BRC Inc. 10-K

Item 8. Financial Statements and Supplementary Data Authentic Brands LLC Audited Consolidated Financial Statements of Authentic Brands LLC as of December 31, 2021 and 2020 and for the three years ended December 31, 2021 ​ Reports of Independent Registered Public Accounting Firms (PCAOB ID: 42 and PCAOB ID: 243 ) F-1 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Members’ Deficit F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 ​ ​ ​ 63 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of BRC Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Authentic Brands LLC (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations , members' deficit, and cash flows for each of the years ended December 31, 2021 and 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years ended December 31, 2021 and 2020, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2020. San Antonio, Texas March 16, 2022 ​ ​ F-1 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors BRC Inc. Salt Lake City, UT Opinion on the consolidated Financial Statements We have audited the accompanying consolidated statements of operations, members’ deficit, and cash flows of Authentic Brands, LLC (the “Company”) for the year ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the Company’s results of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ BDO USA, LLP We began serving as the Company’s auditor in 2018 and became the predecessor auditor in 2020. Houston, Texas April 10, 2020, except for the segment information described in Note 2, as to which the date is November 10, 2021 ​ F-2 Table of Contents AUTHENTIC BRANDS LLC CONSOLIDATED BALANCE SHEETS (Amounts in Thousands, except unit amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 ​ 2021 2020 Assets ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 18,334 ​ $ 35,232 Accounts receivable, net ​ 7,442 ​ 3,629 Inventories ​ 20,872 ​ 16,041 Prepaid expenses and other current assets ​ 6,377 ​ 2,186 Total current assets ​ 53,025 ​ 57,088 Property and equipment, net ​ 31,114 ​ 14,714 Identifiable intangibles, net ​ 167 ​ 191 Restricted cash ​ — ​ 400 Other ​ 2,776 ​ 149 Total assets ​ $ 87,082 ​ $ 72,542 ​ ​ ​ ​ ​ ​ ​ Liabilities and members’ deficit ​ ​ ​ Current liabilities: ​ ​ ​ Accounts payable ​ $ 17,387 ​ $ 11,527 Accrued liabilities ​ 22,233 ​ 16,063 Deferred revenue and gift card liability ​ 7,334 ​ 4,615 Current maturities of long-term debt, net ​ ​ 11,979 ​ 866 Current maturities of capital lease obligations ​ 85 ​ 469 Total current liabilities ​ 59,018 ​ 33,540 Non-current liabilities: ​ ​ ​ ​ ​ ​ Long-term debt, net ​ 22,712 ​ 12,170 Capital lease obligations, net of current maturities ​ 228 ​ 727 Other non-current liabilities ​ 334 ​ — Total non-current liabilities ​ ​ 23,274 ​ ​ 12,897 Total liabilities ​ 82,292 ​ 46,437 Commitments and Contingencies (Note 8) ​ ​ ​ Series A preferred equity, less issuance costs ( 151,406 and 150,000 units authorized , issued and outstanding as of December 31, 2021 and 2020, respectively) ​ 154,281 ​ 128,983 Members’ deficit ( 18,769 Class A units and 73,890 Class B units authorized, issued and outstanding as of December 31, 2021 and 2020) ​ ( 149,491 ) ​ ( 102,878 ) Total liabilities, Series A preferred units and members’ deficit ​ $ 87,082 ​ $ 72,542 ​ See notes to consolidated financial statements. ​ F-3 Table of Contents AUTHENTIC BRANDS LLC CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31 ​ 2021 2020 2019 Revenue, net ​ $ 233,101 ​ $ 163,909 ​ $ 82,128 Cost of goods sold ​ 143,414 ​ 94,500 ​ 46,423 Gross profit ​ 89,687 ​ 69,409 ​ 35,705 Operating expenses ​ ​ ​ Marketing and advertising ​ 36,358 ​ 25,513 ​ 13,349 Salaries, wages and benefits ​ 38,746 ​ 24,194 ​ 13,129 General and administrative ​ 26,162 ​ 13,922 ​ 9,343 Total operating expenses ​ 101,266 ​ 63,629 ​ 35,821 Income (loss) from operations ​ ( 11,579 ) ​ 5,780 ​ ( 116 ) Other income (expense): ​ ​ ​ Interest expense ​ ( 2,033 ) ​ ( 1,047 ) ​ ( 733 ) Other income (expense), net ​ ( 55 ) ​ ( 227 ) ​ 91 Total other expense, net ​ ( 2,088 ) ​ ( 1,274 ) ​ ( 642 ) Earnings (loss) before income taxes ​ ( 13,667 ) ​ 4,506 ​ ( 758 ) State income tax expense ​ 178 ​ 185 ​ 14 Net income (loss) ​ $ ( 13,845 ) ​ $ 4,321 ​ $ ( 772 ) ​ See notes to consolidated financial statements. ​ F-4 Table of Contents AUTHENTIC BRANDS LLC CONSOLIDATED STATEMENTS OF MEMBERS’ DEFICIT (Amounts in Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Members’ ​ Accumulated ​ ​ ​ ​ Interest Deficit Total Balance at January 1, 2019 ​ $ 10,881 ​ $ ( 9,700 ) ​ $ 1,181 Equity-based compensation ​ 143 ​ — ​ 143 Repayment of notes receivable from members ​ 199 ​ — ​ 199 Repurchase member units ​ ( 2,000 ) ​ — ​ ( 2,000 ) Net loss ​ — ​ ( 772 ) ​ ( 772 ) Balance at December 31, 2019 ​ $ 9,223 ​ $ ( 10,472 ) ​ $ ( 1,249 ) Equity-based compensation ​ 1,929 ​ — ​ 1,929 Non-employee equity-based compensation ​ 1,384 ​ — ​ 1,384 Issuance of members units, net of issuance costs of $ 559 ​ 16,551 ​ — ​ 16,551 Series A preferred discount amortization ​ ( 870 ) ​ — ​ ( 870 ) Repayment of notes receivable from members ​ 56 ​ — ​ 56 Repurchase member units ​ ( 125,000 ) ​ — ​ ( 125,000 ) Net income ​ — ​ 4,321 ​ 4,321 Balance at December 31, 2020 ​ $ ( 96,727 ) ​ $ ( 6,151 ) ​ $ ( 102,878 ) Equity-based compensation ​ ​ 3,204 ​ ​ — ​ ​ 3,204 Non-employee equity-based compensation ​ ​ 1,492 ​ ​ — ​ ​ 1,492 Series A preferred discount amortization and equity distribution ​ ​ ( 34,511 ) ​ ​ — ​ ​ ( 34,511 ) Repurchase of member units ​ ​ ( 2,953 ) ​ ​ — ​ ​ ( 2,953 ) Net loss ​ ​ — ​ ​ ( 13,845 ) ​ ​ ( 13,845 ) Balance at December 31, 2021 ​ $ ( 129,495 ) ​ $ ( 19,996 ) ​ $ ( 149,491 ) ​ See notes to consolidated financial statements. ​ F-5 Table of Contents AUTHENTIC BRANDS LLC CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31 ​ 2021 2020 2019 Operating activities ​ ​ ​ ​ ​ Net income (loss) ​ $ ( 13,845 ) ​ $ 4,321 ​ $ ( 772 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: ​ ​ ​ ​ ​ Depreciation and amortization ​ 2,895 ​ 1,375 ​ 933 Equity-based compensation ​ 3,204 ​ 1,929 ​ 143 Non-employee equity-based compensation ​ 1,492 ​ 1,384 ​ — Amortization of debt issuance costs ​ 358 ​ 133 ​ 314 Loss on extinguishment of debt ​ ​ 726 ​ ​ — ​ ​ — Bad debt expense (recovery) ​ ( 51 ) ​ 195 ​ ( 37 ) Loss from equity method investment ​ — ​ 52 ​ 80 Loss on disposal/sale of property and equipment ​ 70 ​ — ​ 4 Changes in operating assets and liabilities: ​ ​ ​ Accounts receivable, net ​ ( 3,761 ) ​ ( 2,956 ) ​ ( 243 ) Inventories ​ ( 4,831 ) ​ ( 10,897 ) ​ 289 Prepaid expenses and other assets ​ ( 5,283 ) ​ ( 1,054 ) ​ ( 692 ) Accounts payable ​ 4,646 ​ 7,032 ​ 986 Accrued liabilities ​ 3,659 ​ 6,425 ​ 3,082 Accrued sales tax ​ ( 23 ) ​ 292 ​ 120 Deferred revenue and gift card liability ​ 2,719 ​ 3,315 ​ 593 Other liabilities ​ 334 ​ — ​ ( 656 ) Net cash provided by (used in) operating activities ​ ( 7,691 ) ​ 11,546 ​ 4,144 Investing activities ​ ​ ​ ​ ​ Purchases of property and equipment ​ $ ( 19,287 ) ​ $ ( 9,760 ) ​ $ ( 1,043 ) Cash paid for asset purchases ​ — ​ — ​ ( 63 ) Net cash used in investing activities ​ ( 19,287 ) ​ ( 9,760 ) ​ ( 1,106 ) Financing activities ​ ​ ​ Proceeds from issuance of long-term debt, net of cash paid for debt issuance costs of $ 338 , $ 591 and $ 59 in 2021, 2020 and 2019, respectively ​ $ 38,402 ​ $ 16,436 ​ $ 2,699 Repayment of long-term debt ​ ( 20,058 ) ​ ( 7,333 ) ​ ( 4,670 ) Repayment of and restricted cash for capital lease obligations ​ ( 1,663 ) ​ ( 451 ) ​ ( 396 ) Issuance of Series A preferred equity, net of cash paid for issuance costs of $ 4,897 ​ — ​ 145,103 ​ — Payment of Series A preferred dividends ​ ​ ( 7,001 ) ​ ​ — ​ — Repurchase of member units ​ — ​ ( 125,000 ) ​ ​ — Repayment of notes receivable from members ​ — ​ 56 ​ 201 Net cash provided by (used in) provided by financing activities ​ 9,680 ​ 28,811 ​ ( 2,166 ) Net increase (decrease) in cash, cash equivalents, and restricted cash ​ ( 17,298 ) ​ 30,597 ​ 872 Beginning cash, cash equivalents, and restricted cash ​ 35,632 ​ 5,035 ​ 4,163 Ending cash, cash equivalents, and restricted cash ​ $ 18,334 ​ $ 35,632 ​ $ 5,035 ​ ​ ​ ​ ​ ​ ​ ​ Non-cash operating activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Accrued other assets ​ $ 750 ​ $ — ​ $ — Deferred transaction costs ​ ​ 1,214 ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities ​ ​ ​ ​ ​ Issuance of Series A preferred unit dividend ​ $ 1,406 ​ $ — ​ $ — Equity investment of property and equipment ​ ​ — ​ ​ — ​ ​ 107 Accrued Series A preferred equity distribution and related discount amortization ​ 27,510 ​ 870 ​ — Issuance of note and other payables for repurchase of member units ​ — ​ — ​ 2,000 Capital expenditures financed through credit facilities and capital leases ​ — ​ 6,430 ​ 77 Accrued capital expenditures ​ 803 ​ 140 ​ 183 Supplemental cash flow information ​ ​ ​ Cash paid for state income taxes ​ $ 147 ​ $ 114 ​ $ 14 Cash paid for interest ​ $ 719 ​ $ 1,007 ​ $ 332 ​ See notes to consolidated financial statements. ​ ​ F-6 Table of Contents AUTHENTIC BRANDS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in Thousands, Except Unit/Share and per Unit/Share Amounts) December 31, 2021 1. Organization and Nature of Business Authentic Brands LLC (individually, “Authentic Brands”, collectively with its subsidiaries, the “Company”), through its wholly owned subsidiaries, purchases, roasts, and sells high quality coffee, coffee accessories, and branded apparel through its online channels and business networks. In addition, the Company develops and promotes online content for the purpose of growing its brands. ​ 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The Company has prepared the consolidated financial statements and accompanying notes in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The consolidated financial statements reflect the financial position and operating results of the Company including wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Such estimates include but are not limited to estimated losses on accounts receivable, inventory reserves, undiscounted future cash flows and the fair value of assets or asset groups for the purpose of assessing impairment of long-lived