BRC Inc.

(in thousands, except unit/share and per unit/share amounts)

Fiscal Years ended December 31, 2025, December 31, 2024, and December 31, 2023

1. Organization and Nature of Business

BRC Inc., a Delaware public benefit corporation (“BRC Inc.” or the “Company”), previously entered into a Business Combination Agreement, dated as of November 2, 2021, as amended by the First Amendment to Business Combination Agreement, dated as of January 4, 2022 (the "First Amendment" and the Business Combination Agreement as so amended, the "Business Combination Agreement"), each by and among BRC Inc., SilverBox Engaged Merger Corp I, a Delaware corporation (“SilverBox”), Authentic Brands LLC, a Delaware limited liability company (“Authentic Brands”), and certain other parties thereto. On February 9, 2022, as contemplated by the Business Combination Agreement, a series of transactions (the "Business Combination") were completed (the “Closing”) for an estimated value of $1,839,815 as a result of which Authentic Brands became a subsidiary of BRC Inc., with BRC Inc. acting as sole managing member thereof as a public benefit corporation.

BRC Inc. conducts substantially all of its business through its solely managed subsidiary, Authentic Brands, and Authentic Brands’ subsidiaries, all of which are consolidated in these financial statements. Authentic Brands, through its wholly-owned subsidiaries, purchases, roasts, and sells high-quality coffee, coffee accessories, and branded apparel through its online channels and business networks. Authentic Brands also develops and promotes online content for the purpose of growing its brands, which include Black Rifle Coffee Company (“BRCC”).

Unless the context indicates otherwise, references to "the Company," "we," "us" and "our" refer to BRC Inc. and its consolidated subsidiaries following the closing of the Business Combination.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The Company has prepared the consolidated financial statements and accompanying notes in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The consolidated financial statements reflect the financial position and operating results of the Company including its wholly-owned subsidiaries. These financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair statement of the operating results for the periods presented. Intercompany transactions and balances have been eliminated in consolidation.

The Business Combination was accounted for as a reverse recapitalization transaction between entities under common control, whereby Authentic Brands was considered the accounting acquirer and predecessor entity. The Business Combination was reflected as the equivalent of Authentic Brands issuing stock for the net assets of SilverBox, accompanied by a recapitalization with no incremental goodwill or intangible assets recognized.

Authentic Brands was determined to be the predecessor entity to the Business Combination based on a number of considerations, including:

• Authentic Brands’ former management making up the majority of the management team of BRC Inc.;

• Authentic Brands’ former management nominating or representing the majority of BRC Inc.'s Board of Directors (the “Board of Directors”);

• Authentic Brands representing the majority of the continuing operations of BRC Inc.; and

• The chief executive officer of Authentic Brands then having voting control of the combined company.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Such estimates include but are not limited to estimated losses on accounts receivable, inventory reserves, undiscounted future cash flows and the fair value of assets or asset groups for the purpose of assessing impairment of long-lived assets, liabilities for legal contingencies, equity-based compensation, estimates for sales returns and related allowance, loyalty rewards, and measurement and realization of deferred tax assets. Actual results could differ materially from those estimates.

Revenue Recognition

The Company recognizes revenue in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, or ASC 606. Revenue is recognized when, or as, control of a promised product or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products. Revenue excludes any amounts collected on behalf of third parties, including sales and indirect taxes. Revenue recognition is evaluated through the following five steps:

1. Identification of the contract with a customer;

2. Identification of the performance obligations in the contract;

3. Determination of the transaction price;

4. Allocation of the transaction price to the performance obligations in the contract; and

5. Recognition of revenue when or as a performance obligation is satisfied.

Sources and Timing of Revenue

The Company’s revenue is primarily derived from product sales through its e-commerce websites and to Wholesale customers who sell the products to end users. In addition, the Company derives revenues from Company-operated store locations, and franchise and license agreements. Revenues from the sale of products and merchandise are recognized when control of the product passes to the customer, typically at the date of delivery of the merchandise to the customer and in an amount that reflects the expected consideration to be received in exchange for such goods. As such, customer orders from e-commerce websites are recorded as deferred revenue prior to delivery of products. Delivery dates are derived from system reports identifying delivery status. For Wholesale customers, revenue is recognized when confirmation of control of the product has passed to the customer. Costs to obtain or fulfill a contract with a customer are expensed as incurred and are generally not significant.

Revenues from Company-operated stores are recognized when payment is tendered at the point of sale as the performance obligation has been satisfied. Store revenues are reported excluding sales, use or other transaction taxes that are collected from customers and remitted to taxing authorities.

Deferred Revenue

Deferred revenue consists of amounts billed to or received from customers prior to delivery of products. The Company recognizes such amounts in revenues when the product is delivered.

Disaggregation of Revenue

The Company disaggregates revenue by sales channel. The Wholesale channel includes product revenue sold to an intermediary and not directly to the consumer. The DTC channel principally comprises revenue from our e-commerce websites and subscription services directly to the consumer. The Outpost channel includes revenue from Company-operated stores, gift cards, franchise stores and licensing.

The following table disaggregates revenue by sales channel(dollars in thousands):

Substantially all revenue is derived from customers located in the United States. One Wholesale customer and its affiliate represented 30%,28%, and 26% of total revenue for the years ended December 31, 2025, 2024, and 2023 respectively.

Loyalty Rewards Program

In August 2020, BRCC established its BRCC Loyalty Points rewards program (the “Loyalty Program”), which is primarily a spend-based program. BRCC customers who establish an online account are enrolled in the Loyalty Program. The Company reserves the right to modify, change, add, or remove rewards and their points thresholds at any time. BRCC loyalty points will expire one year after they have been earned. A portion of the rewards that are expected to expire and not be redeemed will be recognized as income over time. Based on historical expiration rates, the Company estimates a certain percentage of rewards to expire and reassesses this estimate on a quarterly basis.

The Company recognized $1,041, $7,141, and $398 of income related to expired loyalty rewards for the years ended December 31, 2025, 2024, and 2023, respectively, which was included in “Revenue, net” on the consolidated statements of operations.

The Company defers revenue associated with the points earned through purchases that are expected to be redeemed, net of estimated unredeemed loyalty points. When a customer redeems an earned reward, the Company recognizes revenue for the redeemed product and reduces the related deferred revenue liability. The deferred revenue liability is included in "Deferred revenue and gift card liability" on the consolidated balance sheets. Until March 2024, BRCC loyalty points expired if there was no account activity (i.e., if there is no new purchase made or order placed) for a period of twelve months. In March 2024, BRCC amended the Loyalty Program such that BRCC loyalty points expire after twelve months without consideration of account activity. The change in BRCC’s Loyalty Program points policy regarding expired points resulted in a reduction to the deferred revenue liability and an increase to revenue in our DTC Channel of $6,468 for the year ended December 31, 2024.

