Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless the context otherwise requires, references to “we,” “us,” “our,” “Black Rifle Coffee Company,” “BRCC” and the “Company” in this section are to the business and operations of Authentic Brands LLC and its consolidated subsidiaries (d/b/a Black Rifle Coffee Company). The following discussion and analysis should be read in conjunction with the audited annual consolidated financial statements and related notes thereto included in Part II, Item 8, Financial Statements and Supplementary Data in this Report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause BRCC’s actual results to differ materially from management’s expectations. Factors which could cause such differences are discussed herein and set forth in Part I, Item 1A, Risk Factors in this Report.
Overview
BRCC is a rapidly growing, veteran-controlled and led coffee and media company with an incredibly loyal and quickly expanding community of more than 2 million lifetime consumers, more than 287,000 active Coffee Club subscribers, and 11.7 million social media followers across BRCCs, co-founders’, and key media personalities’ accounts as of December 31, 2021. At Black Rifle Coffee, we develop our roast profiles with the same mission focus we learned as military members serving our country. We produce creative and engaging, cause-related media content, self- produced podcasts, and digital and print journalism in-house to inform, inspire, entertain, and build our community. We also sell Black Rifle Coffee-brand apparel, coffee brewing equipment, and outdoor and lifestyle gear that our consumers proudly wear and use to showcase our brand. At the heart of everything we do is our commitment to supporting active military, veterans, first responders, and those who love America.
We utilize a three-pronged approach to craft a unique brand that resonates with our customer base and enhances brand loyalty: Inform, Inspire, and Entertain. We want our audience to love coffee as much as we do, so we strive to inform them on all the awesome facets to coffee. Every day we work to inspire our customers; we take pride in the coffee we roast, the veterans we employ and the
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causes we support. We give back to the community and are committed to support those who serve. Our “Entertain” marketing strategy drives brand excitement, along with valuable customer insights and data.
We own two roasting facilities, one focused on large batch and the other on small batch. Our coffee beans are primarily roasted in-house in the United States to ensure consistency and quality of product. Our coffee beans have an 83-point grade or higher and are sourced only from the highest quality suppliers. Our state-of-the-art equipment guarantees freshness and offers significant capacity for expansion.
We have experienced strong revenue growth since inception. Revenue increased to $233.1 million for the year ended December 31, 2021, from $163.9 million for the year ended December 31, 2020, representing growth of 42%. Revenue increased to $163.9 million for the year ended December 31, 2020, from $82.1 million for the year ended December 31, 2019, representing growth of 100%. Growth in the year ended December 31, 2021, was primarily driven by a significant expansion of our customer base, increasing Wholesale stores, and new Outpost openings. Growth in the year ended December 31, 2020, was primarily driven by a significant expansion in the DTC sales channel.
We are a digitally native brand with an established omnichannel business model, reaching our customers through one reportable segment that is comprised of three channels: DTC, Wholesale, and Outposts. Our DTC channel includes our e-commerce business, through which consumers order our products online and products are shipped to them. Our Wholesale channel includes products sold to an intermediary such as convenience, grocery, drug, and mass merchandise stores, as well as outdoor, DIY, and lifestyle retailers, who in turn sell those products to consumers. Our Outpost channel includes revenue from our company-operated and franchised Black Rifle Coffee retail coffee shop locations.
The Business Combination
On February 9, 2022, we completed the Business Combination contemplated by the Business Combination Agreement. As a result of the Business Combination Agreement and following the consummation of a series of mergers pursuant thereto, Authentic Brands became a subsidiary of BRC Inc., with BRC Inc. acting as sole managing member thereof. The Business Combination was accounted for under ASC 805, Business Combinations as a reverse acquisition and a recapitalization of Authentic Brands. Accordingly, the Business Combination is expected to be reflected as the equivalent of Authentic Brands issuing stock for the net assets of SilverBox, accompanied by a recapitalization. Under this method of accounting, SilverBox is treated as the “acquired” company for financial reporting purposes. The net assets of SilverBox are stated at fair value (which is expected to approximate historical cost), with no goodwill or other intangible assets recorded. This accounting treatment was determined as the individual controlling Authentic Brands prior to the Business Combination also controlled the combined company post business combination.
Effects of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic. The COVID-19 pandemic has significantly impacted global economies, resulting in travel restrictions, business slowdowns or shutdowns in affected areas, reduced economic activity, and changes in consumer behavior.
Despite these COVID-19 pandemic disruptions, which have affected the businesses of our consumers, wholesale partners, and suppliers, our business has been positively affected by the increase in e-commerce spending and strengthening of our company brand. As we entered 2020, great momentum from 2019 continued to be reflected in the strong sales performance throughout the first quarter of 2020. Our revenue was positively impacted during the final weeks of the first quarter of 2020 due to the increase in consumer e-commerce spending and temporary store closures attributed to the COVID-19 pandemic. During the second quarter of 2020, our DTC revenues significantly benefited from a demand surge for in-home coffee products as we saw consumers change their coffee consumption experience, as well as more consumers shopping online while sheltering-in-place. The unprecedented demand continued throughout the remainder of the year. Conversely, our wholesale revenues were temporarily adversely impacted due to temporary store closures for our customers attributed to the COVID-19 pandemic. Offsetting the impact related to these temporary store closures was revenue related to a new product sales and marketing agreement with a large retailer to sell select coffee products and merchandise items to the retailer to be sold in their stores and website. In addition, we introduced a new canned RTD coffee product in early 2020, which expanded our product offering and further strengthened our revenue. This canned RTD coffee product is primarily sold through our Wholesale channel. We have continued to experience revenue growth throughout 2021. This revenue growth has primarily been driven by our Wholesale channel as we expanded our market with businesses and retailers. Revenue growth of our DTC channel has normalized as consumers return to the office.
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To date, we have experienced minimal supply-chain disruptions as a direct result of the COVID-19 pandemic. Additionally, restrictions or disruptions of transportation did not result in significantly higher costs or delays for us during 2020. We increased in-house production of our products and increased inventory purchase orders to align with demand forecasts at the time and safeguard against potential supply chain disruptions. These actions contributed to higher -than -expected inventory levels throughout the year to meet overall demand in our DTC channel and Wholesale channel, particularly in the fourth quarter of 2020. As we continue to expand our business, we have continued to maintain sufficient inventory levels throughout 2021.
Key Factors Affecting Our Performance
Our Ability to Increase Brand Awareness
Our ability to promote and maintain brand awareness and loyalty is critical to our success. We believe we have created a highly efficient marketing strategy that provides us the ability to increase brand awareness and drive consumer interaction. Consumer appreciation of our brands is primarily reflected in the increase of our DTC channel and the additional retail accounts in our Wholesale channel. We expect to continue to develop and implement forward-looking brand strategies that leverage social media and employ targeted digital advertising to expand the reach of our brand.
Our Ability to Grow Our Customer Base in Our DTC, Outposts, and Wholesale Channels
We are currently growing our customer base through our DTC, Outposts, and Wholesale channels. Today we have over 287,000 Coffee Club subscribers and that number continues to grow through various offerings. We continue to grow our retail footprint through company-owned and franchised Outposts. Our products are also sold through a growing number of physical retail channels. Wholesale customers include large national retailers, regional retailers, distributors, and dealers.
Our Ability to Acquire and Retain Customers at a Reasonable Cost
We believe our ability to consistently acquire and retain customers at a reasonable cost will be a key factor affecting our future performance. While we have a strong presence in major markets, we still have the opportunity to grow brand awareness, with less than 20% aided awareness in any region of the country today. To accomplish this goal, we intend to grow our brand awareness through various avenues such as national television and radio advertising, and through select sponsorship opportunities. In addition, we will strive to strengthen our social media footprint across various platforms such as Facebook, Google, and YouTube, even as some of these platforms, such as Apple, have implemented operating system changes that negatively impact our ability to measure and target advertising. Our digital capabilities provide a distinct advantage and enable us to form direct relationships with our customers and capture valuable customer data and insights. We utilize digital marketing tools to optimize our marketing initiatives and drive our brand reach.
Our Ability to Drive Repeat Usage of Our Products
We accrue substantial economic value from repeat users of our products who consistently re-order our products. The pace of our growth rate will be affected by the repeat usage dynamics of existing and newly acquired customers.
