Tattooed Chef

Tattooed Chef, Inc., a plant-based food company, filed for Chapter 11 bankruptcy protection on June 30, 2023, in the U.S. Bankruptcy Court for the Central District of California.^29101213 The company pursued a sale of substantially all of its assets under Section 363 of the U.S. Bankruptcy Code, and sales with 11 different buyers were approved by the bankruptcy court.⁹¹²¹³ Tattooed Chef had achieved revenue of over $230 million and a market cap of over $2 billion in 2021 after going public, but it faced constrained liquidity and an inability to raise additional capital.^9101213

Timeline

Money raised

Tattooed Chef went public via a 2020 reverse merger with Forum Merger II Corporation, a transaction that valued the plant-based meal company at roughly $482 million.¹² In 2021, Tattooed Chef achieved revenue of over $230 million and a market cap of over $2 billion.⁹¹³ For the fiscal year ending December 31, 2022, Tattooed Chef reported revenue of $230 million, up from $208 million the year prior, for a year-over-year growth rate of 11%.¹² Net loss grew to $141 million for fiscal year 2022, and adjusted EBITDA was negative $91.7 million.¹² In Q1 2023, net revenue declined by $8.6 million to $59 million, and net loss was $19 million.¹²¹⁰ From April 2021 through August 2022, Tattooed Chef spent over $66 million to acquire assets including Ittella Italy SRL, New Mexico Food Distributors, Karsten Tortilla Factory, Belmont Confections, and Desert Premium Group.¹² Tattooed Chef invested over $100 million into marketing and promotions over a three-year period.¹² Tattooed Chef agreed to pay $4,750,000 to resolve a securities fraud class action lawsuit.¹⁶

Investors named in the sources: Forum Merger II Corporation¹².

What happened

Tattooed Chef was founded in 2017.¹² Tattooed Chef launched in 2018.¹⁰ Tattooed Chef produced an array of frozen products, including meals, pizza, burritos, and smoothie bowls, sold under its Tattooed Chef brand as well as private label offerings.¹² Tattooed Chef went public via a 2020 reverse merger between Ittella International and the publicly traded Forum Merger II Corporation, a transaction that valued the plant-based meal company at roughly $482 million.¹² At the time of Tattooed Chef's IPO, the brand had household awareness of under 6% and was only available in 4 major retailers, for less than 4,000 doors.¹²

By 2022, household awareness was at over 26% and door count had increased to around 20,000 doors.¹² In 2021, Tattooed Chef achieved revenue of over $230 million and a market cap of over $2 billion.⁹¹³ From April 2021 through August 2022, Tattooed Chef spent over $66 million to acquire a sizable pool of assets including Ittella Italy SRL, New Mexico Food Distributors, Karsten Tortilla Factory, Belmont Confections, and Desert Premium Group.¹² Tattooed Chef operated seven different facilities in California, New Mexico, Ohio, and Italy.⁹¹³ Tattooed Chef offered a broad portfolio of inventive plant-based branded and private-label frozen food products to leading national retailers in all 50 states.⁹¹³

In October 2022, Tattooed Chef disclosed that its 2021 annual report and first, second, and third quarter earnings contained material errors such as overstating revenue and understating net losses.¹² According to the allegations, even once the error was discovered, executives continued to downplay the scope of the company's financial difficulties or the lack of internal controls that had led to the issue.¹² For the fiscal year ending December 31, 2022, Tattooed Chef reported revenue of $230 million, up from $208 million the year prior, for a year-over-year growth rate of 11%.¹² Net loss grew to $141 million for fiscal year 2022, and adjusted EBITDA was negative $91.7 million.¹² In its Q1 financial report released May 15, 2023, Tattooed Chef reported a year-over-year decline in revenue of $8.6 million, or 12.7%, due to one customer's reduction of its products.¹⁰

This led to a gross loss of $4.1 million for the quarter, compared with a gross profit of $4.1 million in Q1 of 2022.¹⁰ Net loss for the quarter was $19 million, compared with a net loss of $20.2 million in the comparable quarter.¹⁰ The company reported in its FY2022 annual report that its recurring losses and significant accumulated deficit had raised substantial doubt regarding its ability to continue as a going concern.¹⁰ Tattooed Chef had been operating with constrained liquidity which impacted the Company's profitability and ability to pay suppliers and other parties necessary to continue operations.⁹¹³ Due to the changes in the capital markets and general macroeconomic conditions, the Company was unable to raise additional financing.⁹¹³

