credit Facility									31			2,093
Borrowings on Line of Credit									702			-
Repayments on Line of Credit									(314	)		-
Repayments of notes payable to related parties		(24	)			(19	)		-			(42	)
Borrowings of notes payable		-				40			1,109			1,168
Repayments of notes payable		(87	)			(169	)		(267	)		(140	)
Capital contributions		-				355
Proceeds from the exercise of warrants		73,917				-			-			73,957
Distributions		(308	)			-
Payment of distributions									-			(308	)
Net cash provided by financing activities		73,502				4,510			1,261			76,728

NET INCREASE IN CASH		53,076				2,859
NET (DECREASE) INCREASE IN CASH									(64,413	)		8,298
EFFECT OF EXCHANGE RATE ON CASH		506				(20	)		(209	)		305
CASH AT BEGINNING OF PERIOD		131,579				4,537		$	92,351		$	131,579
CASH AT END OF PERIOD	$	185,161			$	7,376		$	27,729		$	140,182

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for
Cash paid for:
Interest	$	1			$	636		$	88		$	100
Income taxes	$	-			$	16		$	165		$	249
Noncash investing and financing activities
Distributions	$	-			$	1,438
Noncash investing and financing activities:
Capital expenditures included in accounts payable	$	1,328			$	-		$	1,415		$	776

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

~~1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~TATTOOED CHEF, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. THE COMPANY

~~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)”~~Myjojo”), Sprout Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Forum (“Merger Sub”), and Salvatore Galletti, in his capacity as the holder ~~representative (the “Holder Representative”).~~representative. The transactions contemplated by the Merger Agreement are referred to herein as the “Transaction”.

Upon the consummation of the Transaction, Merger Sub merged with and into Myjojo ~~(Delaware)~~ (the “Merger”), with Myjojo ~~(Delaware)~~ surviving the merger in accordance with the Delaware General Corporation Law. Immediately upon the completion of the Transaction, Myjojo ~~(Delaware)~~ became a direct wholly owned subsidiary of Forum. In connection with the closing of the Transaction (the “Closing”), Forum changed its name to Tattooed Chef, Inc. (“Tattooed Chef”). Tattooed Chef’s common stock began trading on the Nasdaq under the symbol “TTCF” on October 16, 2020.

Tattooed Chef ~~Inc.~~ and its subsidiaries (collectively, the “Company”) are principally engaged in the manufacturing and sale of plant-based foods including, but not limited to, ~~acai and smoothie~~ready-to-cook bowls, zucchini spirals, riced cauliflower, ~~vegetable~~acai and smoothie bowls, ~~and~~ cauliflower crust pizza, wood-fired plant based pizzas, handheld burritos, tortillas, chips, bars and quesadillas primarily in the United States and Italy.

~~About Myjojo~~Ittella Properties LLC (“Ittella Properties”), the Company’s variable interest entity (“VIE”), owns a building located on Alondra Blvd., Paramount, California (“Alondra Building”), which is leased by Ittella International for 10 years from August 1, 2015 through August 1, 2025. Ittella Properties is wholly owned by Salvatore Galletti. The construction and ~~Subsidiaries~~acquisition of the Alondra building by Ittella Properties were funded by a loan agreement with unconditional guarantees by Ittella International and terms providing that 100% of the Alondra building must be leased to Ittella International throughout the term of the loan agreement. Accordingly, Ittella Properties is determined to be a consolidated VIE.

~~Myjojo,~~On May 14, 2021, the Company acquired New Mexico Food Distributors, Inc. ~~was~~(“NMFD”) and Karsten Tortilla Factory, LLC (“Karsten”) in an ~~S corporation formed under~~all-cash transaction for approximately $34.1 million (collectively, the ~~laws~~“NMFD Transaction”). NMFD and Karsten were privately held companies based in Albuquerque, New Mexico. NMFD produces and sells frozen and ready-to-eat Mexican food products to retail and food service customers through its network of California (“Myjojo (California)”) on February 26, 2019 to facilitate a corporate reorganization of Ittella International Inc. On March 27, 2019, the sole stockholder of Ittella International, Inc. contributed all of his share ownership of Ittella International, Inc. to Myjojo (California) in exchange for 100% interestdistributors in the ~~latter, becoming Myjojo (California)’s sole stockholder.~~United States. NMFD processes its products in two leased facilities located in New Mexico. See Note 8 Business Combinations.

~~Ittella International,~~On September 28, 2021, Tattooed Chef formed BCI Acquisition, 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”~~BCI”). On ~~April 15, 2019, UMB Capital Corporation~~December 21, 2021, BCI acquired substantially all of the assets, and assumed certain specified liabilities, from Belmont Confections, Inc. (“~~UMB”~~Belmont”), for an aggregate purchase price of approximately $16.7 million. Belmont was a ~~financial institution, acquired a 12.50% non-controlling interest~~privately held company based in ~~Ittella International (Notes 3).~~Youngstown, Ohio, and specialized in the development and manufacturing of private label nutritional bars. See Note 8 Business Combinations.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Ittella’s Chef, Inc. was incorporated under the laws of the State of California on July 20, 2017 as a qualified Subchapter S subsidiary and a wholly owned subsidiary of Ittella International. Ittella’s Chef, Inc. was formed as a tax passthrough entity for purposes of holding Ittella International’s 70% ownership interest in Ittella Italy, S.R.L. (“Ittella Italy”). On March 15, 2019, Ittella’s Chef, Inc. was converted to a limited liability company, Ittella’s Chef, LLC (“Ittella’s Chef”).

On May 21, 2020, Myjojo (Delaware) was formed with Salvatore Galletti owning all of the shares of common stock. On May 27, 2020, Myjojo, Inc. (California) merged into Myjojo, Inc., (Delaware) with Myjojo, Inc. (Delaware) issuing shares of common stock to the sole stockholder of Myjojo (California).

In connection with the Transaction and as a condition to the Closing, Myjojo (Delaware) entered into a Contribution Agreement with the minority members of Ittella International and the minority shareholders of Ittella Italy. Under the Contribution Agreement, the minority holders contributed all of their equity interests in Ittella International to Myjojo (Delaware) and Ittella Italy to Ittella’s Chef in exchange for Myjojo (Delaware) stock (the “Restructuring”). The Restructuring was consummated prior to the Transaction. The shares of Myjojo (Delaware) were exchanged for shares of Forum’s common stock upon consummation of the Transaction.

Basis of Consolidation. The condensed consolidated financial statements include the accounts of Tattooed Chef and its subsidiaries in which Tattooed Chef has a controlling interest directly or indirectly, and variable interest entities for which the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and ~~Article 8 of~~ Regulation S-X of the ~~SEC.~~Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed ~~consolidated~~ or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 as filed with the SEC on March ~~19, 2021,~~16, 2022, which contains the audited financial statements and notes thereto. The financial information as of December 31, ~~2020~~2021 included in the accompanying unaudited condensed consolidated financial statements is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The interim results for the three and six months ended ~~March 31, 2021~~June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2021~~2022 or for any future interim periods.

The Transaction was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method, Forum was treated as the “acquired” company (“Accounting Acquiree”) and Myjojo, ~~(Delaware),~~ the accounting acquirer, was assumed to have issued stock for the net assets of Forum, accompanied by a recapitalization.

The net assets of Forum are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the ~~reverse recapitalization~~Reverse Recapitalization are those of ~~Myjojo (Delaware).~~Myjojo. The shares and corresponding capital amounts and earnings per share available for common stockholders, prior to the ~~reverse recapitalization,~~Reverse Recapitalization, have been retroactively restated.

~~Revision of Previously Issued Financial Statements for Correction of Immaterial Errors.~~

The Company identified errors in its previously issued annual financial statements that were determined to be individually, and in the aggregate, quantitatively and qualitatively immaterial based on its analysis of Staff Accounting Bulletin (“SAB”) No. 99, “~~Materiality~~~~,” and SAB No. 108, “~~~~Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements~~”. These immaterial errors have been corrected in the accompanying consolidated balance sheet as of December 31, 2020, and the consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows for the three months ended March 31, 2020. The nature of these error corrections is as follows:

●

~~In further consideration of the guidance in Accounting Standards Codification (“ASC”) 815-40,~~ ~~Derivatives and Hedging — Contracts in Entity’s Own Equity~~, the Company concluded that a provision in the warrant agreement related to certain settlement methods specific to the Private Placement Warrants precludes the Private Placement Warrants from being accounted for as components of equity. As the Private Placement Warrants meet the definition of a derivative as contemplated in ASC 815, the Private Placement Warrants should have been recorded as derivative liabilities on the consolidated balance sheet and measured at fair value upon recognition on the Closing Date and at each reporting date in accordance with ASC 820, ~~Fair Value Measurement~~, with changes in fair value recognized in the consolidated statement of operations and comprehensive income in the period of change. Therefore, the Company concluded that it is appropriate to revise the classification of the Private Placement Warrants as of and for the year ended December 31, 2020.

	●	The Company revised the accompanying consolidated balance sheet and statement of stockholders’ equity as of December 31, 2020 to reflect the correction of an immaterial error related to the presentation of 81,087 treasury shares. The treasury shares are now presented separately from common stock shares. This revision has an immaterial impact on the Company’s previously reported net income, earnings per share, or stockholders’ equity.

	●	The Company revised the accompanying consolidated statements of equity and operations and comprehensive income for the year ended December 31, 2020 to reflect the correction of an immaterial error related to the grant of 825,000 stock awards to Harrison Co. (“Harrison”) on October 15, 2020 as consideration for advisory services provided by Harrison to facilitate the successful completion of the Transaction (see Note 18). The stock awards were fully vested on grant date, and therefore a weighted average 174,041 shares should have been included in basic and diluted outstanding shares when calculating earnings per share for the year ended December 31, 2020. In addition, the fair value of the stock awards issued in the amount of $20.54 million should have been included as a reduction to the “Reverse Recapitalization” line item and an increase by the same amount to the “Transaction costs, net of tax” line item. Both items are included within the Company’s additional paid-in capital for the year ended December 31, 2020. The Company also identified a $4.0 million deferred tax asset (with the corresponding offset to additional paid-in capital) that should have been recorded in connection with this grant. The revision has no impact on the Company’s previously reported net income but reduced the earnings per share for the year ended December 31, 2020. The impact of the tax consequences associated with the grant have been reflected in the balance sheet and statement of stockholders’ equity.

	●	The Company revised the accompanying condensed consolidated statements of operations and comprehensive income for the period ended March 31, 2020 to reflect the correction of an immaterial error for amounts previously not reflected in the comprehensive income attributable to noncontrolling interest. This revision has no impact on the Company’s net income, retained earnings, or earnings per share.

●

~~The Company identified errors related to inventoriable costs and the classification of certain expense accounts that primarily impacted revenue, cost of goods sold and operating expenses.~~

	●	A presentation error to the prior quarter stockholders’ equity balance within the condensed consolidated statement of stockholders’ equity for the three months ended March 31, 2020 was found. The common stock shares balance as of January 1, 2020 was improperly included in the cross-footing for the total of stockholders’ equity for the three months ended March 31, 2020.

	●	~~The Company identified a classification error between accounts receivable and deferred revenue, which affected the balance sheet as of December 31, 2020.~~

~~The following table summarizes the effect of the revision on each financial statement line item as of the dates, and for the periods ended, indicated:~~

(In thousands) As Consolidated Balance Sheet
Originally Re- As
As of December 31, 2020 Reported Revisions
classification

Revised

Accounts receivable $ 17,991 $ (1,710 ) $ - $ 16,281
Inventory 38,660 (658 ) - 38,002
Prepaid expenses and other current assets 18,240 176 - 18,416
TOTAL CURRENT ASSETS 206,470 (2,192 ) - 204,278
Deferred income taxes, net 43,525 4,024 - 47,549
TOTAL ASSETS 266,683 1,832 - 268,515
Accounts payable 25,391 - (1,316 ) 24,075
Accrued expenses 2,961 649 - 3,610
Deferred revenue 1,711 (1,711 ) - -
Other current liabilities 87 - 1,316 1,403
TOTAL CURRENT LIABILITIES 30,349 (1,062 ) - 29,287
Warrant liabilities - 5,184 - 5,184
TOTAL LIABILITIES 32,339 4,122 - 36,461
Additional paid-in capital 170,799 (2,351 ) - 168,448
Retained earnings 63,537 61 - 63,598
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 234,344 (2,290 ) - 232,054
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 266,683 1,832 - 268,515

Condensed Consolidated
(In thousands, except EPS) Statements of Operations and
Comprehensive Income
As
Originally
For the three months ended March 31, 2020 Reported Revisions As Revised
Revenue $ 33,170 $ 2 $ 33,172
Cost of goods sold 23,927 109 24,036
Gross profit 9,243 (107 ) 9,136
Operating expense 2,390 (30 ) 2,360
Income from operations 6,853 (77 ) 6,776
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 6,629 (77 ) 6,552
Net income (loss) 5,899 (77 ) 5,822
LESS: INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 1,022 (10 ) 1,012
NET INCOME (LOSS) ATTRIBUTABLE TO TATTOOED CHEF, INC. 4,877 (67 ) 4,810
Basic net income (loss) per share 0.17 - 0.17
Diluted net income (loss) per share 0.17 - 0.17
Comprehensive income $ 5,547 (77 ) $ 5,470
Less: income (loss) attributable to the noncontrolling interest (11 ) 1,012 1,001
Comprehensive income attributable to Tattooed Chef, Inc. stockholders $ 5,558 (1,089 ) $ 4,469

(In thousands) Condensed Consolidated
Statements of Stockholders’ Equity
For the three months ended March 31, 2020 As originally reported Revisions As revised

Redeemable noncontrolling interest beginning balance $ 6,930 (30 ) $ 6,900
Net income in redeemable noncontrolling interest 424 (10 ) 414
Redeemable noncontrolling interest ending balance 11,785 (40 ) 11,745
Retained earnings beginning balance 1,265 (209 ) 1,056
Net income in retained earnings 4,877 (67 ) 4,810
Retained earnings ending balance 273 (276 ) (3 )
Total Stockholders’ equity beginning balance 28,327,184 (28,324,247 ) 2,937
Total Stockholders’ equity ending balance 28,326,793 (28,324,314 ) 2,479

(In thousands) Condensed Consolidated
Statements of Cash Flows
For the three months ended March 31, 2020 As originally reported Revisions As revised
Cash Flows from Operating Activities:
Net income $ 5,899 (77 ) $ 5,822
Adjustments to reconcile net income (loss) to net cash from operating activities:
Inventory (4,703 ) 77 (4,626 )
Net cash (used in) provided by operating activities (1 ) - (1 )

~~Restatement of Previously Issued Financial Statements~~

In connection with the preparation of the consolidated financial statements as of and for the year ended December 31, 2021 included in the Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2022, the Company identified errors related to (i) deferred tax assets resulting from the reverse recapitalization transaction that occurred in 2020; (ii) classification among accounts of inventory, accounts receivable, accounts payable and deferred revenue; and (iii) other errors previously identified but not corrected as they were previously determined to be immaterial. Amounts depicted as “As Restated” throughout the accompanying condensed consolidated financial statements and footnotes include the impact of the restatement, as well as the impact of the adoption of ASC 842, ~~Leases~~ ~~as of January 1, 2021 to the quarter ended March 31, 2021. See Note 24 to the consolidated financial statements and Item 8 of the Form 10-K, as aforementioned.~~

The table below sets forth the condensed consolidated financial statements, including as originally reported, the impacts resulting from ASC 842 adoption, the adjustments resulting from the restatement, the reclassification, , and the as restated balances for the quarterly period ended March 31, 2021 (in thousands):

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, Unaudited) As Reported Adoption of ASC 842 Adjustments
Re-
classification
As Restated
Accounts receivable $ 31,796 - (2,625 ) - $ 29,171
Inventory 38,701 - 280 - 38,981
Prepaid expenses and other current assets 11,739 (27 ) - - 11,712
TOTAL CURRENT ASSETS 267,397 (27 ) (2,345 ) - 265,025
Operating lease right-of-use asset, net - 3,968 - - 3,968
Deferred taxes 45,273 - 4,024 - 49,297
TOTAL ASSETS $ 332,905 3,941 1,679 - $ 338,525
Accounts payable 31,252 - (496 ) (46 ) 30,710
Accrued expenses 6,135 - 423 - 6,558
Deferred revenue 974 - (974 ) - -
Forward contract derivative liability 2,042 - (84 ) - 1,958
Operating lease liabilities, current - 651 - - 651
Other current liabilities 1,188 (47 ) - 46 1,187
TOTAL CURRENT LIABILITIES 41,770 604 (1,131 ) - 41,243
Operating lease, net of current portion - 3,344 - - 3,344
TOTAL LIABILITIES 45,548 3,948 (1,131 ) - 48,365
Additional paid in capital 230,970 - 4,024 - 234,994
Retained earnings 56,269 (7 ) (1,214 ) - 55,048
Total equity 287,357 (7 ) 2,810 - 290,160
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 332,905 3,941 1,679 - $ 338,525

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands except shares and per share amounts, Unaudited) As Reported Adoption of ASC 842 Adjustments As Restated
REVENUE $ 52,682 - (213 ) $ 52,469
COST OF GOODS SOLD 45,905 - (616 ) 45,289
GROSS PROFIT 6,777 - 403 7,180
OPERATING EXPENSES 13,795 7 394 14,196
INCOME (LOSS) FROM OPERATIONS (7,018 ) (7 ) 9 (7,016 )
Other income (expense) (2,589 ) - (92 ) (2,681 )
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (9,627 ) (7 ) (83 ) (9,717 )
NET (LOSS) INCOME (8,152 ) (7 ) (83 ) (8,242 )
NET (LOSS) INCOME ATTRIBUTABLE TO TATTOOED CHEF, INC. $ (8,152 ) (7 ) (83 ) $ (8,242 )
NET (LOSS) INCOME PER SHARE
Basic (0.10 ) - (0.00 ) (0.10 )
Diluted (0.11 ) - (0.00 ) (0.11 )
WEIGHTED AVERAGE COMMON SHARES
Basic 79,415,105 - 825,000 80,240,105
Diluted 79,719,129 - 825,000 80,544,129
Comprehensive income (8,043 ) (7 ) (83 ) (8,133 )
Comprehensive income attributable to Tattooed Chef, Inc. stockholders $ (8,043 ) (7 ) (83 ) $ (8,133 )

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands except per share amounts, Unaudited) As Reported Adjustments As Restated
Additional Paid-In Capital beginning balance $ 164,423 4,025 $ 168,448
Additional Paid-In Capital ending balance 230,969 4,025 234,994
Retained earnings (Deficit) beginning balance 64,729 (1,131 ) 63,598
Net loss in retained earnings (Deficit) (8,152 ) (90 ) (8,242 )
Retained earnings (Deficit) ending balance 56,269 (1,221 ) 55,048
Total Stockholders’ equity beginning balance 229,160 2,894 232,054
Total Stockholders’ equity ending balance 287,356 2,804 290,160

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, Unaudited) As Reported Adoption of ASC 842 Adjustments Re-classification As Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (8,152 ) (7 ) (83 ) - $ (8,242 )
Adjustments to reconcile net (loss) income to net cash from operating activities:
Non-cash lease cost - 27 - - 27
Changes in operating assets and liabilities: - - -
Accounts receivable (13,926 ) - 914 - (13,012 )
Inventory (41 ) - (938 ) - (979 )
Prepaid expenses and other assets (7,359 ) 27 - - (7,332 )
Accounts payable 4,534 - (496 ) 1,270 5,308
Accrued expenses 3,173 - (226 ) - 2,947
Deferred revenue (737 ) - 737 - -
Other current liabilities 963 (47 ) 92 (1,270 ) (262 )
Net cash used in operating activities (17,574 ) - - - (17,574 )
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash investing and financing activities
Cashless warrant exercises 2,990 - (2,990 ) - -

~~Reclassifications.~~ Reclassifications of certain prior period amounts to conform to the current period presentation. Reclassifications have no impact on net income (loss) and do not relate to errors and are included here in order to conform the presentation across the periods presented.

~~Cash.~~ ~~The Company’s cash may be in excess of amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in these accounts.~~

~~Foreign Currency.~~ The Company’s functional currency is the United States dollar for its U.S. entities. Ittella Italy’s functional currency is the Euro. Transactions in currency other than the functional currency are recognized at the rates of exchange prevailing at the dates of the transaction. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency of each entity are included in the results of operations in income from operations as incurred.

The accompanying condensed consolidated financial statements are expressed in United States dollars. Assets and liabilities of foreign operations are translated at period-end rates of exchange. Revenues, costs and expenses are translated at average rates of exchange prevailing during the period. Equity adjustments resulting from translating foreign currency financial statements are accumulated as a separate component of stockholders’ equity.

The Company conducts business globally and is therefore exposed to adverse movements in foreign currency exchange rates, specifically the Euro to US dollar. To limit the exposure related to foreign currency changes, the Company entered into foreign currency exchange forward contracts starting in 2020. The Company does not enter into contracts for speculative purposes.

In February 2020, the Company entered into a trading facility for derivative forward contracts. Under this facility, the Company has access to open foreign exchange forward contract instruments to purchase a specific amount of funds in Euros and to settle, on an agreed-upon future date, in a corresponding amount of funds in United States dollars. During the three months ended March 31, 2021 and 2020, the Company entered into foreign currency exchange forward contracts to purchase 22.00 million Euros and 13.35 million Euros, respectively. The notional amounts of these derivatives are $26.90 million and $14.68 million for the three-month period ended March 31, 2021 and 2020, respectively.

These derivatives are not designated as hedging instruments. Gains and losses on the contracts are included in other income net, and substantially offset foreign exchange gains and losses from the short-term effects of foreign currency fluctuations on assets and liabilities, such as purchases, receivables and payables, of which are denominated in currencies other than the functional currency of the reporting entity. These derivative instruments generally have maturities of up to nine months.

~~Accounts Receivable.~~ Trade receivables are customer obligations due under normal trade terms requiring payment generally within 7 to 45 days from the invoice date. The Company’s allowance for doubtful receivables is based on an analysis that estimates the amount of its total customer receivable balance that is not collectible. This analysis includes assessing a default probability to customers’ receivable balances, which is influenced by several factors, including (i) current market conditions, (ii) periodic review of customer credit worthiness, and (iii) review of customer receivable aging and payment trends.