Our Ability to Expand Our Product Line
Our goal is to substantially expand our product line over time to increase our growth opportunity and reduce product-specific risks through diversification into multiple products each designed around daily use. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time. As an example, we launched RTD coffee products in March 2020 with two 11-ounce SKUs. We have since added two high-caffeine, boldly-flavored 15-ounce SKUs. All four items have grown to become top-25 products in the RTD coffee category on a dollar to percent average cost value basis and can be found in more than 42,000 locations across the country. Moving forward, we believe that it is important to our business that we continue innovating with new products and flavors and continue to explore the world to find the highest quality beans possible to deliver to our customers.
Our Ability to Manage Our Supply Chain
Our ability to grow and meet future demand will be affected by our ability to properly plan for and source inventory from a variety of suppliers located inside and outside the United States. The majority of our green coffee beans come from Colombia and
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Brazil, but since 2020, we have also sourced green coffee beans from over ten countries in Latin America, Africa, and Asia to diversify our supply chain and offer our customers specialty and limited-time-only roasts. Quality control is also a critically important part of our manufacturing and supply chain operations. 99% of our bagged roasted coffee is roasted in-house. Our licensed, Coffee Quality Institute-certified grader and former Green Beret, Edwin Parnell, leads cupping, grading, scoring, and sourcing of our coffees.
Components of Our Results of Operations
Revenue, net
We sell our products both directly and indirectly to our customers through a broad set of physical and online platforms. Our revenue, net reflects the impact of product returns, as well as discounts for certain sales programs, promotions, and loyalty rewards.
Cost of Goods Sold
Cost of goods sold primarily includes raw material costs, labor costs directly related to producing our products, including wages and benefits, shipping costs, lease expenses and other overhead costs related to certain aspects of production, warehousing, fulfillment, shipping, and credit card fees.
Operating Expenses
Operating expenses consist of marketing and advertising expenses related to brand marketing campaigns through various online platforms, including email, digital, website, social media, search engine optimization, as well as performance marketing efforts, including retargeting, paid search and product advertisements, as well as social media advertisements and sponsorships. Operating expenses also consist of salaries, wages, and benefits of payroll and payroll related expenses for labor not directly related to producing our products. Payroll expenses include both fixed and variable compensation. Variable compensation includes bonuses and stock-based compensation for our finance, legal, human resources, and general corporate personnel. Also included are other professional fees and services, and general corporate infrastructure expenses, including utilities and depreciation and amortization.
Interest Expense
Interest expense consists of interest on our borrowing arrangements, the amortization of debt discounts and deferred financing costs, and extinguishment of debt costs for the year ended December 31, 2021.
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Results of Operations
The following table represents the selected results of operations for BRCC for the periods indicated.
Fiscal Year December 31,
($in thousands)
Operating expenses
Other income (expense)
Other income (expense), net (55) (227) 91
Earnings (loss) before income taxes (13,667) 4,506 (758)
State income tax expense 178 185 14
Comparison of the year ended December 31, 2021 to the year ended December 31, 2020
Fiscal Year December 31,
($in thousands)
Gross margin (gross profit as % of revenue, net) 38.5 % 42.3 %
Revenue, net
Net revenue for the year ended December 31, 2021 increased $69.2 million, or 42%, to $233.1 million as compared to $163.9 million for the corresponding period in 2020.
The increase was driven by continued growth in our DTC channel, new products sold and increased points of distribution in our Wholesale channel, and the opening of new company-owned Outposts. DTC channel net revenue increased in aggregate by $27.6 million, or 20%, to $165.3 million for the year ended December 31, 2021 as compared to $137.7 million for the corresponding period in 2020 due to an increase in number of customers and sales of new products on subscription.
For the year ended December 31, 2021, net revenue for our Outpost channel increased $9.2 million, or 329%, to $12.0 million as compared to $2.8 million for the corresponding period in 2020. We opened a total of seven new company-operated Outposts in Texas, Tennessee, and Utah in 2021.
For the year ended December 31, 2021, net revenue from our Wholesale channel increased $32.4 million, or 139%, to $55.8 million as compared to $23.4 million for the corresponding period in 2020. The largest increase came from RTD drink product sales through national distributors and retail accounts, and product sales with a large retail chain.
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Cost of goods sold
For the year ended December 31, 2021, cost of goods sold increased $48.9 million, or 52%, to $143.4 million as compared to $94.5 million over the corresponding period prior year. The increase was partially driven by higher sales and product mix shift, as RTD has higher product costs and lower margins as compared to bagged coffee. In addition, shipping costs, which includes inbound freight, outbound freight, and intracompany freight, increased due to carrier and courier rate increases. Gross margin decreased 380 basis points to 38.5% for the year ended December 31, 2021 as compared to 42.3% for the year ended December 31, 2020.
Operating expenses
Operating expenses for the year ended December 31, 2021 increased $37.6 million, or 59%, to $101.3 million as compared to $63.6 million for the corresponding period in 2020.
Salaries, wages and benefits increased $14.5 million, or 60%, to $38.7 million for the year ended, December 31, 2021, compared to $24.2 million for the corresponding period in 2020. We increased employee headcount to respond to our significant sales growth and invested in existing channels as we built out additional revenue streams and expanded products lines, which resulted in higher salaries, wages and benefits. In addition, in 2021, we continued to strengthen our marketing and advertising capabilities with national radio, television, and billboard advertising placements and in-house production of content. This resulted in increased marketing and advertising expenses of $10.8 million, or 43%, to $36.4 million for the year ended December 31, 2021, compared to $25.5 million for the corresponding period in 2020. In addition, General and Administrative expenses increased $12.2 million, or 88%, to $26.2 million for the year ended December 31, 2021 as compared to $13.9 million for the same period 2020. The increase is due to the addition of corporate infrastructure to support the growth of our business across multiple channels. We also experienced increased costs related to travel related expenses as the Company re-opened corporate offices and the government loosened travel restrictions.
Interest Expense
Interest expense for the year ended December 31, 2021 increased $1.0 million, or 94%, to $2.0 million as compared to $1.0 million for the corresponding period in 2020.
The increase in interest expense was primarily attributed to a loss on the extinguishment of debt incurred in August 2021 of $0.7 million. The additional increase was related to the Company entering into several debt agreements to finance its purchases of property and equipment for corporate office locations, Outposts, and manufacturing facilities.
Comparison of the year ended December 31, 2020 to the year ended December 31, 2019
Fiscal Year December 31,
($in thousands)
Gross margin (gross profit as % of revenue, net) 42.3 % 43.5 %
Revenue, net
Net revenue for the year ended December 31, 2020 increased $81.8 million, or 100%, to $163.9 million as compared to $82.1 million for the year ended December 31, 2019.
The increase was primarily due to the rapid growth in our DTC channel, a sales and marketing agreement with a large retailer in our Wholesale channel, and a newly opened company-operated store in our Outpost channel. DTC net revenue increased $64.1 million, or 87%, to $137.7 million in fiscal 2020 as compared to net revenues of $73.6 million in fiscal 2019, due to continued growth in DTC sales fueled by a surge for in-home coffee products as consumers changed their coffee consumption experience
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attributed to the COVID-19 pandemic. Concurrently, we expanded our subscription offerings that included new products on subscription.
Outpost net revenue increased $2.0 million, or 245%, to $2.8 million for fiscal 2020 as compared to $0.8 million in fiscal 2019, primarily due to a newly opened company-operated retail store in San Antonio, TX.
Wholesale net revenue increased $15.6 million, or 203%, to $23.4 million for fiscal 2020 as compared to $7.7 million in fiscal 2019. We launched the RTD product line, which experienced rapid growth and adoption through a national distributor network. In addition, we entered into a product sales and marketing agreement with a large retailer to sell our products in their locations and on their website.
Cost of goods sold
Cost of goods sold for the year ended December 31, 2020 increased $48.1 million, or 104%, to $94.5 million as compared to $46.4 million for the year ended December 31, 2019.
The increase is partly driven by product mix as RTD has higher product costs and lower gross margins as compared to bagged coffee. In addition, shipping costs, which includes inbound freight, outbound freight, and intracompany freight, increased due to significant carrier and courier rate increases. Gross margin decreased 120 basis points to 42.3% for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to higher shipping cost, partially offset by improved margins and leverage in e commerce and merchant fees.
