krt-20211231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 001-40336

Karat Packaging Inc.

(Exact name of registrant as specified in its charter)


Delaware						83-2237832
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)
6185 Kimball Avenue Chino, California						91708
(Address of registrant's principal executive offices)						(Zip Code)

(626) 965-8882

(Telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

KRT

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No ☒

As of June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, the approximate aggregate market value of the common stock held by non-affiliates of the registrant was $102,247,296, based on the closing price of the registrant’s common stock on that date.

As of March 25, 2022, the number of shares of common stock, $0.001 par value, outstanding was 19,809,424 shares.

Explanatory Note

This Amendment No. 1 on Form 10-K/A (the “Amendment”) is being filed to correct a typographical error relating to the date of the report by BDO USA, LLP, our Independent Registered Public Accounting Firm, that had appeared on page 36 of the original Form 10-K of Karat Packaging Inc. for the fiscal year ended December 31, 2021, as filed on March 31, 2022 (the "2021 Form 10-K"). The correct date of the report is March 31, 2022, and a copy of the report, with the corrected date, is included with this Amendment. The corrected report replaces in its entirety the report originally included on page 36 under “Part II- Item 8. Financial Statements and Supplementary Data.”

In addition, the Company is including in this Amendment currently dated certifications from its Chief Executive Officer and Chief Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, attached hereto as Exhibits 31.1 and 31.2 and Exhibits 32.1 and 32.2, respectively. The exhibits listed in Part IV-Item 15. Exhibits and Financial Statement Schedules are filed herewith in accordance with Rule 12b-15 of the Exchange Act.

Except as expressly set forth above, this Amendment does not, and does not purport to, amend, update or restate the information in any other item of the 2021 Form 10-K or reflect any events that have occurred after the filing of the 2021 Form 10-K.

Table of Contents


Part I I
Item 8. Financial Statements and Supplementary Data			2
Part IV
Item 15. Exhibits and Financial Statement Schedules			34
Signatures			35

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

KARAT PACKAGING INC.

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS


Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (BDO USA LLP, Los Angeles, California PCAOB ID No. 243)			3
Consolidated Balance Sheets			4
Consolidated Statements of Income			6
Consolidated Statement of Stockholders' Equity			7
Consolidated Statements of Cash Flows			8
Notes to Consolidated Financial Statements			10

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Karat Packaging Inc.

Chino, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Karat Packaging Inc. and subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, stockholders’ equity, and cash flows for the years then ended, 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 the years then ended, 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 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 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 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 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 audits 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 audits provide a reasonable basis for our opinion.

/s/ BDO USA, LLP

We have served as the Company’s auditor since 2016.

Los Angeles, California

March 31, 2022

KARAT PACKAGING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	December 31, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents (including $1.2 million and $0.1 million associated with variable interest entity at December 31, 2021 and 2020, respectively)	$	6,483	$	448
Accounts receivable, net of allowance for doubtful accounts of $0.3 million at both December 31, 2021 and 2020	32,776		23,838
Inventories	58,472		48,961
Prepaid expenses and other current assets (including $0.1 million associated with variable interest entity at both December 31, 2021 and 2020)	5,141		6,530

