10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2023

OR

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

Commission File Number: 001-39537

Laird Superfood, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	81-1589788
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5303 Spine Road, Suite 204, Boulder, Colorado 80301

(Address of principal executive offices, including Zip Code)

Registrant’s telephone number, including area code: (541) 588-3600

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	LSF	NYSE American

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 7, 2023 the registrant had 9,349,445 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

	Page
Part I. Financial Information
Item 1. Unaudited Consolidated Condensed Financial Statements	4
Unaudited Consolidated Condensed Balance Sheets	4
Unaudited Consolidated Condensed Statements of Operations	5
Unaudited Consolidated Condensed Statements of Comprehensive Loss	6
Unaudited Consolidated Condensed Statements of Stockholders’ Equity	7
Unaudited Consolidated Condensed Statements of Cash Flows	8
Notes to Unaudited Consolidated Condensed Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations	29
Item 3. Quantitative and Qualitative Disclosures About Market Risk	35
Item 4. Controls and Procedures	36
Part II. Other Information	36
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3. Defaults Upon Senior Securities	37
Item 4. Mine Safety Disclosures	37
Item 5. Other Information	37
Item 6. Exhibits	37
Signatures	39

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements convey our current expectations or forecasts of future events and are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may be forward-looking statements. When we use the words “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will,” “seeks,” or the negative of these terms or other comparable terminology, we are identifying forward-looking statements.

Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. Key factors that could cause actual results to be different than expected or anticipated include, but are not limited to:

● our limited operating history and ability to become profitable;

● our ability to manage our growth, including our human resource requirements;

● our reliance on third parties for raw materials and production of our products to our quality standards;

● our future capital resources and needs, including our ability to continue as a going concern;

● our ability to retain and grow our customer base;

● our reliance on independent distributors for substantially all of our sales;

● our ability to evaluate and measure our business, prospects and performance metrics;

● our ability to compete and succeed in a highly competitive and evolving industry;

● the health of the premium organic and natural food industry as a whole;

● risks related to our intellectual property rights and developing a strong brand;

● our reliance on key personnel, including Laird Hamilton and Gabrielle Reece;

● regulatory risks;

● risks of major bank failure, sustained financial market illiquidity, or illiquidity at our financial institutions;

● the risk of substantial dilution from future issuances of our equity securities; and

● the other risks described herein and in our Annual Report on Form 10-K for the year ended December 31, 2022.

In light of these risks, uncertainties and assumptions, you are cautioned not to place undue reliance on forward-looking statements, which are inherently unreliable and speak only as of the date of this Quarterly Report on Form 10-Q. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. When considering forward-looking statements, you should keep in mind the cautionary statements in this report. We qualify all our forward-looking statements by these cautionary statements. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

3

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Condensed Financial Statements

LAIRD SUPERFOOD, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

	As of
	September 30, 2023			December 31, 2022
Assets
Current assets
Cash, cash equivalents, and restricted cash	$	7,425,050		$	17,809,802
Accounts receivable, net		2,186,645			1,494,469
Inventory, net		6,552,571			5,696,565
Prepaid expenses and other current assets, net		1,436,035			2,530,075
Total current assets		17,600,301			27,530,911
Noncurrent assets
Property and equipment, net		138,604			150,289
Fixed assets held-for-sale		—			800,000
Intangible assets, net		1,136,953			1,292,118
Related party license agreements		132,100			132,100
Right-of-use assets		386,118			133,922
Total noncurrent assets		1,793,775			2,508,429
Total assets	$	19,394,076		$	30,039,340
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	1,869,458		$	1,080,267
Accrued expenses		4,059,799			6,295,640
Related party liabilities		56,574			16,500
Lease liabilities, current portion		129,274			59,845
Total current liabilities		6,115,105			7,452,252
Lease liabilities		278,418			76,076
Total liabilities		6,393,523			7,528,328
Stockholders’ equity
Common stock, $0.001 par value, 100,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 9,709,347 and 9,343,643 issued and outstanding at September 30, 2023, respectively; and 9,576,117 and 9,210,414 issued and outstanding at December 31, 2022, respectively.		9,344			9,210
Additional paid-in capital		119,432,281			118,636,834
Accumulated deficit		(106,441,072	)		(96,135,032	)
Total stockholders’ equity		13,000,553			22,511,012
Total liabilities and stockholders’ equity	$	19,394,076		$	30,039,340