For those points that are earned through other activities, the Company recognizes the redemption of these points as a discount to the transaction price at time of sale. Refer to Note 7, Deferred Revenue and Gift Card Liability for information about changes in the current portion of deferred revenue and gift card liability for the years ended December 31, 2025, 2024, and 2023.

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 amount of consideration the Company receives and the amount of revenue recognized varies with customer incentives offered to the Company’s customers and to their customers. These programs include cash discounts, price allowances, volume-based rebates, product placement fees, and other financial support for items such as trade promotions, displays, new products, consumer incentives, and advertising assistance. Provisions for these discounts and incentives are recorded in the same period in which the related revenues are recognized.

The Company inspects returned items when they arrive at its processing facilities. The Company refunds the full cost of the merchandise returned if the returned item is defective or the Company or its partners have made an error, such as shipping the wrong product. If the return is not a result of a product defect or a fulfillment error and the customer initiates a return of an unopened item within 30 days of delivery, for most products the Company refunds the full cost of the merchandise less the original shipping charge and actual return shipping fees. If the customer returns an item that has been opened or shows signs of wear, the Company issues a partial refund minus the original shipping charge and actual return shipping fees. Bagged coffee and rounds are not eligible for returns. Revenue is recorded net of estimated returns. The Company records an allowance for returns based on current period revenues and historical returns experience. The Company analyzes actual historical returns, current economic trends and changes in order volume and acceptance of its products when evaluating the adequacy of the sales returns allowance in any accounting period. The allowance for sales returns and charge-backs was $756 and $560 as of December 31, 2025 and 2024, respectively, and included in “Accounts receivable, net” on the consolidated balance sheets.

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 is presented within revenue, net on the consolidated statements of operations.

Segment Information

The Company reports operations as a single reportable segment and manages the business as a single-brand consumer products business. This is supported by the operational structure, which includes sales, product design, operations, marketing, and administrative functions focused on the entire product suite rather than individual product categories or sales channels. In accordance with ASC 280, “Segment Reporting”, the Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer, who reviews discrete financial information on a consolidated basis and does not regularly review financial information for individual sales channels, product categories or geographic regions that would allow decisions to be made about allocation of resources or performance. The information reviewed by the CODM is consistent with the presentation on the consolidated statements of operations.

Cost of Goods Sold

Cost of goods sold includes product costs, labor costs, occupancy costs, outbound shipping costs, handling and fulfillment costs, credit card fees, and royalty fees, and is recorded in the period incurred. Refer to Note 6, Accrued Liabilities for information about changes in the current portion of deferred purchase incentive fees as of December 31, 2025 and 2024 and the impact on Cost of Goods Sold.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents also include proceeds due from credit card transactions with settlement terms of less than five days. The Company maintains cash and cash equivalent balances with financial institutions that exceed federally insured limits. The Company has not experienced any losses related to these balances, and it believes credit risk to be minimal.

Restricted cash relates to amounts that are held by former lenders to secure certain commercial credit obligations until such obligations have been satisfied.

Accounts Receivable, Net

Accounts receivable consist primarily of trade amounts due from business customers at period end. Accounts receivable are recorded at invoiced amounts and do not bear interest. From time to time, the Company grants credit to business customers on normal credit terms. The Company maintains an allowance for credit losses based upon its business customers’ financial condition and payment history, and its historical collection experience and expected collectability of accounts receivable. The allowance for credit losses was $350 and $593 as of December 31, 2025 and 2024, respectively.

Inventories, Net

Inventories are stated at the lower of cost, which approximates First In, First Out (“FIFO”), or net realizable value. The Company records inventory reserves for obsolete and slow-moving inventory. Inventory reserves are based on inventory obsolescence trends, historical experience and application of the specific identification method. Inventories, net were $49,703 and $42,647 as of December 31, 2025 and 2024, respectively. Finished goods includes allocations of labor and occupancy expenses, and inbound transportation costs. The reserve for excess and obsolete inventory was $2,899 and $1,436 as of December 31, 2025 and 2024, respectively.

Property, Plant and Equipment, Net

Property, plant, and equipment, net are stated at cost with depreciation calculated using the straight-line method over the estimated useful lives of the related assets or the term of the related finance lease, whichever is shorter. Leasehold improvements are amortized over the shorter of the term of the related leases or estimated useful lives. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are derecognized, and any resulting gain or loss is reflected in earnings for the period. The cost of maintenance and repairs are charged to earnings as incurred; significant renewals and improvements are capitalized.

Estimated useful lives are as follows:

Identifiable Intangibles - Internal Use Software

In accordance with ASC 350-40, Intangibles — Goodwill and Other, Internal-Use Software, the Company capitalizes qualifying internal use software costs that are incurred during the application development stage if management with the relevant authority authorizes the project, it is probable the project will be completed, and the software will be used to perform the function intended. Capitalized internal use software costs are reported in property and equipment on the consolidated balance sheets and are amortized over the expected economic life ofthree years using the straight-line method once the software is ready for intended use. Costs incurred for enhancements that are expected to result in additional significant functionality are capitalized and amortized over the estimated useful life of the enhancement. Costs related to preliminary project activities and post-implementation activities, including training and maintenance, are expensed as incurred. Capitalized software costs net of accumulated amortization are included as a component of “Property, plant and equipment, net” on the consolidated balance sheets.

Impairment of Long-Lived Assets

The Company reviews long-lived assets such as property and equipment and identifiable intangible assets for impairment when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. These events include current period losses combined with a history of losses or the decision to close an Outpost. For those locations which are not currently operating, as is the case for certain non-developed Outpost locations, the event would be based on management’s decision not to continue developing a site at that location. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset or asset group (the lowest level for which there are identifiable cash flows), 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.

Leases

The Company leases certain property and equipment under non-cancelable finance and operating leases which expire at various dates through 2043. The majority of our leases are operating leases for our Company-operated Outposts. We also lease distribution, warehouse, and corporate office facilities. We do not enter into material lease transactions with related parties. We categorize leases as either operating or finance leases at the commencement date of the lease. Operating lease agreements may contain tenant improvement allowances, rent holidays, rent escalation clauses and/or contingent rent provisions. We have lease agreements with lease and non-lease components, which are accounted for together as a single lease component for underlying classes of assets. The Company has estimated that the lease term for retail stores is generally 10 years to 15 years.

We recognize a right-of-use (“ROU”) asset and lease liability for each operating lease with a contractual term greater than twelve months at the time of lease inception. We do not record leases with an initial term of twelve months or less on our consolidated balance sheet but continue to record rent expense on a straight-line basis over the lease term. Our leases often include options to extend or terminate at our sole discretion, which are included in the determination of the lease term when they are reasonably certain to be exercised.

