BRC Inc. 10-K

Item 8. Financial Statements and Supplementary Data BRC Inc. Audited Consolidated Financial Statements of BRC Inc. as of December 31, 2024 and 2023 and for the three years ended December 31, 2024 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 59 Consolidated Balance Sheets 60 Consolidated Statements of Operations 61 Consolidated Statements o f Stockholders’ Equity ( Deficit ) 62 Consolidated Statements of Cash Flows 63 Notes to Consolidated Financial Statements 65 58 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of BRC Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of BRC Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations , stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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 3, 2025 59 Table of Contents BRC Inc. CONSOLIDATED BALANCE SHEETS (in thousands, except share and par value amounts) December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 6,810 $ 12,448 Restricted cash — 1,465 Accounts receivable, net 33,604 25,207 Inventories, net 42,647 56,465 Prepaid expenses and other current assets 12,410 12,153 Total current assets 95,471 107,738 Property, plant and equipment, net 59,204 68,326 Operating lease, right-of-use asset 26,703 36,214 Non-current prepaid marketing expenses 45,506 22,772 Identifiable intangibles, net 359 418 Other 139 308 Total assets $ 227,382 $ 235,776 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 38,817 $ 33,564 Accrued liabilities 27,900 34,911 Deferred revenue and gift card liability 3,918 11,030 Current maturities of long-term debt 2,047 2,297 Current operating lease liability 2,523 2,249 Current maturities of finance lease obligations 13 58 Total current liabilities 75,218 84,109 Non-current liabilities: Long-term debt, net 63,027 68,683 Finance lease obligations, net of current maturities — 23 Operating lease liability 29,087 35,929 Other non-current liabilities 10,554 524 Total non-current liabilities 102,668 105,159 Total liabilities 177,886 189,268 Commitments and Contingencies (Note 18) Stockholders’ equity: Preferred Stock, $ 0.0001 par value, 1,000,000 shares authorized; no shares issued or outstanding as of December 31, 2024 and 2023, respectively — — Class A Common Stock, $ 0.0001 par value, 2,500,000,000 shares authorized; 78,286,909 and 65,637,806 shares issued and outstanding as of December 31, 2024 and 2023, respectively 8 6 Class B Common Stock, $ 0.0001 par value, 300,000,000 shares authorized; 134,536,464 and 146,484,989 shares issued and outstanding as of December 31, 2024 and 2023, respectively 13 15 Class C Common Stock, $ 0.0001 par value, 1,500,000 shares authorized; no shares issued or outstanding as of December 31, 2024 and 2023, respectively — — Additional paid in capital 136,583 133,728 Accumulated deficit ( 123,430 ) ( 120,478 ) Total BRC Inc.’s stockholders’ equity 13,174 13,271 Non-controlling interests 36,322 33,237 Total stockholders’ equity 49,496 46,508 Total liabilities and stockholders' equity $ 227,382 $ 235,776 See notes to consolidated financial statements. 60 Table of Contents BRC INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) Year Ended December 31, 2024 2023 2022 Revenue, net $ 391,490 $ 395,623 $ 301,313 Cost of goods sold 230,316 270,175 202,134 Gross profit 161,174 125,448 99,179 Operating expenses Marketing and advertising 35,631 30,794 38,169 Salaries, wages and benefits 62,415 71,054 64,286 General and administrative 50,827 71,613 64,486 Other operating expense, net 8,453 2,198 — Total operating expenses 157,326 175,659 166,941 Operating income (loss) 3,848 ( 50,211 ) ( 67,762 ) Non-operating income (expenses) Interest expense, net ( 11,325 ) ( 6,330 ) ( 1,593 ) Other income, net — 10 339 Change in fair value of earn-out liability — — ( 209,651 ) Change in fair value of warrant liability — — ( 56,675 ) Change in fair value of derivative liability — — ( 2,335 ) Total non-operating expenses ( 11,325 ) ( 6,320 ) ( 269,915 ) Loss before income taxes ( 7,477 ) ( 56,531 ) ( 337,677 ) Income tax expense 172 185 367 Net loss $ ( 7,649 ) $ ( 56,716 ) $ ( 338,044 ) Less: Net loss attributable to non-controlling interest ( 4,697 ) ( 39,971 ) ( 255,138 ) Net loss attributable to BRC Inc. $ ( 2,952 ) $ ( 16,745 ) $ ( 82,906 ) Net loss per share attributable to Class A Common Stock (1) Basic and diluted $ ( 0.04 ) $ ( 0.27 ) $ ( 1.62 ) Weighted-average shares of Class A Common Stock outstanding (1) Basic and diluted 71,107,562 60,932,225 51,246,632 (1) For the year ended December 31, 2022, net loss per share of Class A Common Stock and weighted-average shares of Class A Common Stock outstanding is representative of the period from February 9, 2022 through December 31, 2022, the period following the Business Combination, as defined in Note 1 - Organization and Nature of Business . For more information, refer to Note 17 - Net Loss per Share . See notes to consolidated financial statements. 61 Table of Contents BRC INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except for number of shares) Shares Members’ Interest Class A Common Stock Class B Common Stock Class C Common Stock Class A Common Stock Class B Common Stock Class C Common Stock Additional Paid-In Capital Accumulated Deficit Non-Controlling Interest Total Stockholders’ Equity (Deficit) Balance at December 31, 2021 $ ( 129,495 ) — — — $ — $ — $ — $ — $ ( 19,996 ) $ — $ ( 149,491 ) Equity-based compensation prior to Business Combination 308 — — — — — — — — — 308 Non-employee equity-based compensation prior to Business Combination 241 — — — — — — — — — 241 Series A preferred discount amortization prior to Business Combination ( 6,621 ) — — — — — — — — — ( 6,621 ) Repurchase of member units prior to Business Combination ( 1,599 ) — — — — — — — — — ( 1,599 ) Net loss prior to Business Combination — — — — — — — — ( 2,691 ) — ( 2,691 ) Effect of Business Combination 137,166 44,009,874 139,106,323 1,388,125 4 14 — ( 103 ) ( 831 ) ( 83,319 ) 52,931 Equity-based compensation after Business Combination — — — — — — — 820 — 3,217 4,037 Non-employee equity-based compensation after Business Combination — — — — — — — — — 608 608 First Tier vesting event — 694,062 9,926,563 ( 694,062 ) — 1 — 38,783 — 133,589 172,373 Second Tier vesting event — 694,063 9,926,562 ( 694,063 ) — 1 — 60,803 — 195,154 255,958 Warrant redemption — 6,376,346 — — 1 — — 24,924 — 68,235 93,160 Applicable premium vesting — 6,196 820,310 — — — — 3,153 — 8,922 12,075 Common Unit redemption — 5,880,733 ( 5,880,733 ) — — — — 1,128 — ( 1,128 ) — Net loss after Business Combination — — — — — — — — ( 80,215 ) ( 255,138 ) ( 335,353 ) Balance at December 31, 2022 $ — 57,661,274 153,899,025 — $ 5 $ 16 $ — $ 129,508 $ ( 103,733 ) $ 70,140 $ 95,936 Equity-based compensation — — — — — — — 2,148 — 4,826 6,974 Common Unit redemption — 7,414,036 ( 7,414,036 ) — — — — 1,758 — ( 1,758 ) — Employee stock purchase plan — 157,044 — — — — — 673 — — 673 Vesting of stock awards, net of shares withheld for taxes — 405,452 — — 1 ( 1 ) — ( 359 ) — — ( 359 ) Net loss — — — — — — — — ( 16,745 ) ( 39,971 ) ( 56,716 ) Balance at December 31, 2023 $ — 65,637,806 146,484,989 — $ 6 $ 15 $ — $ 133,728 $ ( 120,478 ) $ 33,237 $ 46,508 Equity-based compensation — — — — — — — 3,627 — 6,980 10,607 Common Unit redemption — 11,948,525 ( 11,948,525 ) — — — — ( 802 ) — 802 — Employee stock purchase plan — 144,017 — — — — — 518 — — 518 Vesting of stock awards, net of shares withheld for taxes — 554,015 — — 2 ( 2 ) — ( 501 ) — — ( 501 ) Proceeds from exercise of stock options, net of taxes — 2,546 — — — — — 13 — — 13 Net loss — — — — — — — — ( 2,952 ) ( 4,697 ) ( 7,649 ) Balance at December 31, 2024 $ — 78,286,909 134,536,464 — $ 8 $ 13 $ — $ 136,583 $ ( 123,430 ) $ 36,322 $ 49,496 See notes to consolidated financial statements. 62 Table of Contents BRC Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2024 2023 2022 Operating activities Net loss $ ( 7,649 ) $ ( 56,716 ) $ ( 338,044 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 10,057 7,263 4,383 Equity-based compensation 10,607 6,974 6,079 Amortization of debt issuance costs 1,193 549 317 Loss on disposal of assets 1,848 4,763 — Loss on impairment of assets 6,079 — — Paid-in-kind interest 2,535 — — Loss on extinguishment of debt 1,127 — — Other 173 311 849 Change in fair value of earn-out liability — — 209,651 Change in fair value of warrant liability — — 56,675 Change in fair value of derivative liability — — 2,335 Changes in operating assets and liabilities: Accounts receivable, net ( 8,627 ) ( 2,766 ) ( 14,895 ) Inventories, net ( 10,107 ) ( 8,183 ) ( 56,311 ) Prepaid expenses and other assets 900 654 ( 184 ) Accounts payable 6,806 21,557 ( 6,146 ) Accrued liabilities ( 7,890 ) ( 1,811 ) 15,986 Deferred revenue and gift card liability ( 7,112 ) 1,525 2,171 Operating lease liability 560 891 776 Other liabilities 10,808 22 168 Net cash provided by (used in) operating activities 11,308 ( 24,967 ) ( 116,190 ) Investing activities Purchases of property, plant and equipment ( 8,666 ) ( 27,220 ) ( 30,404 ) Proceeds from sale of property and equipment 953 5,712 — Net cash used in investing activities ( 7,713 ) ( 21,508 ) ( 30,404 ) Financing activities Proceeds from issuance of long-term debt, net of discount 353,197 294,508 51,593 Debt issuance costs paid ( 706 ) ( 4,333 ) ( 279 ) Repayment of long-term debt ( 361,565 ) ( 268,230 ) ( 38,761 ) Payments of debt extinguishment costs ( 1,040 ) — — Financing lease obligations ( 68 ) ( 173 ) 3 Repayment of promissory note ( 1,047 ) ( 1,047 ) — Issuance of stock from the Employee Stock Purchase Plan 518 673 — Proceeds from exercise of stock options 13 — — Distribution and redemption of Series A preferred equity — — ( 127,853 ) Proceeds from Business Combination, including PIPE investment — — 337,957 Payment of Business Combination costs — — ( 31,638 ) Redemption of Class A and Class B shares — — ( 20,145 ) Redemption of incentive units — — ( 3,627 ) Net cash (used in) provided by financing activities ( 10,698 ) 21,398 167,250 Net (decrease) increase in cash, cash equivalents, and restricted cash ( 7,103 ) ( 25,077 ) 20,656 Cash and cash equivalents, beginning of period 12,448 38,990 18,334 Restricted cash, beginning of period 1,465 — — Cash and cash equivalents, end of period $ 6,810 $ 12,448 $ 38,990 Restricted cash, end of period $ — $ 1,465 $ — See notes to consolidated financial statements. 63 Table of Contents BRC Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (in thousands) Year Ended December 31, 2024 2023 2022 Non-cash operating activities (Derecognition) Recognition of right-of-use operating lease assets $ ( 8,043 ) $ 18,547 $ 20,050 Recognition of revenue for inventory exchanged for prepaid advertising $ 23,925 $ 28,901 $ — Non-cash investing and financing activities Property and equipment purchased but not yet paid $ 304 $ 1,857 $ 2,279 Debt issuances costs accrued but not yet paid $ 378 $ — $ — Series A preferred equity exchange for PIPE shares $ — $ — $ 26,203 Series A preferred equity amortization $ — $ — $ 5,390 Supplemental cash flow information Cash paid for income taxes $ 425 $ 562 $ 277 Cash paid for interest $ 9,041 $ 4,483 $ 1,279 See notes to consolidated financial statements. 