Operating expenses
Operating expenses for the year ended December 31, 2020 increased $27.8 million, or 78%, to $63.6 million as compared to $35.8 million for the year ended December 31, 2019.
For year ended December 31, 2020, salaries, wages and benefits increased $11.1 million, or 84%, to $24.2 million as compared to $13.1 million for fiscal 2019. In 2020, we experienced significant growth related to the COVID-19 pandemic. We increased employee headcount to be responsive to this growth, which resulted in higher salaries, wages, and benefits costs. In addition, General and Administrative expenses increased $4.6 million, or 49%, to $13.9 million in fiscal 2020 as compared to $9.3 million in fiscal 2019. The increase is due to the addition of corporate personnel and infrastructure to support the growth of our business across multiple channels.
Interest Expense
Interest expense for the year ended December 31, 2020 increased $0.3 million, or 43%, to $1.0 million as compared to $0.7 million for the year ended December 31, 2019.
The increase in interest expense is primarily attributed to increase in our long-term debt. In 2020, we entered into a loan and security agreement, several mortgages to purchase leased buildings, and an equipment financing arrangement.
Liquidity and Capital Resources
Our principal use of cash is to support operational expenses associated with non-capitalizable start-up costs, which largely consist of working capital requirements related to inventories, accounts payable, accounts receivable, and general and administrative expenses. Furthermore, we use cash to fund our debt service commitments, capital equipment acquisitions, stores buildout and other growth-related needs.
Our primary sources of cash are (1) cash on hand, (2) cash provided by operating activities, and (3) net borrowings from our credit facilities. As of December 31, 2021, our cash and cash equivalents were $18.3 million, working capital of $(6.0) million, and $19.1 million of available borrowings under our credit facilities. The Company had $12.0 million of borrowings outstanding classified as current debt as of December 31, 2021. The Company also received $126.8 million in net cash proceeds from the Business Combination. Our ability to draw from the credit facilities is subject to a borrowing base and other covenants. We believe that these
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sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the ordinary course of business and under the current market conditions for at least the next twelve months.
We expect we may continue to incur net operating losses and negative cash flows from operations, and we expect our general and administrative expenses and capital expenditures will continue to increase as we continue to expand our operations, product offerings and customer base.
Mortgages, Equipment Line, Revolving Line of Credit, and Promissory Note
In July 2020, we entered into mortgage loan agreements to refinance the purchase of buildings for a total of $5.5 million at an interest rate of 3.67% per annum. The loans are secured by the real property financed. The loans mature on July 29, 2025. The loans are payable in monthly installments of principal and interest commencing on August 29, 2020. The loans are subject to quarterly covenants related to fixed charge coverage, cash flows, and dividends and distributions.
In April 2021, we entered into mortgage loan agreement to purchase a building for a total of $2.2 million at an interest rate of 3.60% per annum. The loan is secured by the real property financed. The loan matures on April 29, 2026. The loan is payable in monthly installments of principal and interest commencing on May 29, 2021.
The loans are subject to quarterly covenants related to cash flows, dividends and distributions and the Company was in compliance with all covenants related to these mortgage loan agreements as of December 31, 2021.
In July 2020, we entered into an equipment financing agreement which provided a credit line totaling $3.3 million at an interest rate of LIBOR plus 3.50% (the “Equipment Line”). The Equipment Line was amended in April 2021 to include additional availability of $10.0 million. Further, in July 2021, an additional $6.0 million was added to the availability of the Equipment Line. In September 2021, $2.0 million outstanding on the Equipment Line was converted to a 60-month term loan to be utilized for retail expansion (the “Retail Facility”). The Equipment Line is secured by the equipment financed. The Equipment Line matures the earlier of (i) five years subsequent to the equipment project completion or (ii) August 1, 2026. As of December 31, 2021, the Company has available credit under the Equipment Line and the Retail Facility of $8.2 million and $4.1 million, respectively.
In April 2021, we entered into a $10.0 million revolving line of credit agreement (the “Credit Facility”). The Credit Facility earns a floating interest rate calculated at the prime rate plus zero percent.
In November 2021, the Company entered into an amendment to increase the available line under the Credit Facility to $25 million. Interest only payments are due and payable in installments commencing November 30, 2021 and continue regularly until the entire amount outstanding is due on June 30, 2023. Borrowings under the Credit Facility are subject to a borrowing base on qualified collateral values. As of December 31, 2021, the balance of the Credit Facility was $8.0 million. The interest rate for the Credit Facility was the Prime rate plus 1% and the amount of borrowings available was $1.8 million.
In November 2021, the Company entered into a revolving loan agreement to borrow an aggregate principal amount not to exceed $15 million (the Promissory Note). The Promissory Note matures on June 30, 2022 (Initial Maturity) with an option to extend the term by one year to June 30, 2023 (Extended Maturity). The Promissory Note accrues interest of 7% per annum until Initial Maturity and then 12% per annum until the Extended Maturity date. As of December 31, 2021, the amount of borrowings available was $5 million.
As of December 31, 2021, the Company has $2.8 million of outstanding note payable agreements with a weighted average interest rate of 1.01%. The notes are payable in annual installments scheduled to be paid in full in 2025.
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Cash Flows from Operating, Investing and Financing Activities
The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated (in thousands):
Fiscal Year
December 31,
Cash flows provided by (used in):
Comparison of the year ended December 31, 2021 to the year ended December 31, 2020
Operating Activities
Cash flow from operating activities is primarily generated from revenue from our DTC and Wholesale channels.
Net cash used in operating activities was $7.7 million for the year ended December 31, 2021, compared to net cash provided by operating activities of $11.5 million for the year ended December 31, 2020. The $19.2 million decrease was primarily due to a net loss from operations of $13.8 million for the year ended December 31, 2021, compared to net income of $4.3 million for the same period in 2020. In addition, the change in prepaid expenses and other assets increased $4.2 million compared to the same period in 2020 mainly due to an increase in prepaid marketing expenses of $2.0 million and an additional increase in transaction costs. The increases were slightly offset by higher non-cash depreciation, amortization and equity-based compensation expenses in 2021.
Investing Activities
Net cash used in investing activities was $19.3 million for the year ended December 31, 2021, compared to net cash used in investing activities of $9.8 million for the year ended December 31, 2020. The $9.5 million increase in net cash used was primarily due to continued spend on capital expenditure projects for our Outpost locations, roasting facilities, and corporate offices.
Financing Activities
Net cash provided by financing activities was $9.7 million for the year ended December 31, 2021, compared to net cash provided by financing activities of $28.8 million for the year ended December 31, 2020. The $19.1 million decrease in net cash from financing activities was primarily due to repayments of long-term debt and Series A preferred distributions during the year ended December 31, 2021.
Comparison of the year ended December 31, 2020 to the year ended December 31, 2019
Operating Activities
Net cash provided by operating activities was $11.5 million for the year ended December 31, 2020, compared to net cash provided by operating activities of $4.1 million for the year ended December 31, 2019. The $7.4 million increase was primarily due to net income from operations of $4.3 million, increase in accounts payable due to timing of payables and cash payments of $7.0 million, increase in accrued liabilities of $6.4 million due to timing of expenditures and invoice receipts, and an increase in deferred revenue and gift card liability of $3.3 million primarily due to increase in revenue volumes and the establishment of a loyalty reward program. Offsetting these activities are cash used for purchases of inventory of $10.9 million to address inventory levels to meet growth due to customer demands.
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Investing Activities
Net cash used in investing activities was $9.8 million for the year ended December 31, 2020, compared to net cash used in investing activities of $1.1 million for the year ended December 31, 2019. The $8.7 million increase was primarily due to purchases of property and equipment related to our Outpost locations, roasting facilities, and corporate offices.
Financing Activities
Net cash provided by financing activities was $28.8 million for the year ended December 31, 2020, compared to net cash used in financing activities of $2.2 million for the year ended December 31, 2019. The $31.0 million increase was primarily due to issuance of Series A preferred equity, net of $145.1 million and issuance of long-term debt of $16.4 million. Offsetting these activities are cash used to repurchase member units in the amount of $125 million and cash used for payments of long-term debt of $7.3 million.
