Note 2 – Recently Issued Accounting Standards:

Recently Adopted Standards

Revenue Recognition

In May 2014, the Financial Accounting Standard Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers,” (Topic 606). Under the ASU and subsequent issued amendments, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received.

Topic 606 permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or modified retrospectively with the cumulative effect of applying the guidance as of the date of initial application (the cumulative catch-up transition method).

The Company adopted Topic 606 in the first quarter of 2018 using the full retrospective method approach and recast prior year results as shown below. The adoption did not have any material impact on our financial statements and is limited to classification differences within the Consolidated Statements of Operations and Comprehensive Loss from cost of goods sold to a reduction to net sales. The new accounting standard did not impact Net Loss.

The Company recast certain prior period amounts to conform with the adoption of the revenue recognition standard, as shown in the table below:

	Three Months Ended							Six Months Ended
	June 30, 2017							June 30, 2017
	As Previously Reported		Adjustments			Current Presentation		As Previously Reported		Adjustments			Current Presentation
Net Revenues	$	39,968,983	$	(1,240,619	)	$	38,728,364	$	74,482,918	$	(2,076,983	)	$	72,405,935
Cost of Goods Sold		21,799,146		(1,240,619	)		20,558,527		40,509,804		(2,076,983	)		38,432,821
Gross Profit	$	18,169,837	$	—		$	18,169,837	$	33,973,114	$	—		$	33,973,114

Revenue from product sales is recognized when obligations under the terms of the contract with the customer are satisfied, which occurs once control is transferred upon shipment to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods.

The amount of consideration the Company receives and revenue the Company recognizes varies with changes in trade incentives the Company offers to its customers and their consumers. Trade incentives consists primarily of customer pricing allowances and merchandising funds, and consumer coupons are offered through various programs to customers and consumers. Estimates of trade promotion expense and coupon redemption costs are based upon programs offered, timing of those offers, estimated redemption/usage rates from historical performance, management’s experience and current economic trends.

Sales taxes and other similar taxes are excluded from revenue. Costs associated with shipping and handling activities, such as merchandising, are included in SG&A expenses as revenue is recognized.

The Company has recorded contract assets in accordance with Topic 606 of $0.2 million as of June 30, 2018. There were no contract assets as of December 31, 2017.

Information about the Company’s net sales by class of retailer is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Grocery (including Online), Mass and Club	$	38,976,097	$	31,214,749	$	73,992,511	$	58,499,896
Pet Specialty and Natural		8,648,859		7,513,615		16,802,046		13,906,039
Net Sales	$	47,624,956	$	38,728,364	$	90,794,557	$	72,405,935

Standards Effective in Future Years

Leases

In February 2016, the FASB issued ASU No. 2016-02, "Leases,” (Topic 842) which requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is assessing the impact of Topic 842 on its corporate office lease, and upon adoption of this guidance, expects to record the lease on its consolidated balance sheet in accordance with Topic 842.