~~Inventory.~~ Inventory consists of raw materials and packaging materials, work in process and finished goods. Inventories are carried at the lower of cost or net realizable value on a weighted average basis. Inventory is initially measured at cost and consists of the sum of the applicable expenditures and charges directly and indirectly incurred to bring products to their existing condition and location. These costs include purchase costs and any other charges necessary to prepare the items for production. For work in process and finished goods, these costs normally include those incurred directly or indirectly in the production of inventory (i.e., direct labor and production overheads or conversion costs), and other expenses (i.e., inbound freight, transportation and handling charges, taxes and duties).

Overhead costs are allocated to the units produced within the reporting period, while abnormal costs are charged to current operations as incurred. The Company monitors the remaining utility of its inventory and writes down inventory for excess or obsolescence as appropriate.

~~Property, Plant and Equipment~~. Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property, plant and equipment is calculated using the straight-line method over a period considered adequate to amortize the total cost over the useful lives of the assets, which range from 5 to 7 years for machinery and equipment, 5 to 7 years for furniture and fixtures, 20 to 25 years for buildings, and 3 to 5 years for computer equipment. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. Repairs and maintenance are expensed as incurred. Renewals and enhancements are capitalized and depreciated over the remaining life of the specific property unit. When the Company retires or disposes of property, plant or equipment, the cost and accumulated depreciation are removed from the Company’s accounts and any resulting gain or loss is reflected in the condensed consolidated statements of operations and comprehensive income (loss).

~~Long-Lived Assets.~~ Long-lived assets are reviewed for impairment at the asset group level whenever events or changes in circumstances indicate that the carrying amount of such asset group may not be recoverable. Recoverability of assets within an asset group to be held and used is measured by a comparison of the carrying amount of an asset group to the future undiscounted net cash flows expected to be generated by the asset group. If such asset groups are considered to be impaired, the impairment to be recognized is based upon their fair value. No impairment was recorded during the three months ended March 31, 2021 and 2020.

~~Fair Value of Financial Instruments.~~ Certain assets and liabilities are required to be recorded at fair value on a recurring basis. Fair value is determined based on the exchange price that would be received for an asset or transferred for a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The carrying amounts of cash, accounts receivables, accounts payable and certain notes payable approximate fair value because of the short maturity and/or variable rates associated with these instruments. Long-term debt as of March 31, 2021 and December 31, 2020 approximates its fair value as the interest rates are indexed to market rates. The Company categorizes the inputs to the fair value measurements into three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

	~~Level 1 -~~	~~Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company is able to access at the measurement date.~~

	~~Level 2 -~~	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, and can reference interest rates, yield curves, implied volatilities and credit spreads.

	~~Level 3 -~~	~~Inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.~~

~~Warrants.~~ The Public Warrants are considered freestanding equity-classified instruments due to their detachable and separately exercisable features and meet the indexation criteria in ASC 815-40-15-7C. Accordingly, the Public Warrants are presented as a component of Stockholders’ Equity in accordance with ASC 815-40-25. The Agreements with respect to the Company’s Private Placement Warrants include provisions related to determining settlement amounts that preclude the Warrants from being accounted for as components of equity. As these Warrants meet the definition of a derivative as contemplated in ASC 815-40, the Private Placement Warrants are recorded as derivative liabilities on the condensed consolidated balance sheets and measured at fair value at inception (on the Closing date) and at each reporting date in accordance with ASC 820, with changes in fair value recognized in the condensed consolidated statements of operations and other comprehensive income (loss) in the period of change.

~~Revenue Recognition.~~ The Company recognizes revenue in accordance with ASC Topic 606. The Company’s principal business is the manufacturing of plant-based foods including, but not limited to, acai and smoothie bowls, zucchini spirals, riced cauliflower, vegetable bowls and cauliflower crust pizza primarily in the United States and Italy. Revenue recognition is determined by (a) identifying the contract, or contracts, with a customer; (b) identifying the performance obligation in each contract; (c) determining the transaction price; and (d) allocating the transaction price to the performance obligation in each contract; and (e) recognizing revenue when, or as, the Company satisfies performance obligations by transferring the promised goods or services. Each unit of product delivered is determined as a separate performance obligation and in the event there are more than one unit of a product ordered, there will be multiple performance obligations satisfied under the same contract. When control of the promised products and services are transferred to the Company’s customers, the Company recognizes revenue in the amount that reflects the consideration the Company expects to receive in exchange for these products and services.

Control generally transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms. Customer contracts generally do include more than one performance obligation and the performance obligations in the Company’s contracts are satisfied within one year. No payment terms beyond one year are granted at contract inception.

The Company disaggregates revenue based on the type of products sold to its customers – private label, Tattooed Chef and other. The other revenue stream constitutes sale of similar food products directly to customers through a third-party vendor and the Company acts as a principal in these transactions.

Some contracts also include some form of variable consideration, the most common form are discounts and demonstration costs. Variable consideration is treated as a reduction in revenue when product revenue is recognized. Depending on the specific type of variable consideration, the Company uses either the expected value or most likely amount method to determine the variable consideration. The Company reviews and updates its estimates and related accruals of variable consideration each period based on the terms of the agreements, historical experience, and any recent changes in the market.

The Company does not have significant unbilled receivable balances arising from transactions with customers. The Company does not capitalize contract inception costs as contracts are one year or less and the Company does not incur significant fulfillment costs requiring capitalization.

The Company recognizes shipping and handling costs related to products transferred to the end customer as fulfillment cost and includes these costs in cost of goods sold upon delivery of the product to the customer.

~~Sales and Marketing Expenses (As Restated).~~ The Company expenses costs associated with sales and marketing as incurred. Sales and marketing expenses were $6.65 million and $1.21 million for the periods ended March 31, 2021 and 2020, respectively, and are included in operating expenses in the condensed consolidated statements of operations and comprehensive income (loss).

~~Interest Expense.~~ ~~Interest expense includes interest primarily related to the amortization of deferred financing costs, the Company’s notes payable and line of credit.~~

~~Deferred Financing Costs.~~ Deferred financing costs include fees associated with the Company’s line of credit agreement. Such fees are amortized on a straight-line basis over the term of the related line of credit agreement as a component of interest expense, which approximates the effective interest rate method, in accordance with the terms of the agreement. Deferred financing costs, net were $0.09 million and $0.09 million at March 31, 2021 and December 31, 2020, respectively, and are recorded as a component of other assets in the accompanying condensed consolidated balance sheets. Amortization expense of deferred financing costs were $0.00 million and $0.02 million during the periods ended March 31, 2021 and 2020, respectively.

~~Stock-based Compensation.~~ ~~The Company measures compensation expense for stock options and other stock awards in accordance with ASC 718,~~ ~~Compensation — Stock Compensation~~. Stock-based compensation is measured at fair value on grant date and recognized as compensation expense over the requisite service period. The Company accounts for forfeitures when they occur. Generally, the Company issues stock options and other stock awards to employees with service-based and/or performance-based vesting conditions. For awards with only service-based vesting conditions, the Company records compensation cost for these awards using the straight-line method. For awards with performance-based vesting conditions, the Company recognizes compensation cost on a tranche-by-tranche basis (the accelerated attribution method) over the expected service period.

~~Under the provisions of ASC 718,~~ ~~Compensation—Stock Compensation~~, the Company measures stock-based awards granted to non-employees based on the fair value of the award on the date on which the related service is completed. Compensation expense is recognized over the period during which services are rendered by non-employees until service is completed.

~~Income Taxes~~

As part of the process of preparing its condensed consolidated financial statements, the Company is required to estimate its provision for income taxes in each of the tax jurisdictions in which it conducts business, in accordance with the Income Tax Topic 740 of the ASC (“ASC 740”). The Company computes its annual tax rate based on the statutory tax rates and tax planning opportunities available to it in the various jurisdictions in which it earns income. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The factors used to assess the likelihood of realization include the Company’s forecast of the reversal of temporary differences, future taxable income, and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company’s effective tax rate on future earnings. Based on our assessment, it appears more likely than not that the net deferred tax assets will be realized through future taxable income.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must first be determined to be more likely to be sustained based solely on its technical merits, and if so, then measured to be the largest benefit that has a greater than 50% likelihood of being sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2021 and December 31, 2020, respectively. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of March 31, 2021. The Company is currently not aware of any issues under review that could result in significant payment, accruals, or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. See Note 13 for more information on the Company’s accounting for income taxes.

~~Accumulated Other Comprehensive Loss.~~ Accumulated other comprehensive loss is defined as the change in equity resulting from transactions from non-owner sources. Other comprehensive income consisted of gains and losses associated with changes in foreign currency as a result of the translation of the financial results of the Company’s Italian subsidiary.

Use of Estimates. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

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

Sales and Marketing Expenses. The Company expenses costs associated with sales and marketing as incurred. Sales and marketing expenses were $12.3 million and $8.2 million for the three months ended June 30, 2022 and 2021, respectively, and $24.9 million and $14.8 million for the six months ended June 30, 2022 and 2021, respectively. Sales and marketing expenses are included in operating expenses in the condensed consolidated statements of operations and comprehensive loss.

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

Concentrations ~~of Credit Risk (As Restated).~~ Risk. The Company grants credit, generally without collateral, to customers primarily in the United States. Consequently, the Company is subject to potential credit risk related to changes in business and economic factors in this geographical area.

No single external suppliers accounted for more than 10% of the Company’s cost of goods sold during the ~~period~~periods ended ~~March 31, 2021~~June 30, 2022 and ~~2020.~~2021. As such, the Company is not subject to significant concentration risk on suppliers.

~~Three~~

Four customers accounted for ~~89% and 87%~~68% of the Company’s revenue during the three months ended ~~March 31, 2021 and 2020, respectively.~~June 30, 2022. Three customers accounted for more than 78% of the Company’s revenue during the three months ended June 30, 2021.

Customer	2021			2020			2022			2021

Customer C		41	%		41	%
Customer A		38	%		29	%		32	%		37	%
Customer B		10	%		17	%		11	%		12	%
Customer C								13	%		29	%
Customer D								12	%		*

~~Customers~~

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

Three customers accounted for 61% of the Company’s revenue during the six months ended June 30, 2022. Three customers accounted for more than 84% of the Company’s revenue during the six months ended June 30, 2021.

Customer	2022			2021
Customer A		34	%		38	%
Customer B		*			11	%
Customer C		17	%		35	%
Customer D		10	%		*

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

Three customers accounting for more than 10% of the Company’s accounts receivable as of ~~March 31, 2021 (As Restated)~~June 30, 2022 and December 31, ~~2020~~2021 were:

March 31, December 31,
Customer 2021 2020

Customer A (As Restated) 47 % 24 %
Customer B * 10 %
Customer C (As Restated) 40 % 53 %

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

Customer B accounted for less than 10% of accounts receivable as of March 31, 2021. However, Customer B accounted for 10% as of December 31, 2020 and as such was included in the disclosure above for comparison purposes.

~~Segment Information.~~ The Company manages its operations on a company-wide basis as 1 operating segment, thereby making determinations as to the allocation of resources to the business as a whole rather than on a segment-level basis. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the Chief Operating Decision Maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer is the CODM. To date, the Company’s CODM has made such decisions and assessed performance at the Company-level.

~~A majority of the Company’s products are sold from the United States to customers.~~

~~Long-lived assets consist of property, plant and equipment - net. The geographic location of long-lived assets is as follows:~~

March 31, December 31,
Long Lived Assets (in thousands) 2021 2020
Italy $ 10,733 $ 9,113
United States 8,579 6,970
Total $ 19,312 $ 16,083

COVID-19 ~~Pandemic~~Pandemic. – The novel coronavirus (“COVID-19”), which was categorized by the World Health Organization as a pandemic in March 2020, continues to significantly impact the United States and the rest of the world and has altered the Company’s business environment and ~~the~~ overall working conditions.

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

~~Management acknowledges~~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 ~~most~~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)~~COVID-19) generally affecting these growers could adversely affect the Company’s business. If

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

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

Russia-Ukraine Conflict. Although the Company does not have direct exposure to Russia and Ukraine, the Company is ~~unable~~monitoring the geopolitical situation following Russia’s invasion of Ukraine. The Company may experience shortages in materials and increased costs for transportation, energy, and raw materials due in part to ~~manage~~the negative impact of the Russia-Ukraine military conflict on the global economy. To date, the conflict between Russia and Ukraine has not had a material negative impact on the Company’s business, financial condition, or results of operations. However, the full impact of the conflict on the Company’s business operations and financial performance remains uncertain and will depend largely on the nature and duration of uncertain and unpredictable events, such as the severity and duration of further military action and its ~~supply chain effectively~~impact on regional and ~~ensure that its products are available to meet consumer demand, operating costs could increase, and sales and profit margins could decrease.~~

global economic conditions.

~~On March 27,~~3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently issued and adopted accounting pronouncements

In August 2020, Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the 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 carrybackaccounting for convertible instruments. ASU 2020-06 removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815 or for convertible debt issued at a substantial premium. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified improvement property. It also appropriated funds for the SBA Paycheck Protection Programs that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19.within those fiscal years. The Company ~~has elected not to apply for a Paycheck Protection Program loan. As~~adopted the new standard on January 1, 2022. The adoption of ~~March 31, 2021 and December 31, 2020, the Company has analyzed the provisions of the CARES Act and determined it~~this standard did not have a material impact on the Company’s condensed consolidated financial ~~condition, results of operations or cash flows.~~statements and related disclosures.

The extent to which this pandemic will adversely impact the Company’s future business, financial condition and results of operations is dependent upon various factors, many of which are highly uncertain and outside the control of the Company.

~~Earnings per share.~~ Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. The weighted-average number of common shares outstanding during the period includes common stock but is exclusive of certain unvested stock awards that have no economic or participating rights. Diluted earnings per share is computed by dividing the net income by the weighted average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities which include outstanding stock options and restricted stock awards under the Company’s equity incentive plan and warrants have been considered in the computation of diluted earnings per share.

~~2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (As restated for the adoption of ASC 842)~~

In December 2019, the FASB issued ~~Accounting Standards Update (“ASU”)~~ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“(“ASU 2019-12”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of Topic 740, Income Taxes, and simplification in several other areas. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, and interim periods therein. The Company adopted the new standard on January 1, ~~2021, the first day of the reporting year.~~2021. One of the amendments eliminates a limitation on the amount of income tax benefit that can be recognized in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial ~~statements for the period ended March 31, 2021.~~statements.

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

In June 2016, the FASB issued ASU No. 2016-13, ~~(“ASU 2016-13”) regarding ASC Topic 326,~~ Financial Instruments - Credit Losses, which modifies the measurement of expected credit losses of certain financial instruments. The Company will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. The ~~amendments will become effective for~~Company adopted the ~~Company for periods beginning after December 15,~~new standard on January 1, 2022. ~~Adoption of the standard will be applied using a modified retrospective approach.~~ The ~~Company is currently evaluating the impact the~~ adoption of ~~ASU 2016-13 will~~this standard did not have a material impact on ~~its~~the Company’s condensed consolidated financial statements.

~~In March 2020, the FASB issued ASU 2020-04,~~ ~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ (“ASU 2020-04”), which provides guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. Interest on borrowings under the Company’s revolving credit facility is calculated based upon LIBOR. ASU 2020-04. was issued on March 12, 2020 and may be applied prospectively through December 31, 2022. This guidance has had no material effect on the Company for the period ended March 31, 2021. The Company will continue to evaluate the impact this guidance may have on its condensed consolidated financial statements.

~~In August 2020, the FASB issued ASU No. 2020-06,~~ ~~Debt—Debt with Conversion and Other Options~~ ~~(Subtopic 470-20~~~~) and Derivatives and Hedging— Contracts in Entity’s Own Equity~~ ~~(Subtopic 815-40):~~ ~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity~~ (“ASU 2020-06”), which simplifies the accounting for convertible instruments. ASU 2020-06 removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815 or for convertible debt issued at a substantial premium. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company is currently evaluating the impact this guidance may have on its condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02” or ~~“Topic~~“ASC 842”). The FASB has subsequently issued several related ASUs that clarified the implementation guidance for certain aspects of ASU 2016-02, which were effective upon the adoption of ASU 2016-02. The purpose of ASU 2016-02 is to provide financial statement users a better understanding of the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted ASU 2016-02 as of January 1, 2021, using the effective date transition method to recognize the cumulative effect of initially applying Topic 842, if any, as an adjustment to retained earnings. The adoption of ASU ~~2016-02~~2016-12 resulted in an increase of $4.2 million and $4.2 million to total assets and total liabilities from the ~~recognition~~recording of aoperating lease right-of-use ~~asset~~(“ROU”) assets and aoperating lease ~~liability for all leases. New disclosure requirements included qualitative~~liabilities, respectively, and ~~quantitative information about~~did not have any impact on the ~~amounts recorded in~~Company’s retained earnings as of January 1, 2021. Finance leases were not impacted by the ~~financial statements.~~adoption of ASC 842. The ~~original guidance required application on a modified retrospective basis with adjustments to~~adoption did not materially impact the ~~earliest comparative period presented.~~ Company’s condensed consolidated statements of operations or cash flows.

Recently issued but not yet adopted accounting pronouncements

In ~~August 2018,~~October 2021, the FASB issued ASU No. ~~2018-11, “Targeted Improvements~~2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805) (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to ~~ASC 842,” which included an option to not restate comparative~~recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. ASU 2021-08 is effective for annual periods ~~in transition and elect to use the effective date~~beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of ASU ~~No. 2016-02 as~~2021-08 should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. If early adopted, the ~~date of initial application,~~amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption. The Company ~~elected. As~~is currently evaluating the ~~Company will lose EGC status as of December 31, 2021, the Company was required to apply the provisions~~impact of ASU 2016-02 beginning with the annual reporting period ended December 31, 2021 with an effective date as of January 1, 2021. Accordingly, these financial statements have been adjusted to reflect the adoption of Topic 842. See Note 11.

~~3. REDEEMABLE NONCONTROLLING INTEREST~~

On April 15, 2019, UMB contributed $6.00 million to acquire 6,000 units for a 12.5% ownership interest in Ittella International. The Company incurred issuance costs of $0.13 million resulting in net consideration received of $5.87 million.

Per the terms of Ittella International’s operating agreement, UMB was provided with a put right which may cause Ittella International to purchase all, but not less than all of UMB units upon notice (“Put Notice”). UMB could have provided the Put Notice to Ittella International at any time for any reason after April 15, 2024. If Ittella International did not accept the price proposed in the Put Notice, the consideration to be paid by Ittella International to UMB for the units that were the subject of the Put Notice will be the fair market value of the units as established by a third party appraisal, subject to a floor for the fair value at 85%. If the fair value was less than 85% of the consideration proposed by UMB in their Put Notice, UMB may have chosen to abandon the transfer. The put right constituted a redemption feature and therefore UMB’s noncontrolling interest (the “Redeemable Noncontrolling Interest”) was classified as temporary equity (mezzanine) in the accompanying2021-08 on its condensed consolidated financial statements.

~~The Redeemable Noncontrolling Interest was initially measured at fair value, which has been determined by the Company to equal the consideration received from UMB, net of transaction costs.~~

The Redeemable Noncontrolling Interest was not redeemable until April 2024; however, it was probable of becoming redeemable with the passage of time. Therefore, the subsequent measurement of the Redeemable Noncontrolling Interest at each reporting date was determined as the higher of (1) the initial carrying amount, increased or decreased for the redeemable noncontrolling interest’s share of net income and other comprehensive income, or (2) the redemption value, which was determined to be fair value per the terms of Ittella International’s operating agreement above. In determining the measurement method of redemption value, the Company elected to accrete changes in the redemption value over the period from the date of issuance to the earliest redemption date (i.e. April 2024) of the instrument using the effective interest method. Changes in the redemption value are considered to be changes in accounting estimates. Redemption value was determined using a combination of the market approach and income approach. Under the market approach, the Company estimated fair value based on market multiples of EBITDA of comparable companies. Under the income approach, the Company measured fair value based on a projected cash flow method using a discount rate determined by its Management which is commensurate with the risk inherent in its current business model.

There were no Redeemable Noncontrolling Interest for the three months ended March 31, 2021. Changes in the carrying value of the Redeemable Noncontrolling Interest were as follows for the three months ended March 31, 2020:

Amount
Redeemable Noncontrolling Interest as of January 1, 2020 $ 6,900
Net income attributable to redeemable noncontrolling interest 414
Accretion to redeemable noncontrolling interest 4,431
Redeemable Noncontrolling Interest as of March 31, 2020 $ 11,745

All redeemable noncontrolling interest classified as mezzanine equity were reclassified to permanent equity in connection with the contribution of UMB’s 12.5% equity interests in Ittella International to Myjojo (Delaware) in exchange for Myjojo’s (Delaware)’s common stock and were subsequently exchanged for Forum Class A common stock upon consummation of the Transaction.

4. REVENUE RECOGNITION

Nature of Revenues

Substantially all of the Company’s revenue from contracts with customers ~~consist~~consists of the sale of plant-based foods ~~including, but not limited to, acai and smoothie bowls, zucchini spirals, riced cauliflower, vegetable bowls and cauliflower crust pizza in the United States~~ and is recognized at a point in time in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. Each unit of food product sold to the customer is the performance obligation. Revenue from the sale of frozen food products is recognized upon the transfer of control to the customer, which is upon shipment to the customer.

The Company disaggregates revenue based on the type of products sold to its customers – private label, Tattooed Chef and other. ~~The~~Other revenues primarily consist of burritos, enchiladas and quesadillas and other ~~revenue stream constitutes sale of similar food~~ products ~~directly to customers through third-party vendors and~~by NMFD, acquired by the Company ~~acts as a principal in these transactions.~~on May 2021 (see Note 8 Business Combinations), to its restaurant customers on an as-needed basis. All sales are recorded within revenue on the accompanying condensed consolidated statements of operations and comprehensive ~~income (loss).~~loss. The Company does not have any contract assets or contract liabilities as of ~~March~~June 30, 2022 and December 31, ~~2021 and 2020.~~2021.