Commitments
As of December 31, 2021, we had no off-balance sheet debt or arrangements, except for operating leases entered into in the normal course of business and purchase commitments relating to inventory as discussed below.
In September 2021, the Company entered into a manufacturing and purchase agreement to purchase canned beverage product from a third-party supplier. The initial term ends on December 31, 2023, and automatically renews for two consecutive year periods, unless either party provides notice of cancellation at least 120 days prior to the end of the current term. The minimum purchase amount carries a minimum surcharge of approximately $2.25 million through December 31, 2022.
In November 2021, the Company entered into a manufacturing and purchase agreement to purchase coffee product from a third-party supplier. The term remains in effect until December 31, 2023. The minimum purchase amount is based on quantity and will range from approximately $8.8 million to $10.4 million on an annual basis.
Critical Accounting Policies
Critical accounting policies and estimates are those accounting policies and estimates that are both the most important to the portrayal of our net assets and results of operations and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are developed based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Critical accounting estimates are accounting estimates where the nature of the estimates are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates on financial condition or operating performance is material.
The critical accounting estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification 606. Revenue is recognized when a customer obtains control of products or services in an amount that reflects the consideration which we received, or expect to receive, in exchange for those goods or services. We are required to identify our contracts with customers, identify the performance obligations in a contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation.
The majority of our revenue is derived from the sale of our products. In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration to which we expect to be entitled.
Revenue is recognized when control of the product is transferred to the customer (i.e., when our performance obligation is satisfied), which is defined by the commercial terms of each purchase but typically occurs at the date of delivery of the merchandise to the customer. As such, customer orders are recorded as deferred revenue prior to delivery of products. In determining whether control has transferred, we considered whether risks and rewards of ownership have transferred to the customer. We estimate which shipments
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have been delivered and recognize corresponding revenue at the end of the period. Delivery date estimates are based on average transit times calculated based on factors such as the type of carrier, the fulfillment source, the delivery destination and historical transit time experience. Actual shipping times may differ from our estimates.
Loyalty Rewards Program
We have a loyalty points rewards program (the “Loyalty Program”) that is primarily a spend-based program. Customers can earn 1% or 3% on purchases depending on whether the purchase is a subscription or non-subscription. 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. Loyalty points will expire if there is no account activity (i.e., if there is no new purchase made or order placed) in a period of twelve months. Conversion of rewards are non-changeable after redemption, have no cash value, and are non-transferrable.
The Company defers revenue associated with the points earned through purchases that are expected to be redeemed, net of estimated unredeemed loyalty points. Loyalty points that are estimated to be unredeemed is based on a historical percentage of expired 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.
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.
Equity Based Compensation
The Company grants equity-based awards to certain employees and non-employee directors. The Company records equity-based compensation expense based on the fair value of equity awards at the grant date and recognizes compensation expense on a straight-line basis over the requisite service period. The assumptions used to calculate the fair value of equity awards granted are evaluated and revised, as necessary, to reflect the Company’s historical experience and current market conditions.
The Company engages a third-party appraiser (the “Appraiser”) to assist management in estimating the fair value of common stock and incentive units. The Appraiser considers all three valuation approaches to value the Company’s total equity: the income approach, market approach and cost approach but typically relies primarily on the income and market approaches. The Appraiser then weights the selected approaches considering the reliability of each approach as of the grant date. Subsequently, the Appraiser allocates the total equity value to the classes of shares. Discounts for lack of marketability are considered based on the facts and circumstances of the class of shares at each grant date.
Applying these valuation and allocation approaches involves the use of estimates, judgment and assumptions that are highly complex and subjective, such as those regarding the Company’s expected future revenue, expenses and cash flows, as well as discount rates, valuation multiples, the selection of comparable public companies and comparable transactions and the probability of future events. Changes in any or all of these estimates and assumptions, or the relationships between these assumptions, impact the Company’s valuation as of each valuation date and may have a material impact on the valuation of the Company’s equity and equity awards. These estimates involve inherent uncertainties and, if different assumptions had been used, equity-based compensation expense could have been materially different from the amounts recorded.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included in Item 8 of Part II of this 10-K for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent it has made one, of their potential impact on our consolidated financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies for up to five years or until we are no longer an emerging growth company. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not
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publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Commodity Risks
Our profitability is dependent on, among other things, our ability to anticipate and react to changes in costs of key operating resources such as coffee beans, dairy products, aluminum cans and other materials and commodities. The availability and prices of coffee beans and other commodities are subject to significant volatility. Increases in the “C” coffee commodity price increase the price of high-quality coffee. We generally enter into fixed price purchase commitments.
The supply and price of coffee we purchase can also be affected by multiple factors in the producing countries, such as weather (including the potential effects of climate change), natural disasters, crop disease, inventory levels, political and economic conditions. Because of the significance of coffee beans to our operations, combined with our ability to only partially mitigate future price risk through purchasing practices, increases in the cost of high-quality coffee beans could have a material adverse impact on our profitability.
Interest Rate Risk
In order to maintain liquidity and fund certain business operations, our Credit Facility bears a variable interest rate based on the prime rate plus 1%. The Equipment Line bears a variable interest rate based on LIBOR plus 3.50%. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities. As of December 31, 2021, we had $8.0 million outstanding on the Credit Facility with available borrowings of $1.8 million. As of December 31, 2021, we had $5.1 million outstanding on the Equipment Line with available borrowings of $8.2 million. The carrying value of the variable interest rate debt approximates its fair value as the borrowings are based on market interest rates.
Inflation
Inflationary factors such as increases in the cost of our products, overhead costs and transportation costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross profit and operating expenses as a percentage of net revenue, if the selling prices of our products do not increase with these increased costs.
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Item 8. Financial Statements and Supplementary Data
Authentic Brands LLC
Audited Consolidated Financial Statements of Authentic Brands LLC as of December 31, 2021 and 2020 and for the three years ended December 31, 2021
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Members’ Deficit F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of BRC Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Authentic Brands LLC (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, members' deficit, and cash flows for each of the years ended December 31, 2021 and 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years ended December 31, 2021 and 2020, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2020.
San Antonio, Texas
March 16, 2022
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Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
BRC Inc.
Salt Lake City, UT
Opinion on the consolidated Financial Statements
We have audited the accompanying consolidated statements of operations, members’ deficit, and cash flows of Authentic Brands, LLC (the “Company”) for the year ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the Company’s results of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ BDO USA, LLP
We began serving as the Company’s auditor in 2018 and became the predecessor auditor in 2020.
Houston, Texas
April 10, 2020, except for the segment information described in Note 2, as to which the date is November 10, 2021
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AUTHENTIC BRANDS LLC
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, except unit amounts)
December 31
Assets
Current assets:
Prepaid expenses and other current assets 6,377 2,186
Identifiable intangibles, net 167 191
Restricted cash — 400
Liabilities and members’ deficit
Current liabilities:
Deferred revenue and gift card liability 7,334 4,615
Current maturities of long-term debt, net 11,979 866
Current maturities of capital lease obligations 85 469
Non-current liabilities:
Capital lease obligations, net of current maturities 228 727
Other non-current liabilities 334 —
Total non-current liabilities 23,274 12,897
Commitments and Contingencies (Note 8)
See notes to consolidated financial statements.
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AUTHENTIC BRANDS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Year Ended December 31
Operating expenses
Other income (expense):
Other income (expense), net (55) (227) 91
Earnings (loss) before income taxes (13,667) 4,506 (758)
State income tax expense 178 185 14
See notes to consolidated financial statements.
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AUTHENTIC BRANDS LLC
CONSOLIDATED STATEMENTS OF MEMBERS’ DEFICIT
(Amounts in Thousands)
Members’ Accumulated
Interest Deficit Total
Equity-based compensation 143 — 143
Repayment of notes receivable from members 199 — 199
Repurchase member units (2,000) — (2,000)
Equity-based compensation 1,929 — 1,929
Non-employee equity-based compensation 1,384 — 1,384
Issuance of members units, net of issuance costs of $559 16,551 — 16,551
Series A preferred discount amortization (870) — (870)
Repayment of notes receivable from members 56 — 56
Equity-based compensation 3,204 — 3,204
Non-employee equity-based compensation 1,492 — 1,492
Repurchase of member units (2,953) — (2,953)
See notes to consolidated financial statements.