assets, liabilities for contingencies, equity-based compensation, estimates for sales returns and related allowance, and deferred revenue. Actual results could differ materially from those estimates. Revenue from Contracts with Customers The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers , or Accounting Standards Codification 606 (“ASC 606”) on January 1, 2019. There were no impacts to the timing of revenue recognition upon the adoption of the standard. Revenue is recognized when, or as, control of a promised product or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products. Revenue also excludes any amounts collected on behalf of third parties, including sales and indirect taxes. Revenue recognition is evaluated through the following five steps: 1. Identification of the contract with a customer; 2. Identification of the performance obligations in the contract; 3. Determination of the transaction price; 4. Allocation of the transaction price to the performance obligations in the contract; and 5. Recognition of revenue when or as a performance obligation is satisfied. F-7 Table of Contents Sources and Timing of Revenue The Company’s revenue is derived primarily from product sales through its e-commerce websites and direct to businesses. In addition, the Company derives revenues from company-operated store locations, and franchise and license agreements. Revenues from the sale of products and merchandise are recognized when control of the product passes to the customer, typically at the date of delivery of the merchandise to the customer and in an amount that reflects the expected consideration to be received in exchange for such goods. As such, customer orders are recorded as deferred revenue prior to delivery of products. As the Company ships high volumes of packages through multiple carriers, it is not practical for the Company to track the actual delivery date of each shipment. Therefore, the Company uses estimates to determine which shipments are delivered and, therefore, recognize revenue at the end of the period. Delivery date estimates are based on average transit times calculated based on factors such as the type of carrier, the fulfillment source, the delivery destination and historical transit time experience. Actual shipping times may differ from the Company’s estimates. Costs to obtain or fulfill a contract with a customer are expensed as incurred and are generally not significant. Revenues from company-operated stores are recognized when payment is tendered at the point of sale as the performance obligation has been satisfied. Store revenues are reported excluding sales, use or other transaction taxes that are collected from customers and remitted to taxing authorities. Deferred Revenue Deferred revenue consists of amounts billed to or received from customers prior to delivery of products. The Company recognizes such amounts in revenues as the product is delivered. Gift Cards Gift cards are offered through the Company’s e-commerce websites through the form of an e-certificate. When a gift card is purchased, the Company recognizes a corresponding liability for the full amount of the gift card, which is recorded in “Deferred revenue and gift card liability” on the consolidated balance sheets. Gift cards can be redeemed online and on the Company’s website. When a gift card is redeemed, the Company reduces the corresponding liability and recognizes revenue. There are no expiration dates to the gift cards. While the Company will continue to honor all gift cards presented for payment, the Company may determine the likelihood of redemption, based on historical experience, is deemed to be remote for certain cards due to long periods of inactivity. In these circumstances if the Company also determines there is no requirement for remitting balances to government agencies under unclaimed property laws, unredeemed card balances may then be recognized as breakage income, which is included in Revenue, net on the consolidated statements of operations. The Company recorded no breakage income for the years ended December 31, 2021, 2020 and 2019. Loyalty Rewards Program In August 2020, BRCC established its BRCC Loyalty Points rewards program (the “Loyalty Program”), which is primarily a spend-based program. BRCC’s customers who establish an online account are enrolled in the Loyalty Program. Under the program, there are two levels in which customers can participate. Subscription customers (in the BRCC Coffee Club or subscribed to another subscription product type) are considered to be in the highest tier and earn 3 % on purchases. Non-subscription customers earn 1 % on purchases. In addition, to earning points on purchases, customers can earn points through other activities. BRCC reserves the right in its sole discretion to modify, change, add, or remove activities which can be accomplished to earn points at any time. Under the Loyalty Program, customers may redeem rewards as they reach minimum thresholds per reward. BRCC reserves the right to modify, change, add, or remove rewards and their points thresholds at any time. BRCC loyalty points will expire if there is no account activity (i.e., if there is no new purchase made or order placed) in a period of twelve months. Conversion of rewards are non-changeable after redemption, have no cash value, and are non-transferrable. A portion of rewards are expected to expire and not be redeemed and will be recognized as breakage income over time. Based on historical expiration rates, the Company estimates a certain percentage of rewards to expire and reassesses this estimate on a quarterly basis. The Company recognized $ 368 in breakage income for the year ended December 31, 2021, which was included in “Revenue, net” on the consolidated statement of operations. The Company recorded no breakage income for the years ended December 31, 2020 and 2019. The Company defers revenue associated with the points earned through purchases that are expected to be redeemed, net of estimated unredeemed loyalty points. When a customer redeems an earned reward, the Company recognizes revenue for the redeemed F-8 Table of Contents product and reduces the related deferred revenue liability. The deferred revenue liability is included in “Deferred revenue and gift card liability” on the consolidated balance sheets. For those points that are earned through other activities, the Company recognizes the redemption of these points as a discount to the transaction price at time of sale. The following table provides information about deferred revenue, gift cards, and Loyalty Program, including significant changes in deferred revenue balances during the years ended December 31, 2021 and 2020: ​ ​ ​ ​ ​ January 1, 2020 $ 1,300 Sales of gift cards ​ 512 Redemption of gift cards ​ ( 319 ) Increase from deferral of revenue ​ 3,383 Decrease from revenue recognition ​ ( 1,107 ) Loyalty Program points earned ​ ​ 891 Loyalty Program points redeemed ​ ​ ( 45 ) December 31, 2020 ​ $ 4,615 Sales of gift cards ​ 838 Redemption of gift cards ​ ( 458 ) Increase from deferral of revenue ​ 3,750 Decrease from revenue recognition ​ ( 3,507 ) Loyalty Program points earned ​ 3,194 Loyalty Program points redeemed/expired and breakage ​ ( 1,098 ) December 31, 2021 ​ $ 7,334 ​ Franchise Store Revenues Franchise rights may be granted through franchise agreements that set out the terms of the arrangement with the franchisee. The franchise agreements require that the franchisee remit continuing fees to the Company as a percentage of the applicable store’s revenues in exchange for the license of the intellectual property associated with BRCC’s brands. In addition, a portion of these fees are used for national marketing campaigns. Continuing fees represent a portion of the consideration the Company receives under the franchise agreement. Continuing fees are typically billed and paid monthly. Continuing fees are recognized as the related store sales occur. Under the franchise agreement, BRCC sells product to its franchisees. The revenue associated with these product sales are recognized when control of the product passes to the franchisee, typically at the date of delivery of the merchandise to the franchisee and in an amount that reflects the expected consideration to be received in exchange for such goods. The franchise agreements also typically require upfront franchise fees such as initial fees paid for the execution of a franchise agreement. The fees associated with these agreements are typically billed and paid when a new franchise agreement becomes effective. The Company has determined that the services it provides in exchange for upfront franchise fees, which primarily relate to pre-opening support, are highly interrelated with the franchise right and are not individually distinct from the ongoing services provided to the Company’s franchisees. As a result, upfront franchise fees are recognized as revenue over the term of each respective franchise agreement, generally 10 years . Revenues for these upfront franchise fees are recognized on a straight-line basis, which is consistent with the franchisee’s right to use and benefit from the intellectual property. Revenues from continuing fees and upfront franchise fees are presented within Revenue in the consolidated statements of operations. License Revenues License rights may be granted through license agreements that set out the terms of the Company’s arrangement with the licensee. The Company’s license agreements require that the licensee remit continuing fees to the Company as a percentage of the applicable store’s revenues in exchange for the license of the intellectual property associated with BRCC’s brands. In addition, licensed store revenues consist of product sales to the licensee. The revenue associated with these product sales are recognized when control of the product passes to the licensee, typically at the date of delivery of the merchandise to the licensee and in an amount that reflects the expected consideration to be received in exchange for such goods. Continuing fees are recognized as the related store sales occur. F-9 Table of Contents The Company’s license agreements also typically require upfront license fees such as initial fees paid