Revenue streams for the three months ended ~~March 31,~~June 30, 2022 and 2021 ~~(As Restated) and 2020~~ were as follows:

	2021					2020					2022					2021
Revenue Streams (in thousands)	Revenue		% Total			Revenue		% Total			Revenue		% Total			Revenue		% Total
	(As Restated)
Tattooed Chef	$	35,847		68	%	$	17,651		53	%	$	33,918		58	%	$	32,798		65	%
Private Label		16,305		31	%		15,102		46	%		20,972		36	%		17,136		34	%
Other revenues		317		1	%		419		1	%		3,220		6	%		336		1	%
Total	$	52,469				$	33,172				$	58,110				$	50,270

~~Significant Judgments~~Revenue streams for the six months ended June 30, 2022 and 2021 were as follows:

	2022					2021
Revenue Streams (in thousands)	Revenue		% Total			Revenue		% Total
Tattooed Chef	$	77,373		60	%	$	68,640		67	%
Private Label		46,096		35	%		33,448		32	%
Other revenues		6,705		5	%		651		1	%
Total	$	130,174				$	102,739

Significant Judgments

Generally, the Company’s contracts with customers comprise of a written quote and customer purchase order ~~or statement of work and~~which are governed by the Company’s trade terms and conditions. In certain instances, it may be further supplemented by separate pricing agreements. All products are sold on a standalone basis; therefore, when more than one product is included in a purchase order, the Company has observable evidence of stand-alone selling price. Contracts do not contain a significant financing component as payment terms on invoiced amounts are typically between 7 to 45 days, based on the Company’s credit assessment of individual customers, as well as industry expectations. Product returns are not ~~significant.~~material. The contracts with customers do not include any additional performance obligations related to warranties and material rights.

From time to time, the Company may offer incentives to its customers considered to be variable consideration including discounts and demonstration costs. Customer incentives considered to be variable consideration are recorded as a reduction to revenue as part of the transaction price based on the agreement at the time of the transaction. Customer incentives are allocated entirely to the single performance obligation of transferring product to the customer.

5. ACCOUNTS RECEIVABLE, NET

Accounts receivables are reduced by an allowance for an estimate of amounts that are uncollectible. All of the Company’s receivables are due from customers in the United States. The Company extends credit to its customers based upon its evaluation of the following factors: (i) the customer’s financial condition, (ii) the amount of credit the customer requests, and (iii) the customer’s actual payment history (which includes disputed invoice resolution). The Company does not require its customers to post a deposit or supply collateral. The Company’s allowance for doubtful receivables is based on an analysis that estimates the amount of its total customer receivable balance that is not collectible. This analysis includes assessing a default probability to customers’ receivable balances, which is influenced by several factors, including (i) current market conditions, (ii) periodic review of customer credit worthiness, and (iii) review of customer receivable aging and payment trends.

The Company evaluates the creditworthiness of its customers regularly and, based on its analysis, the Company has ~~determined~~recognized an allowance for doubtful receivables ~~is not necessary~~of $0.1 million as of ~~the three months ended March 31, 2021~~June 30, 2022 and $0.0 million as of December 31, ~~2020.~~2021. The Company writes off accounts receivable whenever they become uncollectible, and any payments subsequently received on such receivables are recorded as bad debt recoveries in the period the payment is received. Credit losses from continuing operations have consistently been within management’s expectations.

In 2021, the Company began offering new promotional programs on sales of Tattooed Chef branded products to some new and existing customers. These programs constitute variable considerations and will reduce the transaction price on sales. In addition, the Company estimates variable considerations expected to reduce the related accounts receivables. In developing the estimate, the Company uses either the expected value or most likely amount method to determine the variable consideration. As a result, an allowance for promotional programs of $1.2 million and $4.1 million is recorded and presented as a reduction of accounts receivable as of June 30, 2022 and December 31, 2021, respectively.

Additionally, the Company maintains product demonstration accruals with some of its customers. The product demonstration accruals represent variable consideration and are recorded as a reduction of revenue. The Company’s obligations to the customers are included within accrued expenses on the condensed consolidated balance sheets. The balances outstanding for product demonstration were $1.4 million and $1.5 million as of June 30, 2022 and December 31, 2021, respectively (see Note 12 Accrued Expenses).

6. INVENTORY

Inventory consists of the following as of (in thousands):

	June 30,		December 31,
	2022		2021
Raw materials	$	27,699	$	22,724
Work-in-process		7,083		5,545
Finished goods		23,240		22,756
Packaging		4,600		3,537
Total inventory	$	62,622	$	54,562

~~6. INVENTORY~~

~~Inventory consists of the following (in thousands):~~

March 31, December 31,
2021 2020
(As Restated)
Raw materials $ 14,845 $ 16,534
Work-in-process 5,134 5,040
Finished goods 16,194 13,424
Packaging 2,808 3,004
Total $ 38,981 $ 38,002

7. ~~PREPAID EXPENSES AND OTHER CURRENT ASSETS~~

~~The following table provides additional information related to the Company’s prepaid expenses and other current assets (in thousands):~~

March 31, December 31,
2021 2020
(As Restated)
Prepaid advertising expenses $ 7,458 $ -
Prepaid other expenses 2,300 1,897
Tax credits 1,903 1,884
Warrants receivable (see Note 15) 0 13,542
Other current assets 51 1,093
Total $ 11,712 $ 18,416

8. PROPERTY, PLANT AND EQUIPMENT ~~- NET~~

Property, plant and equipment consists of the following as of (in thousands):

	June 30,			December 31,
	2022			2021
Land	$	680		$	738
Buildings		4,822			4,766
Leasehold improvements		5,299			5,336
Machinery and equipment		34,344			33,975
Computer equipment		541			549
Furniture and fixtures		182			169
Construction in progress		21,312			7,986
		67,180			53,519
Less: accumulated depreciation		(9,493	)		(7,043	)
Property, plant and equipment, net	$	57,687		$	46,476

~~Property, plant and equipment consists of the following (in thousands):~~

March 31, December 31,
2021 2020
Buildings $ 2,827 $ 2,574
Leasehold improvements 2,114 2,106
Machinery and equipment 14,387 12,526
Computer equipment 187 187
Furniture and fixtures 111 109
Construction in progress 3,032 1,533
22,658 19,035
Less: accumulated depreciation (3,346 ) (2,952 )

Net $ 19,312 $ 16,083

The Company recorded depreciation expense for the ~~periods~~three months ended ~~March 31,~~June 30, 2022 and 2021 ~~and 2020~~ of ~~$0.55~~$1.5 million and ~~$0.19~~$0.9 million, respectively.

The Company recorded depreciation expense for the six months ended June 30, 2022 and 2021 of $3.0 million and $1.4 million, respectively.

8. BUSINESS COMBINATIONS

New Mexico Food Distributors, Inc. (NMFD) and Karsten Acquisition

On May 14, 2021, the Company entered into a stock purchase agreement to acquire all outstanding stock of NMFD, a distributor and manufacturer of frozen and ready-to-eat Mexican food products for a total purchase price of $28.9 million. In addition, the Company entered into a membership interests purchase agreement to acquire all of the membership interest of Karsten for a total purchase price of $5.2 million (together, the “NMFD Transaction”). The primary reason for the purchase of NMFD and Karsten was to expand the Company’s manufacturing capacity to develop more ambient and refrigerated products. The NMFD Transaction met the definition of an acquisition of a business in accordance with ASC 805, Business Combinations, and is accounted for under the acquisition method of accounting. The contribution of revenue from NMFD and Karsten was $4.3 million for each of the three and six months ended June 30, 2021. During the three and six months ended June 30, 2021, the contribution of net operating results from NMFD and Karsten were not material.

Though the purchase agreements for each of NMFD and Karsten were executed as legally separate transactions, each was entered into contemporaneously and in contemplation of the other and involved the same group of sellers. As such, the transactions noted above were accounted for on a combined basis and were viewed to represent a single integrated event.

Under the acquisition method of accounting, the assets acquired, and liabilities assumed, by the Company in connection with the NMFD Transaction were initially recorded at their respective fair values. The Company made an election under Section 338(h)(10) to treat the NMFD Transaction as an asset acquisition for income tax purposes, which allows for any goodwill recognized to be tax deductible and amortized over a 15-year statutory life. The excess of the purchase price over the fair value of assets acquired and liabilities assumed of approximately $18.0 million was recorded as goodwill.

Transaction costs of $0.5 million were incurred in relation to the acquisition and were recorded to operating expense within the condensed consolidated statement of operations for the three months and the six months ended June 30, 2021.

The following table summarizes the fair value of assets acquired and liabilities assumed in the NMFD Transaction as of the date of acquisition (in thousands):

	Amount
Purchase consideration, net of cash acquired	$	33,988
Assets acquired and liabilities assumed
Accounts receivable		3,567
Inventory		2,270
Prepaid expenses and other current assets		122
Operating lease, ROU asset		207
Property, plant and equipment		9,819
Finance lease, ROU assets *		5,749
Other noncurrent assets		29
Intangible assets – tradenames		220
Accounts payable		(2,834	)
Accrued expenses		(78	)
Operating lease liability		(207	)
Note payable *		(2,917	)
Goodwill		18,041
Total assets acquired and liabilities assumed	$	33,988

In December 2015 (prior to the NMFD Transaction), NMFD and Karsten entered into an agreement to purchase an industrial revenue bond (“IRB”) issued by Bernalillo County, New Mexico (“Bernalillo”) to be used to finance the costs of the construction, renovation and equipment of the manufacturing plant used by NMFD and Karsten and, concurrently, assigned ownership of the manufacturing plant including building and land (“Property”) to Bernalillo as consideration for the purchase of the IRB, as well as entered into a lease agreement to lease the Property from Bernalillo (“Lease”). The Lease provides NMFD the option to purchase the Property for $1 following the payoff of the Lease. The sale of the Property to Bernalillo and concurrent leaseback of the Property in December 2015 did not meet the sale-leaseback accounting requirements as a result of NMFD’s and Karsten’s continuous involvement with the Property and thus, the IRB was not recorded as a sale but as a financing obligation, with the Property remaining on NMFD’s financial statements. The Lease and the IRB have the same counterparty, therefore a right of offset exists so long as NMFD continues to make rent payments under the terms of the Lease.

On May 14, 2021, the balance of the IRB asset and the lease obligation to Bernalillo was each $2.9 million. Upon the acquisition of NMFD and Karsten, the Company received all rights and assumed obligations related to the IRB, the Property and the Lease. Under business combination accounting literature and prior to the adoption of ASC 842, the transaction involving the IRB and the Lease should not be reassessed and, therefore, the failed sale-leaseback accounting should be reflected in the Company’s purchase accounting. There were no changes to the right of offset as a result of the acquisition and, thus, the lease obligation was offset against the IRB asset and was presented net on the Company’s consolidated balance sheet with no impact to the consolidated operations of income or consolidated cash flow statements. The leased assets were accounted for as a right of use (“ROU”) asset under ASC 842 and the fair value of the ROU asset was determined to be $5.7 million and as such was presented on the consolidated balance sheet as an ROU asset of $5.7 million. In connection with the NMFD Transaction in May 2021, the Company assumed a note payable in the amount of $2.9 million (see Note 14 Indebtedness). The Company recognized the entire balance as a current liability due to noncompliance with certain financing covenants.

In June 2022, the Company paid the sellers a post-closing adjustment of approximately $42,000, which resulted in a corresponding increase in the total purchase consideration. This purchase consideration change has no impact on condensed consolidated statement of operations and only increased the balance of goodwill by the same amount.

The excess of purchase consideration over the fair value of the assets acquired and liabilities assumed was recorded as goodwill, which was primarily attributable to the assembled workforce and expanded market opportunities. Goodwill was assigned to the Company’s single reporting unit.

Belmont Acquisition

On September 28, 2021, Tattooed Chef formed BCI as a wholly-owned subsidiary. On December 21, 2021, BCI acquired substantially all of the assets, and assumed certain specified liabilities, from Belmont for an aggregate purchase price of $16.7 million (“Belmont Acquisition”). Belmont was a privately held company based in Youngstown, Ohio, and specialized in the development and manufacturing of private label nutritional bars. The primary reason for the purchase of Belmont’s assets and assumption of liabilities was to expand the Company’s manufacturing capacity into a nutritional bars and other ambient products. Approximately $4.0 million of the purchase price was paid by issuing 241,546 shares of Tattooed Chef’s common stock to Belmont’s sole shareholder. The number of shares payable at closing was determined based on the average closing price of the Company’s common stock over the three days preceding the closing date of the acquisition (December 21, 2021). The closing price of Tattooed Chef’s common stock was $16.9 per share at the acquisition date.

Under the acquisition method of accounting, the assets acquired and liabilities assumed by the Company in connection with the Belmont Acquisition were initially recorded at their respective fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed of approximately $8.7 million was recorded as goodwill, which was primarily attributable to the assembled workforce and expanded market opportunities. The recognized goodwill is tax deductible and amortized over a 15-year statutory life. Goodwill was assigned to the Company’s single reporting unit. The fair value assigned to the assets acquired and liabilities assumed are based on management’s estimates and assumptions, which are preliminary, are based on provisional amounts and may be subject to change as additional information is received. The Company expects to finalize the valuation of these assets not later than one year from the acquisition date.

In relation to the acquisition, transaction costs of $0.2 million incurred by the Company were recorded to operating expense within the consolidated statement of operations for the year ended December 31, 2021. An immaterial amount of seller’s transaction costs were paid by the Company and included in the purchase price consideration. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed in the Belmont Acquisition as of the date of acquisition (in thousands):

	Amount
Cash consideration	$	12,739
Equity consideration – common stock		4,000
Total purchase consideration	$	16,739
Assets acquired and liabilities assumed
Accounts receivable	$	1,630
Inventory		4,130
Prepaid expenses and other current assets		38
Operating lease ROU asset		870
Property, plant and equipment		6,477
Accounts payable		(3,477	)
Accrued expenses		(723	)
Operating lease liability		(870	)
Goodwill		8,664
Total assets acquired and liabilities assumed	$	16,739

On May 11, 2022, the Company received an escrow joint release letter to receive a refund of $0.3 million from the escrow agent in relation to the acquisition purchase price adjustment. With this refund of payments, total purchase consideration decreased by $0.3 million. This purchase consideration change has no impact on the income statement line items and only decreased the balance of goodwill by the same amount.

The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and all 2021 acquisitions as if both the NMFD Transaction and the Belmont Acquisition had occurred as of January 1, 2021. There were no acquisitions during the three and six months ended June 30, 2022. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had occurred on the dates indicated.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands, except per share amounts)	2022			2021			2022			2021
Net revenue	$	58,110		$	62,729		$	130,174		$	131,703
Net loss		(26,437	)		(53,935	)		(43,988	)		(62,433	)
Net loss per share
Basic	$	(0.32	)	$	(0.66	)	$	(0.53	)	$	(0.77	)
Diluted	$	(0.32	)	$	(0.66	)	$	(0.53	)	$	(0.77	)

9. ~~DERIVATIVE INSTRUMENTS~~INTANGIBLE ASSETS, NET AND GOODWILL

Intangible assets consist of the following as of (in thousands):

	June 30,			December 31,
	2022			2021
Amortizable tradenames	$	220		$	220
Less: accumulated amortization		(124	)		(69	)
Intangible assets, net	$	96		$	151

The estimated useful lives of the identifiable definite-lived intangible assets, acquired in the NMFD Transaction (see Note 8 Business Combinations) in May 2021, were determined to be two years.

The Company recorded insignificant amortization expense for the three and six months ended June 30, 2022.

Estimated future amortization expense for the definite-lived intangible assets is as follows (in thousands):

Six months ending December 31, 2022	$	55
2023		41
Total	$	96

The following table sets forth the change in the carrying amount of goodwill for the six months ended June 30, 2022 (in thousands):

Balance as of January 1, 2022	$	26,924
Measurement period adjustment (change in consideration) (see Note 8 Business Combinations)		(219	)
Balance as of June 30, 2022	$	26,705

Goodwill is tested annually on September 30. No goodwill impairment was recorded during the three and six months ended June 30, 2022.

10. DERIVATIVE INSTRUMENTS

The Company enters into foreign currency exchange forward contracts to reduce the short-term effects of foreign currency fluctuations on assets and liabilities such as foreign currency inventory purchases, receivables and payables. The Company’s primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. The Company’s derivatives expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of the arrangement. The Company does, however, seek to mitigate such risks by limiting its counterparties to major financial institutions. Management does not expect material losses as a result of defaults by counterparties.

Starting in February 2020, the Company entered into a trading facility for derivative forward contracts. Under this facility, the Company has access to open foreign exchange forward contract instruments to purchase a specific amount of funds in Euros and to settle, on an agreed-upon future date, in a corresponding amount of funds in US dollars. During the six months ended June 30, 2022 and 2021, the Company entered into foreign currency exchange forward contracts to purchase 19.9 million Euros and 36.4 million Euros, respectively. The notional amounts of these derivatives were $22.3 million and $44.2 million for the six-month period ended June 30, 2022 and 2021, respectively.

The fair values of the Company’s derivative instruments classified as Level 2 financial instruments (see Note 11 Fair Value Measurements) and the line items within the accompanying condensed consolidated balance sheets to which they were recorded are summarized as follows (in thousands):

		As of
		March 31,
	Balance Sheet Line Item	2021		Balance Sheet Line Item	As of June 30, 2022		As of December 31, 2021
Derivatives not designated as hedging instruments:		(As Restated)
Foreign currency derivatives	Forward contract derivative liability	$	1,958	Forward contract derivative liability	$	2,988	$	1,804
Total		$	1,958		$	2,988	$	1,804

The effect on the accompanying condensed consolidated statements of operations and comprehensive ~~income (loss)~~loss of derivative instruments not designated as hedges is summarized as follows (in thousands):

		Three months
		ended				Three Months Ended
		March 31,				June 30,
	Line Item in Statements of Operations	2021			Line Item in Statements of Operations	2022			2021
Derivatives not designated as hedging instruments:		(As Restated)
Foreign currency derivatives	Other income (expense)	$	(3,001	)	Other income (expense)	$	(2,049	)	$	1,023
Total		$	(3,001	)		$	(2,049	)	$	1,023

		Six Months Ended
		June 30,
	Line Item in Statements of Operations	2022			2021
Derivatives not designated as hedging instruments:
Foreign currency derivatives	Other income (expense)	$	(3,072	)	$	(1,978	)
Total		$	(3,072	)	$	(1,978	)

Unrealized and realized losses on forward currency derivatives for the three and six months ended ~~March 31,~~June 30, 2022 were $2.0 million and $3.1 million, respectively. Unrealized and realized (gains) loss on forward currency derivatives for the three and six months ended June 30, 2021 were ~~$2.18~~$(1.0) million and ~~$0.73~~$2.0 million, respectively. The Company has notional amounts of ~~$55.00~~$41.5 million and ~~$45.60~~$43.5 million on outstanding derivatives as of ~~March 31, 2021~~June 30, 2022 and December 31, ~~2020,~~2021, respectively.

~~10.~~11. FAIR VALUE MEASUREMENTS

~~Contingent Consideration Liabilities – Holdback Shares~~The carrying amounts of cash, accounts receivables, accounts payable and certain notes payable approximate fair value because of the short maturity and/or variable rates generally associated with these instruments. Long-term debt as of June 30, 2022 and December 31, 2021 approximates its fair value as the interest rates are indexed to market rates (Level 2 “inputs”). The Company categorizes the inputs to the fair value measurements into three levels based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company recognized and measured a contingent consideration liability associated with Holdback Shares at a fair value of $120.35 million, determined using a probability-weighted discounted cash flow model. Significant inputs used in the model includes certain financial metric growth rates, volatility rates, projections associated with the applicable contingency, the interest rate, and the related probabilities and payment structure in the Merger Agreement, which are not observable in the market and are therefore considered to be Level 3 inputs.

On November 16, 2020, the contingencies were met and accordingly the Holdback Shares were released. The remeasured fair value of the liability was $83.15 million based on the public share price on release date and was charged against additional paid-in capital. The change in fair value during the period resulted in a gain on settlement of the contingent consideration derivative of $37.20 million and was recorded within “other income” in the condensed consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2020.

There were no changes in the estimated fair value of the Company’s liabilities measured on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2021 and 2020, respectively.

~~Sponsor Earnout Shares Subject to Transfer Restrictions~~

The Company recognized and measured an asset associated with the Sponsor Earnout Shares at its fair value of $0 at the Closing date, determined using a probability-weighted discounted cash flow model. Significant inputs used in the models includes certain financial metric growth rates, volatility rates, projections associated with the applicable contingency, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement, which are not observable in the market and are therefore considered to be Level 3 inputs.

The Sponsor Earnout Shares were released on November 16, 2020 based on the remeasured fair value on the release date of $0, as none of the Sponsor Earnout Shares were forfeited on that date. No gain or loss was recorded by the Company in connection with the Sponsor Earnout Shares.

Warrant Liabilities

In connection with Forum’s IPO and issuance of Private Placement Units in August 2018, Forum issued Units consisting of common stock with attached Public Warrants and Private Placement Warrants (together, the “Warrants”). All Public Warrants were exercised during 2020 and 2021.

Each Private Placement Warrant entitled or entitles the holder to purchase one share of the Company’s common stock at an exercise price of $11.50.

The Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the condensed consolidated balance sheets. The warrant liabilities are measured at fair value at inception (“initial measurement”), which is at the Closing ~~date,~~Date, and on a recurring basis (“subsequent remeasurement”), with changes in fair value presented within change in fair value of warrant liabilities in the condensed consolidated statements of operations and comprehensive ~~income (loss).~~loss.

Initial Measurement

The ~~fair~~ value of the Private Placement Warrants ~~were~~was initially measured at fair value on October 15, 2020, the Closing ~~date.~~Date.

Subsequent Measurement

At each reporting period or upon exercise of the Warrants, the Company remeasures the Private Placement Warrants at their fair values with the change in fair value reported to current operations within the condensed consolidated statements of operations and ~~other~~ comprehensive ~~income (loss).~~loss. During the three and six months ended ~~March 31, 2021, 223,041~~June 30, 2022, no Private Placement Warrants were ~~settled, resulting in an aggregate loss on settlements of $0.15 million.~~settled.