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AUTHENTIC BRANDS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
Year Ended December 31
Operating activities
Non-employee equity-based compensation 1,492 1,384 —
Amortization of debt issuance costs 358 133 314
Loss on extinguishment of debt 726 — —
Bad debt expense (recovery) (51) 195 (37)
Loss from equity method investment — 52 80
Loss on disposal/sale of property and equipment 70 — 4
Changes in operating assets and liabilities:
Prepaid expenses and other assets (5,283) (1,054) (692)
Deferred revenue and gift card liability 2,719 3,315 593
Other liabilities 334 — (656)
Net cash provided by (used in) operating activities (7,691) 11,546 4,144
Investing activities
Purchases of property and equipment $ (19,287) $ (9,760) $ (1,043)
Cash paid for asset purchases — — (63)
Net cash used in investing activities (19,287) (9,760) (1,106)
Financing activities
Payment of Series A preferred dividends (7,001) — —
Repurchase of member units — (125,000) —
Repayment of notes receivable from members — 56 201
Beginning cash, cash equivalents, and restricted cash 35,632 5,035 4,163
Non-cash operating activities
Accrued other assets $ 750 $ — $ —
Deferred transaction costs 1,214 — —
Non-cash investing and financing activities
Issuance of Series A preferred unit dividend $ 1,406 $ — $ —
Equity investment of property and equipment — — 107
Accrued capital expenditures 803 140 183
Supplemental cash flow information
Cash paid for state income taxes $ 147 $ 114 $ 14
See notes to consolidated financial statements.
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AUTHENTIC BRANDS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands, Except Unit/Share and per Unit/Share Amounts)
December 31, 2021
1. Organization and Nature of Business
Authentic Brands LLC (individually, “Authentic Brands”, collectively with its subsidiaries, the “Company”), through its wholly owned subsidiaries, purchases, roasts, and sells high quality coffee, coffee accessories, and branded apparel through its online channels and business networks. In addition, the Company develops and promotes online content for the purpose of growing its brands.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The Company has prepared the consolidated financial statements and accompanying notes in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The consolidated financial statements reflect the financial position and operating results of the Company including wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Such estimates include but are not limited to estimated losses on accounts receivable, inventory reserves, undiscounted future cash flows and the fair value of assets or asset groups for the purpose of assessing impairment of long-lived assets, liabilities for contingencies, equity-based compensation, estimates for sales returns and related allowance, and deferred revenue. Actual results could differ materially from those estimates.
Revenue from Contracts with Customers
The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, or Accounting Standards Codification 606 (“ASC 606”) on January 1, 2019. There were no impacts to the timing of revenue recognition upon the adoption of the standard. Revenue is recognized when, or as, control of a promised product or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products. Revenue also excludes any amounts collected on behalf of third parties, including sales and indirect taxes. Revenue recognition is evaluated through the following five steps:
1. Identification of the contract with a customer;
2. Identification of the performance obligations in the contract;
3. Determination of the transaction price;
5. Recognition of revenue when or as a performance obligation is satisfied.
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Sources and Timing of Revenue
The Company’s revenue is derived primarily from product sales through its e-commerce websites and direct to businesses. In addition, the Company derives revenues from company-operated store locations, and franchise and license agreements. Revenues from the sale of products and merchandise are recognized when control of the product passes to the customer, typically at the date of delivery of the merchandise to the customer and in an amount that reflects the expected consideration to be received in exchange for such goods. As such, customer orders are recorded as deferred revenue prior to delivery of products. As the Company ships high volumes of packages through multiple carriers, it is not practical for the Company to track the actual delivery date of each shipment. Therefore, the Company uses estimates to determine which shipments are delivered and, therefore, recognize revenue at the end of the period. Delivery date estimates are based on average transit times calculated based on factors such as the type of carrier, the fulfillment source, the delivery destination and historical transit time experience. Actual shipping times may differ from the Company’s estimates. Costs to obtain or fulfill a contract with a customer are expensed as incurred and are generally not significant.
Revenues from company-operated stores are recognized when payment is tendered at the point of sale as the performance obligation has been satisfied. Store revenues are reported excluding sales, use or other transaction taxes that are collected from customers and remitted to taxing authorities.
Deferred Revenue
Deferred revenue consists of amounts billed to or received from customers prior to delivery of products. The Company recognizes such amounts in revenues as the product is delivered.
Gift Cards
Gift cards are offered through the Company’s e-commerce websites through the form of an e-certificate. When a gift card is purchased, the Company recognizes a corresponding liability for the full amount of the gift card, which is recorded in “Deferred revenue and gift card liability” on the consolidated balance sheets. Gift cards can be redeemed online and on the Company’s website. When a gift card is redeemed, the Company reduces the corresponding liability and recognizes revenue. There are no expiration dates to the gift cards. While the Company will continue to honor all gift cards presented for payment, the Company may determine the likelihood of redemption, based on historical experience, is deemed to be remote for certain cards due to long periods of inactivity. In these circumstances if the Company also determines there is no requirement for remitting balances to government agencies under unclaimed property laws, unredeemed card balances may then be recognized as breakage income, which is included in Revenue, net on the consolidated statements of operations. The Company recorded no breakage income for the years ended December 31, 2021, 2020 and 2019.
Loyalty Rewards Program
In August 2020, BRCC established its BRCC Loyalty Points rewards program (the “Loyalty Program”), which is primarily a spend-based program. BRCC’s customers who establish an online account are enrolled in the Loyalty Program. Under the program, there are two levels in which customers can participate. Subscription customers (in the BRCC Coffee Club or subscribed to another subscription product type) are considered to be in the highest tier and earn 3% on purchases. Non-subscription customers earn 1% on purchases. In addition, to earning points on purchases, customers can earn points through other activities. BRCC reserves the right in its sole discretion to modify, change, add, or remove activities which can be accomplished to earn points at any time. Under the Loyalty Program, customers may redeem rewards as they reach minimum thresholds per reward. BRCC reserves the right to modify, change, add, or remove rewards and their points thresholds at any time. BRCC loyalty points will expire if there is no account activity (i.e., if there is no new purchase made or order placed) in a period of twelve months. Conversion of rewards are non-changeable after redemption, have no cash value, and are non-transferrable. A portion of rewards are expected to expire and not be redeemed and will be recognized as breakage income over time. Based on historical expiration rates, the Company estimates a certain percentage of rewards to expire and reassesses this estimate on a quarterly basis. The Company recognized $368 in breakage income for the year ended December 31, 2021, which was included in “Revenue, net” on the consolidated statement of operations. The Company recorded no breakage income for the years ended December 31, 2020 and 2019.
The Company defers revenue associated with the points earned through purchases that are expected to be redeemed, net of estimated unredeemed loyalty points. When a customer redeems an earned reward, the Company recognizes revenue for the redeemed
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product and reduces the related deferred revenue liability. The deferred revenue liability is included in “Deferred revenue and gift card liability” on the consolidated balance sheets.
For those points that are earned through other activities, the Company recognizes the redemption of these points as a discount to the transaction price at time of sale.
The following table provides information about deferred revenue, gift cards, and Loyalty Program, including significant changes in deferred revenue balances during the years ended December 31, 2021 and 2020:
Sales of gift cards 512
Redemption of gift cards (319)
Increase from deferral of revenue 3,383
Decrease from revenue recognition (1,107)
Loyalty Program points earned 891
Loyalty Program points redeemed (45)
Sales of gift cards 838
Redemption of gift cards (458)
Increase from deferral of revenue 3,750
Decrease from revenue recognition (3,507)
Loyalty Program points earned 3,194
Loyalty Program points redeemed/expired and breakage (1,098)
Franchise Store Revenues
Franchise rights may be granted through franchise agreements that set out the terms of the arrangement with the franchisee. The franchise agreements require that the franchisee remit continuing fees to the Company as a percentage of the applicable store’s revenues in exchange for the license of the intellectual property associated with BRCC’s brands. In addition, a portion of these fees are used for national marketing campaigns. Continuing fees represent a portion of the consideration the Company receives under the franchise agreement. Continuing fees are typically billed and paid monthly. Continuing fees are recognized as the related store sales occur.