Our lease liability represents the present value of future lease payments over the lease term. We cannot determine the interest rate implicit in each of our leases. Therefore, we use market and term-specific incremental borrowing rates. Our incremental borrowing rate for a lease is the rate of interest we expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. We considered a combination of factors, including the rates that we currently pay on our lines of credit, lease terms and the effect of adjusting the rate to reflect the term consideration of collateral.

Total lease costs recorded as rent and other occupancy costs include fixed operating lease costs and short-term lease costs. Our real estate leases may require that we pay certain expenses, such as common area maintenance costs, real estate taxes and other executory costs, of which any fixed portion would be included in operating lease costs. We recognize operating lease costs on a straight-line basis over the lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. A significant majority of our leases are related to our Company-operated Outposts, and their related costs are recorded within “General and administrative” expenses on the consolidated statements of operations.

The ROU asset is measured at the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, initial direct costs, and any material tenant improvement allowances reasonably certain to be received. For operating leases, ROU assets are reduced over the lease term by the recognized straight-line lease expense less the amount of accretion of the lease liability determined using the effective interest method. For finance leases, assets are amortized on a straight-line basis over the shorter of the useful life of the leased asset or the lease term. Interest expense on each finance lease liability is recognized utilizing the effective interest method. ROU assets are tested for impairment in the same manner as long-lived assets. Additionally, we monitor for events or changes in circumstances that may require a reassessment of one of our leases and determine if a remeasurement is required.

Income Taxes

The Company accounts for income taxes under the liability method, and deferred tax assets (“DTA”) and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. DTAs and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided if it is determined that it is more likely than not that the DTA will not be realized. The Company records interest and penalty expense related to income taxes as interest and other expense, respectively.

The Company evaluates and accounts for uncertain tax positions using a two-step approach: Step 1. Recognition – occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustainable upon examination. Step 2. Measurement – determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more likely-than-not threshold of being sustained.

Equity-Based Compensation

The Company recognizes the cost of equity-based compensation awards and incentive unit awards based on the fair value estimated in accordance with ASC 718, Stock Based Compensation. The Company records equity-based compensation expense for awards with only a service based vesting condition based on the fair value of such awards at the grant date and recognizes compensation expense on a straight-line basis over the requisite service period. Equity-based compensation expense for awards with market based vesting conditions is recorded based on the fair value of such awards at the grant date and recognized on an accelerated basis over the requisite service period. The assumptions used to calculate the fair value of equity awards granted are evaluated and revised, as necessary, to reflect the Company’s historical experience and current market conditions. For more information, see Note 11, Equity-Based Compensation.

Net Loss Per Share

Basic net loss per share is calculated by dividing net loss attributable to BRC Inc. by the weighted-average shares of Class A Common Stock outstanding without the consideration for potential dilutive securities. Diluted net loss per share represents basic net loss per share adjusted to include the potentially dilutive effect of outstanding unvested share awards, and units of Authentic Brands designated as common units (the “Common Units”) and restricted units (the “Restricted Common Units”) in the Third Amended and Restated Limited Liability Company Operating Agreement of Authentic Brands (the "LLC Agreement") that are exchangeable into shares of Class A Common Stock. Diluted net loss per share is computed by dividing the net loss attributable to BRC Inc. by the weighted-average number of shares of Class A Common Stock outstanding for the period determined using the treasury stock method and if-converted method, as applicable. As the impact of these if-converted securities is generally antidilutive during periods of net loss, the diluted net loss per share calculation for periods with net losses is the same as the basic net loss per share. For more information, see Note 14, Net Loss Per Share.

Concentrations of Credit Risk

The Company’s assets that are potentially subject to concentrations of credit risk are cash and accounts receivable. Cash balances are maintained in financial institutions which at times exceed federally insured limits. The Company monitors the financial condition of the financial institutions in which its accounts are maintained and has not experienced any losses in such accounts. The accounts receivable of the Company are spread over a number of customers, of which four customers accounted for 52% and 63% of total outstanding receivables as of December 31, 2025 and 2024, respectively. 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. The Company may also enter into marketing service agreements with third-party production and content providers where the Company prepays for certain services or deliverables and recognizes the expense when the service is completed. Marketing and advertising expenses totaled $39,213, $35,631 and $30,794 for the years ended December 31, 2025, 2024, and 2023, 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 Secured Overnight Financing Rate (“SOFR”), or the PNC Base Rate (see further explanation of the Base Rate in Note 8, Long-Term Debt), plus an applicable floating margin. In measuring fair value, the Company reflects the impact of credit risk on liabilities, as well as any collateral. The Company also considers the credit standing of counterparties in measuring the fair value of assets.

The Company uses any of three valuation techniques to measure fair value: the market approach, the income approach, and the cost approach in determining the appropriate valuation technique based on the nature of the asset or liability being measured and the reliability of the inputs used in arriving at fair value.

The Company follows the provisions of ASU No. 2022-03-Fair Value Measurements (“Topic 820”) for non-financial assets and liabilities measured on a non-recurring basis.

The inputs used in applying valuation techniques include assumptions that market participants would use in pricing the asset or liability (i.e., assumptions about risk). Inputs may be observable or unobservable. The Company uses observable inputs in the Company’s valuation techniques and classifies those inputs in accordance with the fair value hierarchy established by applicable accounting guidance, which prioritizes those inputs. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels are defined as follows:

Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. As of December 31, 2025, the Company had no Level 3 financial assets or liabilities.

Comprehensive Income (Loss)

The Company has no components of comprehensive income and comprehensive income (loss) is equivalent to net income (loss) in each of the periods presented. As such, no statement of comprehensive income (loss) is presented.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which "enhances the transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information". The FASB determined that these amendments should be effective for public business entities for annual periods beginning after December 15, 2024 (early adoption is permitted). The Company retrospectively adopted ASU 2023-09, effective January 1, 2025.

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses, “to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions.” The FASB determined this guidance is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027 (early adoption is permitted). The Company is currently evaluating the impact of this amendment on its consolidated financial statements and accompanying disclosures.

In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Targeted Improvements to the Accounting for Internal-Use Software, "to modernize the accounting for software costs that are accounted for under Subtopic 350-40, Intangibles-Goodwill and Other - Internal-Use Software". The FASB determined this guidance is effective for all entities for fiscal years beginning after December 15, 2027, and interim reporting periods within those fiscal years (early adoption is permitted). The Company is currently evaluating the impact of this amendment on its consolidated financial statements and accompanying disclosures.

3. Inventories, Net

Inventories consist of the following(dollars in thousands):

4. Property, Plant and Equipment, Net

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

The total depreciation expense for internal use software included in accumulated depreciation and amortization was $7,358, $4,504 and $1,233 for the years ended December 31, 2025, 2024 and 2023, respectively.

Substantially all long-lived assets are located in the United States.