for the execution of a license agreement. The fees associated with these agreements are typically billed and paid when a new license agreement becomes effective. The Company has determined the services it provides in exchange for upfront license fees, which primarily relate to initial license set up and are not individually distinct from the ongoing services it provides to its licensees. As a result, upfront license fees are recognized as revenue over the term of each respective license agreement, generally 10 years . Revenues for these upfront license fees are recognized on a straight-line basis, which is consistent with the licensee’s right to use and benefit from the intellectual property. Revenues from continuing fees and upfront license fees are presented within “Revenue, net” in the consolidated statements of operations. Disaggregation of Revenue The Company disaggregates revenue by sales channel. The Direct to Consumer channel is principally comprised of revenue from our e-commerce websites and subscription services directly to the consumer. The Wholesale channel includes product revenue sold to an intermediary and not directly to the consumer. The Outpost channel includes revenue from company-operated stores, gift cards, franchise store and licensing. The following table disaggregates revenue by sales channel: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 ​ 2021 2020 2019 Direct to Consumer ​ $ 165,299 ​ $ 137,724 ​ $ 73,590 Wholesale ​ 55,761 ​ 23,351 ​ 7,717 Outpost ​ 12,041 ​ 2,834 ​ 821 Total net sales ​ $ 233,101 ​ $ 163,909 ​ $ 82,128 ​ Substantially all revenue is attributed from customers located in the United States and no single customer represents more than 10 % of revenue for the years ended December 31, 2021, 2020 and 2019. Sales Returns and Discounts The Company’s product sales contracts include terms that could cause variability in the transaction price for items such as discounts, credits, charge backs, or sales returns. Accordingly, the transaction price for product sales includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur. The Company inspects returned items when they arrive at its processing facilities. The Company refunds the full cost of the merchandise returned if the returned item is defective or the Company or its partners have made an error, such as shipping the wrong product. If the return is not a result of a product defect or a fulfillment error and the customer initiates a return of an unopened item within 30 days of delivery, for most products the Company refunds the full cost of the merchandise minus the original shipping charge and actual return shipping fees. If the customer returns an item that has been opened or shows signs of wear, the Company issues a partial refund minus the original shipping charge and actual return shipping fees. Coffee products are not eligible for returns. Revenue is recorded net of estimated returns. The Company records an allowance for returns based on current period revenues and historical returns experience. The Company analyzes actual historical returns, current economic trends and changes in order volume and acceptance of its products when evaluating the adequacy of the sales returns allowance in any accounting period. The allowance for sales returns and charge backs was $ 199 and $ 205 as of December 31, 2021 and 2020, respectively, and included in accounts receivable. Shipping and Handling Fees and Costs Shipping and handling is considered a fulfillment activity, as it takes place prior to the customer obtaining control of the merchandise, and fees charged to customers are included in net revenue upon completion of the performance obligation. Segment Information The Company reports operations as a single reportable segment and manages the business as a single-brand consumer products business. This is supported by the operational structure, which includes sales, product design, operations, marketing, and F-10 Table of Contents administrative functions focused on the entire product suite rather than individual product categories or sales channels. Our chief operating decision maker reviews financial information on a consolidated basis and does not regularly review financial information for individual sales channels, product categories or geographic regions that would allow decisions to be made about allocation of resources or performance. Cost of Goods Sold Cost of goods sold includes product costs, labor costs, occupancy costs, outbound shipping costs, handling and fulfillment costs, credit card fees, and royalty fees, and is recorded in the period incurred. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents also include proceeds due from credit card transactions with settlement terms of less than five days . The Company maintains cash and cash equivalent balances with financial institutions that exceed federally insured limits. The Company has not experienced any losses related to these balances, and it believes credit risk to be minimal. The Company’s restricted cash balance reflected a certificate of deposit related to a letter of credit established in conjunction with the execution of a building lease agreement. The requirement under the lease was waived in 2021 and the cash is no longer restricted. In May 2021, the letter of credit was terminated. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets to the total amounts reported in the statements of cash flows. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 December 31, 2020 Cash ​ $ 17,329 ​ $ 34,207 Proceeds from credit card transactions in transit-holding cash accounts ​ 1,005 ​ 1,025 Restricted cash ​ — ​ 400 Total cash and cash equivalents and restricted cash ​ $ 18,334 ​ $ 35,632 ​ Accounts Receivable Accounts receivable consist primarily of trade amounts due from business customers at period end. Accounts receivable are recorded at invoiced amounts and do not bear interest. From time to time, the Company grants credit to some of its business customers on normal credit terms. The Company maintains an allowance for doubtful accounts receivable based upon its business customers’ financial condition and payment history, and its historical collection experience and expected collectability of accounts receivable. The allowance for doubtful accounts receivable was $ 112 and $ 176 as of December 31, 2021 and 2020, respectively. Inventories Inventories are stated at the lower of standard cost, which approximates First In , First Out (FIFO), or net realizable value. The Company records inventory reserves for obsolete and slow-moving inventory. Inventory reserves are based on inventory obsolescence trends, historical experience and application of the specific identification method. Finished goods includes allocations of labor and occupancy expenses. Property and Equipment Property and equipment are stated at cost with depreciation calculated using the straight-line method over the estimated useful lives of the related assets or the term of the related capital lease, whichever is shorter. Leasehold improvements are amortized over the shorter of the term of the related leases or estimated useful lives. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in earnings for the period. The cost of maintenance and repairs are charged to earnings as incurred; significant renewals and improvements are capitalized. F-11 Table of Contents Estimated useful lives are as follows: ​ ​ ​ ​ ​ ​ Estimated ​ Useful Lives Land — Building and Leasehold improvements 5 – 39 years Computer equipment and software 3 years Machinery and equipment 5 – 15 years Vehicles 5 years ​ Internal Use Software In accordance with ASC 350-40, Intangibles — Goodwill and Other, Internal-Use Software (ASC 350-40), the Company capitalizes qualifying internal use software costs that are incurred during the application development stage if management with the relevant authority authorizes the project, it is probable the project will be completed, and the software will be used to perform the function intended. Capitalized internal use software costs are reported in property and equipment on the consolidated balance sheets and are amortized over the expected economic life of three years using the straight-line method once the software is ready for intended use. Costs incurred for enhancements that are expected to result in additional significant functionality are capitalized and amortized over the estimated useful life of the enhancement. Costs related to preliminary project activities and post-implementation activities, including training and maintenance, are expensed as incurred. Capitalized software costs net of accumulated amortization are included as a component of property and equipment in the consolidated balance sheets. Impairment of Long-Lived Assets The Company reviews the recoverability of its long-lived assets, such as property and equipment and identifiable intangible assets, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset or asset group from the expected future undiscounted pre-tax cash flows of the related operations. If these undiscounted cash flows are less than the carrying amount of the related asset, an impairment is recognized for the excess of the carrying value over its fair value. No impairment loss was recognized for the years ended December 31, 2021, 2020 and 2019. Leases The Company leases certain property and equipment under non-cancelable capital and operating leases which expire at various dates through 2026. The Company’s operating leases relate to roasting facilities in Tennessee and retail stores. At the inception of each lease, the Company determines the appropriate classification for each lease as operating or capital. The Company has estimated that the lease term for retail stores, including reasonably assured renewal periods, is generally 10 years . Any initial direct costs are capitalized and amortized over the life of the lease. Operating Leases Operating leases can contain escalating rentals over the lease term, as well as optional renewal periods. Rent expense for operating leases is recorded on a straight-line basis over the lease term and begins when the Company has the right to use the property. Any difference between rent expense and cash payment