Under the franchise agreement, BRCC sells product to its franchisees. The revenue associated with these product sales are recognized when control of the product passes to the franchisee, typically at the date of delivery of the merchandise to the franchisee and in an amount that reflects the expected consideration to be received in exchange for such goods.
The franchise agreements also typically require upfront franchise fees such as initial fees paid for the execution of a franchise agreement. The fees associated with these agreements are typically billed and paid when a new franchise agreement becomes effective. The Company has determined that the services it provides in exchange for upfront franchise fees, which primarily relate to pre-opening support, are highly interrelated with the franchise right and are not individually distinct from the ongoing services provided to the Company’s franchisees. As a result, upfront franchise fees are recognized as revenue over the term of each respective franchise agreement, generally 10 years. Revenues for these upfront franchise fees are recognized on a straight-line basis, which is consistent with the franchisee’s right to use and benefit from the intellectual property. Revenues from continuing fees and upfront franchise fees are presented within Revenue in the consolidated statements of operations.
License Revenues
License rights may be granted through license agreements that set out the terms of the Company’s arrangement with the licensee. The Company’s license agreements require that the licensee remit continuing fees to the Company as a percentage of the applicable store’s revenues in exchange for the license of the intellectual property associated with BRCC’s brands. In addition, licensed store revenues consist of product sales to the licensee. The revenue associated with these product sales are recognized when control of the product passes to the licensee, typically at the date of delivery of the merchandise to the licensee and in an amount that reflects the expected consideration to be received in exchange for such goods. Continuing fees are recognized as the related store sales occur.
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The Company’s license agreements also typically require upfront license fees such as initial fees paid for the execution of a license agreement. The fees associated with these agreements are typically billed and paid when a new license agreement becomes effective. The Company has determined the services it provides in exchange for upfront license fees, which primarily relate to initial license set up and are not individually distinct from the ongoing services it provides to its licensees. As a result, upfront license fees are recognized as revenue over the term of each respective license agreement, generally 10 years. Revenues for these upfront license fees are recognized on a straight-line basis, which is consistent with the licensee’s right to use and benefit from the intellectual property. Revenues from continuing fees and upfront license fees are presented within “Revenue, net” in the consolidated statements of operations.
Disaggregation of Revenue
The Company disaggregates revenue by sales channel. The Direct to Consumer channel is principally comprised of revenue from our e-commerce websites and subscription services directly to the consumer. The Wholesale channel includes product revenue sold to an intermediary and not directly to the consumer. The Outpost channel includes revenue from company-operated stores, gift cards, franchise store and licensing.
The following table disaggregates revenue by sales channel:
December 31
Substantially all revenue is attributed from customers located in the United States and no single customer represents more than 10% of revenue for the years ended December 31, 2021, 2020 and 2019.
Sales Returns and Discounts
The Company’s product sales contracts include terms that could cause variability in the transaction price for items such as discounts, credits, charge backs, or sales returns. Accordingly, the transaction price for product sales includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized will not occur.
The Company inspects returned items when they arrive at its processing facilities. The Company refunds the full cost of the merchandise returned if the returned item is defective or the Company or its partners have made an error, such as shipping the wrong product. If the return is not a result of a product defect or a fulfillment error and the customer initiates a return of an unopened item within 30 days of delivery, for most products the Company refunds the full cost of the merchandise minus the original shipping charge and actual return shipping fees. If the customer returns an item that has been opened or shows signs of wear, the Company issues a partial refund minus the original shipping charge and actual return shipping fees. Coffee products are not eligible for returns. Revenue is recorded net of estimated returns. The Company records an allowance for returns based on current period revenues and historical returns experience. The Company analyzes actual historical returns, current economic trends and changes in order volume and acceptance of its products when evaluating the adequacy of the sales returns allowance in any accounting period. The allowance for sales returns and charge backs was $199 and $205 as of December 31, 2021 and 2020, respectively, and included in accounts receivable.
Shipping and Handling Fees and Costs
Shipping and handling is considered a fulfillment activity, as it takes place prior to the customer obtaining control of the merchandise, and fees charged to customers are included in net revenue upon completion of the performance obligation.
Segment Information
The Company reports operations as a single reportable segment and manages the business as a single-brand consumer products business. This is supported by the operational structure, which includes sales, product design, operations, marketing, and
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administrative functions focused on the entire product suite rather than individual product categories or sales channels. Our chief operating decision maker reviews financial information on a consolidated basis and does not regularly review financial information for individual sales channels, product categories or geographic regions that would allow decisions to be made about allocation of resources or performance.
Cost of Goods Sold
Cost of goods sold includes product costs, labor costs, occupancy costs, outbound shipping costs, handling and fulfillment costs, credit card fees, and royalty fees, and is recorded in the period incurred.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents also include proceeds due from credit card transactions with settlement terms of less than five days. The Company maintains cash and cash equivalent balances with financial institutions that exceed federally insured limits. The Company has not experienced any losses related to these balances, and it believes credit risk to be minimal.
The Company’s restricted cash balance reflected a certificate of deposit related to a letter of credit established in conjunction with the execution of a building lease agreement. The requirement under the lease was waived in 2021 and the cash is no longer restricted. In May 2021, the letter of credit was terminated.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets to the total amounts reported in the statements of cash flows.
Restricted cash — 400
Total cash and cash equivalents and restricted cash $ 18,334 $ 35,632
Accounts Receivable
Accounts receivable consist primarily of trade amounts due from business customers at period end. Accounts receivable are recorded at invoiced amounts and do not bear interest. From time to time, the Company grants credit to some of its business customers on normal credit terms. The Company maintains an allowance for doubtful accounts receivable based upon its business customers’ financial condition and payment history, and its historical collection experience and expected collectability of accounts receivable. The allowance for doubtful accounts receivable was $112 and $176 as of December 31, 2021 and 2020, respectively.
Inventories
Inventories are stated at the lower of standard cost, which approximates First In , First Out (FIFO), or net realizable value. The Company records inventory reserves for obsolete and slow-moving inventory. Inventory reserves are based on inventory obsolescence trends, historical experience and application of the specific identification method. Finished goods includes allocations of labor and occupancy expenses.
Property and Equipment
Property and equipment are stated at cost with depreciation calculated using the straight-line method over the estimated useful lives of the related assets or the term of the related capital lease, whichever is shorter. Leasehold improvements are amortized over the shorter of the term of the related leases or estimated useful lives. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in earnings for the period. The cost of maintenance and repairs are charged to earnings as incurred; significant renewals and improvements are capitalized.
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Estimated useful lives are as follows:
Estimated
Useful Lives
Land —
Building and Leasehold improvements 5 – 39 years
Computer equipment and software 3 years
Machinery and equipment 5 – 15 years
Vehicles 5 years
Internal Use Software
In accordance with ASC 350-40, Intangibles — Goodwill and Other, Internal-Use Software (ASC 350-40), the Company capitalizes qualifying internal use software costs that are incurred during the application development stage if management with the relevant authority authorizes the project, it is probable the project will be completed, and the software will be used to perform the function intended. Capitalized internal use software costs are reported in property and equipment on the consolidated balance sheets and are amortized over the expected economic life of three years using the straight-line method once the software is ready for intended use. Costs incurred for enhancements that are expected to result in additional significant functionality are capitalized and amortized over the estimated useful life of the enhancement. Costs related to preliminary project activities and post-implementation activities, including training and maintenance, are expensed as incurred. Capitalized software costs net of accumulated amortization are included as a component of property and equipment in the consolidated balance sheets.
Impairment of Long-Lived Assets
The Company reviews the recoverability of its long-lived assets, such as property and equipment and identifiable intangible assets, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset or asset group from the expected future undiscounted pre-tax cash flows of the related operations. If these undiscounted cash flows are less than the carrying amount of the related asset, an impairment is recognized for the excess of the carrying value over its fair value. No impairment loss was recognized for the years ended December 31, 2021, 2020 and 2019.
Leases
The Company leases certain property and equipment under non-cancelable capital and operating leases which expire at various dates through 2026. The Company’s operating leases relate to roasting facilities in Tennessee and retail stores.
At the inception of each lease, the Company determines the appropriate classification for each lease as operating or capital. The Company has estimated that the lease term for retail stores, including reasonably assured renewal periods, is generally 10 years. Any initial direct costs are capitalized and amortized over the life of the lease.