Sale of Assets

The Company sold an office property including the land, building and improvements during the third quarter of 2025 for a total sale price of $5,350. The net book value of the assets sold was approximately $4,294 which resulted in a gain on the asset sale of approximately $682, which reflected closing costs of approximately $374. This gain is presented within "Other operating expense, net" in the consolidated statements of operations.

The Company sold the land, building and improvements for one of BRCC's company-owned Outposts during the third quarter of 2023 for a total sale price of $1,500. The net book value of the assets sold was approximately $2,692 which resulted in a loss on the asset sale of $1,201, which reflected closing costs of approximately $9. This loss is presented within "Other operating expense, net" in the consolidated statements of operations. Simultaneously with the sale of the property, the Company entered into a lease with the buyer to continue the Company's operations at this Outpost location.

The Company sold an office property including the land, building and improvements during the third quarter of 2023 for a total sale price of $4,058. The net book value of the assets sold was approximately $2,648 which resulted in a gain on the asset sale of approximately $1,097, which reflected closing costs of approximately $313. This gain is presented within "Other operating expense, net" in the consolidated statements of operations.

Impairment of Assets

During the fourth quarter of 2025, management determined that the Company would no longer continue to develop certain non-operating Outpost locations. As a result, a test for impairment was performed and the Company recognized a noncash impairment loss of $3,437 consisting of $1,804 for the carrying value of construction in progress and $1,633 for the associated right of use assets.

During the fourth quarter of 2024, the Company recognized a noncash impairment loss on certain assets related to the Outposts of $6,100, which consisted of approximately $3,500 for the carrying value of the related building improvements, machinery, and equipment and $2,600 for the associated right of use assets.

The total loss on impairment of assets is presented within “Other operating expense, net” in the consolidated statements of operations.

5. Other Assets

As of December 31, 2025 and 2024, we reported $50,312 and $50,546 of other assets on the consolidated balance sheets, respectively, related to prepaid advertising credits received in exchange for finished goods and apparel inventory. We measured the non-cash consideration of the prepaid advertising credits based on the standalone selling price of the finished goods inventory at the time of transfer to the counterparty. Based upon the period over which we expect to use these advertising credits (which was extended to December 31, 2031 during the third quarter of 2025), we concluded that $5,880 and $5,040 were current as of December 31, 2025 and 2024, respectively, and have been recorded as "Prepaid expenses and other current assets" on the consolidated balance sheets, and $44,432 and $45,506 were non-current as of December 31, 2025 and 2024, respectively, and have been recorded as "Non-current prepaid marketing expenses" on the consolidated balance sheets.

Prepaid advertising credits are recorded upon revenue recognition, coinciding with the transfer of the finished goods inventory. We recognized $4,963, $23,925, and $28,901 of revenue for the years ended December 31, 2025, 2024, and 2023, respectively, on the consolidated statements of operations related to shipments of inventory in exchange for prepaid advertising. We utilized $5,198 and $2,280 of prepaid advertising credits for the years ended December 31, 2025 and 2024, respectively.

6. Accrued Liabilities

Accrued liabilities consist of the following(dollars in thousands):

Deferred purchase incentive

During the second quarter of 2024, we entered into an agreement with a co-manufacturing partner for the manufacture and distribution of rounds. As part of this agreement we received a purchase incentive of $9,500 to compensate for incremental transition costs. An amendment to this agreement was entered into during the third quarter of 2024 whereby an additional purchase incentive of $4,000 was received. This purchase incentive will be recognized as a reduction of cost of sales based on units sold over five years. Recognition of this fee commenced during the third quarter of 2024 based upon the terms of the related agreement (as amended). $2,506 of the deferred purchase incentive is classified as current at December 31, 2025 based upon the amount expected to be recognized in the next twelve months, while $7,626 is classified as long-term and is recorded in “Other non-current liabilities” on our consolidated balance sheets at December 31, 2025.

7. Deferred Revenue and Gift Card Liability

The following table provides information about deferred revenue, gift cards, and the Loyalty Program, including significant changes in deferred revenue balances for the below designated periods(dollars in thousands):

8. Long-Term Debt

The Company’s credit facilities and related balances were as follows(dollars in thousands):

Future contractual maturities of credit facilities (not including debt issuance costs) as December 31, 2025 are as follows(dollars in thousands):

ABL Facility and Term Loan Facility

On August 10, 2023, Authentic Brands and certain of its subsidiaries (collectively, the “ABL Borrowers”) entered into a Credit Agreement (as amended in accordance with its terms, the “ABL Credit Agreement”) with PNC Bank, National Association, as administrative agent and collateral agent (“PNC”), and the lenders from time to time party thereto, pursuant to which the lenders thereunder agreed to provide the ABL Borrowers with a senior secured asset-based revolving credit facility in an aggregate principal amount of up to $75,000 (including a sub-facility for letters of credit in an amount up to $7,500, all of which were available at December 31, 2025) (the “ABL Facility”).

On December 27, 2024 (the “Closing Date”), the ABL Borrowers entered into a third amendment to the ABL Credit Agreement, and a Financing Agreement (as further amended in accordance with its terms, the “Term Loan Financing Agreement” and together with the ABL Credit Agreement, the “Credit Agreements”), by and among Authentic Brands, certain subsidiaries of Authentic Brands party thereto as “Borrowers” (the “Term Loan Borrowers”), and certain subsidiaries of Authentic Brands from time to time party thereto as “Guarantors” (collectively with Authentic Brands, the “Term Loan Guarantors”), Blue Torch Finance LLC, as administrative agent and collateral agent, pursuant to which the lenders thereunder provided the Term Loan Borrowers with senior secured term loans on the Closing Date in an aggregate principal amount of $40,000 (the “Term Loan Facility”). The Term Loan Facility also includes an uncommitted accordion feature pursuant to which, under certain conditions, including a maximum pro forma total net leverage ratio, the Term Loan Borrowers may, with the agreement of the lenders providing any such incremental loans, add one or more tranches of additional term loans in an aggregate principal amount not to exceed $20,000. The proceeds of the Term Loan Facility were issued net of a $1,000 discount which was recorded against the outstanding amount of debt on our consolidated balance sheet and will be amortized over the life of the Term Loan Financing Agreement.

Debt issuance costs of $920 were incurred during fiscal 2024 and an additional $229 were incurred during fiscal 2025 in connection with the origination of the Credit Agreements and these costs will be reported as a reduction to the outstanding balance of long-term debt on our consolidated balance sheet and amortized over the life of the Credit Agreements.