64 Table of Contents BRC Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except unit/share and per unit/share amounts) Fiscal Years ended December 31, 2024, December 31, 2023, and December 31, 2022 1. Organization and Nature of Business BRC Inc., a Delaware public benefit corporation (“BRC Inc.” or the “Company”), 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 (the "First Amendment" and the Business Combination Agreement as so amended, the "Business Combination Agreement"), each by and among BRC Inc., SilverBox Engaged Merger Corp I, a Delaware corporation (“SilverBox”), Authentic Brands LLC, a Delaware limited liability company (“Authentic Brands”), and certain other parties thereto. On February 9, 2022, as contemplated by the Business Combination Agreement, a series of transactions (the "Business Combination") were completed (the “Closing”) for an estimated value of $ 1,839,815 as a result of which Authentic Brands became a subsidiary of BRC Inc., with BRC Inc. acting as sole managing member thereof as a public benefit corporation. BRC Inc. conducts substantially all of its business through its solely managed subsidiary, Authentic Brands, and Authentic Brands’ subsidiaries, all of which are consolidated in these financial statements. Authentic Brands, through its wholly-owned subsidiaries, purchases, roasts, and sells high quality coffee, coffee accessories, and branded apparel through its online channels and business networks. Authentic Brands also develops and promotes online content for the purpose of growing its brands, which include Black Rifle Coffee Company (“BRCC”). Unless the context indicates otherwise, references to "the Company," "we," "us" and "our" refers to BRC Inc. and its consolidated subsidiaries following the closing of the Business Combination. 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 (“GAAP”). The consolidated financial statements reflect the financial position and operating results of the Company including its wholly-owned subsidiaries. These financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair statement of the operating results for the periods presented. Intercompany transactions and balances have been eliminated in consolidation. The Business Combination was accounted for as a reverse recapitalization transaction between entities under common control, whereas Authentic Brands was considered the accounting acquirer and predecessor entity. The Business Combination was reflected as the equivalent of Authentic Brands issuing stock for the net assets of SilverBox, accompanied by a recapitalization with no incremental goodwill or intangible assets recognized. Authentic Brands was determined to be the predecessor entity to the Business Combination based on a number of considerations, including: • Authentic Brands former management making up the majority of the management team of BRC Inc.; • Authentic Brands former management nominating or representing the majority of BRC Inc.'s Board of Directors (the “Board of Directors”); • Authentic Brands representing the majority of the continuing operations of BRC Inc.; and • The chief executive officer of Authentic Brands then having voting control of the combined company. Use of Estimates The preparation of consolidated financial statements in conformity with 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, loyalty rewards, deferred revenue, and measurement and realization of deferred tax assets. Actual results could differ materially from those estimates. 65 Table of Contents Revenue Recognition The Company recognizes revenue in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers , or Accounting Standards Codification (“ASC”) 606. 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 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. Sources and Timing of Revenue The Company’s revenue is derived from product sales through its e-commerce websites and to Wholesale customers who sell the products to end users. 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 recognizes revenue based on these estimates 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 when the product is delivered. Gift Cards Gift cards can be purchased online through the Company’s website in digital or physical format. In addition, physical gift cards can be purchased at any of the Company-operated store locations and limited franchise owned stores. 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 through the Company’s website and at any of the Company-operated store locations and limited franchise owned stores. 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. The Company recognized $ 637 of breakage income related to unredeemed card balances for the year ended December 31, 2024, which reduces the related deferred revenue liability. 66 Table of Contents 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 customers who establish an online account are enrolled in the Loyalty Program. Under the program, there are multiple levels in which customers can participate and earn loyalty points. Subscription customers (customers in the BRCC Coffee Club or subscribed to another subscription product type) are in the highest tier and earn 5 % on purchases. Non-subscription customers earn 1 % on purchases. Any customer who spends $ 200 or more annually can also earn 5 % on purchases after the spending criteria is met. In addition to earning points on purchases, customers can earn points through certain 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. The Company reserves the right to modify, change, add, or remove rewards and their points thresholds at any time. BRCC loyalty points will expire one year after they have been earned. Conversion of rewards are non-changeable after redemption, have no cash value, and are non-transferable. A portion of the rewards that are expected to expire and not be redeemed will be recognized as 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 $ 7,141 , $ 398 , and $ 1,033 of income related to expired loyalty rewards for the years ended December 31, 2024, 2023, and 2022, respectively, which was included in “Revenue, net” on the consolidated statement of operations. 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 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. Until March 2024, BRCC loyalty points expired if there was no account activity (i.e., if there is no new purchase made or order placed) for a period of twelve months. In March 2024, BRCC amended the Loyalty Program such that BRCC loyalty points expire after twelve months without consideration of account activity. The change in BRCC’s Loyalty Program points policy regarding expired points resulted in a reduction to the deferred revenue liability and an increase to revenue in our Direct-to-Consumer (“DTC”) Channel of $ 6,468 for the year ended December 31, 2024. 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. Refer to Note 7, Deferred Revenue and Gift Card Liability for information about changes in the current portion of deferred revenue and gift card liability for the years ended December 31, 2024, 2023, and 2022. 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. A portion of these fees are dedicated for national marketing campaigns, promotional programs and materials, and other activities that we believe enhance the image of the BRCC brand. Continuing fees represent a portion of the consideration the Company receives under the franchise agreement. Continuing fees are typically billed and collected weekly. Continuing fees are recognized as the related store sales occur. Revenues from continuing fees are included in “Revenue, net” on the consolidated statements of operations. Under the franchise agreements, BRCC sells products and equipment to its franchisees. The revenue associated with these product and equipment sales are recognized when control 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 associated with BRCC’s brands. The current portion of revenues from upfront franchise fees are included in “Deferred revenue and gift card liability” and the long-term portion of revenues from upfront franchisee fees are included in “Other non-current liabilities” on the consolidated balance sheets. 67 Table of Contents 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. 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” on the consolidated statements of operations. Disaggregation of Revenue The Company disaggregates revenue by sales channel. The Wholesale channel includes product revenue sold to an intermediary and not directly to the consumer. The DTC channel principally comprises revenue from our e-commerce websites and subscription services directly to the consumer. The Outpost Retail Stores (“Outpost”) channel includes revenue from Company-operated stores, gift cards, franchise stores and licensing. The following table disaggregates revenue by sales channel: Year Ended December 31, 2024 2023 2022 Wholesale $ 245,040 $ 225,059 $ 119,360 DTC 123,779 143,232 159,022 Outpost 22,671 27,332 22,931 Total net sales $ 391,490 $ 395,623 $ 301,313 Substantially all revenue is derived from customers located in the United States. One Wholesale customer and its affiliate represents 28 %, 26 %, and 12 % of total revenue for the years ended December 31, 2024, 2023, and 2022 respectively. 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 less 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. Bagged coffee and rounds 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 $ 560 and $ 244 as of December 31, 2024 and 2023, respectively, and included in “Accounts receivable, net” on the consolidated balance sheets. 68 Table of Contents 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 administrative functions focused on the entire product suite rather than individual product categories or sales channels. In accordance with ASC 280, “ Segment Reporting ”, the Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer, who 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. The information reviewed by the CODM is consistent with the presentation on the consolidated statement of operations. 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. Restricted cash relates to amounts that are held by former lenders to secure certain commercial credit obligations until such obligations have been satisfied. Accounts Receivable, Net 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 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 $ 593 and $ 496 as of December 31, 2024 and 2023, respectively. Inventories, Net Inventories are stated at the lower of 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. Inventories were $ 42,647 and $ 56,465 as of December 31, 2024 and 2023, respectively. Finished goods includes allocations of labor and occupancy expenses, and inbound transportation costs. Property, Plant and Equipment, Net 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 finance 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 derecognized, 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. 69 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 Identifiable Intangibles - Internal Use Software In accordance with ASC 350-40, Intangibles — Goodwill and Other, Internal-Use Software , 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, plant and equipment, net” on 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. These events primarily include current period losses combined with a history of losses or a decision to close a store. 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. The fair value of the asset is estimated using a discounted cash flow model based on forecasted future revenues and operating costs, using internal projections. Leases The Company leases certain property and equipment under non-cancelable finance and operating leases which expire at various dates through 2043. The majority of our leases are operating leases for our Company-operated Outposts. We also lease distribution, warehouse, and corporate office facilities. We do not enter into material lease transactions with related parties. We categorize leases as either operating or finance leases at the commencement date of the lease. Operating lease agreements may contain tenant improvement allowances, rent holidays, rent escalation clauses and/or contingent rent provisions. We have lease agreements with lease and non-lease components, which are accounted for together as a single lease component for underlying classes of assets. The Company has estimated that the lease term for retail stores is generally 10 years to 15 years. We recognize a right-of-use (“ROU”) asset and lease liability for each operating lease with a contractual term greater than twelve months at the time of lease inception. We do not record leases with an initial term of twelve months or less on our consolidated balance sheet but continue to record rent expense on a straight-line basis over the lease term. Our leases often include options to extend or terminate at our sole discretion, which are included in the determination of the lease term when they are reasonably certain to be exercised. Our lease liability represents the present value of future lease payments over the lease term. We cannot determine the interest rate implicit in each of our leases. Therefore, we use market and term-specific incremental borrowing rates. Our incremental borrowing rate for a lease is the rate of interest we expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. We considered a combination of factors, including the rates that we currently pay on our lines of credit, lease terms and the effect of adjusting the rate to refle ct the term consideration of collateral. 