For the three and six months ended ~~March 31, 2021,~~June 30, 2022, change in the fair value of the warrant liabilities charged to current operations amounted to ~~$0.47 million.~~a gain of $0.5 million and a gain of $0.7 million, respectively.

Fair Value Measurement

The fair value of the Private Placement Warrants was determined to be ~~$10.16~~$1.26 per Warrant as of ~~March 31, 2021~~June 30, 2022 using Monte Carlo simulations and using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock warrants based on implied volatility from its traded warrants and historical volatility of select peers’ common stock with similar expected term of the Warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield on the grant date with a maturity similar to the expected remaining term of the warrants. The expected term of the Warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company estimated to remain at zero.

The following table provides quantitative information regarding the inputs to the fair value measurement of the Private Placement Warrants as of each measurement date:

	October 15, 2020
	(Initial			December 31,			March 31,			June 30,			December 31,
Input	Measurement)			2020			2021			2022			2021
Risk-free interest rate		0.32	%		0.34	%		0.79	%		2.99	%		1.08	%
Expected term (years)		5			4.79			4.55			3.30			3.79
Expected volatility		35.00	%		35.00	%		40.00	%		50.00	%		45.00	%
Exercise price	$	11.50			11.50			11.50		$	11.50		$	11.50
Fair value of Units	$	13.85			12.72			10.16
Fair value per Unit										$	1.26		$	7.07

~~On October 15, 2020,~~As of June 30, 2022, the fair value of the Private Placement Warrants was determined to be ~~$13.85~~$1.26 per warrant, or an aggregate value of ~~$9.07~~$0.1 million for ~~655,000~~115,160 outstanding warrants.

On December 31, ~~2020,~~2021, the fair value of the Private Placement Warrants was determined to be ~~$12.72~~$7.07 per warrant, or an aggregate value of ~~$5.18~~$0.8 million for ~~407,577~~115,160 outstanding warrants.

The following table presents the changes in the fair value of private placement warrant liabilities (in thousands):
	Six Months Ended
	June 30, 2022
Fair value as of December 31, 2021	$	814
Exercise of Private Placement Warrants		-
Change in fair value⁽¹⁾		(668	)
Fair value as of June 30, 2022	$	146

As of March 31, 2021, the aggregate fair value of the Private Placement Warrants was determined to be $1.87 million, based on the estimated fair value per Private Placement Warrant on that date of $10.16 for 184,536 outstanding warrants.

	Six Months Ended June 30, 2021

Fair value as of December 31, 2020	$	5,184
Exercise of Private Placement Warrants		(3,020	)
Change in fair value⁽¹⁾		51
Fair value as of June 30, 2021	$	2,215

~~The following table presents the changes in the fair value of warrant liabilities:~~

Private
Placement
Fair value at initial measurement on October 15, 2020 $ 9,071,750
Exercise of Private Placement Warrants (2,695,806 )
Change in fair value⁽¹⁾ (1,191,565 )
Fair value as of December 31, 2020 $ 5,184,379
Exercise of Private Placement Warrants (2,989,639 )
Change in fair value⁽¹⁾ (319,854 )
Fair value as of March 31, 2021 $ 1,874,886

⁽¹⁾

Changes in fair value are recognized in change in fair value of warrant liabilities in the condensed consolidated statements of operations and comprehensive ~~income (loss).~~

~~11. LEASES~~

~~As of March 31, 2021, the Company’s primary leasing activities were related to office space, production and storage facilities and certain Company vehicles and equipment.~~

Significant assumptions and judgments were made in the application of GAAP for leases, including those related to the lease discount rate. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate, when the interest rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms of the lease payments at commencement date, and in similar economic environments.

Upon adoption, ASC 842, Leases had an impact in the Company’s consolidated balance sheet and in its consolidated statement of operations. As part of the transition, the Company elected the following practical expedients:

●

Package of practical expedients which eliminates the need to reassess (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) the initial direct costs for any existing leases.

●

~~The practical expedient whereby the lease and non-lease components will not be separated for all classes of assets.~~

●

~~Not to recognize ROU assets and corresponding lease liabilities with a lease term of 12 months or less from the lease commencement date for all class of assets.~~

For existing leases, the Company did not elect the use of hindsight and did not reassess lease term upon adoption. The Company leases office and manufacturing facilities, equipment and vehicles under various operating arrangements. Certain of the leases are subject to escalation clauses and renewal periods. The Company recognizes lease expense, including predetermined fixed escalations, on a straight-line basis over the initial term of the lease from the time that the Company controls the leased property.

The Company adjusted the adoption date opening ROU asset balance by $0.04 million and $0.03 million previously recorded as deferred rent liabilities and prepaid expenses, respectively. On January 1, 2021, the Company recorded $4.16 million in operating lease ROU assets and $4.17 million in operating lease liabilities. The adoption of ASC 842 had no significant impact on the Company’s statement of operations.

~~The components of lease costs are as follows:~~

Three
months ended
(in thousands) Statement of Operations Location March 31,
2021
Operating leases:
Lease cost Cost of goods sold $ 154
Lease cost Operating expenses 67
Operating lease cost 221
Other:
Variable lease cost Cost of goods sold 461
Variable lease cost Operating expenses -
Variable lease cost* 461
Total lease cost $ 682

*	~~Variable lease cost primarily consists of month to month rent, charges based on usage and maintenance.~~loss.

~~The Company’s rent expense for the three months ended March 31, 2020 totaled $0.50 million.~~Derivative Instruments

~~Supplemental balance sheet information as of March 31, 2021~~Derivative contracts are valued using quoted market prices and significant other observable inputs. The Company uses derivative instruments to minimize its exposure to fluctuations in foreign currency exchange rates. The Company’s derivative instruments primarily include foreign currency forward contracts related to ~~leases~~certain intercompany loans and intercompany trading balances. The fair values for the majority of the Company’s foreign currency derivative contracts are ~~as follows:~~ evaluated by comparing the contract rate to a published forward price of the underlying market rates, which is based on market rates of comparable transactions. The valuation approach is classified within Level 2 of the fair value hierarchy. See Note 10 Derivative Instruments.

March 31
(in thousands) Balance Sheet Location 2021
Assets
ROU assets-Operating lease Operating lease right-of-use assets 4,141
Less: accumulated amortization Operating lease right-of-use assets (173 )
Operating lease right-of-use assets, net Operating lease right-of-use assets 3,968
Total Lease ROU assets $ 3,968
Liabilities
Current:
Operating lease liabilities, current Operating lease liabilities, current $ (651 )
Long term:
Operating lease liabilities, noncurrent Operating lease liabilities, noncurrent (3,344 )
Total Lease liabilities $ (3,995 )

~~Supplemental cash flow information related to leases was as follows:~~Business Combination

(in thousands) March 31,
2021
Operating cash flows paid for operating leases $ (177 )

Business combinations are accounted for using the acquisition method of accounting. The ~~following table represents~~Company recognizes the ~~weighted-average remaining lease term~~assets acquired and ~~discount rates for operating lease~~the liabilities assumed at the acquisition date measured at their fair values as of ~~March 31, 2021:~~

that date. Fair value determinations are based on a variety of valuation techniques based on the facts and circumstances surrounding the transaction and the nature of the assets. In determining the fair value of the assets acquired and liabilities assumed in a material acquisition, the Company may utilize from the assistance of third party valuation firms to determine fair values of some or all of the assets acquired, and liabilities assumed, or may complete some or all of the valuations internally. Fair value of property plant and equipment were determined by a cost approach to calculate the replacement or reproduction cost. Fair value of inventories was based on replacement cost to estimate the value of raw materials and the comparative sales method to estimate the value of work in process and finished goods. The value of goodwill reflects the excess of the fair value of the consideration conveyed to the seller over the fair value of the net assets received. See Note 8 Business Combinations.

	Operating Leases
~~Weighted-average remaining lease term (years)~~		~~9.59~~
~~Weighted-average discount rate~~		~~4.0%-5.3%~~ 12. ACCRUED EXPENSES

~~The following table reconciles the undiscounted future lease payments for operating leases to the operating leases recorded in the condensed consolidated balance sheet at March 31, 2021:~~

(in thousands) Operating
Leases
Nine months ended December 31, 2021 $ 624
2022 790
2023 634
2024 374
2025 347
2026 and thereafter 2,413
Total lease payments $ 5,182
Less imputed interest 1,187
Present value of future lease payments $ 3,995
Current Lease liabilities 651
Noncurrent Lease liabilities 3,344

~~12. ACCRUED EXPENSES~~

The following table provides additional information related to the Company’s accrued expenses as of (in thousands):

	March 31,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
	(As Restated)
Accrued customer incentives	$	4,170	$	1,524
Accrued product demonstration					$	1,377	$	1,471
Accrued payroll		1,334		1,471		3,312		1,600
Accrued commission		631		108		1,065		607
Other accrued expenses		423		507		771		89
Total	$	6,558	$	3,610	$	6,525	$	3,767

13. INCOME TAXES

The following table presents the provision for income taxes and the effective tax rate for the ~~three months~~periods ended ~~March 31,~~June 30, 2022 and 2021 ~~and March 31, 2020 in thousand:~~(in thousands):

	March 31,			March 31,			Three months ended						Six months ended
	2021			2020			June 30,						June 30,
Income tax (benefit) expense		(1,475	)		730
							2022			2021			2022			2021
Income tax expense							$	455		$	50,009		$	711		$	48,534
Effective tax rate		15	%		11	%		(2	)%		(670	)%		(2	)%		(283	)%

The income tax ~~(benefit)~~ expense for the three and six months ended ~~March 31,~~June 30, 2022 was primarily attributable to foreign income tax expenses for the Company’s activities in Italy as well as state minimum taxes.

The income tax expense for the three and six months ended June 30, 2021 was primarily attributable to ~~federal, state and foreign income tax expenses attributable to federal and state tax benefits on~~ the Company’s ~~U.S. loss as~~establishment of a ~~C-corporation, offset by~~full valuation allowance on its deferred tax assets, and foreign income tax expenses on the Company’s foreign income in Italy.

~~The income tax (benefit) expense for the three months ended March 31, 2020 was primarily attributable to state and foreign income taxes.~~

The Company also believes that quarterly effective tax rates will vary from the fiscal ~~2021~~2022 effective tax rate as a result of recognizing the income tax effects of items that the Company cannot anticipate such as the changes in tax laws, tax amounts associated with foreign earnings at rates different from the United States federal statutory rate, ~~the tax impact of stock-based compensation.~~and changes in valuation allowance. The Company’s foreign earnings on Italian operations are subject to foreign taxes applicable to its income derived in Italy. ~~These taxes include income tax.~~

As of June 30, 2022 and December 31, ~~2020, and 2019,~~2021, the Company had no open tax examinations by any taxing jurisdiction in which it operates. The taxing authorities of the most significant jurisdictions are the United States Internal Revenue Service, ~~and~~ the California Franchise Tax Board and the Agenzia delle Entrate. The statute of limitations for which the Company’s tax returns are subject to examination are as follows: Federal ~~2017-2020,~~2018-2021, California ~~2016-2020,~~2017-2021, and Italy ~~2016-2020.~~2017-2021.

14. INDEBTEDNESS

Debt consisted of the following as of (in thousands):

March 31, December 31,
2021 2020

Notes payable $ 2,014 $ 2,101
Notes payable to related parties (Note 17) 42 66
Revolving credit facility 26 22
Total debt 2,082 2,189
Less current debt (179 ) (199 )
Total $ 1,903 $ 1,990

~~Revolving credit facility~~

	June 30,			December 31,
	2022			2021
Notes payable	$	6,460		$	5,735
Line of credit		1,510			1,200
Total debt		7,970			6,935
Less current debt		(6,538	)		(6,219	)
Total long-term debt	$	1,432		$	716

Lines of Credit

The Company is party to a revolving line of credit agreement, which has been amended from time to time, pursuant to which a credit facility has been extended to the Company until ~~May 25, 2021~~September 30, 2023 (the “Credit Facility”). The Credit Facility provides the Company with up to ~~$25.00~~$25.0 million in revolving credit. Under the Credit Facility, the Company may borrow up to (a) 90% of the net amount of eligible accounts receivable; plus, (b) the lower of: (i) sum of: (1) 50% of the net amount of eligible inventory; plus (2) 45% of the net amount of eligible in-transit inventory; (ii) ~~$10.00~~$10.0 million; or (iii) 50% of the aggregate amount of revolving loans outstanding, minus (c) the sum of all reserves. Under the Credit ~~Facility: (i)~~Facility amended and effected on June 30, 2022, the ~~Company’s~~ fixed charge coverage ratio ~~may~~was replaced by liquidity requirement. The Company is required to maintain minimum liquidity of not be less than ~~1.10:1.00, and (ii)~~$10.0 million. Not less often than monthly (or weekly during a trigger period), the Company ~~may make dividends or distributions in shares of stock~~shall furnish to lender a borrowing base certificate as of the ~~same class and also distributions for~~close of business on the ~~payment~~last business day of ~~taxes.~~such week. Trigger period means the period following any date on which (a) an event of default has occurred, or (b) the Company’s liquidity is less than $20.0 million. As of ~~March 31, 2021~~June 30, 2022, the Company was compliance with all of the financial covenants under the Credit Facility.

The Credit Facility bears interest at an annual rate equal to the sum of the Daily Adjusting Term SOFR Rate in effect from time to time plus 3.00%. “Daily Adjusting Term SOFR Rate” means, for any day, the rate per annum equal to the Term SOFR. The Daily Adjusting Term SOFR Rate shall be adjusted on a daily basis; provided that, if such rate is not published on such determination date then the rate will be the Term SOFR Rate on the first business day immediately prior thereto. The actual interest rates on outstanding borrowings were at 5.75% and 4.25% as of June 30, 2022 and December 31, ~~2020, the Company was in compliance with all terms and conditions of its Credit Facility.~~2021, respectively.

~~The revolving line of credit bears interest at the sum of (i) the greater of (a) the daily Prime Rate, or (b) LIBOR plus 2%; and (ii) 1%.~~

The ~~revolving line of credit~~Credit Facility has an arrangement associated with it wherein all collections from collateralized receivables are deposited into a collection account and applied to the outstanding balance of the line of credit on a daily basis. The funds in the collection account are earmarked for payment towards the outstanding line of credit and given the Company’s obligation to pay off the outstanding balance on a daily basis, the balance iswas classified as a current liability on the Company’s condensed consolidated balance sheets as of ~~March 31, 2021~~June 30, 2022 and December 31, ~~2020.~~2021. The balance on the Credit Facility was $0.0 million as both of June 30, 2022 and December 31, 2021. As of June 30, 2022, up to the full $25.0 million available for borrowing under the Credit Facility, of which $0.6 million has been utilized for the letter of credit issuance as described below.

~~Capital expenditure loan, term loan, and notes payable~~

The Credit Facility includes a ~~capital expenditure loan (“Capex Loan”)~~letter of credit subfacility in the amount of up to ~~$0.50 million that functions~~$1.0 million. The Company agrees to ~~reimburse~~pay (i) to the lender for each letter of credit, a per annum fee (the “Letter of Credit Fee”) equal to 1.00% of the outstanding letter of credit obligations, which fee shall be payable monthly in arrears on the first day of each calendar month, (ii) to the letter of credit issuer, for its own account, all customary charges and commissions associated with the issuance, amending, negotiating, payment, processing, renewal, transfer and administration of letters of credit, which charges shall be paid as and when incurred, and (iii) to the lender, all customary charges of the letter of credit issuer referenced in clause (ii) above paid by the lender on behalf of the Company. The Letter of Credit Fee shall be payable when the letter of credit is issued and on each anniversary thereof and on the Credit Facility maturity date. As of June 30, 2022, the Company ~~for certain qualified expenses related~~had $0.6 million outstanding letter of credit under the subfacility.

In March 2021, Ittella Italy entered into a credit facility with a financial institution in the amount of up to the Company’s purchase of capital equipment. All borrowings against this loan are payable on a straight-line basis over 5 years and accrue interest at the greater of (a) the daily Prime Rate or (b) the daily LIBOR Rate plus 4%. The loan was paid off in full with the proceeds from the Transaction.0.6 million Euros. The balance on the ~~Capex Loan~~credit facility was $00.6 million Euros ($0.6 million USD) and $00.6 million Euros ($0.7 million USD) as of ~~March 31, 2021~~June 30, 2022, and December 31, ~~2020, respectively,~~2021, respectively. The credit facility bears a one-time commission fee at 0.40% and interest at 1.50% per annum. Under this credit facility, Ittella Italy borrows the amount based on the sales invoices presented to the financial institution and pays back within 60 days. This line of ~~which $0 million~~credit does not have an expiration date and ~~$0 million is classified as current as of March 31, 2021 and December 31, 2020, respectively.~~does not contain financial covenants.

In September ~~2018, the Company amended the Credit Facility to include~~2021, Ittella Italy entered into a ~~term loan~~line of credit (the “Line of Credit”) with a financial institution in the amount of ~~$1.00~~up to 1.4 million ~~(the “Term Loan”).~~Euros. The ~~Term Loan accrues~~balance on the line of credit was 0.8 million Euros ($0.9 million USD) and 0.5 million Euros ($0.5 million USD) as of June 30, 2022, and December 31, 2021, respectively. The Line of Credit bears a one-time commission fee at 0.40% and interest at 0.85% per annum. Under this line of credit, the ~~sum~~financial institution advances suppliers based on purchase invoices presented and Ittella Italy pays back the amounts borrowed within 180 days. This line of credit does not have an expiration date and does not contain financial covenants.

For the ~~(i)~~lines of credit with payment term greater than 90 days, the ~~greater~~Company presents the borrowing and repayment amounts at gross in the condensed consolidated statements of ~~(a)~~cash flows. For the ~~daily Prime Rate, or (b) LIBOR plus 2%;~~lines of credit with payment term shorter than 90 days, the Company presents the borrowing and ~~(ii) 1.5%~~repayment amounts at net in the condensed consolidated statements of cash flows.

Notes payable

In connection with the NMFD Transaction in May 2021 (see Note 8 Business Combinations), the Company assumed a note payable in the amount of $2.9 million. The note payable bears interest at 3.8% per annum and has a maturity date of ~~May 25,~~December 29, 2025. Under the note payable, NMFD must maintain a minimum fixed charge coverage ratio of 1.20:1.00, assessed semi-annually as of June 30 and December 31 of each calendar year beginning December 31, 2021, and the Company must, on a consolidated basis, maintain a funded debt to EBITDA ratio not to exceed 4.00 to 1.00, tested semi-annually as of June 30 and December 31 of each calendar year beginning June 30, 2021. The ~~Credit Facility is secured by substantially all~~outstanding balance of the ~~Company’s assets. The balance on the Term Loan~~note payable was $0$2.8 million and $0$2.8 million as of ~~March 31, 2021~~June 30, 2022, and December 31, ~~2020,~~2021, respectively. The balance was classified as a current liability due to noncompliance with the above financing covenants.

In ~~April 2019,~~May 2021, Ittella Italy entered into a promissory note with a financial institution in the amount of ~~0.40~~1.0 million Euros. The note accrues interest at ~~2.5%~~1.014% per annum and has a maturity date of ~~April 15, 2021,~~May 28, 2025, when the full principal and interest are due. The promissory note does not contain financial covenant. The balance on the promissory note was ~~0.02~~0.8 million Euros ($0.8 million USD) and ~~0.08~~0.9 million Euros ($1.0 million USD) as of ~~March 31, 2021~~June 30, 2022 and December 31, ~~2020,~~2021, respectively. As of June 30, 2022, the balance of the note in the amount of approximately 0.5 million Euros ($0.5 million USD) was classified as long term liability.

~~On June 19, 2015,~~In April 2022, Ittella ~~Properties, LLC, a variable interest entity (“VIE”) (See Note 19), executed~~Italy entered into a promissory note with a financial institution in the amount of ~~$1.30~~1.0 million ~~(the “CB Loan”).~~Euros. The ~~CB Loan~~note accrues interest at ~~an initial rate of 4.99%~~1.9% per annum and ~~is variable on an annual basis in accordance with the United States Treasury Note Index Rate plus 2.66% and subject to a minimum rate of 4.65%. The CB Loan had~~has a maturity date of ~~July 1, 2040~~April 7, 2026, when the full principal and ~~was collateralized by the Alondra Building (Note 19) and was guaranteed by Ittella International.~~interest are due. The ~~loan was paid off in full through a refinancing on January 6, 2020.~~promissory note does not contain financial covenant. The ~~outstanding~~ balance on the ~~CB Loan~~promissory note was $01.0 million ~~and $0.00~~Euros ($1.0 million USD) as of ~~March 31, 2021 and December 31, 2020, respectively.~~

~~On August 12, 2015, Ittella Properties, LLC,~~June 30, 2022. As of June 30, 2022, the ~~VIE, executed a~~balance of the note ~~payable with a financial institution~~ in the amount of ~~$1.06~~approximately 0.9 million ~~(the “CDC Loan”). The CDC Loan accrued interest at 2.88% and had a maturity date of August 1, 2035. The CDC Loan~~Euros ($0.9 million USD) was secured by the Alondra Building (Note 19 and was guaranteed by Ittella International. The loan was paid off in full through a refinancing on January 6, 2020. The outstanding balance on the CDC Loan was $0 million and $0 millionclassified as ~~of March 31, 2021 and December 31, 2020, respectively.~~long term liability.

On January 6, 2020, Ittella Properties, ~~LLC,~~ the VIE, refinanced all of its existing debt with a financial institution in the amount of ~~$2.10 million (the “Note”).~~$2.1 million. The ~~Note~~note accrues interest at 3.60% per annum and has a maturity date of January 31, 2035. Financial covenants of the ~~Note~~note include a minimum fixed charge coverage ratio of 1.20 to 1.00. ~~As of March 31, 2021, the Company was in compliance with all terms and conditions of the Note.~~ The outstanding balance on the ~~Note~~note was ~~$1.99~~$1.9 million ~~and $2.02~~ as of ~~March 31, 2021~~both June 30, 2022 and December 31, ~~2020, respectively.~~2021. As of June 30, 2022, the VIE was not in compliance with the fixed charge coverage ratio and the full balance of the note was classified as a current liability. Commencing with the fiscal quarter ending September 30, 2022, the VIE should meet a minimum fixed charge coverage ratio of 1.20 to 1.00.

