Note 7 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 7 – Commitments and Contingencies

Commitments – The Company’s obligations include leases for office space under non-cancelable operating leases, manufacturing processing and utility servicing that expire at various dates through April 1, 2027.

Leases:

We have various noncancellable lease agreements for office and warehouse space, as well as office equipment, with original remaining lease terms of two years to nine years, some of which include an option to extend the lease term for up to five years. Because the Company is not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term and associated potential option payments are excluded from lease payments. The Company’s leases generally do not include termination options for either party to the lease or restrictive financial or other covenants.

Weighted-average remaining lease term (in years) and discount rate related to operating leases were as follows:

	As of December 31,
	2021			2020
Weighted-average remaining lease term		4.51			5.43
Weighted-average discount rate		6.2	%		6.1	%

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the date of adoption to determine the present value of lease payments.

Costs related to lease obligations for the years ended December 31, 2021 and 2020 were as follows:

	For the Twelve Months Ended December 31,
	2021		2020
Operating lease cost	$	1,779	$	1,796

Supplemental cash flow information and non-cash activity relating to operating leases are as follows:

	For the Twelve Months Ended December 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities	$	1,753	$	1,707
Right-of-use assets obtained in exchange for lease obligations	$	-	$	18

As of December 31, 2021, future minimum payments due under lease obligations for five years were as follows:

Operating Lease Obligations	As of December 31, 2021
2022	$	1,764
2023		1,802
2024		1,511
2025		1,210
2026 and beyond		1,576
Total lease payments	$	7,863
Less: Imputed interest		(769	)
Present value of lease liabilities	$	7,094

Rent expense for operating leases, in accordance with the leasing standard was $1,606 in 2019.

As of December 31, 2021, future minimum payments due under manufacturing and service obligations for five years were as follows:

Manufacturing and Servicing Obligations	December 31, 2021
2022	$	7,366
2023		3,288
2024		4,783
2025 and beyond		712
Total Manufacturing and Servicing Obligations	$	16,149

Certain of the Company’s executives are covered by employment contracts requiring the Company to pay severance in the event of certain terminations.

Legal Obligations:

A shareholder derivative lawsuit, Meldon v. Freshpet, Inc. et al, Docket No. 2:18-cv-10166, was instituted June 5, 2018 in the United States District Court for the District of New Jersey against us and certain of our current and former executive officers and directors on behalf of certain holders of our common stock. We were served with a copy of the complaint in June 2018. The plaintiffs sought to recover damages for investors based on state law claims (alleged breaches of fiduciary duty, waste, and unjust enrichment) in connection with the alleged violations of federal securities laws alleged in the Curran action. On April 3, 2019, the Court granted a stay of the Meldon case pending resolution of certain matters in a related case, Curran v. Freshpet, Inc., which has been settled. The parties to the Meldon action then entered into settlement discussions, after which the parties reached an agreement in principle to settle the case based on the Company's commitment to continue certain governance practices. The parties also reached agreement on attorneys' fees. The settlement was approved and certified on August 4, 2020. 

In addition, we are currently involved in various claims and legal actions that arise in the ordinary course of our business, including claims resulting from employment related matters. None of these claims or proceedings, most of which are covered by insurance, are expected to have a material adverse effect on our business, financial condition, results of operations or cash flows. However, a significant increase in the number of these claims or an increase in amounts owing under successful claims could materially and adversely affect our business, financial condition, results of operations or cash flows.