70 Table of Contents Total lease costs recorded as rent and other occupancy costs include fixed operating lease costs and short-term lease costs. Our real estate leases may require that we pay certain expenses, such as common area maintenance costs, real estate taxes and other executory costs, of which any fixed portion would be included in operating lease costs. We recognize operating lease costs on a straight-line basis over the lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. A significant majority of our leases are related to our Company-operated Outposts, and their related costs are recorded within “General and administrative” expenses on the consolidated statement of operations. The ROU asset is measured at the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, initial direct costs, and any material tenant improvement allowances reasonably certain to be received. For operating leases, ROU assets are reduced over the lease term by the recognized straight-line lease expense less the amount of accretion of the lease liability determined using the effective interest method. For finance leases, assets are amortized on a straight-line basis over the shorter of the useful life of the leased asset or the lease term. Interest expense on each finance lease liability is recognized utilizing the effective interest method. ROU assets are tested for impairment in the same manner as long-lived assets. Additionally, we monitor for events or changes in circumstances that may require a reassessment of one of our leases and determine if a remeasurement is required. Earn-out Liability The earn-out shares that were payable in Common Units (as defined below) of Authentic Brands pursuant to the Business Combination Agreement were recorded as a liability under ASC 480, Distinguishing Liabilities from Equity , and the earn-out shares that were payable in BRC Inc. common stock pursuant to the Business Combination Agreement were recorded as a liability under ASC 815, Derivatives and Hedging . The earn-out liability was initially measured at fair value at the closing of the Business Combination using a Monte Carlo simulation in an option pricing framework that simulated the future path of the Company's stock price over the earn-out period. The earn-out shares vested in March and April 2022. The Company recognized the earn-out shares as liabilities at fair value and adjusted the earn-out shares to fair value at each reporting period. The earn-out liabilities were subject to re-measurement at each balance sheet date until vesting, and any change in fair value was recognized on the Company’s consolidated statement of operations. Warrant Liability The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company had public and private warrants, both of which did not meet the criteria for equity classification and were accounted for as liabilities. Accordingly, the Company recognized the warrants as liabilities at fair value and adjusted the warrants to fair value at each reporting period with any changes in fair value recognized on the Company’s consolidated statement of operations. The public and private warrants were redeemed in May 2022. Income Taxes The Company accounts for income taxes under the liability method, and deferred tax assets (“DTA”) and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. DTAs and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided if it is determined that it is more likely than not that the DTA will not be realized. The Company records interest and penalty expense related to income taxes as interest and other expense, respectively. The Company evaluates and accounts for uncertain tax positions using a two-step approach: Step 1. Recognition – occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustainable upon examination. Step 2. Measurement – determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more likely-than-not threshold of being sustained. 71 Table of Contents Equity-Based Compensation The Company recognizes the cost of equity-based compensation awards and incentive unit awards based on the fair value estimated in accordance with ASC 718, Stock Based Compensation . The Company records equity-based compensation expense for awards with only a service based vesting condition based on the fair value of such awards at the grant date and recognizes compensation expense on a straight-line basis over the requisite service period. Equity-based compensation expense for awards with market based vesting conditions is recorded based on the fair value of such awards at the grant date and recognized on an accelerated 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 14, Equity-Based Compensation . Earnings per Share Basic net loss per share is calculated by dividing net loss attributable to Class A Common Stock by the weighted-average shares of Class A Common Stock outstanding without the consideration for potential dilutive securities. Diluted net loss per share represents basic net loss per share adjusted to include the potentially dilutive effect of outstanding unvested share awards, and units of Authentic Brands designated as common units (the “Common Units”) and restricted units (the “Restricted Common Units”) in the Third Amended and Restated Limited Liability Company Operating Agreement of Authentic Brands (the "LLC Agreement") that are exchangeable into shares of Class A Common Stock. Diluted net loss per share is computed by dividing the net loss attributable to Class A Common Stock by the weighted-average number of shares of Class A Common Stock outstanding for the period determined using the treasury stock method and if-converted method, as applicable. As the impact of these if-converted securities is generally antidilutive during periods of net loss, the diluted net loss per share calculation for periods with net losses is the same as the basic net loss per share. For more information, see Note 17, Net Loss Per Share . 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 four customers accounted for 63 % of total outstanding receivables as of December 31, 2024 and three customers accounted for 55 % of total outstanding receivables as of December 31, 2023. T he 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 influencer s. The Company may also enter into marketing service agreements with third party production and content providers where the Company prepays for certain services or deliverables and recognizes the expense when the service is completed. Prepaid marketing and advertising expenses totaled $ 5,276 and $ 6,826 as of December 31, 2024 and 2023, respectively. This includes $ 5,040 and $ 6,129 of prepaid advertising as of December 31, 2024 and 2023, respectively, in connection with a transaction whereby prepaid advertising was received by BRCC in exchange for finished goods inventory and revenue was recognized for the amount of prepaid advertising credits received. For more information, see Note 5, Other Assets . 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 Secured Overnight Financing Rate (“SOFR”), or the PNC Base Rate (see further explanation of the Base Rate in Note 8, Long-Term Debt ), plus an applicable floating 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. 72 Table of Contents The Company follows the provisions of ASU No. 2022-03- Fair Value Measurements (“Topic 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. As of December 31, 2024, the Company had no Level 3 financial assets or liabilities. Series A Redeemable Preferred Equity The Company accounted for its preferred equity as temporary equity, given the Series A preferred units were probable of becoming redeemable (i.e., exercise of the exit rights is the passage of time). The Series A preferred units have been 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 in connection with the Business Combination. Comprehensive Income (Loss) The Company has no components of comprehensive income and 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. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures , "to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses". The FASB determined these amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 (early adoption is permitted). These amendments should be applied retrospectively to all prior periods presented in the financial statements. As of December 31, 2024, the Company implemented this standard and there has been no material change to the consolidated financial statements. Refer to Note 2 , Summary of Signifi cant Accounting Pol ici es , Segment Information . In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures , which "enhances the transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information". The FASB determined that these amendments should be effective for public business entities for annual periods beginning after December 15, 2024 (early adoption is permitted). The Company plans to adopt ASU 2023-09 and related updates on January 1, 2025. The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures. 73 Table of Contents Recent Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses, “ to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions.” The FASB determined this guidance is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027 (early adoption is permitted). The Company is currently evaluating the impact of these amendments on its consolidated financial statements and accompanying disclosures. 3. Inventories, Net Inventories consist of the following (dollars in thousands) : December 31, 2024 2023 Coffee: Unroasted $ 3,180 $ 4,248 Finished Goods 16,502 10,515 Ready-to-Drink (raw materials) 10,206 14,652 Ready-to-Drink (finished goods) 9,545 21,600 Apparel and other merchandise 3,214 5,450 Total inventories, net $ 42,647 $ 56,465 4. Property, Plant and Equipment, Net Property, plant and equipment, net consists of the following (dollars in thousands) : December 31, 2024 2023 Building and leasehold improvements $ 27,429 $ 29,098 Machinery and equipment 19,946 18,856 Computer equipment and software 17,814 6,847 Furniture and fixtures 2,949 2,856 Land 1,547 1,547 Vehicles 762 889 Construction in progress 10,925 21,602 Property, plant and equipment, gross 81,372 81,695 Less: accumulated depreciation and amortization ( 22,168 ) ( 13,369 ) Total property, plant and equipment, net $ 59,204 $ 68,326 The total depreciation expense for internal use software included in the above table was $ 4,504 , $ 1,233 and $ 732 for the fiscal years ended December 31, 2024, 2023 and 2022, respectively. Substantially all long-lived assets are located in the United States. Sale of Assets The Company sold the land, building and improvements for one of BRCC's company-owned Outposts during the third quarter of 2023 for a total sale price of $ 1,500 . The net book value of the assets sold was approximately $ 2,692 which resulted in a loss on the assets sale of $ 1,201 , which reflected closing costs of approximately $ 9 . This loss is presented within "Other operating expense, net" in the consolidated statements of operations. Simultaneously with the sale of the property, the Company entered into a lease with the buyer to continue the Company's operations of this Outpost location. The Company sold an office property including the land, building and improvements during the third quarter of 2023 for a total sale price of $ 4,058 . The net book value of the assets sold was approximately $ 2,648 which resulted in a gain on the asset sale of approximately $ 1,097 , which reflected closing costs of approximately $ 313 . This gain is presented within "Other operating expense, net" in the consolidated statements of operations. 