Future minimum principal payments due on the revolving credit facilities and notes payable, ~~including notes payable to related parties,~~ for periods subsequent to ~~March 31, 2021~~June 30, 2022 are as follows (in thousands):

Nine months ended December 31, 2021 $ 151
2022 134
2023 119
2024 123
2025 128
Thereafter 1,427

Total $ 2,082

Six months ending December 31, 2022	$	6,230
2023		586
2024		563
2025		437
2026		154
Total	$	7,970

15. STOCKHOLDERS’ EQUITY

The condensed consolidated statements of changes in stockholders’ equity reflect the Reverse Recapitalization as of October 15, ~~2020.~~2020 as discussed in Note 1. Since Myjojo ~~(Delaware)~~ was determined to be the accounting acquirer in the Reverse Recapitalization, all periods prior to the consummation of the Transaction reflect the balances and activity of Myjojo ~~(Delaware)~~ (other than shares which were retroactively restated in connection with the Transaction).

Further, the Company issued awards to certain officers and all of the directors pursuant to the Tattooed Chef, Inc. 2020 Incentive Award Plan ~~(“Director Awards”~~(the “Plan”) on December 17, 2020 (see Note ~~16)~~16 Equity Incentive Plan). Salvatore Galletti received 4,935 shares of common stock of the Company as part of the Director Awards. Such shares together with the shares that Salvatore Galletti received as a result of the Transaction and the release of the Holdback Shares from escrow, allowed Salvatore Galletti to have approximately 39.4% (separate from the shares assigned to Project Lily) of the voting power of the capital stock of the Company as of March 31, 2021.

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock ~~with a~~, par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of ~~March~~June 30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.

Common Stock

The Company is authorized to issue 1,000,000,000 shares of common stock, ~~with a~~ par value of $0.0001 per share. Holders of common stock are entitled to one vote for each share. As of ~~March~~June 30, 2022 and December 31, 2021, there were ~~81,400,199~~82,459,803 and 82,237,813 shares of common stock issued and ~~outstanding.~~outstanding, respectively.

~~Noncontrolling Interest~~Warrants

Prior to the consummation of the Transaction, noncontrolling interest in Ittella Italy was included as a component of stockholders’ equity on the accompanying condensed consolidated balance sheets. Noncontrolling interest in Ittella International contains a redemption feature and was included as mezzanine equity on the accompanying condensed consolidated balance sheets (Notes 3). The share of income attributable to noncontrolling interest were included as a component of net income in the accompanying consolidation statements of operations and comprehensive income prior to the Transaction.

The following schedule discloses the components of the Company’s changes in other comprehensive income attributable to noncontrolling interest for the three months ended March 31, 2020 (in thousands):

Net income attributable to noncontrolling interest in Ittella Italy $ 598
Net income attributable to noncontrolling interest in Ittella International 414
Increase in noncontrolling interest due to foreign currency translation (11 )

Change in net comprehensive income attributable to noncontrolling interest for the three months ended March 31, 2020 $ 1,001

~~As discussed in Note 3, all noncontrolling interest were converted into Myjojo (Delaware)’s common shares which were subsequently exchanged for the Company’s common shares in the Transaction.~~

~~Warrants~~

In connection with Forum’s IPO and issuance of Private Placement Units in August 2018, Forum issued Units consisting of ~~Common Stock~~common stock with attached warrants as follows:

Public Warrants – Forum issued 20,000,000 Units at a price of $10.00 per Unit, each Unit consisting of one share of ~~Common Stock of Forum~~common stock and one ~~redeemable warrant.~~Public Warrant.

Private Placement Warrants – Forum issued 655,000 Private Placement Units, each consisting of one share of ~~Common Stock~~common stock and one ~~warrant to the Sponsor, Jefferies LLC and EarlyBirdCapital, Inc.~~Private Placement Warrant.

Each ~~Public~~ Warrant ~~and Private Placement Warrant (together, the “Warrants”)~~ entitles the holder to purchase one share of ~~Common Stock~~the Company’s common stock at an exercise price of $11.50.

The Public Warrants ~~contain~~contained a redemption feature that ~~provides~~provided the Company the option to call the Public Warrants for redemption 30 days after notice to the holder when any of conditions described in the following paragraph iswas met, and to require that any Public Warrant holder who desires to exercise his, her or its Public Warrant prior to the redemption date do so on a “cashless basis,” by converting each Public Warrant for an equivalent number of shares of ~~Common Stock,~~common stock, determined by dividing (i) the product of the number of shares of ~~Common Stock~~common stock underlying the Warrants, multiplied by the difference between the ~~Warrant Price~~exercise price and the “Fair Market Value”, and (ii) the Fair Market Value (defined as the average last sale price of the ~~Common Stock~~common stock for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of the Public Warrants).

The Public Warrants ~~become~~became exercisable upon the occurrence of certain events (trigger events), including the completion of the Transaction. Once the Public Warrants ~~become~~became exercisable, the Company ~~may~~was able to redeem the Public Warrants in whole, at a price of $0.01 per ~~warrant~~Warrant within 30 days after a written notice of redemption, and if, and only if, the reported last sale price of the Company’s common stock ~~equals~~equaled or ~~exceeds~~exceeded $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before the Company ~~sends~~sent the notice of redemption to the holder.

The Private Placement Warrants are identical to the Public Warrants, except that so long as they are held by the ~~Sponsor, an Underwriter,~~original holders or any of their ~~Permitted Transferees,~~permitted transferees, the Private Placement Warrants: (i) may be exercised for cash or on a cashless basis; (ii) may not be transferred, assigned, or sold 30 days after the ~~completion of a defined Business Combination~~Closing Date except to a ~~Permitted Transferee~~permitted transferee who enters into a written agreement with the Company agreeing to be bound by the transfer restrictions, and (iii) are not redeemable by the Company.

A Warrant may be exercised only during the “Exercise Period” commencing on the later of: (i) the date that is 30 days after the first date on which Forum completes its initial business combination; or (ii) 12 months from the date of the closing of ~~the~~Forum’s IPO, and terminating on the earlier to occur (x) five years after Forum completes its initial business combination; (y) the liquidation of the Company or, (z) the ~~Redemption Date (as that term is defined in the Warrant Agreement),~~redemption date, subject to any applicable conditions as set forth in the ~~Warrant Agreement.~~warrant agreement governing the Warrants. The Company in its sole discretion may extend the duration of the Warrants by delaying the expiration date, provided it give at least 20 days prior written notice of any such extension to the registered holders of the Warrants.

~~Forum completed a business combination, which is one~~The consummation of the ~~trigger events for~~Transaction triggered exercisability of the Warrants.

Warrant activity is as follows:

										Private
							Public			Placement
	Public Warrants			Private Placement Warrants			Warrants			Warrants
Issued and outstanding as of October 15, 2020		20,000,000			655,000			20,000,000			655,000
Exercised		(5,540,316	)		(247,423	)		(5,540,316	)		(247,423	)
Issued and outstanding as of December 31, 2020		14,459,684			407,577			14,459,684			407,577
Exercised		(14,459,684	)		(223,041	)		(14,459,684	)		(292,417	)
Issued and outstanding as of March 31, 2021		-			184,536
Issued and outstanding as of December 31, 2021								-			115,160
Exercised								-			-
Redeemed								-			-
Issued and outstanding as of June 30, 2022								-			115,160

The Public Warrants ~~are~~were considered freestanding equity-classified instruments due to their detachable and separately exercisable features. Accordingly, the Public Warrants ~~are~~were presented as a component of Stockholders’ Equity in accordance with ASC 815-40-25.

As discussed in Note ~~10,~~11, the Private Placement Warrants are considered freestanding liability-classified instruments under ASC 815-40-25.

The Company did not receive payment from the transfer agent for 1,177,602 of the 5,793,611 warrants exercised during the period ended December 31, 2020 and, accordingly, a Warrant Receivable of $13.54 million was recognized as part of Prepaid Expenses and Other Current Assets on the condensed consolidated balance sheet as of December 31, 2020.

During the three-month period ended March 31, 2021, the Company recognized aggregate cash and cashless exercises of 5,234,017 and 9,368,925, respectively, in relation to the Public Warrants. During the three-month period ended March 31, 2021, 223,041 Private Placement Warrants were exercised. The Company issued 10,025,303 common stock shares in connection with all exercises occurred in the three-month period ended March 31, 2021. During the same period, the Company recognized transfers of 143,258 of the Public Warrants from Private Placement Warrants that ceased to meet contractual criteria and became Public Warrants as a result.

On January 14, 2021, the Company announced that it would redeem all Public Warrants that had not been exercised as of 5:00 p.m. EST on February 16, 2021 and sent the required redemption notice to Public Warrant holders. As of that time and date, all but 132,580 of the Public Warrants had been exercised, and those remaining Public Warrants were redeemed for $0.01 per Public Warrant.

~~Appropriated Retained Earnings~~

In accordance with Italian Company law, the Company’s subsidiary Ittella Italy maintains an appropriated retained earnings account for 5% of the total profit for the prior year until the appropriated retained earnings balance reaches 20% of share capital.

~~The appropriated retained earnings amount included in retained earnings was $0.07 million and $0.07 million as of March 31, 2021 and December 31, 2020, respectively.~~

16. EQUITY INCENTIVE PLAN ~~(As Restated)~~

On October 15, 2020, the ~~Company’s Tattooed Chef, Inc. 2020 Incentive~~ Plan ~~(the “Plan”)~~ became effective and permits the granting of equity awards of up to 5,200,000 common shares to executives, employees and non-employee directors, with the maximum number of common shares to be granted in a single fiscal year, when taken together with any cash fees paid to the non-employee director during that year in respect of his or her service as a non-employee director, not exceeding ~~$100,000~~$0.1 million in total value to any non-employee ~~director.~~director or $0.125 million in total value to any non-employee director who serves as the chairperson of a duly formed and authorized committee of the Company’s board of directors. Awards available for grant under the Plan include ~~Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Other Share-based Awards, Other Cash-based Awards~~incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), other share-based awards, other cash-based awards and ~~Dividend Equivalents.~~dividend equivalents. Shares issued under the Plan may be newly issued shares or reissued treasury shares.

Options maybe granted at a price per share not less than 100% of the fair market value at the date of grant. Options granted generally vest over a period of three to five years, subject to the grantee’s continued service with the Company through the scheduled vested date and expire no later than 10 years from the grant date.

Stock Options

Stock options under the Plan are generally granted with a strike price equal to 100% of the fair market value of the common stock on the date of grant, with a three-year vesting period and ~~a grant life~~expire 10 years from the date of ~~10 years.~~grant. The strike price may be higher than the fair value of the common stock on the date of the grant but cannot be lower.

The table below summarizes the share-based activity inunder the Plan:

Weighted
Average
Weighted Remaining
Number of Average Contractual Intrinsic
Awards Exercise Terms Value
Outstanding Price (Years) (in thousands)
Balance at December 31, 2020 756,300 $ 24.69 9.98 $ -
Granted - - - -
Cancelled and forfeited (1,500 ) 24.69 9.82 -
Exercised - - - -
Balance at March 31, 2021 754,800 $ 24.69 9.73 $ -
Exercisable at March 31, 2021 - $ - - $ -

	Number of Awards Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms (Years)		Intrinsic Value (in thousands)
Balance at December 31, 2021		1,593,800		$	21.30		9.26	$	-
Granted 01/01/2022 - 03/31/2022		45,000			13.06
Granted 04/01/2022 - 06/30/2022		-			-
Cancelled and forfeited		(30,000	)		19.72
Exercised		-			-
Balance at June 30, 2022		1,608,800		$	21.10		8.78	$	-
Vested and Exercisable at June 30, 2022		426,267		$	21.69		8.68	$	-

	Number of Awards Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms (Years)		Intrinsic Value (in thousands)
Balance at December 31, 2020		756,300		$	24.69		9.98	$	-
Granted 01/01/2021 - 03/31/2021		-			-
Granted 04/01/2021 - 06/30/2021		270,000			17.82
Cancelled and forfeited		(3,000	)		24.69
Exercised		-			-
Balance at June 30, 2021		1,023,300		$	22.88		9.57	$	-
Vested and Exercisable at June 30, 2021		-		$	-		-	$	-

There were no options exercised during the three months and six months ended ~~March 31, 2021.~~June 30, 2022 and 2021, respectively.

Compensation expense is recorded on a straight-line basis over the vesting period, which is the requisite service period, beginning on the grant date. The compensation expense is based on the fair value of each option grant using the Black-Scholes option pricing model. During the three and six months ended ~~March 31, 2021,~~June 30, 2022, the Company recorded in the aggregate ~~$0.47~~$0.8 million and $1.7 million, respectively, of share-based compensation expense related to stock options, which is included in ~~SG&A~~operating expenses in the Company’s condensed consolidated statements of operations and comprehensive loss. During the three and six months ended June 30, 2021, the Company recorded in the aggregate $0.6 million and $1.1 million, respectively, of share-based compensation expense related to stock options, which is included in operating expenses in the Company’s condensed consolidated statements of operations. As of ~~March 31, 2021,~~June 30, 2022, the Company had stock-based compensation of ~~$5.17~~$6.0 million related to ~~unvested~~ stock options not yet recognized that are expected to be recognized over an estimated weighted average period of approximately three years.

There were no new options granted during the three months ended June 30, 2022. The fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions during the six months ended June 30, 2022:

Equity volatility	32.37	%
Risk-free interest rate	2.50	%
Expected term (in years)	6
Expected dividend	-

The fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following ~~assumptions:~~assumptions for the three and six months ended June 30, 2021:

Equity volatility	~~25.89~~33.93	%
Risk-free interest rate	~~0.67~~1.27	%
Expected term (in years)	6
Expected dividend	-

~~Expected term—This represents the~~The weighted-average ~~period the~~grant date fair value of granted stock options ~~are expected to remain outstanding based upon expected exercise~~was $0.0 million and ~~expected post-vesting termination.~~$0.2 million for the three and six months ended June 30, 2022, respectively. The weighted-average grant date fair value of granted stock options was $1.7 million for each of the three and six months ended June 30, 2021.

~~Risk-free interest rate—The assumption is based upon the observed U.S. treasury rate appropriate for the expected life of the employee stock options.~~

Expected volatility—The expected volatility assumption is based upon the weighted-average historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant based on the contractual term of the awards, adjusted for activity which is not expected to occur in the future. Dividend yield—The dividend yield assumption is based on our history and expectation of dividend payouts.

Any option granted under the Plan may include tandem Stock Appreciation Rights (“~~SAR”~~SARs”). ~~SAR~~SARs may also be awarded to eligible persons independent of any option. The strike price for common share for each SAR shall not be less than 100% of the fair value of the shares determined as of the date of grant. There were no SARs outstanding as of June 30, 2022 and December 31, 2021.

Restricted Stock Awards and Restricted Stock Units

~~Restricted Stock Units (“RSUs”)~~RSUs are convertible into shares of Company common stock upon vesting on a one-to-one basis. Restricted stock awards has the same rights as other issued and outstanding shares of Company common stock except they are not entitled to dividends until the awards vest. Restrictions also limit the sale or transfer of the ~~same~~shares during the vesting period. Any unvested portion of ~~the Restricted Stock~~restricted stock and RSUs shall typically be terminated and forfeited upon termination of employment or service of the grantee.

Director restricted stock activity under the Plan for the ~~three~~six months period ended ~~March 31, 2021 is~~June 30, 2022 was as follows:

Non-Employee Director
Employee Director Awards Awards
Weighted- Weighted-
Number of Average Number of Average
Shares Fair Value Shares Fair Value
Balance at December 31, 2020 - $ - - $ -
Granted - - 15,216 18.93
Vested - - (15,216 ) 18.93
Forfeited - - - -
Non-vested restricted stock at March 31, 2021 - $ - - $ -

	Non-Employee Director Awards
				Weighted-
	Number of			Average
	Shares			Fair Value
Balance at December 31, 2021		-		$	-
Granted 01/01/2022 - 03/31/2022		-			-
Granted 04/01/2022 - 06/30/2022		18,162			12.25
Vested		(18,162	)		12.25
Forfeited		-			-
Non-vested restricted stock at June 30, 2022		-		$	-

Director restricted stock activity under the Plan for the six months period ended June 30, 2021 was as follows:

	Non-Employee Director Awards
				Weighted-
	Number of			Average
	Shares			Fair Value
Balance at December 31, 2020		-		$	-
Granted 01/01/2021 - 03/31/2021		15,216			18.93
Granted 04/01/2021 - 06/30/2021		-			-
Vested		(15,216	)		18.93
Forfeited		-			-
Non-vested restricted stock at June 30, 2021		-		$	-

Non-director employee and consultant restricted stock activity under the Plan for the six months period ended June 30, 2022 was as follows:

	Employee Awards					Consultant (Non-Employee) Awards
				Weighted-					Weighted-
	Number of			Average		Number of			Average
	Shares			Fair Value		Shares			Fair Value
Balance at December 31, 2021	-			$	-	-			$	-
Granted 01/01/2022 - 03/31/2022		3,828			13.06		200,000			15.54
Granted 04/01/2022 - 06/30/2022		-			-		-			-
Vested		(3,828	)		13.06		(50,000	)		15.54
Forfeited		-			-		-			-
Non-vested restricted stock at June 30, 2022		-		$	-		150,000		$	15.54

Non-director employee and consultant restricted stock activity under the Plan for the six months period ended June 30, 2021was as follows:

	Employee Awards					Consultant (Non-Employee) Awards
				Weighted-					Weighted-
	Number of			Average		Number of			Average
	Shares			Fair Value		Shares			Fair Value
Balance at December 31, 2020		400,000		$	24.28		100,000		$	24.69
Granted 01/01/2021 - 03/31/2021		30,416			23.65		100,000			18.96
Granted 04/01/2021 - 06/30/2021		-			-		10,000			18.15
Vested		(4,916	)		24.28		(110,000	)		18.89
Forfeited		(425,500	)		24.62		(100,000	)		24.69
Non-vested restricted stock at June 30, 2021		-		$	-		-		$	-

During the three and six months ended ~~March 31,~~June 30, 2022, the Company recorded share-based compensation expense related to restricted stock awards in aggregate of $0.6 million and $1.0 million, respectively. During the three and six months ended June 30, 2021, the Company recorded share-based compensation expense related to restricted stock awards in aggregate of $(0.3) million and $2.4 million, respectively. Share-based compensation expense is ~~as follows:~~included in operating expenses in the Company’s condensed consolidated statements of operations and comprehensive loss.

Consultant (Non-Employee)
Employee Awards Awards
Weighted- Weighted-
Number of Average Number of Average
Shares Fair Value Shares Fair Value
Balance at December 31, 2020 400,000 $ 24.28 100,000 $ 24.69
Granted 30,416 23.65 100,000 18.96
Vested (4,916 ) 24.28 (100,000 ) 18.96
Forfeited (100,000 ) 24.69 (100,000 ) 24.69
Non-vested restricted stock at March 31, 2021 325,500 $ 24.10 $ -

The fair value of ~~the consultant (non-employee) performance shares vested~~granted restricted stock award was $0.2 million and $3.4 million for the three and six months ended ~~March 31, 2021 was approximately $1.90 million.~~June 30, 2022, respectively. The fair value of ~~employee~~granted restricted stock ~~awards vested~~ was ~~approximately $0.53~~$0.2 million and $2.4 million for the three and six months ended ~~March 31, 2021. The fair value of non-employee restricted stock awards vested was approximately $0.29 million for the three months ended March 31, 2021.~~June 30, 2021, respectively.

As of ~~March 31, 2021,~~June 30, 2022, unrecognized compensation costs related to the ~~employee~~ restricted stock awards was ~~$7.4~~$2.3 million and is expected to be recognized over ~~the weighted average~~a remaining period of ~~four years.~~

In addition, non-employee consultant share-based compensation expense for the three months ended March 31, 2021 was approximately $1.90 million as a result of an accelerated equity grant. The amount recognized vested immediately and had no restrictions or performance conditions.

~~Employee Performance Shares and Performance Units~~

This award may be granted to certain executive officers of the Company and vest if the performance goals and/or other vesting criteria as stated in the relevant Award Agreement are achieved or the awards otherwise vest, which generally is for a period of three to five years from the grant date. Vesting of this award applies if the grantee remains employed by the Company through the applicable vesting date.

The fair value of the award is equal to the average market price of the Company’s common stock at the grant date, adjusted for dividends over the vesting period. Compensation expense is recorded ratably over the period beginning on the grant date until the shares become unrestricted based on the amount of the award that is expected to be earned, adjusted each reporting period based on current information.

Under the Plan, an executive of the Company was granted restricted stock of 300,000 shares of the Company’s common stock (included within the restricted stock grants described above), to be vested 60,000 shares on each anniversary of the closing of the Transaction, provided certain target share prices are met, and conditioned on his continued employment with the Company. If the applicable target share price is not met, the 60,000 shares eligible for vesting will carry over and will be eligible for vesting in the full amount in the following vesting period. Any unvested shares will continue to carry over into the next vesting period. Any unvested shares as of October 15, 2025 will be forfeited.18 months.

17. RELATED PARTY TRANSACTIONS ~~(As Restated)~~

The Company leases office property in San Pedro, California from Deluna Properties, Inc., a company owned by the Company’s CEO, Salvatore Galletti. ~~Rent expense~~The amount of rent paid was ~~$0.04 million~~approximately $40,000 and ~~$0.02 million~~$80,000 for the three and six months ended ~~March 31,~~June 30, 2022, respectively. The amount of rent paid was approximately $50,000 and $80,000 for the three and six months ended June 30, 2021, ~~and 2020,~~ respectively. As of ~~March 31, 2021,~~June 30, 2022, under the adoption of ASC 842, the Company recorded ~~$2.12~~$2.0 million of operating lease right-of-use asset and ~~$2.14~~$2.1 million of operating lease liabilities in relation to this lease.