The obligations under the ABL Credit Agreement are guaranteed by each ABL Borrower and each Guarantor (as defined therein). The obligations under the ABL Credit Agreement are secured by a first priority lien on certain deposit accounts, cash and cash equivalents, accounts receivable, inventory and other related assets of the ABL Borrowers and the Guarantors (the “ABL Priority Collateral”) and a second priority lien on substantially all of the other assets of the ABL Borrowers and the Guarantors. The obligations under the Term Loan Financing Agreement are secured by a second priority lien on the ABL Priority Collateral and a first priority lien on substantially all of the other assets of the Term Loan Borrowers and the Term Loan Guarantors.

Each Credit Agreement includes certain conditions to borrowings, representations and warranties, affirmative and negative covenants, and events of default customary for financings of their type and size. Each Credit Agreement requires the Term Loan Borrowers and the ABL Borrowers to maintain (i) a maximum total net leverage ratio (4.00 to 1.00 for the fiscal quarter ended March 31, 2025 and at the end of each fiscal quarter thereafter through and including fiscal quarter ended September 30, 2025;3.50 to 1.00 for the fiscal quarter ended December 31, 2025 and at the end of each fiscal quarter thereafter through and including fiscal quarter ended September 30, 2026; and 3.00 to 1.00 for the fiscal quarter ended December 31, 2026 and the end of each fiscal quarter thereafter); (ii) a fixed charge coverage ratio greater than or equal to 1.10 to 1.00; and (iii) minimum liquidity of at least $7,500. The Credit Agreements also limit the ABL Borrowers and the Term Loan Borrowers’ ability to, among other things, incur additional indebtedness, create liens on any assets, pay dividends or make certain restricted payments, make certain investments, consummate certain asset sales, make certain payments on indebtedness, and merge, consolidate or engage in other fundamental changes.

On the Closing Date, the Company used the proceeds from the Term Loan Facility and approximately $12,813 of borrowings under the ABL Facility (i) to retire the Company’s term loan credit facility with Whitehawk Capital Partners LP, (ii) to pay transaction fees, costs and expenses related to the Credit Agreements, and (iii) for other general corporate and working capital purposes.

Under the terms of the ABL Credit Agreement, the amount available for advances is subject to a borrowing base, which is calculated by reference to the value of certain eligible inventory, unrestricted cash and cash equivalents, eligible credit card receivables, eligible accounts receivable and eligible inventory, offset by certain reserves. The available borrowings under the ABL Credit Facility at December 31, 2025 were $55,375.

Borrowings under the ABL Facility bear interest at a rate per annum of either (i) the Alternate Base Rate (as defined in the ABL Credit Agreement) plus a margin ranging from 0.50% to 1.50% or (ii) term SOFR (as defined in the ABL Credit Agreement) plus a margin ranging from 1.50% to 2.50%. The ABL Borrowers are also required to pay certain fees in connection with the ABL Credit Agreement, including an unused commitment fee based on the average daily unused portion of the ABL Facility, equal to 0.375% on an annual basis. The ABL Credit Facility is scheduled to mature on December 27, 2029.

Borrowings under the Term Loan Facility bear interest at a rate per annum equal to either (i) a Reference Rate (as defined in the Term Loan Financing Agreement) plus a margin ranging from 5.00% to 5.50% based on a total net leverage ratio threshold or (ii) term SOFR (as defined in the Term Loan Financing Agreement) plus a margin ranging from 6.00% to 6.50% based on a total net leverage ratio threshold. The Reference Rate and term SOFR rate are subject to floors of 3.50% and 2.50%, respectively. The Term Loan Facility requires the Term Loan Borrowers to make quarterly principal repayments in an aggregate principal amount equal to (i)0.625% of the original aggregate principal amount of the Term Loan commencing with the fiscal quarter ending on March 31, 2025 through the first anniversary of the Closing Date, (ii)1.25% of the original aggregate principal amount of the term loans extended thereunder commencing with the fiscal quarter ending after the first anniversary of the Closing Date through the maturity date of the Term Loan Facility. The Term Loan Facility is also subject to customary mandatory prepayment provisions, including payments of proceeds from asset dispositions, casualty events, extraordinary receipts and a percentage of excess cash flow. The Term Loan Borrowers may voluntarily prepay amounts outstanding under the Term Loan Facility at any time, subject in certain cases to a prepayment premium. The Term Loan Facility is scheduled to mature on December 27, 2029.

Notes Payable

In July and September 2021, the Company entered into note payable agreements for $2,588 at an interest rate of approximately 1.00% per annum to repurchase Incentive Units (as defined below) from former employees. The notes are payable infour annual installment payments. In the third quarter of fiscal 2025, the Company fully repaid these notes payable agreements for $647.

In January 2022, the Company entered into a note payable agreement for $1,599 at an interest rate of 1.30% per annum to repurchase Incentive Units from a former employee. As of December 31, 2025, the outstanding balance on the notes payable is $400. This note was fully repaid in January 2026.

9. Leases

The components of lease costs for the years ended December 31, 2025, 2024, and 2023 are as follows(dollars in thousands):

The following table includes supplemental information:

Cash paid related to operating lease liabilities was $3,876 for the year ended December 31, 2025.

The total operating lease liability arising from ROU assets was $27,303 for the year ended December 31, 2025.

Finance lease assets are recorded in “Property, plant, and equipment, net” with the corresponding finance lease liabilities on the consolidated balance sheets.

Minimum future maturities of operating lease liabilities as of December 31, 2025 were as follows(dollars in thousands):

We have not entered into any operating leases that have not yet commenced as of December 31, 2025.

As discussed in Note 4, Property, Plant and Equipment, Net, the Company recognized a total impairment loss on right of use assets related to our BRCC Outposts during the fourth quarter of 2025 and 2024 of $1,633 and $2,600, respectively. This total loss on impairment of assets is presented within “Other operating expense, net” in the consolidated statements of operations.

10. Stockholders’ Equity

The Company's authorized capital stock consists of 2,802,500,000 shares including (i)2,500,000,000 shares of Class A Common Stock, (ii)300,000,000 shares of Class B Common Stock, (iii)1,500,000 shares of Class C Common Stock, par value $0.0001 per share (the “Class C Common Stock”), and (iv)1,000,000 shares of preferred stock, par value $0.0001 per share (the “Preferred Stock”). The Class C Common Stock is divided into two series as follows: (a)750,000 shares of Series C-1 Common Stock, par value $0.0001 per share; and (b)750,000 shares of Series C-2 Common Stock, par value $0.0001 per share.

Holders of the Class A Common Stock and the Class B Common Stock are each entitled toone vote per share, and holders of the Class C Common Stock do not have any voting rights. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our Class A Common Stock are entitled to receive dividends and other distributions as may from time to time be declared by the Board of Directors at its discretion out of legally available Company assets, ratably in proportion to the number of shares held by each such holder, and at such times and in such amounts as the Board of Directors in its discretion may determine. No dividends or other distributions will be declared or paid on the Class B Common Stock or the Class C Common Stock.