74 Table of Contents Impairment of Assets The Company recognized a total impairment loss on certain assets related to our BRCC Outposts during the fourth quarter of 2024 of $ 6,100 , which consisted of approximately $ 3,500 for the carrying value of the related building improvements, machinery, and equipment and $ 2,600 for the right of use asset associated with these Outposts. The total loss on impairment of assets is presented within “Other operating expense, net” in the consolidated statements of operations. 5.  Other Assets During the third quarter of 2023, we entered into a contract whereby we agreed to exchange finished goods inventory for prepaid advertising which must be used within four years from the contract date, for a stated contract price of $ 41,565 . We measured the noncash consideration using the standalone selling price of finished goods sold to distributors, which was 84 % of the stated contract price. During 2024, we entered into amendments to exchange additional finished goods inventory for prepaid advertising for a stated contract price of $ 19,487 . Using the standalone selling price of finished goods sold to non-barter customers, the contract value was reduced by approximately $ 2,798 for inventory sold under these amendments. Revenue and corresponding prepaid advertising is recognized based on the standalone selling price as the products are delivered. As of December 31, 2024 and 2023, we recognized $ 50,546 and $ 28,901 of other assets on our consolidated balance sheet, respectively. Based upon the period over which we expect to use these advertising credits, we concluded that $ 5,040 and $ 6,129 were current as of December 31, 2024 and 2023, respectively, and have been recorded as prepaid and other current assets on our consolidated balance sheets, and $ 45,506 and $ 22,772 were non-current and have been recorded as non-current prepaid marketing expense on our consolidated balance sheets as of December 31, 2024 and 2023, respectively. We recognized $ 23,925 and $ 28,901 of revenue for the year ended December 31, 2024 and 2023, respectively, on our consolidated income statement related to shipments of inventory in exchange for prepaid advertising under these contracts. We utilized $ 2,280 of prepaid advertising credits during the year ended December 31, 2024. 6.  Accrued Liabilities Accrued liabilities consist of the following (dollars in thousands) : December 31, 2024 2023 Accrued compensation and benefits $ 5,873 $ 6,881 Accrued marketing 4,180 1,457 Accrued professional fees 3,014 2,240 Deferred purchase incentive 2,264 — Accrued inventory purchases 2,175 8,859 Accrued sales and other taxes 1,164 1,329 Credit card liabilities 780 186 Accrued freight 478 4,616 Accrued interest 61 1,842 Other accrued expenses 7,911 7,501 Total accrued liabilities $ 27,900 $ 34,911 Deferred purchase incentive During the second quarter of 2024, we entered into an agreement with a co-manufacturing partner for the manufacture and distribution of rounds. As part of this agreement we received a purchase incentive of $ 9,500 to compensate for incremental transition costs. An amendment to this agreement was entered into during the third quarter of 2024 whereby an additional purchase incentive of $ 4,000 was received. This purchase incentive will be recognized as a reduction of cost of sales based on units sold over five years . Recognition of this fee commenced during the third quarter of 2024 based upon the terms of the related agreement (as amended). $ 2,264 of the deferred purchase incentive is classified as current at December 31, 2024 based upon the amount expected to be recognized in the next twelve months, while $ 10,172 is classified as long-term and is recorded in other non-current liabilities on our consolidated balance sheet at December 31, 2024. 75 Table of Contents Restructuring Costs During fiscal year 2023, management implemented a plan to reduce costs and improve efficiency of certain company-wide functions. The Company accounts for all exit or disposal activities in accordance with ASC 420, Exit or Disposal Cost Obligations (“ASC 420”). Costs are recorded when management has committed to a plan and incurred a liability related to the plan. These costs primarily pertained to workforce reduction and other restructuring costs (to include advisory fees, terminated leases, and our Salt Lake City production shutdown). Approximately 180 employees across the Company were terminated as part of management’s plan. The Company recorded $ 3,548 in 2023 for severance expenses in accordance with ASC 420. As of December 31, 2023, the Company had accrued severance costs of $ 1,037 , which were fully paid out during the first half of fiscal year 2024. We incurred an additional $ 266 of severance costs in the first quarter of 2024. Severance costs are included in the consolidated statement of operations in the line “Salaries, wages and benefits”. In addition to costs paid out for terminated employees, the Company recognized a total of $ 3,264 in costs related to advisory fees, fees for terminated leases, and costs related to our Salt Lake City production shutdown, all of which were paid out during fiscal 2023. The Company recognized $ 2,397 related to advisory fees and $ 358 related to terminated leases during 2023, which were included in the line “General and administrative” expenses in the consolidated statement of operations. The Company also recognized $ 508 of costs related to our Salt Lake City production shutdown, which were included in the line “Cost of goods sold” in the consolidated statement of operations. As of December 31, 2024, accrued restructuring costs related to management’s 2023 plan, consisted of the following (dollars in thousands) : Reduction in Workforce Other Costs Total Restructuring Costs Balance as of January 1, 2023 $ — $ — $ — Costs incurred 3,548 3,264 6,812 Costs paid or settled ( 2,511 ) ( 3,264 ) ( 5,775 ) Balance as of December 31, 2023 $ 1,037 $ — $ 1,037 Costs incurred 266 — 266 Costs paid or settled ( 1,303 ) — ( 1,303 ) Balance as of December 31, 2024 $ — $ — $ — 7.  Deferred Revenue and Gift Card Liability The following table provides information about deferred revenue, gift cards, and the Loyalty Program, including significant changes in deferred revenue balances for the below designated periods (dollars in thousands) : Year Ended December 31, 2024 2023 2022 Balance at beginning of period $ 11,030 $ 9,505 $ 7,334 Sales of gift cards 946 1,804 1,358 Redemption of gift cards ( 1,379 ) ( 1,489 ) ( 912 ) Increase from deferral of revenue 1,788 2,823 3,569 Decrease from revenue recognition ( 2,832 ) ( 3,560 ) ( 3,587 ) Loyalty Program points earned 2,049 3,508 2,499 Loyalty Program points redeemed/expired ( 7,684 ) ( 1,561 ) ( 756 ) Balance at end of period $ 3,918 $ 11,030 $ 9,505 76 Table of Contents 8.  Long-Term Debt The Company’s credit facilities and related balances were as follows (dollars in thousands) : December 31, 2024 2023 Term Loan Facility $ 40,000 $ 50,000 ABL Facility 28,853 23,947 Notes payable 1,446 2,493 Total principal 70,299 76,440 Less debt issuance costs and original issue discount ("OID") ( 5,225 ) ( 5,460 ) Long-term debt, net $ 65,074 $ 70,980 Current maturities: Current maturities of long-term debt $ 2,047 $ 2,297 Long-term debt: Non-current principal $ 68,252 $ 74,143 Less non-current portion of debt issuance costs and OID ( 5,225 ) ( 5,460 ) Long-term debt, net $ 63,027 $ 68,683 Future contractual maturities of credit facilities (not including debt issuance costs) as December 31, 2024 are as follows (dollars in thousands) : Year ending December 31, 2025 $ 2,047 2026 2,400 2027 2,000 2028 2,000 2029 61,852 Total $ 70,299 ABL Facility and Term Loan Facility On August 10, 2023, Authentic Brands and certain of its subsidiaries (collectively, the “ABL Borrowers”) entered into a Credit Agreement (the “ABL Credit Agreement”) with PNC Bank, National Association, as administrative agent and collateral agent (“PNC”), and the lenders from time to time party thereto, pursuant to which the lenders thereunder agreed to provide the ABL Borrowers with a senior secured asset-based revolving credit facility in an aggregate principal amount of up to $ 75,000 (including a sub-facility for letters of credit in an amount up to $ 7,500 all of which is available at December 31, 2024) (the “ABL Facility”). On December 27, 2024 (the “Closing Date”), Authentic Brands and certain of its subsidiaries entered into a third amendment to the ABL Credit Agreement, and a Financing Agreement (the “Term Loan Financing Agreement” and together with the ABL Credit Agreement, the “Credit Agreements”), by and among Authentic Brands, certain subsidiaries of Authentic Brands party thereto as “Borrowers” (the “Term Loan Borrowers”), and certain subsidiaries of Authentic Brands from time to time party thereto as “Guarantors” (collectively with Authentic Brands, the “Term Loan Guarantors”), Blue Torch Finance LLC, as administrative agent and collateral agent, pursuant to which the lenders thereunder provided the Term Loan Borrowers with senior secured term loans on the Closing Date in an aggregate principal amount of $ 40,000 (the “Term Loan Facility”). The Term Loan Facility also includes an uncommitted accordion feature pursuant to which, under certain circumstances, including a maximum pro forma total net leverage ratio, the Term Loan Borrowers may, with the agreement of the lenders providing any such incremental loans, add one or more tranches of additional term loans in an aggregate principal amount not to exceed $ 20,000 . The proceeds of the Term Loan Facility were issued net of a $ 1,000 discount which was recorded against the outstanding amount of debt on our consolidated balance sheet and will be amortized over the life of the Term Loan Financing Agreement. Debt issuance costs of $ 920 were incurred in connection with the origination of the Credit Agreements and these costs will be reported as a reduction to the outstanding balance of long-term debt on our consolidated balance sheet and amortized over the life of the Credit Agreements. 