In ~~January 2009,~~addition, the Company leased a building from Ittella Properties, an entity owned by Salvatore Galletti. Ittella Properties is considered as the Company’s VIE and consolidated to the Company’s financial statements. See Note 19 Consolidated Variable Interest Entity,

In Connection with Belmont acquisition in December 2021, the Company entered into a ~~promissory note~~lease agreement with ~~Salvatore Galletti~~Penhurst Realty, LLC, owned by Belmont’s prior owner who is currently serving as the ~~lender~~president of BCI. The amounts of rent paid were approximately $60,000 and $120,000 for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, under the adoption of ASC 842, the Company recorded $0.6 million each of operating lease right-of-use asset and operating lease liabilities in ~~the amount of $0.05 million, which matured on December 31, 2020. The note bore interest at 4.75% over the Prime Rate. The promissory note was paid off in full on January 6, 2020.~~related to this lease.

A company affiliated with one of the Company’s non-employee directors has been contracted to provide marketing assistance to the Company. The Company ~~entered into a credit agreement with Salvatore Galletti~~paid $0.1 million and $0.2 million to this company for ~~a $1.20 million revolving line of credit in January 2007. Monthly interest payments were accrued at 4.75% above~~ the Prime Rate on any outstanding balance. In addition, the Company agreed to pay Salvatore Galletti 0.67% per month of the full amount of the revolving credit line, regardless of whether the Company has borrowed against the line of credit. Forservices provided during the three and six months ended March 31, 2021 and 2020, respectively, zero amount of the fees have been paid to the lender. This agreement originally expired on December 31, 2011, which was amended from time to time and extended to December 31, 2024. The outstanding balance of the line of credit was $0 million at both of March 31, 2021 and December 31, 2020.

In June 2010, the Company entered into a promissory note with the Salvatore Galletti as the lender in the amount of $0.15 million, which bears interest at 8.00% per annum. The promissory note was paid off in full on June 2, 2020. It had a balance of $0.15 million as of December 31, 2019 and was recorded as notes payable to related parties in the accompanying condensed consolidated balance sheets.

In May 2018, Ittella Italy entered into a promissory note with Pizzo in the amount of 0.48 million Euros. The note bears interest at 8.00% per annum. The balance of the note was 0.04 million Euros and 0.07 million Euros as of March 31, 2021 and December 31, 2020,30, 2022, respectively.

The Company is party to a revolving line of credit with Marquette Business Credit as of March 31, 2021 and December 31, 2020 with borrowing capacity of $25.00 million and $25.00 million, respectively (Note 14). The parent organization of Marquette Business Credit is UMB (Note 3).

18. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company also enters into ~~real property~~ leases, which require the Company as lessee to indemnify the lessor from liabilities arising out of the Company’s occupancy of the properties. The Company’s indemnification obligations are generally covered under the Company’s general insurance policies.

From time to time, the Company is involved in various litigation matters arising in the ordinary course of business. The Company does not believe the disposition of any current matter will have a material ~~adverse~~ effect on its condensed consolidated financial position or results of ~~operations.~~operations and cash flows.

A subsidiary of the Company, Ittella Italy, is involved in certain litigation related to the death of an independent contractor who fell off of the roof of Ittella Italy’s premises while performing pest control services. The case was brought by five relatives of the deceased worker. The five plaintiffs are seeking collectively 1.87 million Euros from the defendants. In addition to Ittella Italy, the pest control company for which the deceased was working at the time of the accident is co-defendant. Furthermore, under Italian law, the president of an Italian company is automatically criminally charged if a workplace death occurs on site. Ittella Italy has engaged local counsel, and while local counsel does not believe it is probable that Ittella Italy or its president will be found culpable, Ittella Italy cannot predict the ultimate outcome of the litigation. Procedurally, the case remains in a very early stage of the litigation. Ultimately, a trial will be required to determine if the defendants are liable, and if they are liable, a second separate proceeding will be required to establish the amount of damages owed by each of the co-defendants. Ittella Italy believes any required payment could be covered by its insurance policy; however, it is not possible to determine the amount at which the insurance company will reimburse Ittella Italy or whether any reimbursement will be received at all. Based on information received from its Italian lawyers, Ittella Italy believes that the litigation may continue for a number of years before it is finally resolved.

Based on the assessment by management together with the independent assessment from its local legal counsel, the Company believes that a loss is currently not probable and an estimate cannot be made. Therefore, no accrual has been made as of ~~March 31, 2021 or~~June 30, 2022 nor December 31, ~~2020.~~2021.

19. CONSOLIDATED VARIABLE INTEREST ENTITY

Ittella Properties, ~~LLC (“Properties”),~~ the Company’s consolidated VIE, owns the Alondra Building, which is leased by Ittella International for 10 years from August 1, 2015 through August 1, 2025. Ittella Properties is wholly owned by Salvatore Galletti. The construction and acquisition of the Alondra building by Ittella Properties were funded by a loan agreement with unconditional guarantees by Ittella International and terms providing that 100% of the Alondra building must be leased to Ittella International throughout the term of the loan agreement.

~~The Company concluded that it has a variable interest in Properties on the basis that~~ Ittella International guarantees the loan for Ittella Properties and substantially all of Ittella Properties’ transactions occur with the Ittella International. Thus, Ittella Properties’ equity at risk is considered to be insufficient to finance its activities without additional support from Ittella ~~International,~~International. Therefore, Ittella Properties was designed in a way such that substantially all of the assets benefit the Company, and ~~therefore,~~substantially all of the obligations are absorbed by the Company. Given the Company has control over the assets that most significantly affect the economic performance of Ittella Properties, the Company is determined to be the primary beneficiary of Ittella Properties. As a result, Ittella Properties is considered a ~~VIE.~~VIE of the Company and is required to be consolidated.

The results of operations and cash flows of Ittella Properties are included in the Company’s condensed consolidated financial statements. For the ~~three-month~~three and six month periods ended ~~March 31,~~both of June 30, 2022 and 2021, ~~and 2020,~~ 100% of the revenue of Ittella Properties, isapproximately $0.1 million and $0.2 million of lease income, respectively, received from Ittella International, was intercompany and ~~thus was~~ eliminated in consolidation. Ittella Properties contributed expenses of ~~$0.05 million~~approximately $50,000 for each of the three month periods ended June 30, 2022 and ~~$0.10~~2021. Ittella Properties contributed expenses of $0.1 million for each of the six month periods ended ~~March 31, 2021~~June 30, 2022 and ~~2020, respectively.~~2021.

20. ~~EARNINGS~~LOSS PER SHARE

The following is the summary of basic and diluted ~~EPS~~loss per share for the ~~three-months~~three and six months ended ~~March 31,~~June 30, 2022 and 2021 ~~(As Restated) and 2020~~ (in thousands):

						Three months ended						Six months ended
						June 30,						June 30,
	2021			2020		2022			2021			2022			2021
Numerator		(As Restated)
Net Income (Loss) attributable to Tattooed Chef, Inc.	$	(8,242	)	$	4,810
Dilutive Net Income (Loss) attributable to Tattooed Chef, Inc.		(8,714	)		4,810
Net loss						$	(26,437	)	$	(57,472	)	$	(43,988	)	$	(65,714	)
Dilutive net loss						$	(26,437	)	$	(57,472	)	$	(43,988	)	$	(65,811	)

Denominator
Weighted average common shares outstanding		80,240			28,324		82,284,005			81,981,428			82,261,079			81,121,795
Effect of potentially dilutive securities related to Warrants		304			-
Weighted average diluted shares outstanding		80,544			28,324		82,284,005			81,981,428			82,261,079			81,258,427
Earnings per share

Loss per share
Basic	$	(0.10	)	$	0.17	$	(0.32	)	$	(0.70	)	$	(0.53	)	$	(0.81	)
Diluted	$	(0.11	)	$	0.17	$	(0.32	)	$	(0.70	)	$	(0.53	)	$	(0.81	)

The following have been excluded from the calculation of diluted ~~earnings~~loss per share as the effect of including them would have been anti-dilutive for the ~~three-months~~three and six months ended ~~March 31,~~June 30, 2022 and 2021 ~~and 2020~~ (in thousands):

	2021		2020		Three months ended				Six months ended
					June 30,				June 30,
					2022		2021		2022		2021
Warrants						115		75		115		189
Stock options		318		-		1,624		445		1,601		408
Restricted stock awards		318		-		163		25		175		-
Warrants		-		-
Total		636		-		1,902		545		1,891		597

21. SUBSEQUENT EVENTS

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Other than as described in these financial statements, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.

On ~~May 2, 2021,~~August 5, 2022, the Company ~~entered into an agreement~~expanded the Credit Facility with UMB Bank N.A. from $25.0 million to ~~acquire Food of New Mexico Distributors, Inc. (“NMFD”)~~$40.0 million and Karsten Tortilla Factory, LLC (“Karsten”) in an all-cash transaction approximately $35.00 million. NMFD is a privately-held company based in Albuquerque, New Mexico. Together with Karsten, NMFD produces and sells readyextended the maturity date from September 2023 to eat New Mexican food products for retail and food service customers. The transaction closed on May 14, 2021. As of the date of issuance of these condensed consolidated financial statements, the initial acquisition and disclosures under ASC 805, ~~Business Combinations~~~~, have not been prepared as the Company has not obtained all of the information necessary, nor has there been sufficient time, to complete the related activities.~~

~~On April 13, 2021, Ittella Italy purchased a manufacturing facility in Italy for 4.00 million Euros (or $4.69 million). The Company had previously been leasing this facility.~~September 2025.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our financial statements and related notes (the “Financial Statements”) included elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”) and the section entitled “Risk Factors.” Unless otherwise indicated, the terms “Tattooed Chef,” “the Company,” “we,” “us,” or “our” refer to Tattooed Chef, Inc., a Delaware corporation, together with its consolidated subsidiaries.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek”, “expand” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K for the period ending December 31, 2021 filed with the SEC and Part II, Item 1A. Risk Factors herein. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following:

●

our ability to maintain the listing of our common stock on Nasdaq;

●

our ability to raise ~~financing~~capital in the future;

●

our ability to acquire and integrate new operations successfully;

●

market conditions and global and economic factors beyond our control, including the potential adverse effects of the ongoing global coronavirus (COVID-19) pandemic on capital markets, war (including the ongoing conflict in Ukraine), climate change, general economic conditions, unemployment and our liquidity, operations and personnel;

●

our ability to obtain raw materials on a timely basis or in quantities sufficient to meet the demand for our products;

●

our ability to grow our customer base;

●

our ability to forecast and maintain an adequate rate of revenue growth and appropriately plan its expenses;

●

our expectations regarding future expenditures;

●

our ability to attract and retain qualified employees and key personnel;

●

our ability to retain relationship with third party suppliers;

●

our ability to compete effectively in the competitive packaged food industry;

●

our ability to protect and enhance our corporate reputation and brand;

●

the impact of inflation; and

●

the impact of future regulatory, judicial, and legislative changes on our industry.

Overview

We are a rapidly growing plant-based food company offering a broad portfolio of innovative frozen foods. We supply plant-based products to leading retailers in the United States, with signature products such as ready-to-cook bowls, zucchini spirals, riced cauliflower, acai and smoothie bowls, ~~and~~ cauliflower crust ~~pizza.~~pizza, wood fire crusted pizza, handheld burritos, tortillas, chips, bars and quesadillas. Our products are available both in private label and our ~~“Tattooed~~Tattooed Chef™” brand in the frozen food section of retail food stores.

Both NMFD and BCI, our new entities that were acquired in the second and fourth quarters of 2021 (see Note 8 Business Combinations), currently primarily manufacture private label products. NMFD is expected to manufacture both private label and Tattooed Chef branded products during 2022. Our Mexican-style plant-based Tattooed Chef branded products, including burritos, enchiladas, and quesadillas, total 18 new SKUs, were introduced to the market during the six months ended June 30, 2022. The Karsten facility is not currently in operation and is expected to become active during the third quarter of 2022. The Karsten facility is expected to manufacture Tattooed Chef branded salty snacks and other alternative Tattooed Chef branded and private label products. BCI is also expected to start manufacturing Tattooed Chef branded products during the third quarter of 2022. We anticipate continued growth in Tattooed Chef branded products primarily due to new product introductions, further expansion with current customers, and increased sales to new retail customers. While we are primarily focused on growing our branded business, we will continue to support our current private label business and will evaluate new opportunities with private label customers as they arise.

Results of Operations

The following table sets forth key statistics for the three and six months ended June 30, 2022 and 2021:

	Three months Ended												Six months Ended
	June 30,												June 30,
(in thousands)	2022			% of revenue			2021			% of revenue			2022			% of revenue			2021			% of revenue
Net revenue	$	58,110			100.0	%	$	50,270			100.0	%	$	130,174			100.0	%	$	102,739			100.0	%
Cost of goods sold		57,370			98.7	%		41,953			83.5	%		121,284			93.2	%		87,242			84.9	%
Gross profit		740			1.3	%		8,317			16.5	%		8,890			6.8	%		15,497			15.1	%
Operating expenses		24,346			41.9	%		16,419			32.7	%		49,139			37.7	%		30,615			29.8	%
Loss from operations		(23,606	)		-40.6	%		(8,102	)		-16.1	%		(40,249	)		-30.9	%		(15,118	)		-14.7	%
Interest expense		(42	)		-0.1	%		(94	)		-0.2	%		(83	)		-0.1	%		(114	)		-0.1	%
Other (expense) income		(2,334	)		-4.0	%		733			1.5	%		(2,945	)		-2.3	%		(1,948	)		-1.9	%
Loss before provision for income taxes		(25,982	)		-44.7	%		(7,463	)		-14.8	%		(43,277	)		-33.2	%		(17,180	)		-16.7	%
Income tax expense		(455	)		-0.8	%		(50,009	)		-99.5	%		(711	)		-0.5	%		(48,534	)		-47.2	%
Net loss		(26,437	)		-45.5	%		(57,472	)		-114.3	%		(43,988	)		-33.8	%		(65,714	)		-64.0	%

Results of Operations ~~(As Restated)~~for the Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021.

~~For the three months ended March 31, 2021, we had a net loss of $8.24~~Net revenue

Net revenue increased by $7.8 million, ~~which included stock compensation expenses of $3.19 million, marketing expenses of $2.65 million, and promotional expenses of $1.93 million compared~~or 15.6%, to ~~net income of $5.82~~$58.1 million for the three months ended ~~March 31, 2020, which included marketing expenses of $0.03~~June 30, 2022 as compared to $50.3 million ~~and nil of stock compensation expenses and promotional expenses.~~for the comparable period in 2021. The ~~decrease is primarily~~increase was due to an increase of $3.8 million in private label products revenue primarily driven by the ~~significant~~sales generated from NMFD and BCI, an increase of $2.9 million in ~~operating expenses.~~other revenues, mainly driven by the sales of burritos, enchiladas, quesadillas and other products by NMFD to its restaurant customers, and an increase of $1.1 million in Tattooed Chef branded products.

~~Revenue~~Cost of goods sold

Cost of goods sold increased ~~by $19.30~~$15.4 million, or ~~58.2%~~36.7%, to ~~$52.47~~$57.4 million for the three months ended ~~March 31, 2021, from $33.17~~June 30, 2022 as compared to $42.0 million for the comparable period in 2021. Cost of goods sold, as a percentage of revenue, increased to 98.7% for the three months ended March 31, 2020. The increase in revenue is primarily due to growth in sales of our “Tattooed Chef” branded products. For the three months ended March 31, 2021, we had $35.85 million of sales of “Tattooed Chef” branded products compared to $17.65 millionJune 30, 2022 from 83.5% for the three months ended ~~March 31, 2020.~~

~~Cost~~June 30, 2021. The increase of cost of goods sold ~~increased by $21.25 million, or 88.4%,~~in dollar amount is primarily due to ~~$45.29 million for the three months ended March 31, 2021, from $24.04 million for the three months ended March 31, 2020. The primary reason for the increase is~~ the increase in ~~volume~~sales volume. The increase as a percentage of ~~product sold which accounts for an estimated $14.08 million of the increase. The remaining $7.17 million~~revenue is attributable to increases in freight (inbound and outbound), cold storage expenses, fulfillment expenses, investment in facility improvements and personal protective equipment. These expenses have increased due to inflation.

~~Gross profit decreased by $1.96 million, or 21.4%, to $7.18 million for the three months ended March 31, 2021, from $9.14 million for the three months ended March 31, 2020. The decrease is~~primarily due to the increases in cost of ~~goods sold noted previously.~~freight, packaging, raw materials, and labor due to inflation and the increase in fixed costs including rent and depreciation expenses resulting from new leases assumed and fixed assets acquired though the acquisitions completed during the second and fourth quarters of 2021, as well as our newly leased facility in Vernon, California that started on April 1, 2022. As these new facilities are not yet operating at full capacity, the fixed cost as a percentage of revenue is higher than the comparable period in 2021.

Gross Profit

Gross profit decreased $7.6 million, or 91.1%, to $0.7 million for the three months ended June 30, 2022 as compared to $8.3 million for the comparable period in 2021. Gross margin for the three months ended ~~March 31, 2021~~June 30, 2022 was ~~13.7%~~1.3%, as compared to ~~27.5%~~16.5% for the three months ended ~~March 31, 2020. The decrease is due to the increases in costs of goods sold noted previously.~~

Operating expenses for the three months ended March 31, 2021 increased by $11.84 million, or 501.5%, to $14.20 million, compared to $2.36 million for the three months ended March 31, 2020. The increase is primarily due to increased costs of operating as a public company, non-cash stock compensation, and additional marketing and promotional expenses that were not presentJune 30, 2021. We are in the ~~three months ended March 31, 2020. We~~process of ramping production on new Tattooed Chef branded products utilizing the facilities and equipment acquired through the NMFD transaction and the BCI acquisitions. Moving forward, we expect ~~operating expenses~~Tattooed Chef branded products to ~~decrease~~be manufactured by both plants. Therefore, we expect our fixed cost as a percentage of revenue ~~over time as many relatively fixed operating expenses will be spread over increasing revenue.~~to decrease and our gross margin to increase once the facilities operate at full capacity and achieve economies of scale. In addition, beginning in the fourth quarter of 2022, we plan to implement the first ever price increases for Tattooed Chef branded products.

Adjusted EBITDA was negative $2.96 million for the three months ended March 31, 2021, compared to positive $6.97 million for the three months ended March 31, 2020. The decline in Adjusted EBITDA was primarily due to public company costs that were not present in the three months ended March 31, 2020, and to $4.58 million in marketing and promotional expenses to invest in the future of our Tattooed Chef brand. The benefits from these expenditures are expected be realized in both the near and distant future through brand expansions in revenue and distribution.

~~Non-GAAP Financial Measures~~Operating expenses

Operating expenses increased $7.9 million, or 48.3%, to $24.3 million for the three months ended June 30, 2022 as compared to $16.4 million for the comparable period in 2021. The increase is primarily due to a $2.5 million increase in marketing and promotional expenses, a $1.0 million increase in post-manufacture cold storage expenses, a $1.1 million increase in stock compensation expense, a $1.5 million increase in payroll related expenses, a $0.2 million increase in ERP software implementation and a $2.2 million increase related to entities that were acquired during the second and fourth quarter of 2021, partially offset by a $1.8 million decrease in professional expenses.

The significant increase in marketing, promotional and post-manufacture cold storage expenses is due to our heavy investment in the Tattooed Chef brand, in order to increase distribution, raise brand awareness, and drive sales in the new stores that are launching our products. The increase in payroll related expenses is primarily due to our efforts to recruit and retain key employees who will grow our business, expand the Tattooed Chef brand and meet the additional compliance requirements of being a public company. The increase in stock compensation expense is primarily due to the vesting of one restricted stock grant to a marketing consultant on January 1, 2022 (this grant vests over two years), plus the effect of a forfeiture of restricted stock upon a former employee’s termination during the three months ended June 30, 2021. The decrease in professional expenses is primarily related to acquisitions that occurred during the three months ended June 30, 2021.

Income tax expense

Income tax expense decreased $49.6 million, or 99.1%, to $0.5 million for the three months ended June 30, 2022 as compared to $50.0 million for the comparable period in 2021. The decrease was mainly driven by $50.0 million income tax expense recognized during the comparable period of 2021 that resulted from a whole valuation allowance recognition with respect to a deferred tax asset. We continue to use a full valuation allowance established against our net deferred tax assets in the U.S.

Net Loss

For the three months ended June 30, 2022, we had a net loss of $26.4 million, compared to a net loss of $57.5 million for the three months ended June 30, 2021. The decrease in net loss was mainly driven by the $50.0 million income tax expense in 2021 as discussed above, which was not present in 2022.

Results of Operations for the Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021.

Net revenue

Net revenue increased by $27.4 million, or 26.7%, to $130.2 million for the six months ended June 30, 2022 as compared to $102.7 million for the comparable period in 2021. The increase was due to an increase of $12.6 million in private label products revenue, primarily driven by the sales generated from NMFD and BCI, an increase of $8.7 million in Tattooed Chef branded products, and an increase of $6.1 million in other revenues, mainly driven by the sales of burritos, enchiladas, quesadillas and other products by NMFD to its restaurant customers.

Cost of goods sold

Cost of goods sold increased $34.0 million, or 39.0%, to $121.3 million for the six months ended June 30, 2022 as compared to $87.2 million for the comparable period in 2021. Cost of goods sold, as a percentage of revenue, increased to 93.2% for the six months ended June 30, 2022 from 84.9% for the six months ended June 30, 2021. The increase of cost of goods sold in dollar amount is primarily due to the increase in sales volume. The increase as a percentage of revenue is primarily due to the increases in cost of freight, packaging, raw materials, and labor due to inflation and the increase in fixed costs including rent and depreciation expenses resulting from new leases assumed and fixed assets acquired though the acquisitions completed during the second and fourth quarters of 2021, as well as our newly leased facility in Vernon that started on April 1, 2022. As these new facilities are not yet operating at full capacity, the fixed cost as a percentage of revenue is higher than the comparable period in 2021.