is recorded as deferred rent on the accompanying consolidated balance sheets. Tenant incentives used to fund leasehold improvements are recorded in deferred rent and amortized as reductions to rent expense over the term of the lease. Capital Leases Property under capital leases is stated at the net present value of the related minimum lease payments at lease inception and amortized over the initial lease term. F-12 Table of Contents Income Taxes The Company was formed as an LLC in the state of Delaware and thus is not subject to federal income taxes; therefore, its pro rata share of income, losses and tax credits are reported by its members on their individual income tax returns. However, the Company is subject to state income taxes in various states in which it operates. The Company applies guidance issued by FASB which clarifies accounting for uncertainty in income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the consolidated financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. The Company has completed an analysis of its tax positions and believes there are no uncertain tax positions that would require recognition in the consolidated financial statements as of December 31, 2021, 2020 and 2019. The Company believes that there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within twelve months of the reporting date. The federal income tax position taken for each of the subsidiaries organized as LLC’s for any years open under the various statutes of limitations is that they will continue to be exempt from income taxes by virtue of being a pass-through entity. The statute of limitations for federal income tax returns are open from the period ended December 31, 2018. The statute of limitations for the state income tax returns are generally open from the period ended December 31, 2017. Equity-Based Compensation The Company recognizes the cost of equity-based restricted and incentive unit awards based on the fair value estimated in accordance with FASB ASC 718, Stock Based Compensation (ASC 718). The Company records equity-based compensation expense based on the fair value of equity awards at the grant date and recognizes compensation expense on a straight-line basis over the requisite service period. The assumptions used to calculate the fair value of equity awards granted are evaluated and revised, as necessary, to reflect the Company’s historical experience and current market conditions. For more information, see Note 11, Equity-Based Compensation. Concentrations of Credit Risk The Company’s assets that are potentially subject to concentrations of credit risk are cash and accounts receivable. Cash balances are maintained in financial institutions which at times exceed federally insured limits. The Company monitors the financial condition of the financial institutions in which its accounts are maintained and has not experienced any losses in such accounts. The accounts receivable of the Company are spread over a number of customers, of which one customer accounted for 19 % of total outstanding receivables as of December 31, 2021 and two customers accounted for 54 % of total outstanding receivables as of December 31, 2020. The Company performs ongoing credit evaluations as to the financial condition of its customers and creditors with respect to trade accounts. Marketing and Advertising Expenses The Company’s marketing and advertising expenses are primarily internet marketing expenses, commercial sponsorships and advertising time slots. Marketing expenses are recognized as incurred based on the terms of the individual agreements, which are generally, but not limited to: a commission for traffic driven to its websites that generate a sale, programmatic targeting advertisements, national television and radio advertisements, or payments to social media influencers. We may also enter into marketing service agreements with third party production and content providers where we prepay for certain services or deliverables. Prepaid marketing and advertising expenses totaled $ 1,941 and $ 93 for the years ended December 31, 2021 and 2020, respectively. Fair Value Measurements The Company’s financial instruments consist primarily of accounts receivable, accounts payable and long-term debt. The carrying amounts of accounts receivable and accounts payable are representative of their respective fair values due to the short-term maturity of these instruments. The fair value of variable rate long-term debt is based upon the current market rates for debt with similar credit risk and maturity, which approximated its carrying value, as interest is based upon the LIBOR or Prime rates plus an applicable floating F-13 Table of Contents margin. In measuring fair value, the Company reflects the impact of credit risk on liabilities, as well as any collateral. The Company also considers the credit standing of counterparties in measuring the fair value of assets. The Company uses any of three valuation techniques to measure fair value: the market approach, the income approach, and the cost approach in determining the appropriate valuation technique based on the nature of the asset or liability being measured and the reliability of the inputs used in arriving at fair value. The Company follows the provisions of ASC 820, Fair Value Measurements (ASC 820) for non- financial assets and liabilities measured on a non-recurring basis. The inputs used in applying valuation techniques include assumptions that market participants would use in pricing the asset or liability (i.e., assumptions about risk). Inputs may be observable or unobservable. The Company uses observable inputs in the Company’s valuation techniques and classifies those inputs in accordance with the fair value hierarchy established by applicable accounting guidance, which prioritizes those inputs. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels are defined as follows: Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Redeemable Preferred Equity The Company accounts for its preferred equity as temporary equity, given the Series A preferred units are probable of becoming redeemable (i.e., exercise of the exit rights is the passage of time). The Series A preferred units are subsequently remeasured by accreting changes in the redemption value from the date of issuance to the expected redemption date using the effective interest method. The Series A preferred units were redeemed in February 2022. For more information, see Note 14, Subsequent Events . Comprehensive Income (Loss) Comprehensive income (loss) is equivalent to net income (loss) in each of the periods presented. As such, no statement of comprehensive income (loss) is presented. New Accounting Pronouncements In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15) . Under the new guidance, a customer in a cloud computing arrangement that is a service contract is required to follow the internal use software guidance in ASC 350-40. The internal use software guidance requires the capitalization of certain costs incurred only during the application development stage. It also requires entities to expense costs during preliminary project and post-implementation stages. The guidance requires a customer to present the expense related to capitalize implementation in the same line in the income statement as the fees associated with the hosting element of the arrangement, present the capitalized implementation costs in the same line item in the statement of financial position that a prepayment of the fees for the associated hosting arrangement would be presented and classify payment for capitalized implementation costs in the statement of cash flows in the same manner as payments of the fees for the service component of the hosting arrangement. The guidance requires entities to disclose the nature of their hosting arrangements that are service contracts and make the disclosures in ASC 360-10, Impairment and Disposal of Long-Lived Assets , as if capitalized implementation costs were a F-14 Table of Contents separate major class of depreciable asset. For non-public entities, ASU 2018-15, is effective for annual periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption was permitted. The Company adopted ASU 2018-15 for the year ended December 31, 2020. In February 2016, the FASB issued ASU 2016-02, Leases (Subtopic 842) . Under the guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current US GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current US GAAP, which requires only capital leases to be recognized on the balance sheet, ASU 2016-02 will require both types of leases to be recognized on the balance sheet. ASU 2016-02 also will require disclosures to help investors and other financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The guidance is effective for the Company for the year beginning after December 15, 2021. Early adoption of the amendments of ASU 2016-02 is permitted for all entities is to be applied using the modified retrospective approach. The Company will adopt ASU 2016-02 as of January 1, 2022. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application. Upon adoption, the Company expects to apply the practical expedients permitted within the new standard, which among other things, allows the Company to retain its existing assessment of whether an arrangement is, or contains, a lease and is classified as an operating or finance lease. The Company will make an accounting policy election that will keep leases with an initial term of twelve months or less off of the balance sheet and will result in recognizing those lease payments in the consolidated statement of operations on a straight-line basis over the lease term. The Company is in the process of analyzing its lease portfolio and continues to evaluate the full impact of the new standard. The Company expects to recognize material right-of-use assets and related liabilities on the Company’s consolidated balance sheet. 