A holder of Class B Common Stock may transfer or assign shares of Class B Common Stock only if such holder also simultaneously transfers an equal number of such holder’s Common Units in compliance with and as permitted by the LLC Agreement.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after payment of debts and other liabilities and after the rights of holders of preferred stock, if any, have been satisfied, the holders of all outstanding shares of Class A Common Stock will be entitled to receive the remaining assets of the Company available for distribution ratably in proportion to the number of shares held by each such stockholder.

The Board of Directors may establish one or more classes or series of preferred stock. The Board of Directors may determine, with respect to any class or series of preferred stock, the terms and rights of such class or series. The Company currently does not have any preferred stock issued and outstanding.

Common Units are entitled to share in the profits and losses of Authentic Brands and to receive distributions declared and have no voting rights. Holders of Common Units receive one share of Class B Common Stock, which are voting, non-economic shares in the Company, for each Common Unit they own. Subject to the terms of the LLC Agreement, the Common Unit holders have the option to redeem all or any portion of their Common Units. However, upon redemption, the Board of Directors determines whether the Common Units are redeemed in cash or Class A Common Stock.

Common Units that are redeemed for shares, are exchanged for a number of Class A Common Stock equal to the number of exchanged Common Units. Simultaneously, a number of Class B Common Stock held by the unitholder is surrendered equal to the number of Common Units being redeemed. For Common Units redeemed for cash, cash redemption may only be effected if a concurrent fundraising activity takes place by the Company.

Non-Controlling Interests

Non-controlling interests represent the ownership interests in Authentic Brands held by holders other than the Company. As of December 31, 2025, BRC Inc.’s ownership percentage in Authentic Brands controlling and non-controlling interests was 36.8% and 63.2%, respectively.

Public Offering

On July 16, 2025, the Company entered into an underwriting agreement (the "Underwriting Agreement") with D.A. Davidson & Co. (the "Underwriter"), pursuant to which the Company agreed to issue and sell 28,000,000 shares of Class A Common Stock at an offering price of $1.25 per share (the "Offering"). Pursuant to the Underwriting Agreement, the Company granted the Underwriter a 30-day option to purchase up to an additional 4,200,000 shares of Class A Common Stock, which option was fully exercised by the Underwriter on July 17, 2025. The Offering closed on July 18, 2025 resulting in the issuance of 32,200,000 shares and gross proceeds of $40,250, which were reduced by $2,974 of issuance costs, resulting in total net proceeds of $37,276 recorded as an increase to Class A common stock as of December 31, 2025.

Shares Issued for Legal Settlement

On May 15, 2024, Alta Partners, LLC (“Alta”) filed a lawsuit in the federal district court in the Southern District of New York against the Company: Alta Partners, LLC v. BRC Inc., Case 24-CV-03741 (AT) (RWL) (Southern District of New York). The complaint alleged breach of contract and that Alta suffered damages arising from the Company’s refusal to permit Alta to exercise warrants between March 11 and May 4, 2022. On June 20, 2025, the Company entered into a settlement and release agreement with Alta, pursuant to which, in full settlement of the claims described therein, the Company issued 2,300,100 shares of Class A Common Stock with a market value of $3,367, net, in exchange for $1,000 which resulted in $2,367 noncash charge during the second quarter of 2025. Insurance proceeds were received in the amount of $2,367 in the third quarter of 2025 related to this settlement.

11. Equity-Based Compensation

Incentive Units

Authentic Brands maintains an equity incentive plan (the “2018 Equity Incentive Plan”) under which it granted Incentive Units (as defined in the 2018 Equity Incentive Plan) to employees or non-employee directors prior to the Business Combination. As of December 31, 2025,8,472 Incentive Units remained outstanding under the 2018 Equity Incentive Plan, and no new Incentive Units have been granted under the 2018 Equity Incentive Plan since the completion of the Business Combination. The Board of Directors has the authority to determine the terms and conditions of each grant under the 2018 Equity Incentive Plan, and 200,000 non-voting units have been authorized thereunder. These units may contain certain service and performance related vesting provisions. The Incentive Units were awarded to eligible employees and non-employee directors and entitle each grantee to receive non-voting member units upon vesting, subject solely to the employee’s continuing employment or the non-employee director’s continuing service on the Board of Directors.

The grant date estimated fair value of the Incentive Units was based upon an option pricing model valuation of the awards at the grant date. The Company utilized the probability-weighted expected return method. The Incentive Units have no strike price; however, participation thresholds, as defined in the 2018 Equity Incentive Plan were established at the grant date and must be exceeded for the holder of the unit to participate in any distributions of the Company. The following assumptions were utilized in determining the fair value of the units at the grant date:

The computation of expected volatility is based on a weighted average of comparable public companies within the Company’s industry. Expected life is based on the estimated liquidity event timing. The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury securities of comparable terms. The Company does not anticipate paying dividends in the foreseeable future. The Company recognizes pre-vesting forfeitures as they occur rather than estimate the forfeiture rate at the grant date.

The following table summarizes the changes in the number of Incentive Units for the years ended December 31, 2025, 2024 and 2023:

As of December 31, 2025, the equity compensation expense related to nonvested Incentive Units was fully recognized. As of December 31, 2024 and 2023, total unrecognized equity compensation expense related to nonvested Incentive Units to be recognized was $134 and $421, respectively, over a weighted average period of approximatelyone year for 2024 andtwo years for 2023.

In connection with the Business Combination, the Company adopted the 2022 Omnibus Incentive Plan (the “Omnibus Plan”), which replaced the 2018 Equity Incentive Plan, and the 2022 Employee Stock Purchase Plan (the “ESPP”) (see disclosed below).

Stock Options

The Company grants stock options to employees under the Omnibus Plan that vest ratably over three years and expire after seven years. The grant date estimated fair value of the stock options is based upon a Black-Scholes model valuation of the options at the grant date. The following weighted average assumptions were utilized in determining the fair value of options granted:

Since inception and prior to 2024, the Company computed expected volatility based on a weighted average of comparable public companies within the Company’s industry. Beginning in 2024, the Company utilizes its own history to estimate volatility based on the annualized historical daily volatility of the Company’s stock price. The Company uses the “simplified method” prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term of options granted. The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury securities of comparable terms. The Company does not anticipate paying dividends in the foreseeable future. The Company recognizes pre-vesting forfeitures as they occur rather than estimate the forfeiture rate at the grant date.

The following table summarizes information about stock options activities for the years ended December 31, 2025, 2024 and 2023:

As of December 31, 2025, 2024 and 2023, total unrecognized equity compensation expense related to stock options to be recognized was $6,447, $7,540 and $7,228, respectively, over a weighted average period of approximatelytwo years for all three years.