Gross Profit

Gross profit decreased $6.6 million, or 42.6%, to $8.9 million for the six months ended June 30, 2022 as compared to $15.5 million for the comparable period in 2021. Gross margin for the six months ended June 30, 2022 was 6.8%, as compared to 15.1% for the six months ended June 30, 2021. We are in the process of ramping production on new Tattooed Chef branded products by utilizing the facilities and equipment acquired through the NMFD transaction and the BCI acquisition. Moving forward, we expect Tattooed Chef branded products to be manufactured by both plants. Therefore, we expect our fixed cost as a percentage of revenue to decrease and our gross margin to increase once the facilities operate at full capacity and achieve economies of scale. In addition, beginning in the fourth quarter of 2022, we plan to implement the first ever price increases for Tattooed Chef branded products.

Operating expenses

Operating expenses increased $18.5 million, or 60.5%, to $49.1 million for the six months ended June 30, 2022 as compared to $30.6 million for the comparable period in 2021. The increase is primarily due to a $6.9 million increase in marketing and promotional expenses, a $2.1 million increase in post-manufacture cold storage expenses, a $3.5 million increase in payroll related expenses, a $0.3 million increase in ERP software implementation and a $4.6 million increase related to entities that were acquired during the second and fourth quarters of 2021, partially offset by a $0.8 million decrease in stock compensation expense and a $0.3 million decrease in professional expenses.

The significant increase in marketing, promotional and post-manufacture cold storage expenses is due to our heavy investment in the Tattooed Chef brand, in order to increase distribution, raise brand awareness, and drive sales in the new stores that are launching our products. The increase in payroll related expenses is primarily due to our efforts to recruit and retain key employees who will grow our business, expand the Tattooed Chef brand and meet the additional compliance requirements of being a public company. The decrease in stock compensation expense is mainly driven by one restricted stock grant to a marketing consultant during the first quarter of 2021, which was vested immediately. The decrease in professional expenses is primarily related to acquisitions that occurred during the six months ended June 30, 2021.

Income tax expense

Income tax expense decreased $47.8 million, or 98.5%, to $0.7 million for the six months ended June 30, 2022 as compared to $48.5 million for the comparable period in 2021. The decrease was mainly driven by $50.0 million income tax expense recognized during the comparable period of 2021 resulted from a whole valuation allowance recognition with respect to a deferred tax asset. We continue to use a full valuation allowance established against our net deferred tax assets in the U.S.

Net Loss

For the six months ended June 30, 2022, we had a net loss of $44.0 million, compared to a net loss of $65.7 million for the six months ended June 30, 2021. The decrease in net loss was mainly driven by $50.0 million income tax expense in 2021 as discussed above, which was not present in 2022.

Non-GAAP Financial Measures

We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in operating results, and provide additional insight on how the management team evaluates the business. Our management team uses Adjusted EBITDA to make operating and strategic decisions, evaluate performance and comply with indebtedness related reporting requirements. Below are details on this non-GAAP measure and the non-GAAP adjustments that the management team makes in the definition of Adjusted EBITDA. The adjustments generally fall within the categories of non-cash items, acquisition and integration costs, business transformation initiatives, ~~financing related costs~~ and ~~operating costs of~~infrequent or unusual losses and gains in a non-recurring nature. We believe this non-GAAP measure should be considered along with net income, the most closely related GAAP financial measure. Reconciliations between Adjusted EBITDA and net income are below, and discussion regarding underlying GAAP results throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As new events or circumstances arise, the definition of Adjusted EBITDA could change. When the definitions change, we will provide the updated definition and present the related non-GAAP historical results on a comparable basis.

We define EBITDA as net income before interest, taxes, depreciation. Adjusted EBITDA further ~~adjust~~adjusts EBITDA by adding back non-cash compensation expenses, non-recurring expenses, and other non-operational charges. Adjusted EBITDA is one of the key performance indicators we use in evaluating our operating performance and in making financial, operating, and planning decisions. We believe Adjusted EBITDA is useful to the readers of this quarterly report on Form 10-Q in the evaluation of our operating performance.

The following table provides a reconciliation from net income to Adjusted EBITDA for the three and six months ended ~~March 31, 2021 (As Restated)~~June 30, 2022, and 2021:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2022			2021			2022			2021
Net loss	$	(26,437	)	$	(57,472	)	$	(43,988	)	$	(65,714	)
Interest expense		42			94			83			114
Income tax expense		455			50,009			711			48,534
Depreciation and amortization		1,536			896			3,043			1,448
EBITDA		(24,404	)		(6,473	)		(40,151	)		(15,618	)
Adjustments
Stock compensation expense		1,415			318			2,702			3,502
Loss (gain) on foreign currency forward contracts		2,049			(1,023	)		3,072			1,978
(Gain) loss on warrant remeasurement		(461	)		371			(668	)		51
Unrealized foreign currency losses		626			-			626			-
Acquisition expenses		119			726			224			726
UMB ATM transaction		-			22			-			22
ERP related expenses		179			-			338			-
Total Adjustments		3,927			414			6,294			6,279
Adjusted EBITDA	$	(20,477	)	$	(6,059	)	$	(33,857	)	$	(9,339	)

Adjusted EBITDA was negative $20.5 million and negative $33.9 million for the three and six months ended ~~March 31, 2020:~~June 30, 2022, respectively, compared to adjusted EBITDA of negative $6.1 million and negative $9.3 million for the three and six months ended June 30, 2021, respectively. The decline in Adjusted EBITDA was primarily due to a lower gross margin resulting primarily from inflation related increases in costs that have not yet been recouped through product price increases as well as the fixed cost of our new facilities that are currently operating at low capacity, and a significant increase in spending on sales and marketing expenses to support the growth in revenue and brand recognition for Tattooed Chef.

Three Months Ended
March. 31, March. 31,
(in thousands) 2021 2020
(As Restated)
Net income (loss) $ (8,242 ) $ 5,822
Interest $ 20 $ 224
Income tax (benefit) expense $ (1,475 ) $ 730
Depreciation $ 552 $ 193
EBITDA $ (9,145 ) $ 6,969
Adjustments ��
Stock compensation expense $ 3,185 $ -
Loss on foreign currency forward contracts $ 3,001 $ -
Total Adjustments $ 6,186 $ -
Adjusted EBITDA $ (2,959 ) $ 6,969

We negotiate different prices at our different club and retail customers based on product quantity and packaging configuration. At this time, we do not expect to adjust product prices from the current levels. However, we do acknowledge that competitive pressures, such as the introduction of additional plant-based products by our competitors, may require us to lower prices, increase marketing and advertising expenditures, or increase the use of discounting or promotional campaigns, each of which may affect its margins, operating results or profitability.

Liquidity and Capital Resources

As of ~~March 31, 2021,~~June 30, 2022, we had ~~$185.16~~$27.7 million in cash and cash equivalents. WeThe cash outflow during the six months ended June 30, 2022 is primarily attributable to $23.8 million in marketing and promotional spend to raise our brand awareness, and $15.6 million capital expenditures. The capital expenditures are for automation and robotic machinery to improve our production efficiency and reduce labor cost. By evaluating our business projections and expenditure budgets for 2022 and 2023, we believe our cash on hand isplus availability under our credit facilities are sufficient to meet our current working capital and capital expenditure requirements for a period of at least twelve months from the date of this filing.

Indebtedness

We ~~have~~are party to a revolving line of credit ~~that~~agreement, which has been amended from time to time, pursuant to which a credit facility has been extended to us until September 30, 2023 (the “Credit Facility”). The Credit Facility provides ~~for borrowings~~us with up to $25.0 million in revolving credit. Under the Credit Facility, we may borrow up to (a) 90% of the net amount of eligible accounts ~~receivables;~~receivable; plus, (b) the ~~least of~~lower of: (i) ~~the~~ sum of: ~~(A)~~(1) 50% of the net amount of eligible inventory; plus ~~(B)~~(2) 45% of the net amount of eligible in-transit inventory; (ii) $10.0 million; or (iii) 50% of the aggregate amount of revolving loans outstanding, minus ~~(C)~~(c) the sum of all reserves. This line of credit is secured by substantially all of our assets. Outstanding borrowings under this line of credit bear interest at the sum of (i) the higher of the prime rate or LIBOR rate plus 2.0% and (ii) 1%. As of ~~December 31, 2020, the outstanding balance on the line of credit was less than $0.1 million and the borrowing base was~~June 30, 2022, up to the full $25.0 ~~million. The line~~million was available for borrowing under the Credit Facility, of credit is secured by our inventory and accounts receivable and a first position lien on all our assets. In July 2018, we exercised an option within this line of credit to enter into a promissory note withwhich $0.6 million has been utilized for the same financial institution in the amount of $1.0 million. The note accrues interest at the sum of (i) the higher of the prime rate or LIBOR rate plus 2.0% and (ii) 1.5% and has a maturity date of May 2021. The note is secured by substantially all of our assets.

A letter of credit inissuance leaving $24.4 million of undrawn availability. Under the ~~approximate amount~~Credit Facility we must always maintain minimum liquidity of ~~445,000 Euros was outstanding~~not less than $10.0 million. Not less often than monthly (or weekly during a Trigger Period), we must furnish to the lender a Borrowing Base Certificate as of ~~March 31, 2021. The letter~~the close of ~~credit was issued~~business on the last business day of each month (or week, as applicable). “Trigger Period” means the period of time between (a) the date on which (i) an event of default has occurred, or (ii) our liquidity is less than $20.0 million and (b) the date the event of default has been cured or liquidity exceeds the minimum requirement. See Note 14 to ~~guarantee~~ the ~~Italian facility lease.~~condensed consolidated financial statements that appear elsewhere in this Quarterly Report on Form 10-Q, for additional details regarding our indebtedness. On August 5, 2022, we expanded the Credit Facility with the lender from $25.0 million to $40.0 million and extended the maturity date from September 2023 to September 2025.

Liquidity

We generally fund our ~~short-~~short-term and long-term liquidity needs through a combination of cash on hand, cash flows generated from operations, and available borrowings under our ~~line of credit~~Credit Facility (See “— Indebtedness” above). Our management regularly reviews certain liquidity measures to monitor performance.

Cash Flows

The following section presents the major components of net cash flows from and used in operating, investing and financing activities for the ~~three~~six months ended ~~March 31, 2021~~June 30, 2022 and ~~the three months ended March 31, 2020:~~2021:

(in thousands)	2022			2021
Cash (used in) provided by:
Operating activities	$	(50,064	)	$	(24,372	)
Investing activities		(15,610	)		(44,058	)
Financing activities		1,261			76,728
Net (decrease) increase in cash	$	(64,413	)	$	8,298

Operating Activities ~~(As Restated)~~

For ~~the three~~six months ended ~~March 31, 2021,~~June 30, 2022, net cash used in ~~operations~~operating activities was ~~$17.57~~$50.1 million, primarily driven ~~in part~~ by the net loss of ~~$8.24~~$44.0 million, ~~adjusted for~~partially offset by non-cash items, which included depreciation expense of $3.0 million, stock compensation expense of ~~$3.19~~$2.7 million, unrealized forward contract loss of ~~$2.18~~$1.2 million, ~~net change in deferred taxes~~unrealized foreign currency losses of ~~$1.75~~$0.6 million, ~~depreciation expense~~and a gain on the revaluation of ~~$0.55 million,~~ warrant liability ~~revaluation gain~~ of ~~$0.32 million, and bad debt expense of $0.12~~$0.6 million. Expenses increased for the three months ended March 31, 2021 primarily due to marketing expenses and promotional expenses mentioned above to build the Tattooed Chef brand and increase awareness of the products on the shelf to further drive revenue. Working capital ~~usage has also increased largely due to~~consumed cash of $13.2 million driven by an $8.7 million increase in inventory, a ~~$13.01~~$7.1 million increase in accounts receivable, ~~resulting from increased revenue,~~ a ~~$7.33~~$3.5 million increase in prepaid expenses, ~~mainly due to the increase in prepaid advertising expenses, a $0.98 million increase in inventory, and~~partially offset by a ~~$7.99~~$6.1 million increase in accounts payable, accrued expenses and other current liabilities.

For the ~~three~~six months ended ~~March 31, 2020, we realized~~June 30, 2021, net ~~income of $5.82 million. Net~~ cash used in operating activities was ~~negligible at $0.01~~$24.4 million, primarily driven by the net loss of $65.7 million, partially offset by non-cash items which include net change in deferred taxes of $47.5 million, stock compensation expense of $3.5 million, depreciation expense of $1.5 million, and unrealized forward contract loss of $1.1 million. The net loss is largely due to the income tax valuation allowance recorded as of period end. Working capital consumed cash of $12.7 million driven by an $8.4 million increase in inventory, a ~~$5.62~~$3.6 million increase in prepaid expenses and other current assets, a $2.3 million increase in accounts receivable ~~as a result of~~due to increased revenue, ~~and a $4.63 million increase in inventory to meet anticipated growth in sales,~~ partially offset by a ~~$3.68~~$1.7 million increase in accounts payable, accrued expenses and accrued expenses. During this period, non-cash items included depreciation expense of $0.19 million related to capital expenditures to build new lines in the Italy facility, as well as additional freezer space in the California facility. There were capital expenditures to build new lines in the Italy facility, as well as additional freezer space in the California facility.other current liabilities.

We anticipate that our depreciation and amortization expense will increase for the balance of 2021 and for future periods based on capital expenditures on property, plant and equipment made in 2019 and 2020, and expected capital expenditures to expand production capabilities in both the Italy and California facilities. We also anticipate increases in stock-based compensation as we make equity grants to certain key employees, members of our management team and our Board of Directors.

Investing Activities

Net cash used in investing activities relates to capital expenditures to support growth and investment in property, plant and equipment to expand production capacity, tenant improvements, and to a lesser extent, replacement of existing equipment.

For the ~~three~~six months ended ~~March 31, 2021,~~June 30, 2022, net cash used in investing activities was ~~$2.85~~$15.6 million as compared to ~~$1.65~~$44.1 million for the ~~three~~six months ended ~~March 31, 2020.~~June 30, 2021. Cash used in both periods consisted primarily of capital expenditures to improve efficiency and output from our current ~~facilities.~~facilities and, in the 2021 period, included the expansion of existing production capacity through the acquisition of NMFD and Karsten and assets from Esogel and Ferdifin.

Financing Activities

For the ~~three~~six months ended ~~March 31,~~June 30, 2022, net cash provided by financing activities was $1.3 million, primarily from borrowings under our credit facilities, net of repayments.

For the six months ended June 30, 2021, net cash provided by financing activities was ~~$73.50~~$76.7 million, primarily from $74.0 million due to warrant ~~exercises.~~

~~For the three months ended March 31, 2020, net cash provided by financing activities was $4.51 million primarily attributable to a $4.30 million increase in~~exercises and borrowings under the ~~credit facility~~Credit Facility of $2.1 million to support working capital requirements to fund continued growth.

~~Off-balance Sheet Financing Arrangements~~

We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of March 31, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

~~Contractual Obligations~~

We do not have any long-term debt, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than immaterial supplier contracts with growers in Italy to ensure that product is available to fulfill demand.

Critical Accounting Policies and Estimates

The preparation of the condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires managementThere have been no material changes to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the followingour critical accounting ~~policies:~~policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“Form 10-K”).

~~Valuation of Holdback Shares and Sponsor Earnout Shares~~Recent Accounting Pronouncements

We recognized and measured the contingent amounts associated with the Holdback Shares and Sponsor Earnout Shares at fair value as of the Closing date of $120.35 million and $0, respectively, using a probability-weighted discounted cash flow model. These measures are based upon significant inputs that are not observableThe information required by ~~the market and are therefore considered to be Level 3 inputs. Refer to Note 10 to our consolidated financial statements for discussion related~~this Item is incorporated herein by reference to the ~~measurement and recognition.~~Notes to Condensed Consolidated Financial Statements - Note 3. Recent Accounting Pronouncements, in Part I, Item 1, of this Quarterly Report on Form 10-Q.

~~Revenue Recognition~~

We sell plant-based meals and snacks including, but not limited to, acai and smoothie bowls, zucchini spirals, riced cauliflower, vegetable bowls and cauliflower crust pizza primarily in the U.S. and Italy. All of our revenue relates to contracts with customers. Our accounting contracts are from purchase orders or purchase orders combined with purchase contracts. Revenue recognition is completed on a point in time basis when product control is transferred to the customer. In general, control 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 our contracts are satisfied within one year. No payment terms beyond one year are granted at contract inception.

Most contracts also include some form of variable consideration. The most common forms of variable consideration include discounts and demonstration costs. Variable consideration is treated as a reduction in revenue when product revenue is recognized. Depending on the specific type of variable consideration, we use either the expected value or most likely amount method to determine the variable consideration. We review and update our 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.

~~Accounts Receivable~~

Accounts receivables are recorded at invoiced amounts. We extend credit to our customers based on an evaluation of a customer’s financial condition and collateral is generally not required. We maintain an allowance for doubtful accounts for estimated uncollectible accounts receivable. The allowance is based on our assessment of known delinquent accounts, historical experience, and other currently available evidence of the collectability and the aging of accounts receivable. Although management believes the current allowance is sufficient to cover existing exposures, there can be no assurance against the deterioration of a major customer’s creditworthiness, or against defaults that are higher than what has been experienced historically.

~~Income Taxes~~

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

~~Valuation Allowances for Deferred Tax Assets~~

We establish an income tax valuation allowance when available evidence indicates that it is more likely than not that all or a portion of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, we consider the amounts and timing of expected future deductions or carryforwards and sources of taxable income that may enable utilization. We maintain an existing valuation allowance until enough positive evidence exists to support its reversal. Changes in the amount or timing of expected future deductions or taxable income may have a material impact on the level of income tax valuation allowances. Our assessment of the realizability of the deferred tax assets requires judgment about its future results. Inherent in this estimation is the requirement for us to estimate future book and taxable income and possible tax planning strategies. These estimates require us to exercise judgment about our future results, the prudence and feasibility of possible tax planning strategies, and the economic environment in which it does business. It is possible that the actual results will differ from the assumptions and require adjustments to the allowance. Adjustments to the allowance would affect future net income.

~~Warrant Liabilities~~

We account for the Private Placement Warrants issued in connection with our private placements in accordance with ASC 815, whereby the Private Placement Warrants are recorded as liabilities as they do not meet the criteria for an equity classification. As the Private Placement Warrants meet the definition of a derivative as contemplated in ASC 815, they are measured at fair value at inception and subsequently remeasured at each reporting date, with changes in fair value recognized in the consolidated statements of operations and other comprehensive income (loss) in the period of change.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Not required for smaller reporting companies.~~We are exposed to certain market risks in the ordinary course of our business, including fluctuations in interest rates, raw material prices, foreign currency exchange fluctuations and inflation as follows:

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our cash that consists of amounts held by third-party financial institutions and our long-term debt. Our treasury policy has as its primary objective to preserve principal without significantly increasing risk. We generally held our cash with financial institutions without investment activities, therefore we are not exposed to increasing interest rate risk. Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt obligations to increase along with the interest rate increase. Our long-term debt is carried at amortized cost and thus fluctuations in interest rates do not impact our condensed consolidated financial statements. However, the fair value of our long term debt, which pays interest at a fixed rate, will generally fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest.

Ingredient Risk

We are exposed to risk related to the price and availability of our ingredients because our profitability is dependent on, among other things, our ability to anticipate and react to raw material and food costs. We manage the impact of the ingredients costs through select raw material contracts with growers and cooperatives in Italy that allow us to better control ingredient costs.

We source many of our vegetables from Italy, which is one of the largest organic crop areas in the European Union. We engage the services of an agronomist to help with forecasting and scheduling. Based in part on these forecasts, we obtain written commitments from a number of growers and cooperatives to grow certain crops in specified amounts for agreed upon prices, confirmed by purchase orders issued closer to the start of each harvesting season. In addition, we utilize multiple growers across various regions in Italy and are not dependent on any single grower for any single commodity. These commitments provide us with consistent supply throughout the growing season to support our year-round production schedule.

We source strawberries and certain other crops in the United States but are not bound by purchase agreements for the crops sourced in the United States. Acai purée was primarily sourced from Brazil through an American supplier and we buy, at one time, all of our organic Acai that we need for the whole year. We have secured our source of organic Acai for 2022. While we substantially single source this ingredient, we believe there to be ample supply in the market. In 2021, we engaged two additional suppliers to supply Acai purée and we are currently in process to contract another supplier, which would be our fourth supplier, in 2022.

We rely on a sole supplier for liquid nitrogen, Messer LLC, which is used to freeze products during the manufacturing process. We have entered into an agreement that expires in 2025 with Messer LLC to provide up to 120% of our monthly requirements of liquid nitrogen.

During the six months ended June 30, 2022, a hypothetical 10% increase or 10% decrease in the weighted-average cost of our primary ingredients, would have resulted in a corresponding increase or decrease of approximately $6.8 million to cost of goods sold. We are working to expand our supply chain to ensure the certainty of supply of the highest quality raw materials that meet our demanding requirements for quality and intend to enter into long-term contracts to better ensure stability of prices of our ingredients.

Foreign Currency Risk

We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of foreign subsidiary, transaction gains and losses associated with intercompany loans with foreign subsidiary and transactions denominated in currencies other than a location’s functional currency. Our foreign entity, Ittella Italy, uses its local currency as the functional currency. We translate net assets into U.S. dollars at period end exchange rates, while revenue and expense accounts are translated at average exchange rates prevailing during the periods being reported. Resulting currency translation adjustments are included in “Accumulated other comprehensive income” and foreign currency transaction gains and losses are included in “Other income (expense)”. Transaction gains and losses on long-term intra-entity transactions are recorded as a component of “Other comprehensive income (loss)” in the condensed consolidated statements of operations and comprehensive loss. Transactions denominated in a currency other than the reporting entity’s functional currency may give rise to transaction gains and losses that impact our results of operations.

Translation losses, net of tax, reported as cumulative translation adjustments through “Other comprehensive income (loss)” were $0.4 million and $0.9 million for the three and six months ended June 30, 2022, respectively. Foreign currency transaction losses included in “Other income (expense)” were $2.7 million and $3.7 million for the three and six months ended June 30, 2022, respectively

Inflation Risk

Historically, inflation did not have a material effect on our business, results of operations, or financial condition. Starting in fiscal 2021, some of our ingredient, packaging, freight and storage costs have increased at a rapid rate. We expect the pressures of cost inflation to continue into the remaining of fiscal 2022. In addition, the escalation of the conflict between Russia and Ukraine, including international sanctions in response to that conflict, could result in further inflationary pressures and increase disruption to supply chains, all of which could result in additional increases in the cost of our ingredients, packaging, freight and storage.