3. Product Sales and Marketing Services Agreement The Company entered into a product sales and marketing services agreement (the “Agreement”) with a large retailer to sell select coffee products and merchandise items to the retailer to be sold in the retailer’s stores and website. The Agreement was effective January 28, 2020 and is to continue through April 2, 2025 (the “Initial Term”). After the Initial Term, the agreement automatically renews for an additional two years until terminated in accordance with its terms. The revenues associated to product sales to the retailer are recognized when control of the product passes to the retailer, typically at the date of delivery of the merchandise to the retailer and in an amount that reflects the expected consideration to be received in exchange for such goods. In addition to product sales, the Agreement provides a licensing agreement with the retailer and its suppliers. The licensing agreement provides the retailer and its suppliers license rights to the intellectual property of select BRCC brands. These license rights provide the retailer the ability to manufacture its own BRCC branded soft goods and hard goods. License fees are recognized as the related purchases occur by the retailer. For the year ended December 31, 2021, the Company’s revenues related to the Agreement for product sales and license fees were $ 8,121 and $ 1,111 , respectively. For the year ended December 31, 2020, the Company’s revenues related to the Agreement for product sales and licenses fees were $ 7,133 and $ 428 , respectively. As part of the Agreement, the Company entered into a marketing services agreement , which is effective through April 2, 2025. As part of the marketing services agreement, the Company granted 5,430 Class B common units in the Company which vest over a 30 -month period from date of grant. The equity grant date is January 28, 2020, and total expense related to the equity award is expected to be $ 3,725 . In December 2021, the Agreement was amended to reduce the marketing service fees paid to the retailer over the term of the Agreement. The Company has accrued marketing expenses relating to the Agreement of $ 950 and $ 2,835 at December 31, 2021 and 2020, respectively. For the years ended December 31, 2021 and 2020, the Company recognized marketing expenses of $ 1,606 and $ 2,138 , respectively. F-15 Table of Contents The following is the amended future minimum cash payments due to the retailer: ​ ​ ​ ​ ​ 2022 $ 1,000 2023 ​ $ 1,000 2024 ​ $ 1,000 2025 ​ $ 500 Total ​ $ 3,500 ​ The marketing services agreement is a separate distinct service from the product supply agreement. The Company will expense the costs associated with the agreement in accordance with applicable guidance related to similar transactions. ​ 4. Inventories Inventories consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 ​ 2021 2020 Coffee: ​ ​ ​ ​ Unroasted ​ $ 2,578 ​ $ 2,054 Finished Goods ​ 6,681 ​ 6,091 Ready-to-Drink ​ 3,727 ​ 2,672 Apparel and other merchandise ​ 7,886 ​ 5,224 Inventories ​ $ 20,872 ​ $ 16,041 ​ 5. Property and Equipment, Net and Other Assets Property and equipment, net consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 ​ 2021 2020 Land ​ $ 2,196 ​ $ 2,086 Building and leasehold improvements ​ 11,273 ​ 5,291 Computer equipment and software ​ 3,474 ​ 1,944 Machinery and equipment ​ 8,323 ​ 4,808 Vehicles ​ 1,057 ​ 721 Furniture and Fixtures ​ 961 ​ 714 Construction in progress ​ 9,236 ​ 1,953 ​ ​ 36,520 ​ 17,517 Less: accumulated depreciation and amortization ​ ( 5,406 ) ​ ( 2,803 ) Property and Equipment, net ​ $ 31,114 ​ $ 14,714 ​ The portion of depreciation expense related to production and distribution facilities is included in cost of goods sold including occupancy costs on the consolidated statements of operations. Depreciation expense recorded in cost of goods sold and general and administrative expenses was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 ​ 2021 2020 2019 Cost of goods sold ​ $ 773 ​ $ 586 ​ $ 417 General and administrative ​ 2,073 ​ ​ 764 ​ ​ 494 Total depreciation expense ​ $ 2,846 ​ $ 1,350 ​ $ 911 ​ The total depreciation expense for internal use software included in the above table was $ 798 , $ 138 and $ 0 for the years ended December 31, 2021, 2020 and 2019, respectively. Substantially all long-lived assets are located in the United States. F-16 Table of Contents Other Assets In August 2021, the Company entered into an agreement with a related party, whereby the Company agreed to reimburse the related party for initial direct costs incurred totaling $ 1,000 for establishing retail coffee shop locations in the Phoenix, Arizona metropolitan area. After additional site evaluation in the fourth quarter 2021, the direct costs were subsequently written down to $ 571 as some locations will not be utilized and are included in Other assets for the respective retail coffee shops and will be amortized over the life of the completed lease agreements. ​ 6. Accrued Liabilities Accrued liabilities consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 ​ 2021 2020 Accrued compensation and benefits ​ $ 2,799 ​ $ 5,159 Accrued marketing ​ 3,323 ​ 4,304 Accrued Series A preferred equity distribution ​ 2,650 ​ 438 Accrued freight ​ 1,912 ​ 1,394 Accrued sales taxes ​ ​ 1,364 ​ ​ 1,387 Credit card liabilities ​ 4,759 ​ 1,340 Other accrued expenses ​ 5,426 ​ 2,041 Total ​ $ 22,233 ​ $ 16,063 ​ ​ 7. Long-Term Debt The Company’s credit facilities and related balances were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 ​ 2021 2020 Mortgages ​ $ 7,380 ​ $ 5,423 Equipment financing loan ​ 5,067 ​ 1,007 Retail facility ​ ​ 1,904 ​ ​ — Loan and security agreement ​ — ​ 6,500 Credit facility ​ ​ 8,000 ​ ​ — Promissory note ​ 10,000 ​ — Notes payable ​ 2,779 ​ 565 Total principal ​ 35,130 ​ 13,495 Less debt issuance costs ​ ( 439 ) ​ ( 459 ) Long-term debt, net ​ $ 34,691 ​ $ 13,036 Current maturities: ​ ​ Current maturities of principal ​ 12,273 ​ 1,030 Less current portion of debt issuance costs ​ ( 294 ) ​ ( 164 ) Current maturities of long-term debt, net ​ 11,979 ​ 866 Long-term debt: ​ ​ Non-current principal ​ 22,857 ​ 12,465 Non-current portion of debt issuance costs ​ ( 145 ) ​ ( 295 ) Long-term debt, net ​ $ 22,712 ​ $ 12,170 ​ F-17 Table of Contents Future contractual maturities of credit facilities as of December 31, 2021 are as follows: ​ ​ ​ ​ ​ Year ending December 31: ​ 2022 ​ $ 12,273 2023 ​ 10,309 2024 ​ 2,065 2025 ​ 6,320 2026 ​ 2,577 Thereafter ​ 1,586 ​ ​ $ 35,130 ​ Debt Issuance Costs The Company capitalizes fees associated with the origination of its credit facilities which are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the related loans. The debt issuance costs are amortized using the effective interest method. The Company incurred debt issuance costs of $ 338 and $ 592 for the years ended December 31, 2021 and 2020, respectively. Amortization of the debt issuance costs for the years ended December 31, 2021, 2020 and 2019 was $ 358 , $ 133 and $ 314 , respectively, and are included in interest expense in the consolidated statements of operations. Mortgages In July 2020, the Company entered into mortgage loan agreements to refinance the purchase of buildings for a total of $ 5,500 at an interest rate of 3.67 % per annum. The loans are secured by the real property financed. The loans mature on July 29, 2025. The loans are payable in monthly installments of principal and interest of $ 32 commencing on August 29, 2020. In April 2021, the Company entered into a mortgage loan agreement to purchase a building for a total of $ 2,200 at an interest rate of 3.60 % per annum. The loan is secured by the real property financed. The loan matures on April 29, 2026. The loan is payable in monthly installments of principal and interest of $ 13 that commenced on May 29, 2021. The mortgage loans require quarterly financial covenants related to cash flows, dividends and distributions. As of December 31, 2021, the Company was in compliance with all covenants related to these mortgage loan agreements. Equipment Financing Loan In July 2020, the Company entered into an equipment financing agreement which provided a credit line totaling $ 3,250 at an interest rate of LIBOR plus 3.5 %. The credit line is secured by the equipment financed. The equipment financing agreement matures the earlier of (i) five years subsequent to the equipment project completion or (ii) August 1, 2026. In April 2021, the Company increased its equipment credit line by $ 10,000 . Further, in July 2021, an additional $ 6,000 was added to the available credit on the equipment finance loan. In September 2021, $ 1,998 outstanding on the equipment credit line was converted to a 60-month term loan at an interest rate of 4.05 % to be utilized for retail expansion (Retail Facility). As of December 31, 2021, the Company has available credit under the equipment credit line and Retail Facility of $ 8,183 and $ 4,096 , respectively. Loan and Security Agreement and Credit Facility In January 2020, the Company entered into a Loan and Security Agreement which provided two funding tranches to the Company, Term A and Term B. Term A was for $ 4,000 and was immediately available to be drawn. Term B was for $ 6,000 in which funds could be withdrawn monthly in minimum installments of $ 500 . After repayment, no funds could be reborrowed. In April 2021, the Company entered into a $ 10,000 revolving line of credit agreement (“Credit Facility”). Borrowings under the Credit Facility were used to pay off the Loan and Security Agreement of $ 6,500 . F-18 Table of Contents In November 2021, the Company entered into an amendment to increase the Credit Facility to $ 25,000 . Interest only payments are due and payable in installments commencing November 30, 2021 and continue regularly until the entire amount outstanding is due on June 30, 2023. Borrowings under the Credit Facility are subject to a borrowing base on qualified collateral values. As of December 31, 2021, the interest rate for the Credit Facility was the Prime rate plus 1 % and the amount of borrowings available was $ 1,771 . Promissory Note In November 2021, the Company entered into a revolving loan agreement to borrow an aggregate principal amount not to exceed $ 15,000 (the “Promissory Note”). The Promissory Note matures on June 30, 2022 (“Initial Maturity”) with an option to extend the term by one year to June 30, 2023 (“Extended Maturity”). The Promissory Note accrues interest of 7 % per annum until Initial Maturity