Operating Leases
Operating leases can contain escalating rentals over the lease term, as well as optional renewal periods. Rent expense for operating leases is recorded on a straight-line basis over the lease term and begins when the Company has the right to use the property. Any difference between rent expense and cash payment is recorded as deferred rent on the accompanying consolidated balance sheets. Tenant incentives used to fund leasehold improvements are recorded in deferred rent and amortized as reductions to rent expense over the term of the lease.
Capital Leases
Property under capital leases is stated at the net present value of the related minimum lease payments at lease inception and amortized over the initial lease term.
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Income Taxes
The Company was formed as an LLC in the state of Delaware and thus is not subject to federal income taxes; therefore, its pro rata share of income, losses and tax credits are reported by its members on their individual income tax returns. However, the Company is subject to state income taxes in various states in which it operates.
The Company applies guidance issued by FASB which clarifies accounting for uncertainty in income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the consolidated financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement.
The Company has completed an analysis of its tax positions and believes there are no uncertain tax positions that would require recognition in the consolidated financial statements as of December 31, 2021, 2020 and 2019. The Company believes that there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within twelve months of the reporting date. The federal income tax position taken for each of the subsidiaries organized as LLC’s for any years open under the various statutes of limitations is that they will continue to be exempt from income taxes by virtue of being a pass-through entity. The statute of limitations for federal income tax returns are open from the period ended December 31, 2018. The statute of limitations for the state income tax returns are generally open from the period ended December 31, 2017.
Equity-Based Compensation
The Company recognizes the cost of equity-based restricted and incentive unit awards based on the fair value estimated in accordance with FASB ASC 718, Stock Based Compensation (ASC 718). The Company records equity-based compensation expense based on the fair value of equity awards at the grant date and recognizes compensation expense on a straight-line basis over the requisite service period. The assumptions used to calculate the fair value of equity awards granted are evaluated and revised, as necessary, to reflect the Company’s historical experience and current market conditions. For more information, see Note 11, Equity-Based Compensation.
Concentrations of Credit Risk
The Company’s assets that are potentially subject to concentrations of credit risk are cash and accounts receivable. Cash balances are maintained in financial institutions which at times exceed federally insured limits. The Company monitors the financial condition of the financial institutions in which its accounts are maintained and has not experienced any losses in such accounts. The accounts receivable of the Company are spread over a number of customers, of which one customer accounted for 19% of total outstanding receivables as of December 31, 2021 and two customers accounted for 54% of total outstanding receivables as of December 31, 2020. The Company performs ongoing credit evaluations as to the financial condition of its customers and creditors with respect to trade accounts.
Marketing and Advertising Expenses
The Company’s marketing and advertising expenses are primarily internet marketing expenses, commercial sponsorships and advertising time slots. Marketing expenses are recognized as incurred based on the terms of the individual agreements, which are generally, but not limited to: a commission for traffic driven to its websites that generate a sale, programmatic targeting advertisements, national television and radio advertisements, or payments to social media influencers. We may also enter into marketing service agreements with third party production and content providers where we prepay for certain services or deliverables. Prepaid marketing and advertising expenses totaled $1,941 and $93 for the years ended December 31, 2021 and 2020, respectively.
Fair Value Measurements
The Company’s financial instruments consist primarily of accounts receivable, accounts payable and long-term debt. The carrying amounts of accounts receivable and accounts payable are representative of their respective fair values due to the short-term maturity of these instruments. The fair value of variable rate long-term debt is based upon the current market rates for debt with similar credit risk and maturity, which approximated its carrying value, as interest is based upon the LIBOR or Prime rates plus an applicable floating
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margin. In measuring fair value, the Company reflects the impact of credit risk on liabilities, as well as any collateral. The Company also considers the credit standing of counterparties in measuring the fair value of assets.
The Company uses any of three valuation techniques to measure fair value: the market approach, the income approach, and the cost approach in determining the appropriate valuation technique based on the nature of the asset or liability being measured and the reliability of the inputs used in arriving at fair value.
The Company follows the provisions of ASC 820, Fair Value Measurements (ASC 820) for non- financial assets and liabilities measured on a non-recurring basis.
The inputs used in applying valuation techniques include assumptions that market participants would use in pricing the asset or liability (i.e., assumptions about risk). Inputs may be observable or unobservable. The Company uses observable inputs in the Company’s valuation techniques and classifies those inputs in accordance with the fair value hierarchy established by applicable accounting guidance, which prioritizes those inputs. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The three levels are defined as follows:
Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Redeemable Preferred Equity
The Company accounts for its preferred equity as temporary equity, given the Series A preferred units are probable of becoming redeemable (i.e., exercise of the exit rights is the passage of time). The Series A preferred units are subsequently remeasured by accreting changes in the redemption value from the date of issuance to the expected redemption date using the effective interest method. The Series A preferred units were redeemed in February 2022. For more information, see Note 14, Subsequent Events.
Comprehensive Income (Loss)
Comprehensive income (loss) is equivalent to net income (loss) in each of the periods presented. As such, no statement of comprehensive income (loss) is presented.
New Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15). Under the new guidance, a customer in a cloud computing arrangement that is a service contract is required to follow the internal use software guidance in ASC 350-40. The internal use software guidance requires the capitalization of certain costs incurred only during the application development stage. It also requires entities to expense costs during preliminary project and post-implementation stages. The guidance requires a customer to present the expense related to capitalize implementation in the same line in the income statement as the fees associated with the hosting element of the arrangement, present the capitalized implementation costs in the same line item in the statement of financial position that a prepayment of the fees for the associated hosting arrangement would be presented and classify payment for capitalized implementation costs in the statement of cash flows in the same manner as payments of the fees for the service component of the hosting arrangement. The guidance requires entities to disclose the nature of their hosting arrangements that are service contracts and make the disclosures in ASC 360-10, Impairment and Disposal of Long-Lived Assets, as if capitalized implementation costs were a
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separate major class of depreciable asset. For non-public entities, ASU 2018-15, is effective for annual periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption was permitted. The Company adopted ASU 2018-15 for the year ended December 31, 2020.
In February 2016, the FASB issued ASU 2016-02, Leases (Subtopic 842). Under the guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current US GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current US GAAP, which requires only capital leases to be recognized on the balance sheet, ASU 2016-02 will require both types of leases to be recognized on the balance sheet. ASU 2016-02 also will require disclosures to help investors and other financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The guidance is effective for the Company for the year beginning after December 15, 2021. Early adoption of the amendments of ASU 2016-02 is permitted for all entities is to be applied using the modified retrospective approach.
The Company will adopt ASU 2016-02 as of January 1, 2022. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application. Upon adoption, the Company expects to apply the practical expedients permitted within the new standard, which among other things, allows the Company to retain its existing assessment of whether an arrangement is, or contains, a lease and is classified as an operating or finance lease. The Company will make an accounting policy election that will keep leases with an initial term of twelve months or less off of the balance sheet and will result in recognizing those lease payments in the consolidated statement of operations on a straight-line basis over the lease term. The Company is in the process of analyzing its lease portfolio and continues to evaluate the full impact of the new standard. The Company expects to recognize material right-of-use assets and related liabilities on the Company’s consolidated balance sheet.
3. Product Sales and Marketing Services Agreement
The Company entered into a product sales and marketing services agreement (the “Agreement”) with a large retailer to sell select coffee products and merchandise items to the retailer to be sold in the retailer’s stores and website. The Agreement was effective January 28, 2020 and is to continue through April 2, 2025 (the “Initial Term”). After the Initial Term, the agreement automatically renews for an additional two years until terminated in accordance with its terms.
The revenues associated to product sales to the retailer are recognized when control of the product passes to the retailer, typically at the date of delivery of the merchandise to the retailer and in an amount that reflects the expected consideration to be received in exchange for such goods. In addition to product sales, the Agreement provides a licensing agreement with the retailer and its suppliers. The licensing agreement provides the retailer and its suppliers license rights to the intellectual property of select BRCC brands. These license rights provide the retailer the ability to manufacture its own BRCC branded soft goods and hard goods. License fees are recognized as the related purchases occur by the retailer. For the year ended December 31, 2021, the Company’s revenues related to the Agreement for product sales and license fees were $8,121 and $1,111, respectively. For the year ended December 31, 2020, the Company’s revenues related to the Agreement for product sales and licenses fees were $7,133 and $428, respectively.