Restricted Stock Units

The Company grants restricted stock unit (“RSU”) awards to employees and non-employee directors under the Omnibus Plan that vest annually over approximately three years. The grant date fair values are based on the closing price of the Class A Common Stock of the Company on the date of grant.

The following table summarizes information about the RSUs under the Omnibus Plan for the years ended December 31, 2025, 2024 and 2023:

As of December 31, 2025, 2024 and 2023, total unrecognized equity compensation expense related to RSUs to be recognized was $6,963, $7,031 and $7,711, respectively, over a weighted average period of approximatelytwo years for all three years.

Performance-Based Restricted Stock Units

On December 29, 2022, the Company granted 8,462,412 performance-based restricted stock units (“PSUs”) to a key employee which vest if certain market capital growth rates are achieved each year through April 2027. Vested PSUs are settled in shares of the Company Class A Common Stock equal to the number of PSUs granted. The PSUs are forfeited upon termination of employment before the performance period ends. PSUs granted during the year ended December 31, 2022 have a weighted-average grant date fair value of $0.46 per share. All PSUs were unvested as of December 31, 2025. The Company used the Monte Carlo pricing model to estimate the fair value of PSUs utilizing the following assumptions at the grant date:

As of December 31, 2025, 2024 and 2023, total unrecognized equity-based compensation expense related to PSUs to be recognized was $382, $976 and $1,901, respectively, over a weighted average period of approximatelytwo years for 2025, three years for 2024, andfour years for 2023.

Employee Stock Purchase Plan

In September 2022, the Company began offering shares of its Class A Common Stock under its ESPP adopted in connection with the Business Combination, whereby eligible employees may acquire an equity interest in the Company through payroll contributions. At the end of asix-month offering period, shares are purchased at 85% of the stock price at enrollment date or purchase date, whichever is lower.

12. Defined Contribution Plan

The Company maintains a voluntary qualified defined contribution plan covering eligible employees as defined by the plan documents. Participating employees may elect to defer and contribute a portion of their eligible compensation to the plan up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws. The Company’s matching contributions to the plan were $840, $1,051 and $951 for the years ended December 31, 2025, 2024 and 2023, respectively.

13. Income Taxes

As described in Management's Discussion and Analysis, we completed a business combination on February 9, 2022 and as a result, Authentic Brands became a subsidiary of BRC Inc. Authentic Brands LLC is, and has since the business combination been, treated as a flow-through entity for U.S. federal income tax purposes and as such, has generally not been subject to U.S. federal income tax at the entity level. BRC Inc. did not engage in any operations prior to the business combination. This section describes the operations of the Company, operating under Authentic Brands prior to the Business Combination, and contains the financial results of Authentic Brands for the period before the Business Combination through December 31, 2021. Accordingly, the historical results of operations and other financial information set forth in this Annual Report do not include any material provisions for U.S. federal income tax. Following the Company's initial public offering, BRC Inc. is taxed as a corporation and is subject to U.S. federal, state, and local income taxes with respect to its allocable share of any taxable income or loss of Authentic Brands, as well as any stand-alone income or loss generated by the Company.

Net loss before income taxes was $32,103, $7,477 and $56,531 for the years ended December 31, 2025, 2024 and 2023, respectively. The Company had an income tax expense of $132, $172 and $185 for the years ended December 31, 2025, 2024 and 2023, respectively.

The components of the provision for income tax (benefit) provision are as follows (dollars in thousands):

The Company recognized a tax expense of $132 on pre-tax book loss of $32,103. The Company has determined that its deferred tax assets (“DTA”) require a full valuation allowance. As a result, the only tax expense recognized in the Company’s financials relate to state taxes at the Authentic Brands level.

Reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate is as follows(dollars in thousands):

[1]State taxes in Texas made up the majority (greater than 50%) of the tax effect in this category.

The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below (dollars in thousands):

As of December 31, 2025, the Company had federal net operating loss carry forwards of $91,864. Federal losses can be carried forward indefinitely. The Company also has losses in various states that will begin to expire in 2044.

We recognize DTAs to the extent we believe these assets are more likely than not to be realized. In making such a determination, we consider all positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. A valuation allowance is provided if it is determined that it is more likely than not that the DTA will not be realized. During the year ended December 31, 2025, management performed an assessment of the recoverability of DTAs. Management determined, based on the accounting standards applicable to such assessment, that there was sufficient negative evidence as a result of the Company’s cumulative losses to conclude that it was more likely than not that its DTAs would not be realized and has recorded a full valuation allowance of $108,401 against its deferred tax assets.

During fiscal years 2025, 2024, and 2023 the Company paid cash taxes of $132, $425, and $562, respectively, to the state of Texas(dollars in thousands):

Tax Receivable Agreement

As part of the Business Combination, the Company entered into Tax Receivable Agreements (the “TRA”) with certain shareholders that require the Company to pay to such shareholders approximately 85% of the tax savings the Company realizes as a result of (i) increases in tax basis in Authentic Brands’ assets resulting from the redemption of existing preferred units of Authentic Brands, (ii) increase in tax basis resulting from the redemption of Common Units for consideration paid pursuant to the Business Combination Agreement, (iii) increases in tax basis resulting from future exchanges of Common Units for shares of the Company's stock or cash pursuant to the Amended and Restated LLC Agreement, (iv) pre-existing tax attributes of the Blocker Corp as well as certain (v) other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. Due to the uncertainty of various factors, we cannot estimate the likely tax benefits we will realize as a result of LLC Unit exchanges, and the resulting amounts we are likely to pay out to LLC Unitholders pursuant to the TRA; however, we estimate that such payments may be substantial. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of exchanges by the LLC Unitholders, the amount of gain recognized by such LLC Unitholders, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable.

The Company has determined that it will record the TRA liability when it is probable and estimable. Given the uncertainty regarding the potential payments such that the timing is not fixed or determinable, any TRA liability will be recorded on an undiscounted basis consistent with general practice. The Company's TRA payments generally relate directly to DTAs that have been recorded in its financial statements subject to a full valuation allowance. These payments will relate to IRC §743(b) adjustments from the business combination, future exchanges, and Blocker Corp basis. In addition, the Company will be required to make TRA payments for tax savings related to other tax attributes discussed above. In no circumstance, will the Company be required to make a TRA payment without a realized tax savings.

The Company has reviewed its DTAs and has determined that it is not more likely than not that it will be able to utilize them. Accordingly, it has established a full valuation allowance against its DTAs. In addition, Authentic Brands has four quarters of cumulative pre-tax losses adjusted for permanent items prior to consideration of any tax attributes covered by the TRA. The Company's only source of taxable income is Authentic Brands. As a result of the full valuation allowance against its DTAs, and Authentic Brands’ historic losses, the Company did not record a TRA liability for the year ended December 31, 2025.