and then 12 % per annum until the Extended Maturity. As of December 31, 2021, the amount of borrowings available was $ 5,000 . Notes Payable As discussed in Note 9, in December 2019, the Company entered into a note payable agreement for $ 1,000 due January 5, 2022. The note was payable in monthly installments of principal and interest of $ 46 and carried an interest rate of 9.0 %. The note was fully repaid in December 2021. In May 2021, the Company entered into a note payable agreement for $ 365 at an interest rate of 1.07 % per annum. The note matures on May 14, 2025. The loan is payable in four annual installments of principal commencing in May 2021. As of December 31, 2021, the outstanding balance on this note payable is $ 273 . In July and September 2021, the Company entered into note payable agreements for $ 2,588 at an interest rate of approximately 1 % per annum to repurchase incentive units from former employees. The notes are payable in four annual installment payments. As of December 31, 2021, the outstanding balance on this note payable is $ 2,506 . ​ 8. Commitments and Contingencies Leases The Company leases certain property and equipment under non-cancelable capital and operating leases which expire at various dates through 2026. The Company’s operating leases relate to roasting facilities in Tennessee and retail stores. In June 2018, the Company entered into a lease agreement to lease equipment for $ 1,863 at an implicit interest rate of 6.6 % (the “Machinery and Equipment Lease”). The lease maturity was October 31, 2022 and was secured by the assets purchased. The lease was accounted for as a capital lease due to the present value of minimum lease payments being greater than 90% value of the assets. In August 2021, the Company borrowed $ 1,226 under the Equipment financing loan to buyout the equipment pledged under the Machinery and Equipment Lease. The Company incurred $ 726 of debt extinguishment cost representing the difference between the lease liability and the fair value of the machinery and equipment. The debt extinguishment cost is reported in interest expense in the consolidated statement of operations. The Company has vehicle leases that are accounted for as capital leases based on the lease term representing greater than 75% of the economic life of the assets. The period of these leases is between 60 and 72 months and have interest rates between 3.9 % and 12.6 %. Total rent expense for the years ended December 31, 2021, 2020 and 2019 was $ 1,224 , $ 820 and $ 675 , respectively. F-19 Table of Contents Future minimum lease payments under non-cancelable operating leases are as follows: ​ ​ ​ ​ ​ ​ Operating Year ending December 31: ​ 2022 ​ $ 2,966 2023 ​ 3,233 2024 ​ 3,381 2025 ​ 3,323 2026 ​ 3,358 Total minimum lease payments ​ $ 16,261 ​ Future minimum lease payments under non-cancelable capital leases are as follows: ​ ​ ​ ​ ​ ​ Capital Year ending December 31: ​ 2022 ​ $ 106 2023 ​ 95 2024 ​ 102 2025 ​ 50 2026 ​ 4 Total minimum lease payments ​ $ 357 Less: amount representing interest ​ 44 Present value of net minimum lease payments ​ 313 Less: current portion ​ 85 Capital lease obligations, net of current maturities ​ $ 228 ​ The following describes property and equipment which have been classified as capital leases: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31 ​ 2021 2020 Vehicles ​ $ 433 ​ $ 481 Machinery and equipment ​ — ​ 1,732 ​ ​ 433 ​ 2,213 Less: accumulated amortization ​ 186 ​ 801 Total ​ $ 247 ​ $ 1,412 ​ Depreciation expense of assets recorded under capital leases totaled $ 256 , $ 321 and $ 302 for the years ended December 31, 2021, 2020 and 2019, respectively. Purchase Agreements In September 2021, the Company entered into a manufacturing and purchase agreement to purchase canned beverage product from a third-party supplier. The initial term ends on December 31, 2023, and automatically renews for two consecutive year periods, unless either party provides notice of cancellation at least 120 days prior to the end of the current term. The minimum purchase amount carries a minimum surcharge of approximately $ 2,250 through December 31, 2022. In November 2021, the Company entered into a manufacturing and purchase agreement to purchase coffee product from a third-party supplier. The term remains in effect until December 31, 2023. The minimum purchase amount is based on quantity and will range from approximately $ 8,800 to $ 10,400 on an annual basis. Contingencies The Company is the subject of various legal actions in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to such lawsuits, the Company accrues reserves when it is probable a liability F-20 Table of Contents has been incurred and the amount of loss can be reasonably estimated. The Company does not believe any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on results of operations, cash flows or financial condition. The Company could be subject to additional sales tax or other tax liabilities. Based on the 2018 Supreme Court decision in South Dakota v. Wayfair Inc. , an increasing number of states have considered or adopted laws or administrative practices, with or without notice, that impose new taxes on remote sellers to collect transaction taxes such as sales, consumption, or similar taxes. Failure to comply with such laws or administrative practices, or a successful assertion by such states requiring the Company to collect taxes where it does not, could result in substantial tax liabilities, including for past sales, as well as penalties and interest. New taxes could also create significant increases in internal costs necessary to capture data and collect and remit taxes. Furthermore, more jurisdictions are considering laws or administrative practices to assess new taxes on all or a portion of gross revenue or other similar amounts. The Company follows the guidelines of ASC 450, Accounting for Contingencies , and the consolidated financial statements reflect the current impact of such legislation through the Company’s best estimates. However, any of these events could have a material effect on the Company’s business and operating results depending on the previous periods of applied enforcement by certain jurisdictions. The Company is also subject to U.S. (federal and state) laws, regulations, and administrative practices that require us to collect information from its customers, vendors, merchants, and other third parties for tax reporting purposes and report such information to various government agencies. The scope of such requirements continues to expand, requiring us to develop and implement new compliance systems. Failure to comply with such laws and regulations could result in significant penalties and interest which might have an adverse effect on the Company’s business and operating results. The Company has accrued $ 326 and $ 628 related to potential sales and other tax exposure as of December 31, 2021 and 2020, respectively, which is included in accrued liabilities on the accompanying consolidated balance sheets. ​ 9. Members’ Equity Members’ equity consists of Class A common units, Class B common units, and incentive units discussed in Note 11. The details of the Class A common units and the Class B common units outstanding were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Class A ​ Class B ​ ​ ​ ​ Common ​ Common ​ ​ ​ Units Units Total Outstanding, January 1, 2019 20,000 94,286 114,286 Repurchased — ( 5,714 ) ( 5,714 ) Outstanding, December 31, 2019 20,000 88,572 108,572 Issued — 8,855 8,855 Repurchased ( 1,231 ) ( 23,537 ) ( 24,768 ) Outstanding, December 31, 2020 and 2021 18,769 73,890 92,659 ​ There were no Class A common unit or Class B common unit transactions in 2021. Each Class A common unit entitles the holder to ten votes on any matter submitted to a vote of the members. Each Class B common unit entitles the holder to one vote on any matter submitted to a vote of the members. Profits and losses are allocated pro rata to each common unit holder and incentive unit holder whose participation threshold has been achieved. Upon a liquidation event, remaining available cash after distribution to Series A Preferred Equity holders is distributed pro rata to each common unit holder and incentive unit holder whose participation threshold has been met. On December 28, 2020, the Company entered into several equity repurchase agreements with several members. The purchase was funded through the proceeds of the Series A preferred units sale. The cash transferred to repurchase the units was equal to the units’ fair value at the time of the transaction, and no compensation expense was recorded. In December 2019, the Company entered into an equity repurchase agreement with one of its former members. The purchase was financed with a $ 1,000 long-term note payable due January 5, 2022 and a $ 1,000 current liability. The current liability was paid in 2020 and the note payable was fully repaid in December 2021. ​ F-21 Table of Contents 10. Series A Redeemable Preferred Equity On December 15, 2020, the Company entered into a purchase agreement under which various parties agreed to purchase 150,000 Series A preferred units and 3,425 Class B common units for an aggregate purchase price of $ 150,000 . The Company recorded the Series A preferred units and Class B common units at their relative fair values on the date of issuance, net of issuance costs. The Company classified the Series A preferred units outside of members’ deficit because, in the event certain circumstances occurred in connection with certain liquidation events, the shares would become redeemable at the option of the holders. Redemption Rights The Series A preferred units contain several redemption features that could result in the Company redeeming the Series A preferred units by transferring cash or other assets. Specifically, the following provisions could result in the Company redeeming the Series A preferred units by transferring assets: (i) The occurrence of a Liquidation Event (as defined below); (ii) In connection with a change of control; (iii) The preferred members exercising their rights under Exit Rights (as defined below); or (iv) The Company exercising its rights under Optional Redemption (as defined