As part of the Agreement, the Company entered into a marketing services agreement , which is effective through April 2, 2025. As part of the marketing services agreement, the Company granted 5,430 Class B common units in the Company which vest over a 30-month period from date of grant. The equity grant date is January 28, 2020, and total expense related to the equity award is expected to be $3,725.
In December 2021, the Agreement was amended to reduce the marketing service fees paid to the retailer over the term of the Agreement. The Company has accrued marketing expenses relating to the Agreement of $950 and $2,835 at December 31, 2021 and 2020, respectively. For the years ended December 31, 2021 and 2020, the Company recognized marketing expenses of $1,606 and $2,138, respectively.
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The following is the amended future minimum cash payments due to the retailer:
The marketing services agreement is a separate distinct service from the product supply agreement. The Company will expense the costs associated with the agreement in accordance with applicable guidance related to similar transactions.
4. Inventories
Inventories consist of the following:
December 31
Coffee:
Apparel and other merchandise 7,886 5,224
5. Property and Equipment, Net and Other Assets
Property and equipment, net consists of the following:
December 31
Building and leasehold improvements 11,273 5,291
Computer equipment and software 3,474 1,944
Furniture and Fixtures 961 714
Less: accumulated depreciation and amortization (5,406) (2,803)
The portion of depreciation expense related to production and distribution facilities is included in cost of goods sold including occupancy costs on the consolidated statements of operations.Depreciation expense recorded in cost of goods sold and general and administrative expenses was as follows:
December 31
The total depreciation expense for internal use software included in the above table was $798, $138 and $0 for the years ended December 31, 2021, 2020 and 2019, respectively.
Substantially all long-lived assets are located in the United States.
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Other Assets
In August 2021, the Company entered into an agreement with a related party, whereby the Company agreed to reimburse the related party for initial direct costs incurred totaling $1,000 for establishing retail coffee shop locations in the Phoenix, Arizona metropolitan area. After additional site evaluation in the fourth quarter 2021, the direct costs were subsequently written down to $571 as some locations will not be utilized and are included in Other assets for the respective retail coffee shops and will be amortized over the life of the completed lease agreements.
6. Accrued Liabilities
Accrued liabilities consist of the following:
December 31
Accrued compensation and benefits $ 2,799 $ 5,159
Accrued Series A preferred equity distribution 2,650 438
7. Long-Term Debt
The Company’s credit facilities and related balances were as follows:
December 31
Retail facility 1,904 —
Loan and security agreement — 6,500
Credit facility 8,000 —
Promissory note 10,000 —
Less debt issuance costs (439) (459)
Current maturities:
Current maturities of principal 12,273 1,030
Less current portion of debt issuance costs (294) (164)
Current maturities of long-term debt, net 11,979 866
Long-term debt:
Non-current portion of debt issuance costs (145) (295)
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Future contractual maturities of credit facilities as of December 31, 2021 are as follows:
Year ending December 31:
Debt Issuance Costs
The Company capitalizes fees associated with the origination of its credit facilities which are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the related loans. The debt issuance costs are amortized using the effective interest method. The Company incurred debt issuance costs of $338 and $592 for the years ended December 31, 2021 and 2020, respectively. Amortization of the debt issuance costs for the years ended December 31, 2021, 2020 and 2019 was $358, $133 and $314, respectively, and are included in interest expense in the consolidated statements of operations.
Mortgages
In July 2020, the Company entered into mortgage loan agreements to refinance the purchase of buildings for a total of $5,500 at an interest rate of 3.67% per annum. The loans are secured by the real property financed. The loans mature on July 29, 2025. The loans are payable in monthly installments of principal and interest of $32 commencing on August 29, 2020.
In April 2021, the Company entered into a mortgage loan agreement to purchase a building for a total of $2,200 at an interest rate of 3.60% per annum. The loan is secured by the real property financed. The loan matures on April 29, 2026. The loan is payable in monthly installments of principal and interest of $13 that commenced on May 29, 2021.
The mortgage loans require quarterly financial covenants related to cash flows, dividends and distributions. As of December 31, 2021, the Company was in compliance with all covenants related to these mortgage loan agreements.
Equipment Financing Loan
In July 2020, the Company entered into an equipment financing agreement which provided a credit line totaling $3,250 at an interest rate of LIBOR plus 3.5%. The credit line is secured by the equipment financed. The equipment financing agreement matures the earlier of (i) five years subsequent to the equipment project completion or (ii) August 1, 2026.
In April 2021, the Company increased its equipment credit line by $10,000. Further, in July 2021, an additional $6,000 was added to the available credit on the equipment finance loan. In September 2021, $1,998 outstanding on the equipment credit line was converted to a 60-month term loan at an interest rate of 4.05% to be utilized for retail expansion (Retail Facility). As of December 31, 2021, the Company has available credit under the equipment credit line and Retail Facility of $8,183 and $4,096, respectively.
Loan and Security Agreement and Credit Facility
In January 2020, the Company entered into a Loan and Security Agreement which provided two funding tranches to the Company, Term A and Term B. Term A was for $4,000 and was immediately available to be drawn. Term B was for $6,000 in which funds could be withdrawn monthly in minimum installments of $500. After repayment, no funds could be reborrowed.
In April 2021, the Company entered into a $10,000 revolving line of credit agreement (“Credit Facility”). Borrowings under the Credit Facility were used to pay off the Loan and Security Agreement of $6,500.
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In November 2021, the Company entered into an amendment to increase the Credit Facility to $25,000. Interest only payments are due and payable in installments commencing November 30, 2021 and continue regularly until the entire amount outstanding is due on June 30, 2023. Borrowings under the Credit Facility are subject to a borrowing base on qualified collateral values. As of December 31, 2021, the interest rate for the Credit Facility was the Prime rate plus 1% and the amount of borrowings available was $1,771.
Promissory Note
In November 2021, the Company entered into a revolving loan agreement to borrow an aggregate principal amount not to exceed $15,000 (the “Promissory Note”). The Promissory Note matures on June 30, 2022 (“Initial Maturity”) with an option to extend the term by one year to June 30, 2023 (“Extended Maturity”). The Promissory Note accrues interest of 7% per annum until Initial Maturity and then 12% per annum until the Extended Maturity. As of December 31, 2021, the amount of borrowings available was $5,000.
Notes Payable
As discussed in Note 9, in December 2019, the Company entered into a note payable agreement for $1,000 due January 5, 2022. The note was payable in monthly installments of principal and interest of $46 and carried an interest rate of 9.0%. The note was fully repaid in December 2021.
In May 2021, the Company entered into a note payable agreement for $365 at an interest rate of 1.07% per annum. The note matures on May 14, 2025. The loan is payable in four annual installments of principal commencing in May 2021. As of December 31, 2021, the outstanding balance on this note payable is $273.
In July and September 2021, the Company entered into note payable agreements for $2,588 at an interest rate of approximately 1% per annum to repurchase incentive units from former employees. The notes are payable in four annual installment payments. As of December 31, 2021, the outstanding balance on this note payable is $2,506.
8. Commitments and Contingencies
Leases
The Company leases certain property and equipment under non-cancelable capital and operating leases which expire at various dates through 2026. The Company’s operating leases relate to roasting facilities in Tennessee and retail stores.
In June 2018, the Company entered into a lease agreement to lease equipment for $1,863 at an implicit interest rate of 6.6% (the “Machinery and Equipment Lease”). The lease maturity was October 31, 2022 and was secured by the assets purchased. The lease was accounted for as a capital lease due to the present value of minimum lease payments being greater than 90% value of the assets. In August 2021, the Company borrowed $1,226 under the Equipment financing loan to buyout the equipment pledged under the Machinery and Equipment Lease. The Company incurred $726 of debt extinguishment cost representing the difference between the lease liability and the fair value of the machinery and equipment. The debt extinguishment cost is reported in interest expense in the consolidated statement of operations.
The Company has vehicle leases that are accounted for as capital leases based on the lease term representing greater than 75% of the economic life of the assets. The period of these leases is between 60 and 72 months and have interest rates between 3.9% and 12.6%.
Total rent expense for the years ended December 31, 2021, 2020 and 2019 was $1,224, $820 and $675, respectively.
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