Uncertain Tax Positions

An entity shall initially recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The term “more likely than not” means a likelihood of more than 50 percent. The Company began filing tax returns for the year ended December 31, 2020 and subject to examination by taxing authorities for U.S. federal and state income tax purposes. The Company did not engage in any operations prior to the Business Combination. Authentic Brands LLC is treated as a partnership for U.S. federal and state income tax purposes and its tax returns are subject to examination by taxing authorities. Authentic Brands LLC has filed income tax returns for years through December 31, 2022. These returns are subject to examination by the taxing authorities in the respective jurisdictions, generally for three or four years after they were filed. The Company has reviewed the tax profile to assess and determine whether any new or existing uncertainties exist. Based on the Company's analysis of tax positions taken on income tax returns filed, no uncertain tax positions existed as of December 31, 2025.

Although the outcome of open tax audits is uncertain, in management’s opinion, adequate provisions for income taxes have been made. If actual outcomes differ materially from these estimates, they could have a material impact on our financial condition and results of operations. Differences between actual results and assumptions or changes in assumptions in future periods are recorded in the period they become known. To the extent additional information becomes available prior to resolution, such accruals are adjusted to reflect probable outcomes.

No interest or penalties were recognized in the consolidated financial statements. To the extent we recognize interest expense and penalties related to income tax matters in the future, we will recognize the amounts in pre-tax income (loss) on our consolidated financial statements.

14. Net Loss Per Share

Basic net loss per share is calculated by dividing net loss attributable to BRC Inc. by the weighted-average shares of Class A Common Stock outstanding without consideration for potential dilutive securities. Shares of Class B Common Stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted loss per share of Class B Common Stock under the two-class method has not been presented.

The following table sets forth the computation of basic and diluted net loss per share(in thousands, except unit/share and per unit/share amounts):

The Company excluded the following potentially dilutive securities, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to Class A common shareholders because including them would have had an antidilutive effect:

15. Commitments and Contingencies

Purchase Agreements

The Company has entered into manufacturing and purchase agreements to purchase and produce coffee product from third-party suppliers. These purchase agreements are typically obligations to purchase minimum volumes with fixed pricing if the volume terms are not fulfilled, in the form of a take-or-pay provision. The aggregate value of purchases from these third-party suppliers totaled $57,275, $42,370, and $84,007 for the years ended December 31, 2025, 2024 and 2023, respectively.

The amounts in the table below represents the Company's future minimum purchase commitments as of December 31, 2025(dollars in thousands):

Contingencies

The Company is the subject of various legal actions in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to such lawsuits, the Company accrues reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. Although the outcomes of these proceedings cannot be predicted with certainty, the Company does not believe any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on results of operations, cash flows or financial condition.

The Company could be subject to additional sales tax or other tax liabilities. The Company follows the guidelines of ASC 450, Accounting for Contingencies, and the consolidated financial statements reflect the current impact of such legislation through the Company’s best estimates. However, any of these events could have a material effect on the Company’s business and operating results depending on the previous periods of applied enforcement by certain jurisdictions.

The Company is also subject to U.S. (federal and state) laws, regulations, and administrative practices that require us to collect information from its customers, vendors, merchants, and other third parties for tax reporting purposes and report such information to various government agencies. The scope of such requirements continues to expand, requiring us to develop and implement new compliance systems. Failure to comply with such laws and regulations could result in significant penalties and interest which might have an adverse effect on the Company’s business and operating results.

The Company has accrued $319 and $320 annually related to potential sales and other tax exposure as of December 31, 2025 and 2024, respectively, which is included in “Accrued liabilities” on the consolidated balance sheets.

Legal Disputes

On June 22, 2023, John Brian Clark, JBC Structured Products LLC, and Marathon Capital LLC (collectively, “Clark”) filed a complaint against BRC Inc. and Black Rifle Coffee Company LLC: John Brian Clark, et al. v. BRC Inc., et al., Case 1:23-CV-5340 (RWL) (Southern District of New York). Clark alleged breach of contract and sought a declaratory judgment. The complaint alleged that Clark suffered damages arising from the Company’s refusal to allow Clark to exercise warrants. On December 24, 2025 the Company and Clark agreed to settle all claims relating to the lawsuit, a portion of which was paid in December 2025, and a portion of which will be paid by the end of the second quarter of 2026.

On May 20, 2024, one of our co-manufacturers filed a complaint in the district court of Riley County, Kansas againstone of the Company's wholly-owned subsidiaries, Black Rifle Coffee Company LLC, Case RL-2024-CV-000119. The complaint alleges breach of contract and anticipatory breach of contract with respect to certain fees and order volume pursuant to the parties' drink manufacturing agreement, amongst other allegations. On July 18, 2024, the Company filed a partial motion to dismiss relating to certain of these allegations. On November 13, 2024, the court denied the Company’s motion to dismiss other than for the co-manufacturer’s claim of fraudulent inducement, for which the court has granted leave to amend. The parties are currently engaged in discovery. The Company believes that it has meritorious defenses to the claims asserted against it and will defend itself in these proceedings. The Company has recorded accrued liabilities of $2,700 related to this matter, which does not include interest or penalties.

16. Operational Improvement Plan

Beginning in the second quarter of fiscal year 2025, management implemented an Operational Improvement Plan to reduce costs and improve the efficiency of certain company-wide functions. These costs pertained primarily to workforce reductions, and the actions for this plan are expected to be completed by the end of fiscal year 2025. In the third quarter of 2025, the Operational Improvement Plan was modified as a result of the relocation of our corporate headquarters and the relocation of our inventory as a result of a change in third-party logistics providers.

Headcount was reduced by approximately 67 employees across the Company as part of the Operational Improvement Plan which includes incremental headcount reduction of 15 employees and 4 employees in the third and fourth quarter, respectively, resulting from the modification of the Operational Improvement Plan in the third quarter of 2025. No liabilities were excluded due to the inability to estimate fair value. For the year ended December 31, 2025, the Company recorded $2,954 of severance expenses as part of the Operational Improvement Plan. As of December 31, 2025, the Company had accrued severance costs of $751, which are expected to be paid by the end of the first quarter of fiscal year 2026. Severance costs are included in "Salaries, wages, and benefits" in our consolidated statements of operations.

The Company also incurred $2,645 of transition costs for the year ended December 31, 2025 as a result of the relocation of our corporate headquarters and the relocation of our inventory during the third and fourth quarters of 2025, consisting of $2,128 of cash expenses and $517 of noncash expenses. In our consolidated statements of operations, $1,834 and $294 of cash costs are reported as “Cost of goods sold” and "General and administrative expenses", respectively, in our consolidated statements of operations. All of the noncash expenses are reported as “Cost of goods sold” in our consolidated statements of operations.

As of December 31, 2025, accrued restructuring costs related to the 2025 Operational Improvement Plan, consisted of the following(dollars in thousands):