below). Voting Rights The Series A preferred units are not granted any voting rights. Conversion Rights The Series A preferred units do not provide the preferred members with any conversion rights. Dividend Rights The preferred members are entitled to Series A preferred distributions which are non-discretionary distributions that accrue (i.e., cumulative) at a stated Series A preferred distributions rate (i.e., increasing rate). Furthermore, in the event that the Series A preferred distributions are not paid within the specified timeframe, the Company is subject to a step-up rate (i.e., a penalty provision of an additional 3.0 %). Issuance of Additional Common Units So long as a new common member holds any Series A preferred units, such new common member will receive on each of December 31, 2022, December 31, 2023, and December 31, 2024 (each such date, a “Distribution Date”) such member’s pro rata share of additional Class B common units representing 1.00 % of post-distribution outstanding common units; provided, that, if the Series A preferred units are partially redeemed on or prior to a Distribution Date, the percentage of additional Class B common units to be issued to the new common member on such Distribution Date will be proportionately decreased to reflect the number of Series A preferred units outstanding on such Distribution Date as compared to the amount of Series A preferred units outstanding on December 15, 2020. Liquidation Event A Liquidation Event is defined as any liquidation, dissolution, or winding up, whether voluntary or involuntary of the Company or its subsidiaries; provided, that, in case of any involuntary event, such event is not cured within 60 days following its commencement. F-22 Table of Contents Any distributions in connection with a Liquidation Event will be made among members as follows: (i) First, to the preferred members, pari passu and pro rata based on the number of Series A preferred units held by each preferred member, until the aggregate amounts distributed to each preferred member is equal to the applicable redemption price payable at the time of such Liquidation Event; (ii) Second, an amount equal to the product of the remaining available cash after the distribution described in (i) above multiplied by the incentive unit factor will be distributed to the members holding vested units in proportion to the number of vested units held by each such member (provided, however, that the participation threshold for the incentive units has been achieved); (iii) Thereafter, an amount equal to the remaining available cash after the distribution described in (i) and (ii) above will be distributed to the holders of common units pro rata in accordance with their respective aggregate number of common units. Permitted Distributions Until April 15, 2021, the Company was permitted to make distributions with available cash and/or proceeds from the sale of Series A preferred units and Class B common units to the common members for a total amount of up to $ 135,000 , provided that the Company will have at least $ 30,000 of cash equivalents, after payment of up to $ 5,000 of fees and expenses. The Company paid distributions of $ 125,000 in December 2020. Distributions on Series A Preferred Units — Cumulative Cash Distributions After December 15, 2020, distributions at the Series A preferred Distributions Rate (defined below) will accrue on each Series A preferred unit. Series A preferred distributions accrue, whether or not declared, and are cumulative. Subject to the Company’s right to make Series A non-cash distribution elections during the period from December 15, 2020 to December 31, 2022, Series A preferred distributions will be payable in cash, in arrears on each Series A preferred distributions payment date. “Series A Preferred Distributions Rate” means (i) in the event distributions are made in cash, (a) 7.0 % per annum through December 31, 2021, (b) 7.5 % per annum from January 1, 2022 through December 31, 2022, (c) 8.0 % per annum from January 1, 2023 through December 31, 2023, (d) 8.5 % per annum from January 1, 2024 through December 31, 2024 and (c) 9.0 % per annum from January 1, 2025 through December 31, 2025, and (ii) in the event of a Series A non-cash distribution election and solely with respect to such non-cash portion, (a) 7.5 % per annum through December 31, 2021, (b) 8.0 % per annum from January 1, 2022 through December 31, 2022, (c) 8.5 % per annum from January 1, 2023 through December 31, 2023, (d) 9.0 % per annum from January 1, 2024 through December 31, 2024 and (c) 9.5 % per annum from January 1, 2025 through December 31, 2025, in each case of the Series A preferred issue amount as in effect for the applicable period. Distributions on Series A Preferred Units — Non-Cash Distributions The Company may, at the sole election of the board of directors, with respect to any Series A preferred distribution accrued until December 31, 2022, elect to have up to 50 % of the amount that would have been payable in cash if such distribution had been a cash distribution to instead be paid through the issuance to the preferred members of a number of Series A preferred units. In the event that the Company makes a Series A non-cash distribution election, the applicable Series A preferred distributions rate will increase by 50 basis points. As of December 31, 2021, the Company had elected to pay distributions in cash, except for the third quarter ending September 30, 2021 where the election was made to pay 50% in cash with the remaining to be paid through the issuance of additional Series A Preferred Units. Limitation on Debt For so long as last twelve months’ (“LTM”) earnings before taxes, depreciation, and amortization (“EBITDA”) is less than $20,000, the Company will not incur any debt, unless immediately after giving effect to the incurrence thereof, (i) the aggregate outstanding principal amount of all debt outstanding does not exceed $ 45,000 and (ii) debt incurred under any asset backed line of credit facility does not exceed $ 20,000 . F-23 Table of Contents For so long as LTM EBITDA equals to or exceeds $20,000, but is less than $25,000, the Company will not incur any debt, unless immediately after giving effect to the incurrence thereof, the aggregate outstanding principal amount of all debt outstanding does not exceed 300 % of LTM EBITDA. For so long as LTM EBITDA equals to or exceeds $25,000, the Company and its subsidiaries will not incur any debt, unless immediately after giving effect to the incurrence thereof, the aggregate outstanding principal amount of all debt outstanding does not exceed 400 % of LTM EBITDA. Exit Right Unless previously redeemed by the Company pursuant to Optional Redemption described below, at any time on or after December 31, 2025, any holder of Series A preferred units may redeem all or a portion of its outstanding Series A preferred units at a redemption price equal to 103.00 % of the total outstanding principal amount thereof, plus accrued and unpaid distributions, if any, to, but excluding, the redemption date. Optional Redemption At any time on or before December 31, 2022, the Company may elect at its sole discretion to redeem all or a portion of the outstanding Series A preferred units at a redemption price equal to 100 % of the total outstanding principal amount thereof plus the applicable premium as of, and accrued and unpaid distributions, if any, to, but excluding the redemption date. No applicable premium will be payable if the Series A preferred units are redeemed (i) following the expiration of a lock-up period relating to a qualified IPO that occurred on or prior to December 31, 2022; provided, that, at the time of such redemption, the equity value of the Company is equal to or in excess of $ 1,250,000 (determined using the 30-day volume-weighted average price ending two trading days prior to the calculation date) or (ii) in connection with a sale of the Company occurring prior to December 31, 2022, provided, that such sale of the Company is based on an equity value of the Company equal to or in excess of $ 1,250,000 . The Series A preferred units were redeemed in February 2022 in connection with the Business Combination. For more information, see Note 14, Subsequent Events . ​ 11. Equity-Based Compensation The Company maintains an equity incentive plan (the “Plan”) under which it may grant incentive units (“Incentive Units”) to employees or non-employee directors. The board has the authority to determine the terms and conditions of each grant. In connection with the Plan, 200,000 non-voting units have been authorized. These units may contain certain service and performance related vesting provisions. The Incentive Units are awarded to eligible employees and non-employee directors and entitle the grantee to receive non-voting member units upon vesting, subject solely to the employee’s continuing employment or the non-employee director’s continuing service on the board. In May 2021, the Board approved a decrease in the participation threshold for equity Incentive Unit holders. The decrease was intended to offset the dilutive effect of the issuance of the Series A Redeemable Preferred Equity and related redemption of common units. The decrease in the participation threshold was accounted for as a modification and resulted in $ 2,749 of incremental compensation cost, of which $ 1,988 was recognized during the year ended December 31, 2021 including a cumulative adjustment at the time of the modification. The remaining incremental compensation will be recognized over the remaining service period of the awards. In September 2021, the Company amended and restated the Plan to expand the definition of “Change in Control.” The Company concluded that the vesting conditions of awards had changed and that a modification had occurred for all awards under the Plan. As the awards were expected to vest under their original terms as well as under their modified terms, no additional incremental compensation expense was recognized. The grant date estimated fair value of the Incentive Units was based upon an option pricing model valuation of the awards at the grant date. The Company did not change pricing models during the year, however, began to incorporate