77 Table of Contents The obligations under the ABL Credit Agreement are guaranteed by each ABL Borrower and each Guarantor (as defined therein). The obligations under the ABL Credit Agreement are secured by a first priority lien on certain deposit accounts, cash and cash equivalents, credit card payments, accounts receivable, inventory and other related assets of the Guarantors (the “ABL Priority Collateral”) and a second priority lien on substantially all of the other assets of the Guarantors. The obligations under the Term Loan Financing Agreement are secured by a second priority lien on the ABL Priority Collateral and a first priority lien on substantially all of the other assets of the Guarantors. Each Credit Agreement includes certain conditions to borrowings, representations and warranties, affirmative and negative covenants, and events of default customary for financings of their type and size. Each Credit Agreement requires the Term Loan Borrowers and ABL Borrowers to maintain (i) a maximum total net leverage ratio; (ii) a fixed charge coverage ratio greater than or equal to 1.10 to 1.00; and (iii) minimum liquidity of $ 7,500 . The Credit Agreements also limit the ABL Borrowers and the Term Loan Borrowers ability to, among other things, incur additional indebtedness, create liens on any assets, pay dividends or make certain restricted payments, make certain investments, consummate certain asset sales, make certain payments on indebtedness, and merge, consolidate or engage in other fundamental changes. On the Closing Date, the Company used the proceeds from the Term Loan Facility and approximately $ 12,813 of borrowings under the ABL Facility (i) to retire the Company’s term loan credit facility with Whitehawk Capital Partners LP, (ii) to pay transaction fees, costs and expenses related to the Credit Agreements, and (iii) for other general corporate and working capital purposes. A loss on extinguishment of debt of approximately $ 1,127 was recorded as a result of this early retirement of debt which has been reported in interest expense on our consolidated income statement. Under the terms of the ABL Credit Agreement, the amount available for advances is subject to a borrowing base, which is calculated by reference to the value of certain eligible deposit accounts, cash and cash equivalents, credit card payments, accounts receivable and inventory, offset by certain reserves. The amount available for advances will be reduced by $ 5,000 until the Borrowers have maintained a fixed charge coverage ratio of not less than 1.10 to 1.00 based on a trailing four fiscal quarter calculation as of December 31, 2024 (the date such condition is satisfied, the “Availability Block Release Date”). Our available borrowings under the ABL Credit Facility at December 31, 2024 was approximately $ 25,540 , after the consideration of the $ 5,000 reduction required before the Availability Block Release Date. Borrowings under the ABL Facility bear interest at a rate per annum of either (i) the Base Rate (as defined below) plus a margin ranging from 0.50 % to 1.50 % or (ii) term SOFR plus a margin ranging from 1.50 % to 2.50 %. “Base Rate” means, for any day, the base commercial lending rate of PNC as publicly announced to be in effect from time to time. The ABL Borrowers are also required to pay certain fees in connection with the ABL Credit Agreement, including an unused commitment fee based on the average daily unused portion of the ABL Facility, equal to 0.375 % on an annual basis. The ABL Credit Facility is scheduled to mature on December 27, 2029. Borrowings under the Term Loan Facility bear interest at a rate per annum equal to either (i) a reference rate plus a margin ranging from 5.00 % to 5.50 % based on a total net leverage ratio threshold or (ii) term SOFR plus a margin ranging from 6.00 % to 6.50 % based on a total net leverage ratio threshold. The reference rate and term SOFR rate are subject to floors of 3.50 % and 2.50 %, respectively. The Term Loan Facility requires the Term Loan Borrowers to make quarterly principal repayments in an aggregate principal amount equal to (i) 0.625 % of the original aggregate principal amount of the Term Loan commencing with the fiscal quarter ending March 31, 2025 through the first anniversary of the Closing Date, (ii) 1.25 % of the original aggregate principal amount of the term loans extended thereunder commencing with the fiscal quarter ending after the first anniversary of the Closing Date through the maturity date of the Term Loan Facility. The Term Loan Facility is also subject to customary mandatory prepayment provisions, including payments of proceeds from asset dispositions, casualty events, extraordinary receipts and a percentage of excess cash flow. The Term Loan Borrowers may voluntarily prepay amounts outstanding under the Term Loan Facility at any time, subject in certain cases to a prepayment premium. The Term Loan Facility is scheduled to mature on December 27, 2029. Notes Payable In July and September 2021, the Company entered into note payable agreements for $ 2,588 at an interest rate of approximately 1.00 % per annum to repurchase Incentive Units (as defined below) from former employees. The notes are payable in four annual installment payments. As of December 31, 2024, the total outstanding balance on these notes payable is $ 646 . 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. As of December 31, 2024, the outstanding balance on the notes payable is $ 800 . 78 Table of Contents 9. Leases As discussed in Note 2, Summary of Significant Accounting Policies , the majority of our leases are operating leases for our Company-operated Outposts. We also lease distribution, warehouse facilities, and corporate office facilities. We do not enter into material lease transactions with related parties. We categorize leases as either operating or finance leases at the commencement date of the lease. Operating lease agreements may contain tenant improvement allowances, rent holidays, rent escalation clauses and/or contingent rent provisions. We have lease agreements with lease and non-lease components, which are accounted for together as a single lease component for underlying classes of assets. The table below presents the components of lease costs for the years ended December 31, 2024, 2023, and 2022 (dollars in thousands) : Year Ended December 31, 2024 2023 2022 Operating leases costs $ 3,937 $ 3,906 $ 1,579 Short-term lease costs 309 335 201 Total lease costs $ 4,246 $ 4,241 $ 1,780 The following table includes supplemental information: December 31, 2024 2023 2022 Weighted-average remaining operating lease term (in years) 9.6 9.5 9.0 Weighted-average operating lease discount rate 4.59 % 4.48 % 4.56 % Cash paid related to operating lease liabilities was $ 3,422 for the year ended December 31, 2024. The total operating lease liability arising from ROU assets was $ 31,610 for the year ended December 31, 2024. Finance lease assets are recorded in property, plant, and equipment, net with the corresponding finance lease liabilities on the consolidated balance sheet. Minimum future maturities of operating lease liabilities as of December 31, 2024 were as follows (dollars in thousands) : 2025 $ 3,932 2026 3,848 2027 3,757 2028 3,659 2029 3,665 Thereafter 22,386 Total lease payments 41,247 Less imputed interest ( 9,637 ) Total $ 31,610 We have not entered into any operating leases that have not yet commenced as of December 31, 2024. As discussed in Note 4, Property, Plant and Equipment , Net , the Company recognized a total impairment loss on assets related to our BRCC Outposts of $ 6,100 , which consisted of approximately $ 2,600 for the carrying value of the related right-of-use lease assets. This total loss on impairment of assets is presented within “Other operating expense, net” in the consolidated statements of operations. 79 Table of Contents 10. Earn-out Liability At the Closing, certain stockholders were entitled to receive up to 21,241,250 earn-out shares, in the form of Common Units of Authentic Brands and Class A Common Stock of the Company, if certain milestones were satisfied. A total of 50.0 % of the earn-out shares were issuable ("First Tier Vesting Event"), in the aggregate, if the volume weighted average trading price of the Company's Class A Common Stock was $ 15.00 or greater for any 20 trading days within a period of 30 trading days prior to the fifth anniversary of the Closing. The remaining 50.0 % of earn-out shares were issuable ("Second Tier Vesting Event"), in the aggregate, if the volume weighted average trading price of the Company’s Class A Common Stock was $ 20.00 or greater for any 20 trading days within a period of 30 trading days prior to the seventh anniversary of the Closing. In March 2022, the First Tier Vesting Event occurred, as a result of which 694,062 shares of Class C Common Stock (as defined below) were exchanged for 694,062 shares of Class A Common Stock and 9,926,563 Restricted Common Units of Authentic Brands were converted into Common Units of Authentic Brands and BRC Inc. issued 9,926,563 shares of Class B Common Stock to the holders thereof. In April 2022, the Second Tier Vesting Event occurred, as a result of which 694,063 shares of Class C Common Stock were exchanged for 694,063 shares of Class A Common Stock and 9,926,562 Restricted Common Units of Authentic Brands were converted into Common Units of Authentic Brands and BRC Inc. issued 9,926,562 shares of Class B Common Stock to the holders thereof. The earn-out liabilities were initially measured at fair value at the Closing and subsequently remeasured at the end of each reporting period and vesting dates. The changes in fair value of the earn-out liabilities were recorded as Non-operating income (expense), net in the consolidated statement of operations. The following table is a summary of the earn-out liability changes in fair value and the reported balances (dollars in thousands) : Total Initial fair value, as of February 9, 2022 $ 218,678 Loss on change in fair value 171,098 First Tier Vesting Event ( 172,372 ) Loss on change in fair value 38,553 Second Tier Vesting Event ( 255,957 ) Balance as of December 31, 2022 $ — 80 Table of Contents 11. Warrant Liability In connection with the Business Combination, the Company assumed from SilverBox 11,499,974 public warrants and 6,266,667 private placement warrants. Each warrant entitled its holder to purchase one share of Class A Common Stock at an exercise price of $ 11.50 per share, subject to certain adjustments. In May 2022, the Company redeemed all of its outstanding public and private placement warrants in accordance with a warrant agreement between Continental Stock Transfer & Trust Company and SilverBox (the “Warrant Agreement”). During the redemption period, the holders of warrants had the option to exercise warrants on a “cashless” basis to receive 0.361 shares of Class A Common Stock per warrant in lieu of receiving the redemption price. In connection with the redemption, 11,396,726 public warrants and 6,266,667 private placement warrants, representing approximately 99.0 % of the public warrants and 100.0 % of the private placement warrants, respectively, were exercised on a cashless basis in exchange for an aggregate of 6,376,346 shares of Class A Common Stock. A total of 103,218 public warrants remained unexercised in May 2022 and such unexercised public warrants were redeemed for an aggregate redemption price of $ 10.00 , representing a redemption price of $ 0.10 per warrant. Following the redemption, the Company had no warrants outstanding. In connection with the redemption, the warrants ceased trading on the New York Stock Exchange and were delisted. The warrant liabilities were initially measured at fair value at the Closing and subsequently remeasured at the end of each reporting period. The changes in fair value of the warrant liabilities were recorded as Non-operating income (expense), net in the consolidated statement of operations. The following table is a summary of the warrants changes in fair value and the reported balances (dollars in thousands) : Total Initial fair value, as of February 9, 2022 $ 36,484 Loss on change in fair value 62,110 Gain on change in fair value ( 5,435 ) Warrant redemption ( 93,159 ) Balance as of December 31, 2022 $ — 12. Series A Redeemable Preferred Equity and Derivative Liability In January 2022, the Company entered into the First Amendment to the Business Combination Agreement, which modified the terms of the Applicable Premium (as defined below) that was payable upon the redemption of the Series A preferred units prior to December 31, 2022. Under the amended terms, the Applicable Premium shall be allocated by the Company as follows: (i) if the Applicable Premium was payable to the former holders of Existing Company Preferred Units (as defined in the First Amendment), then the Company shall use all of the proceeds from the Applicable Premium to pay the Applicable Premium to the former holders of Existing Company Preferred Units on a pro rata basis; and (ii) if the Applicable Premium was not payable to the former holders of Existing Company Preferred Units, then (A) the Company shall issue the Supplemental Company Common Units to the Existing Company Unitholders (other than Blocker (each, as defined in the First Amendment)) on a pro rata basis, (B) BRC Inc. shall issue (1) a number of shares of Class B Common Stock equal to the number of Supplemental Company Common Units to the Existing Company Unitholders (other than Blocker) on a pro rata basis and (2) the Supplemental Pubco Class A Shares to the Blocker Shareholders on a pro rata basis (each, as defined in the First Amendment), and (C) the Company shall release the Applicable Premium held in the Applicable Premium Account (as defined in the First Amendment) to the Company to make such funds available for use as general working capital funds. For the purpose of determining whether the Applicable Premium shall be payable or not payable to the former holders of Existing Company Preferred Units, (x) the threshold of $ 1,250,000 equity value of the Company, as referenced in Section 8.13(b) of the Authentic Brands' Limited Liability Company Agreement, shall be determined using the 30 -day volume-weighted average price calculated as of the later of the 30 th day following the Closing Date and the date on which the Form S-1 Shelf (as defined in the Investor Rights Agreement) is declared effective by the SEC, and (y) in computing such threshold, the Common Unit Redemption Amount shall be added to the foregoing calculation of the Company’s equity value based upon the 30 -day volume weighted average price. We analyzed the amendment to the Series A preferred units and determined that the amendment should be accounted for prospectively as a modification to the Series A preferred units. Additionally, as part of our assessment, we further considered whether the amendment resulted in any additional embedded features being bifurcated and accounted for separately as a freestanding derivative in accordance with ASC 815, Derivatives and Hedging . 