Total current assets	102,872		79,777
Property and equipment, net (including $46.6 million and $47.8 million associated with variable interest entity at December 31, 2021 and 2020, respectively)	93,475		95,533
Deposits	6,885		2,456
Goodwill	3,510		3,113
Intangible assets, net	380		—
Deferred tax asset	—		64
Other assets (including $0.1 million associated with variable interest entity at both December 31, 2021 and 2020)	477		161
Total assets	$	207,599	$	181,104
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable (including $0.1 million and $0.6 million associated with variable interest entity at December 31, 2021 and 2020, respectively)	$	18,470	$	20,069
Accrued expenses (including $0.1 million associated with variable interest entity at both December 31, 2021 and 2020)	7,813		4,959
Related party payable	2,003		5,038
Credit cards payable	—		794
Income taxes payable	85		41
Customer deposits (including $0.1 million and $0.0 million associated with variable interest entity at December 31, 2021 and 2020, respectively)	1,215		551
Capital leases, current portion	—		321
Debt, current portion (including $1.2 million and $0.7 million associated with variable interest entity at December 31, 2021 and 2020, respectively)	1,178		11,364
Total current liabilities	30,764		43,137
Deferred tax liability	5,634		6,181
Line of credit	—		33,169
Long-term debt, net of current portion and debt discount of $0.2 million and $0.1 million at December 31, 2021 and December 31, 2020, respectively (including $35.3 million and $36.7 million associated with variable interest entity at December 31, 2021 and 2020, respectively, and debt discount of $0.2 million and $0.1 million associated with variable interest entity at December 31, 2021 and 2020, respectively)	35,339		53,410
Capital leases, net of current portion	—		290
Other liabilities (including $2.6 million and $3.9 million associated with variable interest entity at December 31, 2021 and 2020, respectively)	3,837		5,049
Total liabilities	75,574		141,236
Commitments and Contingencies (Note 14)


	December 31, 2021		December 31, 2020
Karat Packaging Inc. stockholders’ equity
Common stock, $0.001 par value, 100,000,000 shares authorized, 19,827,417 and 19,804,417 shares issued and outstanding, respectively, as of December 31, 2021 and 15,190,000 and 15,167,000 shares issued and outstanding, respectively, as of December 31, 2020	20		15
Additional paid in capital	83,694		13,981
Treasury stock, $0.001 par value, 23,000 shares as of both December 31, 2021 and 2020	(248)		(248)
Retained earnings	39,434		18,656
Total Karat Packaging Inc. stockholders’ equity	122,900		32,404
Noncontrolling interest	9,125		7,464
Total stockholders’ equity	132,025		39,868
Total liabilities and stockholders’ equity	$	207,599	$	181,104

The accompanying notes to the consolidated financial statements are an integral part of these statements.

KARAT PACKAGING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data)


	Year Ended December 31,
	2021		2020
Net sales	$	364,244	$	295,518
Cost of goods sold	256,417		206,393
Gross profit	107,827		89,125
Operating expenses:
Selling expenses	32,261		22,186
General and administrative expenses (including $2.5 million and $2.0 million associated with variable interest entity for the years ended December 31, 2021 and 2020, respectively)	52,421		39,242
Total operating expenses	84,682		61,428
Operating income	23,145		27,697
Other income (expenses)
Rental income (including $0.9 million and $0.3 million associated with variable interest entity for the years ended December 31, 2021 and 2020, respectively)	931		322
Other income	259		72
Loss on foreign currency transactions	(412)		(688)
Gain on sale of asset	—		16
Interest expense, net (including $0.5 million and $2.9 million associated with variable interest entity for the years ended December 31, 2021 and 2020, respectively)	(1,395)		(5,492)
Gain on forgiveness of debt	5,000		—
Total other income (expenses)	4,383		(5,770)
Income before provision for income taxes	27,528		21,927
Provision for income taxes	5,089		5,259
Net income	22,439		16,668
Net income (loss) attributable to noncontrolling interest	1,661		(849)
Net income attributable to Karat Packaging Inc.	$	20,778	$	17,517
Basic and diluted earnings per share:
Basic	$	1.13	$	1.15
Diluted	$	1.12	$	1.13
Weighted average common shares outstanding, basic	18,409,243		15,176,809
Weighted average common shares outstanding, diluted	18,566,260		15,447,809

The accompanying notes to the consolidated financial statements are an integral part of these statements.

KARAT PACKAGING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share data)


	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity Attributable to Karat Packaging Inc.		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance, January 1, 2020	15,190,000	$	15	—	$	—	$	13,981	$	1,745	$	15,741	$	8,313	$	24,054
Treasury stock purchases	—	—		(23,000)	(248)		—		—		(248)		—		(248)
Dividends paid to stockholders (0.04 per share)	—	—

SEC Form 10-K/A filed by Karat Packaging Inc. (Amendment)