and consider the probability-weighted expected return method (PWERM). The Incentive Units have no strike price; however, participation thresholds, as defined in F-24 Table of Contents the Plan were established at grant date that must be exceeded for the holder of the unit to participate in any distributions of the Company. The following assumptions were utilized in determining the fair value of the units at the grant date: ​ ​ ​ ​ Expected dividend — Expected volatility 60 % to 85 % Risk-free interest rate 0.13 % to 2.53 % Expected life of incentive awards (in years) 1 to 5 years Grant date performance and market threshold ​ $ 35,000 to $ 1,000,000 ​ The computation of expected volatility is based on a weighted average of comparable public companies within the Company’s industry. Expected life is based on the estimated liquidity event timing. The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury securities of comparable terms. The Company does not anticipate paying dividends in the foreseeable future. The Company recognizes pre-vesting forfeitures as they occur rather than estimate the forfeiture rate at the grant date. The following table summarizes the changes in the number of Incentive Units for the years ended December 31, 2021, 2020 and 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ Incentive Grant Date Total ​ ​ Units ​ Fair Value ​ Value Granted and Outstanding at January 1, 2019 108,500 ​ $ 49.89 ​ $ 5,413 Granted 50,000 ​ 5.13 ​ 257 Forfeited ( 16,000 ) ​ 15.04 ​ ( 241 ) Granted and Outstanding at December 31, 2019 ​ 142,500 ​ $ 38.10 ​ $ 5,429 Granted ​ 49,119 ​ 95.27 ​ 4,680 Forfeited ​ ( 10,000 ) ​ 15.40 ​ ( 154 ) Repurchased ​ ( 7,116 ) ​ 447.15 ​ ( 3,182 ) Granted and Outstanding at December 31, 2020 174,503 ​ $ 38.82 ​ $ 6,773 Granted 18,400 ​ $ 215.31 ​ $ 3,962 Forfeited ( 10,709 ) ​ $ 100.66 ​ $ ( 1,078 ) Repurchased ( 6,202 ) ​ $ 476.06 ​ $ ( 2,953 ) Granted and Outstanding at December 31, 2021 175,992 ​ $ 38.09 ​ $ 6,704 Vested at December 31, 2021 129,972 ​ $ 56.41 ​ $ 7,332 ​ As of December 31, 2021 and 2020, the Company maintained 24,008 and 25,497 Incentive Units available for granting, respectively. As of December 31, 2021, the weighted average remaining contractual term of outstanding Incentive Units was 1 year . As of December 31, 2021, total unrecognized equity compensation expense related to nonvested Incentive Units to be recognized over a weighted average period of approximately 3 years was $ 5,772 . In connection with the Business Combination, BRC Inc. adopted the 2022 Omnibus Incentive Plan, which replaced the Plan, and the 2022 Employee Stock Purchase Plan. ​ 12. Defined Contribution Plan The Company maintains a voluntary qualified defined contribution plan covering eligible employees as defined by the plan documents. Participating employees may elect to defer and contribute a portion of their eligible compensation to the plan up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws. The Company’s matching contributions to the plan were $ 587 , $ 300 and $ 317 for the years ended December 31, 2021, 2020 and 2019, respectively. 13. Concentrations The Company has significant suppliers and service providers that are important to its sourcing, roasting, manufacturing, and any related ongoing servicing of merchandise and content. Approximately 81.4 %, 71.6 % and 80.9 % of the Company’s coffee purchases were generated from four vendors for the years ended December 31, 2021, 2020 and 2019, respectively. The Company’s five main F-25 Table of Contents shipping vendors account for approximately 91.7 %, 81.0 % and 82.5 % of total shipping expenses for the years ended December 31, 2021, 2020 and 2019, respectively. In addition, the Company’s primary fulfillment service provider accounted for 96.6 %, 92.0 % and 99.0 % of total fulfillment costs for the years ended December 31, 2021, 2020 and 2019, respectively. Further, approximately 53.1 % of the Company’s marketing expenses for the year ended December 31, 2021 were generated from five vendors; 62.0 % of the Company’s marketing expenses for the year ended December 31, 2020 were generated from four vendors; and 57.6 % of the Company's marketing expenses for the year ended December 31, 2019 were generated from three vendors. The Company does not have any long-term arrangements with these vendors or its other suppliers and service providers to guarantee availability of inventory, content, or services. The loss of the above vendors could have an impact on the operations of the Company until a suitable replacement could be engaged. ​ 14. Subsequent Events In January 2022, the Company entered into a note payable agreement for $ 1,599 at an interest rate of 1.30 % per annum to repurchase Incentive Units from a former employee. The note matures on January 14, 2026. The loan is payable in four annual installments of principal commencing on January 14, 2023. In January 2022, the Company borrowed $ 5,000 under the Promissory Note. BRC Inc., a Delaware public benefit corporation (for purposes of this section, “PubCo”), previously entered into a Business Combination Agreement, dated as of November 2, 2021, as amended by the First Amendment to Business Combination Agreement, dated as of January 4, 2022 (as so amended, the “Business Combination Agreement”), each by and among PubCo, SilverBox Engaged Merger Corp I, a Delaware corporation (“SilverBox”), the Company and other parties thereto. On February 9, 2022, as contemplated by the Business Combination Agreement, a series of transactions (the “Transaction”) were completed for an estimated value of $ 1,839,815 . As a result of the Transaction, the following events occurred: ● (a) Each share of SilverBox’s Class A common stock (the “SilverBox Class A Common Stock”), outstanding immediately prior to the effectiveness of the Transaction converted into one share of PubCo’s Class A common stock, (the “PubCo Class A Common Stock”), or an aggregate of 7,629,317 shares of PubCo Class A Common Stock with an aggregate value of $ 76,293 (at a deemed value of $ 10.00 per share); (b) each share of SilverBox’s Class C common stock (the “SilverBox Class C Common Stock”), outstanding immediately prior to the effectiveness of the Transaction converted into one share of PubCo Class A Common Stock, or an aggregate of 30,000,000 shares of PubCo Class A Common Stock with an aggregate value of $ 300,000 (at a deemed value of $ 10.00 per share), (c) each share of SilverBox’s Class B common stock, (the “SilverBox Class B Common Stock”), outstanding immediately prior to the effectiveness of the Transaction converted into the right to receive a combination of shares of PubCo Class A Common Stock, or an aggregate of 5,244,993 shares of PubCo Class A Common Stock with an aggregate value of $ 52,450 (at a deemed value of $ 10.00 per share), and PubCo’s Class C common stock, (the “PubCo Class C Common Stock”), which is subject to performance-based vesting conditions, or an aggregate of 1,241,250 shares of PubCo Class C Common Stock with an aggregate value of $ 12,413 (at a deemed value of $ 10.00 per share), and (d) each warrant of SilverBox outstanding immediately prior to the effectiveness of the Transaction converted into the right to receive one warrant of PubCo, with PubCo assuming SilverBox’s obligations under the existing warrant agreement; ● Certain existing members of the Company (“Continuing Unitholders”), including certain directors and officers of the Company, received a combination of cash consideration and an aggregate of 139,106,323 common units in the Company and a corresponding number of shares of PubCo’s Class B common stock (the “PubCo Class B Common Stock”), representing an aggregate value of $ 1,391,000 which shares of PubCo Class B Common Stock have no economic rights but entitle the holders thereof to vote on all matters on which stockholders of PubCo are entitled to vote generally and 21,241,250 restricted common units in the Company, which are subject to performance-based vesting conditions. ● Entered into a Tax Receivable Agreement whereby PubCo will be required to pay the Continuing Unitholders 85 % of the tax savings that the PubCo realizes as a result of increases in tax basis in the Company assets resulting from the redemption of existing preferred units of the Company and a portion of the Common Units for the consideration paid pursuant to the Business Combination Agreement, the future exchange of Common Units for shares of PubCo Class A Common Stock or cash. ● The Company’s Credit Facility borrowings of $ 8,000 were paid off. F-26 Table of Contents ● The Company repaid $ 15,000 outstanding on the Promissory Note and the Promissory Note was terminated. ● The Company’s Series A preferred units were redeemed for $ 134,698 including $ 8,265 of redemption premium that was placed in an escrow account. The remaining $ 26,203 of Series A preferred units were exchanged for an aggregate amount of PIPE Shares, which represented SilverBox Class C Common Stock prior to the close of the Transaction. ● Net cash proceeds from the Transaction after repayment of outstanding debt was $ 126,810 and after paying $ 29,464 of transaction related expenses on behalf of the Company and SilverBox. The Transaction was accounted for as a reverse recapitalization with SilverBox as the acquired company. Operations prior to the Transaction will be those of the Company. Following the closing of the Transaction, PubCo holds limited liability company interests in the Company and is the sole managing member of the Company. In March 2022, PubCo entered into a Guaranty Agreement to guaranty payment of all the Company’s outstanding mortgage loans, Equipment financing loan, the Retail Facility, and the Credit Facility. In March 2022, the First Tier Vesting Event occurred, as a result of which 694,062 shares of Series C-1 Common Stock were exchanged for 694,062 shares of PubCo Class A Common Stock and 9,926,563 Restricted Common Units were converted into Common Units and the Company issued 9,926,563 shares of PubCo Class B Common Stock to the holders thereof. Other than those noted above, no other material subsequent events have occurred. ​ F-27 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures Not applicable.