81 Table of Contents Based on our analysis, we determined that the amendment to the Applicable Premium resulted in multiple redemption features which require the payment of the Applicable Premium as part of the settlement amount to be bifurcated from the Series A preferred units and accounted for separately as a freestanding derivative. The guidance in ASC 815, Derivatives and Hedging requires that in instances where multiple embedded features are bifurcated from the host contract, the bifurcated features shall be combined into a single compound derivative. Accordingly, the Company recognized the compound derivative at fair value and adjusted the compound derivative to fair value at each reporting period. The compound derivative was subject to re-measurement at each balance sheet date until the settlement of the derivative occurred with any changes in fair value recognized in the Company’s consolidated statement of operations. In February 2022, in conjunction with the Business Combination, the Series A preferred units were redeemed for $ 134,698 , including $ 8,265 of applicable premium that was placed in an escrow account and reported as restricted cash (the "Applicable Premium"). The remaining $ 26,203 of Series A preferred units were exchanged for shares of Class A Common Stock in connection with the Business Combination. In May 2022, upon effectiveness of the Company's registration statement on Form S-1, 820,310 Common Units in Authentic Brands, representing the Supplemental Company Common Units, and an equal number of shares of Class B Common Stock, as well as 6,196 shares of Class A Common Stock, representing the Supplemental Pubco Class A Shares, were issued in connection with the vesting of the Applicable Premium. In conjunction with the vesting, the Applicable Premium restricted cash balance became unrestricted. The following table is a summary of the derivative liability changes in fair value and the reported balance (dollars in thousands) : Total Initial fair value, as of February 9, 2022 $ 9,741 Loss on change in fair value 7,506 Gain on change in fair value ( 5,172 ) Applicable Premium vesting ( 12,075 ) Balance as of December 31, 2022 $ — 13. Stockholders’ Equity In conjunction with the Business Combination on February 9, 2022, 18,769 class A common units and 73,890 class B common units of Authentic Brands (the holders thereof, the "Existing Members") were converted into an aggregate of 139,106,323 common units in Authentic Brands (the “Common Units”) and 19,853,125 restricted common units in Authentic Brands (the “Restricted Common Units”). The Existing Members also received 139,106,323 shares of Class B Common Stock of the Company. Subsequent to the Business Combination, the Company's authorized capital stock consists of 2,802,500,000 shares including (i) 2,500,000,000 shares of Class A Common Stock, (ii) 300,000,000 shares of Class B Common Stock, (iii) 1,500,000 shares of Class C Common Stock, par value $ 0.0001 per share (the “Class C Common Stock”), and (iv) 1,000,000 shares of preferred stock, par value $ 0.0001 per share (the “Preferred Stock”). The Class C Common Stock is divided into two series as follows: (a) 750,000 shares of Series C-1 Common Stock, par value $ 0.0001 per share; and (b) 750,000 shares of Series C-2 Common Stock, par value $ 0.0001 per share. Holders of the Class A Common Stock and the Class B Common Stock are each entitled to one vote per share, and holders of the Class C Common Stock do not have any voting rights. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our Class A Common Stock are entitled to receive dividends and other distributions as may from time to time be declared by the Board of Directors at its discretion out of legally available Company assets, ratably in proportion to the number of shares held by each such holder, and at such times and in such amounts as the Board of Directors in its discretion may determine. No dividends or other distributions will be declared or paid on the Class B Common Stock or the Class C Common Stock. A holder of Class B Common Stock may transfer or assign shares of Class B Common Stock only if such holder also simultaneously transfers an equal number of such holder’s Common Units in compliance with and as permitted by the LLC Agreement. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after payment of debts and other liabilities and after the rights of holders of preferred stock, if any, have been satisfied, the holders of all outstanding shares of Class A Common Stock will be entitled to receive the remaining assets of the Company available for distribution ratably in proportion to the number of shares held by each such stockholder. 82 Table of Contents The Board of Directors may establish one or more classes or series of preferred stock. The Board of Directors may determine, with respect to any class or series of preferred stock, the terms and rights of such class or series. The Company currently does not have any preferred stock issued and outstanding. Common Units are entitled to share in the profits and losses of Authentic Brands and to receive distributions declared and have no voting rights. Holders of Common Units receive one share of Class B Common Stock, which are voting, non-economic shares in the Company, for each Common Unit they own. Subject to the terms of the LLC Agreement, the Common Unit holders have the option to redeem all or any portion of their Common Units. However, upon redemption, the Board of Directors determines whether the Common Units are redeemed in cash or Class A Common Stock. Common Units that are redeemed for shares, are exchanged for a number of Class A Common Stock equal to the number of exchanged Common Units. Simultaneously, a number of Class B Common Stock held by the unitholder is surrendered equal to the number of Common Units being redeemed. For Common Units redeemed for cash, cash redemption may only be effected if a concurrent fundraising activity takes place by the Company. Non-Controlling Interests Non-controlling interests represents the ownership interests in Authentic Brands held by holders other than the Company. The Business Combination occurred on February 9, 2022. As a result, net loss for the year ended December 31, 2022 was attributed to pre-Business Combination period from January 1, 2022 through February 8, 2022 and to the post-Business Combination period from February 9, 2022 through December 31, 2022. During the pre-Business Combination period, net loss was attributable to Authentic Brands. During the post-Business Combination period, net loss was attributable to BRC Inc. and its respective non-controlling interests. Following the Business Combination, BRC Inc.’s ownership percentage in Authentic Brands’ controlling and noncontrolling interests was 22.5 % and 77.5 %, respectively. As of December 31, 2024, BRC Inc.’s ownership percentage in Authentic Brands’ controlling and non-controlling interests was 36.4 % and 63.6 %, respectively. 14. Equity-Based Compensation Incentive Units Authentic Brands maintains an equity incentive plan (the “2018 Equity Incentive Plan”) under which it granted Incentive Units (as defined in the 2018 Equity Incentive Plan) to employees or non-employee directors prior to the Business Combination. As of December 31, 2024, 8,472 Incentive Units remain outstanding under the 2018 Equity Incentive Plan, and no new Incentive Units have been granted under the 2018 Equity Incentive Plan since the completion of the Business Combination. The Board of Directors has the authority to determine the terms and conditions of each grant under the 2018 Equity Incentive Plan, and 200,000 non-voting units have been authorized thereunder. These units may contain certain service and performance related vesting provisions. The Incentive Units were awarded to eligible employees and non-employee directors and entitle each 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 of Directors. In May 2021, the Board of Directors 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. 83 Table of Contents 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. The Incentive Units have no strike price; however, participation thresholds, as defined in 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 for the years ended December 31, 2024, 2023 and 2022: 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 $ 1,250,000 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, 2024, 2023 and 2022: Incentive Units Weighted Average Grant Date Fair Value Granted and outstanding at January 1, 2022 175,992 $ 38.09 Granted 850 215.31 Forfeited ( 2,989 ) 174.19 Repurchased ( 1,832 ) 97.57 Business Combination ( 157,811 ) 56.54 Granted and outstanding at December 31, 2022 14,210 $ 192.52 Granted — — Forfeited ( 5,625 ) 215.31 Granted and outstanding at December 31, 2023 8,585 $ 213.81 Granted — — Forfeited ( 113 ) 215.31 Granted and outstanding at December 31, 2024 8,472 $ 213.79 Vested at December 31, 2024 7,435 $ 213.57 As of December 31, 2024, 2023 and 2022, total unrecognized equity compensation expense related to nonvested Incentive Units to be recognized was $ 134 , $ 421 and $ 2,268 , respectively, over a weighted average period of approximately one year for 2024, two years for 2023 and three years for 2022. In connection with the Business Combination, 28,990 Incentive Units under the Plan fully vested and converted into Common Units in Authentic Brands that allow for their exchange into Class A Common Stock of BRC Inc. The Company recognized $ 1,856 of compensation costs as a result of the accelerated vesting of Incentive Units under the "Change in Control" provision of the Plan. The Company accounted for the accelerated vesting of the Incentive Units as a modification. However, because the fair value of the modified awards was the same immediately before and after the modification, no incremental compensation expense was recognized. In connection with the Business Combination, the Company adopted the 2022 Omnibus Incentive Plan (the “Omnibus Plan”), which replaced the 2018 Equity Incentive Plan, and the 2022 Employee Stock Purchase Plan (the “ESPP”) (see disclosed below). 