The company cited an inability to raise additional capital, either by selling additional shares or via alternative financing and funding solutions.¹² The bankruptcy filing noted that the company explored various reductions in expenses such as reductions in its labor force.¹² At the time of the bankruptcy filing, the company had more than 1,600 creditors.¹² The company had 800 full time employees in the U.S. and 140 full time employees in Italy.¹² On June 28, 2023, The Nasdaq Stock Market notified Tattooed Chef that its closing stock price had fallen below the required $1 per share minimum for 30 consecutive days.¹⁰

Tattooed Chef had until Dec. 26 to raise the closing stock price to at least $1 per share for 10 consecutive days.¹⁰ On June 30, 2023, Tattooed Chef announced its intention to file for Chapter 11 bankruptcy protection and pursue a sale of assets under Section 363 of the U.S. Bankruptcy Code.²¹⁰¹² Chairman and CEO Sam Galletti said the plant-based food company would continue operations as it solicited bids for its assets.¹⁰ The company provided notice of intended layoffs to its employees in California and New Mexico.¹⁰ Tattooed Chef filed its Chapter 11 case in the Central District of California.¹⁰¹²

Tattooed Chef petitioned for access to cash collateral and $3 million in loans in order to keep the business afloat and maintain its value for a future sale.¹² SC&H Capital was retained as the exclusive investment banker to run an expedited sale process to market the assets and solicit bids from interested parties.⁹¹³ Within eight weeks, SC&H Capital had 133 groups under non-disclosure agreements and conducted 40 site visits at the various facilities.⁹¹³ Heading into the auction on September 19, 2023, there were 16 groups qualified to bid.⁹¹³ After an extensive, multi-parcel auction conducted by SC&H Capital, sales with 11 different buyers were approved by the U.S. Bankruptcy Court for the Central District of California.⁹¹³

Closings occurred over the next few months that provided maximum recovery to creditors, continued employment, and operating businesses for vendors to support.⁹¹³ On February 23, 2024, SC&H Capital announced that Tattooed Chef had completed a sale of substantially all of its assets.⁹ A securities fraud class action lawsuit was filed against Tattooed Chef, Inc. in the United States District Court for the Central District of California.¹⁶ Tattooed Chef agreed to pay $4,750,000 to resolve the class action lawsuit alleging the company and certain of its officers and/or directors violated federal securities laws by making false or misleading statements.¹⁶ On September 4, 2026, the Court granted Final Approval of the Class Action Settlement.¹⁶

Legal outcomes

• settledA securities fraud class action lawsuit was filed against Tattooed Chef, Inc. in the United States District Court for the Central District of California, alleging the company and certain of its officers and/or directors violated federal securities laws by making false or misleading statements.¹⁶
• settledTattooed Chef agreed to pay $4,750,000 to resolve the class action lawsuit.¹⁶
• settledOn September 4, 2026, the Court granted Final Approval of the Class Action Settlement.¹⁶

Where the founders are now

Sam Galletti served as Chairman and CEO of Tattooed Chef.¹⁰¹² Sarah Galletti, Sam Galletti's daughter, served as the company's chief creative officer and largely acted as the public face of the company.¹²

Lessons, as others put them

"The actions we are announcing today are designed to promote a fast, efficient, and value-maximizing sale, which will allow us to provide clarity on the future of the company for all our stakeholders."Salvatore "Sam" Galletti, Chairman and CEO of Tattooed Chef¹²

"This was an incredibly challenging situation given the breadth of products Tattooed Chef was involved with and the need to move extremely quickly to a sale in order to maximize value."Ed Bidanset, Chief Restructuring Officer for Tattooed Chef⁹¹³

Sources

2. Tattooed Chef Intends to file for Voluntary Chapter 11 ..., finance.yahoo.com, Jun 30, 20
9. SC&H Capital Advises Tattooed Chef in Sale of its Assets | SC&H, SC&H
10. Tattooed Chef to file for bankruptcy, plans to sell assets, New Hope Network
12. Failing to Find New Source of Funding, Tattooed Chef Declares Chapter 11, Nosh.com, 2023-07-05
13. SC&H Capital Advises Tattooed Chef in Sale of Assets - News | ABL Advisor, abladvisor.com, Feb 29, 20
15. Frozen Foods Brand Tattooed Chef Files for Bankruptcy, ..., vegconomist.com, Jul 6, 202
16. Tattooed Chef, Inc. (NASDAQ: TTCF) Securities Fraud Class Action | New Cases | Kessler Topaz, Kessler Topaz

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