BRC Inc.

3. Supplemental Balance Sheet Information

Accounts Receivable, Net

Allowances

The allowance for sales returns and charge backs was $575 and $756 as of March 31, 2026 and December 31, 2025, respectively, and included in "Accounts receivable, net" on the consolidated balance sheets.

The allowance for credit losses was $67 and $350 as of March 31, 2026 and December 31, 2025, respectively.

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 six customers accounted for 63% of total outstanding receivables as of March 31, 2026, and four customers accounted for 52% of total outstanding receivables as of December 31, 2025. The Company performs ongoing credit evaluations as to the financial condition of its customers and creditors with respect to trade accounts.

Inventories, Net

Inventories, net, consists of the following (dollars in thousands):

The reserve for excess and obsolete inventory was $5,524 and $2,899 as of March 31, 2026 and December 31, 2025, respectively.

Other Assets

As of March 31, 2026 and December 31, 2025, the Company reported $48,802 and $50,312 of other assets on the consolidated balance sheets, respectively, related to prepaid advertising credits received in exchange for finished goods and apparel inventory. The Company 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 the Company expects to use these advertising credits, $5,880 of these credits were current as of both March 31, 2026 and December 31, 2025, and have been recorded as "Prepaid expenses and other current assets" on the consolidated balance sheets, and $42,922 and $44,432 were non-current as of March 31, 2026 and December 31, 2025, 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. The revenue recognized for both the three months ended March 31, 2026 and 2025 on the consolidated statements of operations related to shipments of inventory was insignificant. $1,470 and $916 of prepaid advertising credits were utilized for the three months ended March 31, 2026 and 2025, respectively.

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 was $986 and $1,334 for the three months ended March 31, 2026 and 2025, respectively.

Accrued Liabilities

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

Deferred purchase incentive

This purchase incentive was received in conjunction with a co-manufacturing agreement and will be recognized as a reduction of cost of sales based on units sold through 2029. $2,506 of the deferred purchase incentive is classified as current at March 31, 2026 based upon the amount expected to be recognized in the next twelve months, while $7,073 is classified as long-term and is recorded in “Other non-current liabilities” on our consolidated balance sheets at March 31, 2026.

Deferred Revenue and Gift Card Liability

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