84 Table of Contents Stock Options The Company grants stock options to employees under the Omnibus Plan that vest ratably over three years and expire after seven years . The grant date estimated fair value of the stock options is based upon a Black-Scholes model valuation of the options at the grant date. The following weighted average assumptions were utilized in determining the fair value of options granted: Year Ended December 31, 2024 2023 2022 Weighted average grant date fair value $ 2.21 $ 2.58 $ 5.48 Expected dividend yield — — — Expected volatility 66 % 65 % 55 % Risk-free interest rate 4.32 % 4.17 % 2.40 % Options term (in years) 4.5 4.5 4.5 The Company computes expected volatility based on the annualized historical daily volatility of our stock as a publicly traded company. Prior to 2024, the date at which we had sufficient history as a public company to estimate our volatility, the computation of expected volatility was based on a weighted average of comparable public companies within the Company’s industry. The Company uses the “simplified method” prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term of options granted. 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 information about stock options activities for the years ended December 31, 2024, 2023 and 2022: Stock Options Weighted Average Exercise Price Granted and outstanding at February 9, 2022 518,180 $ 10.00 Granted 362,720 9.49 Forfeited ( 88,530 ) 10.00 Outstanding at December 31, 2022 792,370 $ 9.77 Granted 3,813,166 4.66 Forfeited ( 1,192,196 ) 6.43 Outstanding at December 31, 2023 3,413,340 $ 5.19 Granted 2,680,584 3.94 Forfeited ( 666,967 ) 6.53 Exercised ( 2,546 ) $ 5.05 Outstanding at December 31, 2024 5,424,411 $ 4.41 Vested and exercisable at December 31, 2024 1,101,913 $ 5.07 As of December 31, 2024, 2023 and 2022, total unrecognized equity compensation expense related to stock options to be recognized was $ 7,540 , $ 7,228 and $ 3,298 , respectively, over a weighted average period of approximately two years for all three years. 85 Table of Contents Restricted Stock Units The Company grants restricted stock unit (“RSU”) awards to employees and non-employee directors under the Omnibus Plan that vest annually over approximately three years . The grant date fair values are based on the closing price of the Class A Common Stock on the date of grant. The following table summarizes information about the RSUs under the Omnibus Plan for the years ended December 31, 2024, 2023 and 2022: Restricted Stock Units Weighted Average Grant Date Fair Value Granted and outstanding at May 2, 2022 400,775 $ 13.70 Granted 484,054 8.56 Forfeited ( 51,875 ) 13.70 Vested ( 9,125 ) 13.70 Nonvested at December 31, 2022 823,829 $ 10.68 Granted 2,008,519 4.90 Forfeited ( 685,484 ) 6.49 Vested ( 461,909 ) 9.70 Nonvested at December 31, 2023 1,684,955 $ 5.77 Granted 1,726,212 4.02 Forfeited ( 476,399 ) 5.16 Vested ( 701,816 ) 5.87 Nonvested at December 31, 2024 2,232,952 $ 4.51 As of December 31, 2024, 2023 and 2022, total unrecognized equity compensation expense related to RSUs to be recognized was $ 7,031 , $ 7,711 and $ 6,788 , respectively, over a weighted average period of approximately two years for all three years. Performance-Based Restricted Stock Units On December 29, 2022, the Company granted 8,462,412 performance-based restricted stock units (“PSUs”) to a key employee which vest if certain market capital growth rates are achieved each year through April 2027. Vested PSUs are settled in shares of the Class A Common Stock equal to the number of PSUs granted. The PSUs are forfeited upon termination of employment before the performance period ends. PSUs granted during the year ended December 31, 2022 have a weighted-average grant date fair value of $ 0.46 per share. All PSUs were unvested as of December 31, 2024. The Company used the Monte Carlo pricing model to estimate the fair value of PSUs utilizing the following assumptions at the grant date for December 31, 2024, 2023 and 2022: Expected dividend — Expected volatility 65 % Risk-free interest rate 3.97 % Award term years 4.3 Valuation date share price $ 6.21 As of December 31, 2024, 2023 and 2022, total unrecognized equity-based compensation expense related to PSUs to be recognized was $ 976 , $ 1,901 and $ 3,863 , respectively, over a weighted average period of approximately three years for 2024 and four years for 2023 and 2022. Employee Stock Purchase Plan In September 2022, the Company began offering shares of its Class A Common Stock under the ESPP adopted in connection with the Business Combination, whereby eligible employees may acquire an equity interest in the Company through payroll contributions. At the end of a six-month offering period, shares are purchased at 85 % of the stock price at enrollment date or purchase date, whichever is lower. 86 Table of Contents 15. 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 $ 1,051 , $ 951 and $ 990 for the years ended December 31, 2024, 2023 and 2022, respectively. 16. Income Taxes As described in Management's Discussion and Analysis, we completed a business combination on February 9th, 2022 and as a result, Authentic Brands became a subsidiary of BRC Inc. Authentic Brands LLC is, and has been the business combination, treated as a flow-through entity for U.S. federal income tax purposes and as such, has generally not been subject to U.S. federal income tax at the entity level. BRC Inc. did not engage in any operations prior to the business combination. This section describes the operations of the Company, operating under Authentic Brands prior to the Business Combination, and contains the financial results of Authentic Brands for the period before the Business Combination through December 31, 2021. Accordingly, the historical results of operations and other financial information set forth in this Annual Report do not include any material provisions for U.S. federal income tax. Following the Company's initial public offering, BRC Inc. is taxed as a corporation and is subject to U.S. federal, state, and local income taxes with respect to its allocable share of any taxable income or loss of Authentic Brands, as well as any stand-alone income or loss generated by the Company. Net loss before income taxes was $ 7,477 , $ 56,531 and $ 337,677 for the years ended December 31, 2024, 2023 and 2022, respectively. The Company had an income tax expense of $ 172 , $ 185 and $ 367 for the year ended December 31, 2024, 2023 and 2022, respectively. The components of the provision for income tax (benefit) provision are as follows (dollars in thousands) : Year Ended December 31, 2024 2023 2022 Current expense Federal $ — $ — $ — State 172 185 367 Total current expense 172 185 367 Deferred expense Federal — — — State — — — Total deferred expense — — — Total income tax (benefit) provision $ 172 $ 185 $ 367 The Company recognized a tax expense of $ 172 on pre-tax book loss of $ 7,477 . The Company has determined that its deferred tax assets require a full valuation allowance. As a result, the only tax expense recognized in the Company’s financials relate to state taxes at the Authentic Brands level. Reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate is as follows (dollars in thousands) : December 31, 2024 December 31, 2023 December 31, 2022 Amount Rate Amount Rate Amount Rate Expected U.S. federal income taxes at statutory rate $ ( 1,570 ) 21.0 % $ ( 11,872 ) 21.0 % $ ( 70,912 ) 21.0 % State Taxes 150 ( 2.0 ) % 30 ( 0.1 ) % ( 72 ) — % Loss attributable to non-controlling interests 1,088 ( 14.5 ) % 8,366 ( 14.8 ) % 54,050 ( 16.0 ) % Valuation allowance 504 ( 6.8 ) % 3,649 ( 6.4 ) % 17,280 ( 5.1 ) % Other — — % 12 — % 21 — % Income tax expense (benefit) $ 172 ( 2.3 ) % $ 185 ( 0.3 ) % $ 367 ( 0.1 ) % 87 Table of Contents The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below (dollars in thousands) : December 31, 2024 2023 2022 Deferred tax assets: Investment in partnership $ 88,506 $ 83,483 $ 78,801 Net operating losses 14,330 11,209 5,212 Other 1,048 438 71 Total deferred tax assets before valuation allowance 103,884 95,130 84,084 Less: valuation allowance ( 103,884 ) ( 95,130 ) ( 84,084 ) Deferred tax assets - net of valuation allowance — — — Deferred tax liabilities — — — Total deferred tax liabilities — — — Deferred tax (liabilities) assets, net $ — $ — $ — As of December 31, 2024, the Company had federal net operating loss carry forwards of $ 66,086 . Federal losses can be carried forward indefinitely. The Company also has losses in various states that will begin to expire in 2043. We recognize deferred tax assets to the extent we believe these assets are more likely than not to be realized. In making such a determination, we consider all positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. A valuation allowance is provided if it is determined that it is more likely than not that the DTA will not be realized. During the year ended December 31, 2024, management performed an assessment of the recoverability of DTAs. Management determined, based on the accounting standards applicable to such assessment, that there was sufficient negative evidence as a result of the Company’s cumulative losses to conclude it was more likely than not that its DTAs would not be realized and has recorded a full valuation allowance of $ 103,884 against its deferred tax assets. Tax Receivable Agreement As part of the Business Combination, the Company entered into Tax Receivable Agreements (the “TRA”) with certain shareholders that requires the Company to pay to such shareholders approximately 85 % of the tax savings the Company realizes as a result of (i) increases in tax basis in Authentic Brands’ assets resulting from the redemption of existing preferred units of Authentic Brands, (ii) increase in tax basis resulting from the redemption of Common Units for consideration paid pursuant to the Business Combination Agreement, (iii) increases in tax basis resulting from future exchanges of Common Units for shares of the Company's stock or cash pursuant to the Amended and Restated LLC Agreement, (iv) pre-existing tax attributes of the Blocker Corp as well as certain (v) other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. Due to the uncertainty of various factors, we cannot estimate the likely tax benefits we will realize as a result of LLC Unit exchanges, and the resulting amounts we are likely to pay out to LLC Unitholders pursuant to the TRA; however we estimate that such payments may be substantial. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of exchanges by the LLC Unitholders, the amount of gain recognized by such LLC Unitholders, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. The Company has determined that it will record the TRA liability when probable and estimable. Given the uncertainty regarding the potential payments such that the timing is not fixed or determinable, any TRA liability will be recorded on an undiscounted basis consistent with general practice. The Company's TRA payments generally relate directly to DTAs that have been recorded in its financial statements subject to a full valuation allowance. These payments will relate to IRC §743(b) adjustments from the business combination, future exchanges, and Blocker Corp basis. In addition, the Company will be required to make TRA payments for tax savings related to other tax attributes discussed above. In no circumstance, will the Company be required to make a TRA payment without a realized tax savings. The Company has reviewed its DTAs and has determined that it is not more likely than not that it will be able to utilize them. Accordingly, it has established a full valuation allowance against its DTAs. In addition, Authentic Brands has four quarters of cumulative pre-tax losses adjusted for permanent items prior to consideration of any tax attributes covered by the TRA. The Company's only source of taxable income is Authentic Brands. As a result of the full valuation allowance against its DTAs, and Authentic Brands historic losses, the Company is not recording a TRA liability for the year ended December 31, 2024. 