We use a variety of strategies to offset inflation costs. However, we may not be able to generate sufficient productivity improvements or implement price increases to fully offset these cost increases or do so on an acceptable timeline. Our inability or failure to do so could harm our business, results of operations and financial condition.

ITEM 4. CONTROLS AND PROCEDURES

~~In connection with the audit~~Evaluation of our consolidated financial statements as of and for the years ended December 31, 2020 and 2019, we identified five material weaknesses in our internal control over financial reporting. 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 first material weakness is related to the lack of design or maintenance of an effective control environment commensurate with financial reporting requirements and lack of a sufficient number of accounting professionals with the appropriate level of experience and training.

The second material weakness is related to a lack of design and maintenance of formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, and monitoring controls maintained at the corporate level which are at a sufficient level of precision to provide for the appropriate level of oversight of activities related to our internal control over financial reporting.

The third material weakness is related to lack of implementation and maintenance of appropriate information technology general controls, including controls over data center and network operations, system software acquisition, change and maintenance, program changes, access security and application system acquisition, development, and maintenance.

The fourth material weakness is related to a lack of design and maintenance of effective controls over segregation of duties with respect to the preparation and review of account reconciliations as well as the creation and posting of manual journal entries.

~~The fifth material weakness relates to the lack of design and maintenance of formal accounting policies, processes and controls to analyze, account for and disclose complex transactions.~~

We have begun the process of, and we are focused on, designing and implementing effective internal controls measures to improve our internal control over financial reporting and remediate the material weaknesses. Our efforts include a number of actions:

●

~~We hired qualified staff and outside resources to segregate key functions within our financial and information technology processes supporting our internal controls over financial reporting.~~

●

~~We developed internal controls documentation, including comprehensive accounting policies and procedures and designed, implemented, and tested new controls over key financial processes.~~

While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting.

~~Limitations on Effectiveness of~~Disclosure Controls and Procedures

In designing and evaluating our disclosure controls and procedures, ~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act),~~ management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

~~Evaluation of Disclosure Controls~~Our Chief Executive Officer and ~~Procedures~~

~~Our management, with the participation of our chief executive officer and chief financial officer, has~~Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures ~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)~~ as of ~~the end of the period covered by this Quarterly Report. Based~~June 30, 2022 and, based on this evaluation, ~~our chief executive officer and chief financial officer~~have concluded that ~~as of March 31, 2021, our disclosure controls and procedures were not effective~~ due to the material weaknesses in our internal control over financial reporting ~~described above.~~previously identified in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021, our disclosure controls and procedures were not effective as of June 30, 2022. These material weaknesses did not result in a material misstatement of the condensed consolidated financial statements.

~~However, after giving full consideration~~Remediation of Material Weaknesses

Our remediation efforts previously disclosed in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021 to ~~these~~address the identified material weaknesses are ongoing. In the quarter ended June 30, 2022, we hired an Executive Vice President of Accounting, who has experience in serving in lead roles over financial reporting and implementation of internal controls at other public companies. In addition, we engaged a technical advisory firm to assist with the ~~additional analyses~~Company’s SOX compliance program. While we believe the steps taken to date and ~~other procedures that~~those planned for future implementation will improve the effectiveness of our internal control over financial reporting, we ~~performed to ensure that our consolidated financial statements included in this Quarterly Report were prepared in accordance with U.S. GAAP, our~~have not completed all remediation efforts.

The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our ~~consolidated~~internal control over financial ~~statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP.~~reporting.

Changes in Internal Control Over Financial Reporting

~~Other than described above~~In 2021, we began a multi-year implementation of a new enterprise resource planning (“ERP”) system, which replaced our existing core financial system at our Paramount location in ~~this Item 4, there has been no~~January 2022, and will replace our existing core financial systems at certain other locations and acquired locations in the future. The ERP system is designed to accurately maintain the Company’s financial records, enhance the flow of financial information, improve data management and provide timely information to our management team. As the phased implementation of the new ERP system progresses, we may change our processes and procedures which, in turn, could result in changes to our internal control over financial ~~reporting during the fiscal quarter ended March 31, 2021 that has materially affected, or is reasonably likely to~~reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting.

Other than the ongoing steps being taken to implement the remediation plan described above and under Part II, Item 9A in our Annual Report on Form 10-K for the year ended December 31, 2021, and the ERP system implementation described above, there have been no other changes in internal control over financial reporting that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

~~None.~~The information required by this Item is incorporated herein by reference to the Notes to Condensed Consolidated Financial Statements - Note 18.

Commitments and Contingencies in Part I, Item 1, of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our ~~2020~~2021 Form 10-K, as updated and supplemented ~~below and in subsequent filings.~~below. These risk factors could materially harm our business, operating results and financial condition. Additional factors and uncertainties not currently known to us or that we currently consider immaterial also may materially adversely affect our business, financial condition or future results.

~~Prolonged inflation~~Increasing tensions between the United States and Russia, and other effects of the ongoing conflict in Ukraine, could negatively impact our business, results of operations, and financial condition.

While we do not operate in Russia or Ukraine, the increasing tensions between the United States and Russia and the other effects of the ongoing conflict in Ukraine, have resulted in many broader economic impacts such as the United States imposing sanctions and bans against Russia and Russian products imported into the United States. Such sanctions and bans have and may continue to impact commodity pricing such as fuel and energy costs, making it more expensive for us and our carriers to deliver products to our customers. Further sanctions, bans or other economic actions in response to the ongoing conflict in Ukraine could result in ~~higher~~an increase in costs, ~~and decreased margins and earnings.~~

~~A majority~~further disruptions to our supply chain, or a lack of consumer confidence resulting in reduced demand. While the extent of such items is not presently known, any of them could negatively impact our products are manufactured and sold inside of the United States, which increases our exposure to, among other things, domestic inflation and fuel price increases. A prolonged period of inflation could cause interest rates, fuel, wages, and other costs to increase, which would adversely affect ourbusiness, results of operations, unless freight rates correspondingly increase. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business,and financial ~~condition, and results of operation.~~condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. ~~EXHIBITS (As Restated).~~EXHIBITS.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.

No.		Description of Exhibit
10.1		Amended and Restated loan and security agreement loan between UMB Bank N.A and Ittella International, LLC and each Affiliate, effective as of June 30,2022.
31.1		Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002..
32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). 36

SIGNATURES

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

	TATTOOED CHEF, INC.

Date: ~~April 29,~~August 9, 2022	By:	/s/ Salvatore Galletti
	Name:	Salvatore Galletti
	Title:	Chief Executive Officer
		(Principal Executive Officer)

Date: ~~April 29,~~August 9, 2022	By:	/s/ Stephanie Dieckmann
	Name:	Stephanie Dieckmann
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

4339

0001741231 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 iso4217:USD xbrli:shares

	Three Months Ended
	March 31, 2021			March 31, 2020
	(As Restated)

NET REVENUE	$	52,469		$	33,172
COST OF GOODS SOLD		45,289			24,036
GROSS PROFIT		7,180			9,136
OPERATING EXPENSES		14,196			2,360
INCOME (LOSS) FROM OPERATIONS		(7,016	)		6,776
Interest expense		(20	)		(224	)
Other income (expense)		(2,681	)		-
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES		(9,717	)		6,552
INCOME TAX BENEFIT (EXPENSE)		1,475			(730	)
NET (LOSS) INCOME		(8,242	)		5,822
LESS: INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		-			1,012
NET (LOSS) INCOME ATTRIBUTABLE TO TATTOOED CHEF, INC.	$	(8,242	)	$	4,810

NET (LOSS) INCOME PER SHARE
Basic	$	(0.10	)	$	0.17
Diluted	$	(0.11	)	$	0.17
WEIGHTED AVERAGE COMMON SHARES
Basic		80,240,105			28,324,038
Diluted		80,544,129			28,324,038

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Foreign currency translation adjustments		109			(352	)
Total other comprehensive income (loss), net of tax		109			(352	)

Comprehensive (loss) income		(8,133	)		5,470
Less: comprehensive (loss) income attributable to the noncontrolling interest		-			1,001
Comprehensive (loss) income attributable to Tattooed Chef, Inc. stockholders	$	(8,133	)	$	4,469

	Common						Common		Additional		Accumulated		Retained
	Stock			Treasury			Shares		Paid-In		Comprehensive		Earnings			Noncontrolling
	Shares			Shares			Amount		Capital		Income (Loss)		(Deficit)			Interests		Total
									(As Restated)				(As Restated)					(As restated)
BALANCE AS OF JANUARY 1, 2021		71,551,067			(81,087	)	$	7	$	168,448	$	1	$	63,598		$	-	$	232,054

FOREIGN CURRENCY TRANSLATION ADJUSTMENT		-			-			-		-		109		-			-		109

DISTRIBUTIONS		-			-			-		-		-		(308	)		-		(308	)

STOCK-BASED COMPENSATION		-			-			-		3,185		-		-			-		3,185

FORFEITURE OF STOCK- BASED AWARDS		(95,084	)		-			-		-		-		-			-		-

CANCELLATION OF TREASURY SHARES		(81,087	)		81,087			-		-		-		-					-
																	-
EXERCISE OF WARRANTS		10,025,303			-			1		63,361		-		-			-		63,362

NET LOSS		-			-		$	-	$	-	$	-	$	(8,242	)	$	-	$	(8,242	)

BALANCE AS OF MARCH 31, 2021		81,400,199			-		$	8	$	234,994	$	110	$	55,048		$	-	$	290,160

	Redeemable Noncontrolling		Common				Common Additional				Accumulated			Retained
	Interest		Stock		Treasury		Shares		Paid-In		Comprehensive			Earnings			Noncontrolling
	Amount		Shares		Shares		Amount		Capital		Income (Loss)			(Deficit)			Interests			Total

BALANCE AS OF JANUARY 1, 2020	$	6,900		28,324,038		-	$	3	$	2,314	$	(692	)	$	1,056		$	256		$	2,937

CAPITAL CONTRIBUTIONS		-		-		-		-		-		-			-			355			355

FOREIGN CURRENCY TRANSLATION ADJUSTMENT		-		-		-		-		-		(341	)		-			(11	)		(352	)

DISTRIBUTIONS		-		-		-		-		-		-			(1,438	)		-			(1,438	)

ACCRETION OF REDEEMABLE NONCONTROLLING INTEREST TO REDEMPTION VALUE		4,431		-		-		-		-		-			(4,431	)		-			(4,431	)

NET INCOME	$	414		-		-	$	-	$	-	$	-		$	4,810		$	598		$	5,408

BALANCE AS OF MARCH 31, 2020	$	11,745		28,324,038		-	$	3	$	2,314	$	(1,033	)	$	(3	)	$	1,198		$	2,479

(In thousands)	As		Consolidated Balance Sheet
	Originally					Re-			As
As of December 31, 2020	Reported		Revisions			classification			Revised
Accounts receivable	$	17,991	$	(1,710	)	$	-		$	16,281
Inventory		38,660		(658	)		-			38,002
Prepaid expenses and other current assets		18,240		176			-			18,416
TOTAL CURRENT ASSETS		206,470		(2,192	)		-			204,278
Deferred income taxes, net		43,525		4,024			-			47,549
TOTAL ASSETS		266,683		1,832			-			268,515
Accounts payable		25,391		-			(1,316	)		24,075
Accrued expenses		2,961		649			-			3,610
Deferred revenue		1,711		(1,711	)		-			-
Other current liabilities		87		-			1,316			1,403
TOTAL CURRENT LIABILITIES		30,349		(1,062	)		-			29,287
Warrant liabilities		-		5,184			-			5,184
TOTAL LIABILITIES		32,339		4,122			-			36,461
Additional paid-in capital		170,799		(2,351	)		-			168,448
Retained earnings		63,537		61			-			63,598
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		234,344		(2,290	)		-			232,054
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		266,683		1,832			-			268,515

	Condensed Consolidated
(In thousands, except EPS)	Statements of Operations and Comprehensive Income
	As
	Originally
For the three months ended March 31, 2020	Reported			Revisions			As Revised
Revenue	$	33,170		$	2		$	33,172
Cost of goods sold		23,927			109			24,036
Gross profit		9,243			(107	)		9,136
Operating expense		2,390			(30	)		2,360
Income from operations		6,853			(77	)		6,776
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES		6,629			(77	)		6,552
Net income (loss)		5,899			(77	)		5,822
LESS: INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		1,022			(10	)		1,012
NET INCOME (LOSS) ATTRIBUTABLE TO TATTOOED CHEF, INC.		4,877			(67	)		4,810
Basic net income (loss) per share		0.17			-			0.17
Diluted net income (loss) per share		0.17			-			0.17
Comprehensive income	$	5,547			(77	)	$	5,470
Less: income (loss) attributable to the noncontrolling interest		(11	)		1,012			1,001
Comprehensive income attributable to Tattooed Chef, Inc. stockholders	$	5,558			(1,089	)	$	4,469

(In thousands)	Condensed Consolidated Statements of Stockholders’ Equity
For the three months ended March 31, 2020	As originally reported		Revisions			As revised

Redeemable noncontrolling interest beginning balance	$	6,930		(30	)	$	6,900
Net income in redeemable noncontrolling interest		424		(10	)		414
Redeemable noncontrolling interest ending balance		11,785		(40	)		11,745
Retained earnings beginning balance		1,265		(209	)		1,056
Net income in retained earnings		4,877		(67	)		4,810
Retained earnings ending balance		273		(276	)		(3	)
Total Stockholders’ equity beginning balance		28,327,184		(28,324,247	)		2,937
Total Stockholders’ equity ending balance		28,326,793		(28,324,314	)		2,479

(In thousands)	Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2020	As originally reported			Revisions			As revised
Cash Flows from Operating Activities:
Net income	$	5,899			(77	)	$	5,822
Adjustments to reconcile net income (loss) to net cash from operating activities:
Inventory		(4,703	)		77			(4,626	)
Net cash (used in) provided by operating activities		(1	)		-			(1	)

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, Unaudited)	As Reported		Adoption of ASC 842			Adjustments			Re- classification			As Restated
Accounts receivable	$	31,796		-			(2,625	)		-		$	29,171
Inventory		38,701		-			280			-			38,981
Prepaid expenses and other current assets		11,739		(27	)		-			-			11,712
TOTAL CURRENT ASSETS		267,397		(27	)		(2,345	)		-			265,025
Operating lease right-of-use asset, net		-		3,968			-			-			3,968
Deferred taxes		45,273		-			4,024			-			49,297
TOTAL ASSETS	$	332,905		3,941			1,679			-		$	338,525
Accounts payable		31,252		-			(496	)		(46	)		30,710
Accrued expenses		6,135		-			423			-			6,558
Deferred revenue		974		-			(974	)		-			-
Forward contract derivative liability		2,042		-			(84	)		-			1,958
Operating lease liabilities, current		-		651			-			-			651
Other current liabilities		1,188		(47	)		-			46			1,187
TOTAL CURRENT LIABILITIES		41,770		604			(1,131	)		-			41,243
Operating lease, net of current portion		-		3,344			-			-			3,344
TOTAL LIABILITIES		45,548		3,948			(1,131	)		-			48,365
Additional paid in capital		230,970		-			4,024			-			234,994
Retained earnings		56,269		(7	)		(1,214	)		-			55,048
Total equity		287,357		(7	)		2,810			-			290,160
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	332,905		3,941			1,679			-		$	338,525

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands except shares and per share amounts, Unaudited)	As Reported			Adoption of ASC 842			Adjustments			As Restated
REVENUE	$	52,682			-			(213	)	$	52,469
COST OF GOODS SOLD		45,905			-			(616	)		45,289
GROSS PROFIT		6,777			-			403			7,180
OPERATING EXPENSES		13,795			7			394			14,196
INCOME (LOSS) FROM OPERATIONS		(7,018	)		(7	)		9			(7,016	)
Other income (expense)		(2,589	)		-			(92	)		(2,681	)
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES		(9,627	)		(7	)		(83	)		(9,717	)
NET (LOSS) INCOME		(8,152	)		(7	)		(83	)		(8,242	)
NET (LOSS) INCOME ATTRIBUTABLE TO TATTOOED CHEF, INC.	$	(8,152	)		(7	)		(83	)	$	(8,242	)
NET (LOSS) INCOME PER SHARE
Basic		(0.10	)		-			(0.00	)		(0.10	)
Diluted		(0.11	)		-			(0.00	)		(0.11	)
WEIGHTED AVERAGE COMMON SHARES
Basic		79,415,105			-			825,000			80,240,105
Diluted		79,719,129			-			825,000			80,544,129
Comprehensive income		(8,043	)		(7	)		(83	)		(8,133	)
Comprehensive income attributable to Tattooed Chef, Inc. stockholders	$	(8,043	)		(7	)		(83	)	$	(8,133	)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands except per share amounts, Unaudited)	As Reported			Adjustments			As Restated
Additional Paid-In Capital beginning balance	$	164,423			4,025		$	168,448
Additional Paid-In Capital ending balance		230,969			4,025			234,994
Retained earnings (Deficit) beginning balance		64,729			(1,131	)		63,598
Net loss in retained earnings (Deficit)		(8,152	)		(90	)		(8,242	)
Retained earnings (Deficit) ending balance		56,269			(1,221	)		55,048
Total Stockholders’ equity beginning balance		229,160			2,894			232,054
Total Stockholders’ equity ending balance		287,356			2,804			290,160

	March 31,		December 31,
Long Lived Assets (in thousands)	2021		2020
Italy	$	10,733	$	9,113
United States		8,579		6,970
Total	$	19,312	$	16,083

	Amount
Redeemable Noncontrolling Interest as of January 1, 2020	$	6,900
Net income attributable to redeemable noncontrolling interest		414
Accretion to redeemable noncontrolling interest		4,431
Redeemable Noncontrolling Interest as of March 31, 2020	$	11,745

	Private
	Placement
Fair value at initial measurement on October 15, 2020	$	9,071,750
Exercise of Private Placement Warrants		(2,695,806	)
Change in fair value⁽¹⁾		(1,191,565	)
Fair value as of December 31, 2020	$	5,184,379
Exercise of Private Placement Warrants		(2,989,639	)
Change in fair value⁽¹⁾		(319,854	)
Fair value as of March 31, 2021	$	1,874,886

		Three months ended
(in thousands)	Statement of Operations Location	March 31, 2021
Operating leases:
Lease cost	Cost of goods sold	$	154
Lease cost	Operating expenses		67
Operating lease cost			221
Other:
Variable lease cost	Cost of goods sold		461
Variable lease cost	Operating expenses		-
Variable lease cost*			461
Total lease cost		$	682

		March 31
(in thousands)	Balance Sheet Location	2021
Assets
ROU assets-Operating lease	Operating lease right-of-use assets		4,141
Less: accumulated amortization	Operating lease right-of-use assets		(173	)
Operating lease right-of-use assets, net	Operating lease right-of-use assets		3,968
Total Lease ROU assets		$	3,968
Liabilities
Current:
Operating lease liabilities, current	Operating lease liabilities, current	$	(651	)
Long term:
Operating lease liabilities, noncurrent	Operating lease liabilities, noncurrent		(3,344	)
Total Lease liabilities		$	(3,995	)

(in thousands)		March 31, 2021
Operating cash flows paid for operating leases		$	(177	)

(in thousands)	Operating Leases
Nine months ended December 31, 2021	$	624
2022		790
2023		634
2024		374
2025		347
2026 and thereafter		2,413
Total lease payments	$	5,182
Less imputed interest		1,187
Present value of future lease payments	$	3,995
Current Lease liabilities		651
Noncurrent Lease liabilities		3,344

Net income attributable to noncontrolling interest in Ittella Italy	$	598
Net income attributable to noncontrolling interest in Ittella International		414
Increase in noncontrolling interest due to foreign currency translation		(11	)

Change in net comprehensive income attributable to noncontrolling interest for the three months ended March 31, 2020	$	1,001

						Weighted
						Average
				Weighted		Remaining
	Number of			Average		Contractual		Intrinsic
	Awards			Exercise		Terms		Value
	Outstanding			Price		(Years)		(in thousands)
Balance at December 31, 2020		756,300		$	24.69		9.98	$	-
Granted		-			-		-		-
Cancelled and forfeited		(1,500	)		24.69		9.82		-
Exercised		-			-		-		-
Balance at March 31, 2021		754,800		$	24.69		9.73	$	-
Exercisable at March 31, 2021		-		$	-		-	$	-

					Non-Employee Director
	Employee Director Awards				Awards
			Weighted-					Weighted-
	Number of		Average		Number of			Average
	Shares		Fair Value		Shares			Fair Value
Balance at December 31, 2020		-	$	-		-		$	-
Granted		-		-		15,216			18.93
Vested		-		-		(15,216	)		18.93
Forfeited		-		-		-			-
Non-vested restricted stock at March 31, 2021		-	$	-		-		$	-

						Consultant (Non-Employee)
	Employee Awards					Awards
				Weighted-					Weighted-
	Number of			Average		Number of			Average
	Shares			Fair Value		Shares			Fair Value
Balance at December 31, 2020		400,000		$	24.28		100,000		$	24.69
Granted		30,416			23.65		100,000			18.96
Vested		(4,916	)		24.28		(100,000	)		18.96
Forfeited		(100,000	)		24.69		(100,000	)		24.69
Non-vested restricted stock at March 31, 2021		325,500		$	24.10				$	-

		Three Months Ended
		March. 31,			March. 31,
(in thousands)		2021			2020
		(As Restated)
Net income (loss)		$	(8,242	)	$	5,822
Interest		$	20		$	224
Income tax (benefit) expense		$	(1,475	)	$	730
Depreciation		$	552		$	193
EBITDA		$	(9,145	)	$	6,969
Adjustments	��						��
Stock compensation expense		$	3,185		$	-
Loss on foreign currency forward contracts		$	3,001		$	-
Total Adjustments		$	6,186		$	-
Adjusted EBITDA		$	(2,959	)	$	6,969