88 Table of Contents Uncertain Tax Positions An entity shall initially recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The term more likely than not means a likelihood of more than 50 percent. The Company started filing tax returns for the year ended December 31, 2020 and subject to examination by taxing authorities for U.S. federal and state income tax purposes. The Company did not engage in any operations prior to the Business Combination. Authentic Brands LLC is treated as a partnership for U.S. federal and state income tax purposes and its tax returns are subject to examination by taxing authorities. Authentic Brands LLC has filed income tax returns for years through December 31, 2022. These returns are subject to examination by the taxing authorities in the respective jurisdictions, generally for three or four years after they were filed. The Company has reviewed the tax profile to assess and determine whether any new or existing uncertainties exist. Based on the Company's analysis of tax positions taken on income tax returns filed, no uncertain tax positions existed as of December 31, 2024. Although the outcome of open tax audits is uncertain, in management’s opinion, adequate provisions for income taxes have been made. If actual outcomes differ materially from these estimates, they could have a material impact on our financial condition and results of operations. Differences between actual results and assumptions or changes in assumptions in future periods are recorded in the period they become known. To the extent additional information becomes available prior to resolution, such accruals are adjusted to reflect probable outcomes. No interest or penalties were recognized in the consolidated financial statements. To the extent we recognize interest expense and penalties related to income tax matters in the future, we will recognize the amounts in pre-tax income (loss) on our consolidated financial statements. 89 Table of Contents 17. Net Loss Per Share Basic net loss per share is calculated by dividing net loss attributable to Class A Common Stock by the weighted-average shares of Class A Common Stock outstanding without consideration for potential dilutive securities. Diluted net loss per share represents basic net loss per share adjusted to include the potentially dilutive effect of outstanding unvested share awards, warrants, Common Units and Restricted Common Units that are exchangeable into shares of Class A Common Stock. Diluted net loss per share is computed by dividing the net loss attributable to Class A Common Stock by the weighted-average number of shares of Class A Common Stock outstanding for the period determined using the treasury stock method and if-converted method, as applicable. Shares of Class B Common Stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted loss per share of Class B Common Stock under the two-class method has not been presented. The Company analyzed the calculation of net loss per share for periods prior to the Business Combination on February 9, 2022 and determined that it resulted in values that would not be meaningful to the users of the consolidated financial statements, as the capital structure completely changed as a result of the Business Combination. Therefore, net loss per share information has not been presented for periods prior to the Business Combination. The basic and diluted net loss per share attributable to Class A common shareholders for the year ended December 31, 2022, as presented on the consolidated statements of operations, represents only the period after the Business Combination to December 31, 2022. The following table sets forth the computation of basic and diluted net loss per share (in thousands, except unit/share and per unit/share amount s): Year Ended December 31, Period After Business Combination Through December 31, 2024 2023 2022 Numerator: Net loss $ ( 7,649 ) $ ( 56,716 ) $ ( 335,352 ) Less: Net loss attributable to non-controlling interests ( 4,697 ) ( 39,971 ) ( 252,185 ) Net loss attributable to Class A Common Stock - basic and diluted $ ( 2,952 ) $ ( 16,745 ) $ ( 83,167 ) Denominator: Weighted-average shares of Class A Common Stock outstanding 71,107,562 60,932,225 51,246,632 Net loss per share attributable to Class A common stockholders, basic and diluted $ ( 0.04 ) $ ( 0.27 ) $ ( 1.62 ) The Company excluded the following potentially dilutive securities, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to Class A common shareholders because including them would have had an antidilutive effect: December 31, 2024 2023 2022 Stock Options 5,424,411 3,413,340 792,370 Common Units 134,536,464 146,484,989 153,899,025 RSUs 2,232,952 1,684,955 823,829 PSUs 8,462,412 8,462,412 8,462,412 Incentive Units (Share Equivalents) 1,221,857 1,237,892 2,039,563 ESPP 69,661 77,841 50,549 Total units excluded from computation of diluted net loss per share 151,947,757 161,361,429 166,067,748 90 Table of Contents 18. Commitments and Contingencies Purchase Agreements The Company has entered into manufacturing and purchase agreements to purchase and produce coffee product from third-party suppliers. These purchase agreements are typically obligations to purchase minimum volumes with fixed pricing if the volume terms are not fulfilled, in the form of a take-or-pay provision. The aggregate value of purchases from these third-party suppliers totaled $ 42,370 , $ 84,007 , and $ 86,531 for the years ended December 31, 2024, 2023 and 2022, respectively. The amounts in the table below represents the Company's future minimum purchase commitments as of December 31, 2024 (dollars in thousands) : Year ending December 31, 2025 $ 26,058 2026 30,018 2027 32,427 2028 15,141 2029 14,934 Total $ 118,578 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 has been incurred and the amount of loss can be reasonably estimated. Although the outcomes of these proceedings cannot be predicted with certainty, 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. 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 $ 320 annually related to potential sales and other tax exposure as of each of December 31, 2024 and 2023, which is included in accrued liabilities on the accompanying consolidated balance sheets. 91 Table of Contents Legal Disputes On April 28, 2022, Tang Capital Partners, LP (“Tang Capital”) filed a lawsuit in federal district court in the Southern District of New York against the Company, Tang Capital Partners, LP v. BRC Inc., Case 22-CV-3476 (RWL) (Southern District of New York). The complaint alleges that Tang Capital suffered damages arising from the Company’s refusal on two alleged occasions to permit Tang Capital to exercise warrants. On March 8, 2023, the court granted the Company’s motion to dismiss a claim for declaratory judgment but denied the Company’s motion to dismiss Tang Capital's breach of contract claim. Each party filed respective motions for summary judgment and completed the briefing of these motions on May 31, 2024. Tang Capital's motion for summary judgment sought $ 10,535 in compensatory damages, plus prejudgment interest. On November 8, 2024, the court granted in part, and denied in part, the respective motions for summary judgment, holding that the Company breached the warrant agreement by not allowing Tang Capital to exercise warrants, but determining that there were fact issues that need to be resolved at trial on the issue of Tang Capital’s alleged damages, including whether Tang could have mitigated its alleged damages. The case is currently set for trial in July 2025. The Company believes that it has meritorious defenses to the damage claims asserted against it and will defend itself vigorously in these proceedings and potentially on appeal; however, there can be no assurances that it will be successful in its efforts. The Company is not able at this time to determine or predict the ultimate outcome of this lawsuit or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter. On February 3, 2023, Strategy and Execution, Inc. ("SEI") filed a lawsuit in federal district court in Texas against one of the Company's wholly owned subsidiaries, Strategy and Execution, Inc., v. Black Rifle Coffee Company LLC, Case 23-CV-00135 (FB) (Western District of Texas). The complaint alleges that SEI, a former consultant to the Company, is owed certain disputed royalties and expense reimbursements from the Company. On April 4, 2023, the Company filed a partial motion to dismiss several of the claims which was granted with prejudice with respect to the Company's position that all royalties expired upon expiration of the parties' contract on December 31, 2023. On May 8, 2024, SEI filed a motion for reconsideration of the order granting the partial motion to dismiss, and on May 14, 2024, SEI filed a motion for leave to amend its complaint. These motions are currently pending. On October 3, 2024, SEI and the Company held a mediation, at which no agreement was reached. On January 28, 2025, the parties settled all remaining claims not subject of the pending motions. The Company believes that it has meritorious defenses to the claims asserted against it in the pending motions and will continue to defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts. $ 418 has been included in accrued liabilities related to this matter and this amount was paid to the counterparty in the first quarter of 2025. On June 22, 2023, John Brian Clark, JBC Structured Products LLC, and Marathon Capital LLC (collectively, “Clark”) filed a complaint against BRC Inc. and Black Rifle Coffee Company LLC: John Brian Clark, et al. v. BRC Inc., et al., Case 1:23-CV-5340 (RWL) (Southern District of New York). Clark alleges breach of contract and is seeking a declaratory judgment. The complaint alleges that Clark suffered damages arising from the Company’s refusal to allow Clark to exercise warrants. The lawsuit seeks unspecified general and compensatory damages, attorneys’ fees, and other reasonable costs and disbursements. The Company believes that it has meritorious defenses to the claims asserted against it and will defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts. Currently the case is stayed through the resolution of the Tang Capital matter, but Clark has the option to end the stay at any time after the end of June 2024 or a summary judgment decision in Tang Capital, whichever comes first. The Company is not able at this time to determine or predict the ultimate outcome of this lawsuit or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter. On May 15, 2024, Alta Partners, LLC (“Alta”) filed a lawsuit in the federal district court in the Southern District of New York against the Company: Alta Partners, LLC v. BRC Inc., Case 24-CV-03741 (AT) (RWL) (Southern District of New York). The complaint alleges breach of contract and that Alta suffered damages arising from the Company’s refusal to permit Alta to exercise warrants between March 11 and May 4, 2022. The lawsuit seeks unspecified general and compensatory damages, attorneys’ fees, and other costs and disbursements. On July 11, 2024, the Company filed a pre-motion with the court, posing certain arguments in its defense and requesting permission to move to dismiss. The Company believes that it has meritorious defenses to the claims asserted against it and will defend itself in these proceedings; however, the Company is not able at this time to determine or predict the ultimate outcome of this lawsuit or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter. On May 20, 2024, one of our co-manufacturers filed a complaint in the district court of Riley County, Kansas against one of the Company's wholly owned subsidiaries, Black Rifle Coffee Company LLC, Case RL-2024-CV-000119. The complaint alleges breach of contract and anticipatory breach of contract with respect to certain fees and order volume pursuant to the parties' drink manufacturing agreement, amongst other allegations. On July 18, 2024, the Company filed a partial motion to dismiss relating to certain of these allegations. On November 13, 2024, the court denied the Company’s motion to dismiss other than for the co-manufacturer’s claim of fraudulent inducement, for which the court has granted leave to amend. The Company believes that it has meritorious defenses to the claims asserted against it and will defend itself in these proceedings. $ 2,700 has been included in accrued liabilities related to this matter. 92 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures Not applicable.