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

4

LAIRD SUPERFOOD, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Sales, net	$	9,179,781		$	8,844,845		$	25,016,810		$	26,858,864
Cost of goods sold		(6,332,624	)		(6,773,029	)		(18,419,709	)		(21,259,300	)
Gross profit		2,847,157			2,071,816			6,597,101			5,599,564
General and administrative
Impairment of goodwill and long-lived assets		—			—			—			8,126,426
Other expense		2,208,213			4,383,868			7,822,834			10,721,611
Total general and administrative expenses		2,208,213			4,383,868			7,822,834			18,848,037
Research and product development		40,123			115,077			206,313			335,377
Sales and marketing
Advertising		1,137,488			1,832,172			3,454,485			5,191,374
Related party marketing agreements		141,712			19,500			435,084			52,750
Other expense		2,106,690			1,539,185			5,423,541			5,871,375
Total sales and marketing expenses		3,385,890			3,390,857			9,313,110			11,115,499
Total operating expenses		5,634,226			7,889,802			17,342,257			30,298,913
Operating loss		(2,787,069	)		(5,817,986	)		(10,745,156	)		(24,699,349	)
Other income (expense)		132,185			79,777			452,288			(77,008	)
Loss before income taxes		(2,654,884	)		(5,738,209	)		(10,292,868	)		(24,776,357	)
Income tax expense		—			—			(13,172	)		(5,774	)
Net loss	$	(2,654,884	)	$	(5,738,209	)	$	(10,306,040	)	$	(24,782,131	)
Net loss per share:
Basic	$	(0.28	)	$	(0.63	)	$	(1.11	)	$	(2.71	)
Diluted	$	(0.28	)	$	(0.63	)	$	(1.11	)	$	(2.71	)
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted		9,337,789			9,178,533			9,279,541			9,136,071

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

5

LAIRD SUPERFOOD, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net loss	$	(2,654,884	)	$	(5,738,209	)	$	(10,306,040	)	$	(24,782,131	)
Amounts reclassified from accumulated other comprehensive loss		—			—			—			61,016
Total other comprehensive income		—			—			—			61,016
Comprehensive loss	$	(2,654,884	)	$	(5,738,209	)	$	(10,306,040	)	$	(24,721,115	)

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

6

LAIRD SUPERFOOD, INC.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Stockholders’ Equity
	Common Stock				Additional			Accumulated Other Comprehensive		Accumulated
	Shares		Amount		Paid-in Capital			Income (Loss)		Deficit			Total
Balances, January 1, 2023		9,210,414	$	9,210	$	118,636,834		$	—	$	(96,135,032	)	$	22,511,012
Stock-based compensation		—		—		147,635								147,635
Restricted stock units issued, net of taxes		9,086		10		(4,420	)		—		—			(4,410	)
Net loss		—		—		—			—		(4,143,910	)		(4,143,910	)
Balances, March 31, 2023		9,219,500	$	9,220	$	118,780,049		$	—	$	(100,278,942	)	$	18,510,327
Stock-based compensation		—		—		306,076			—		—			306,076
Restricted stock units issued, net of taxes		114,662		115		(14,842	)		—		—			(14,727	)
Net loss		—		—		—			—		(3,507,246	)		(3,507,246	)
Balances, June 30, 2023		9,334,162	$	9,335	$	119,071,283		$	—	$	(103,786,188	)	$	15,294,430
Stock-based compensation		—		—		364,936			—		—			364,936
Restricted stock units issued, net of taxes		9,481		9		(3,938	)		—		—			(3,929	)
Net loss		—		—		—			—		(2,654,884	)		(2,654,884	)
Balances, September 30, 2023		9,343,643	$	9,344	$	119,432,281		$	—	$	(106,441,072	)	$	13,000,553

	Stockholders’ Equity
	Common Stock				Additional			Accumulated Other Comprehensive			Accumulated
	Shares		Amount		Paid-in Capital			Income (Loss)			Deficit			Total
Balances, January 1, 2022		9,094,539	$	9,095	$	117,903,455		$	(61,016	)	$	(55,797,714	)	$	62,053,820
Stock-based compensation		—		—		10,796			—			—			10,796
Stock option exercises		1,750		1		14,247			—			—			14,248
Restricted stock units issued, net of taxes		5,164		5		(5	)		—			—			—
Amounts reclassified from accumulated other comprehensive loss		—		—		—			61,016			—			61,016
Net loss		—		—		—			—			(14,139,402	)		(14,139,402	)
Balances, March 31, 2022		9,101,453	$	9,101	$	117,928,493		$	—		$	(69,937,116	)	$	48,000,478
Stock-based compensation		—		—		(209,242	)		—			—			(209,242	)
Stock option exercises		43,553		44		49,956			—			—			50,000
Restricted stock units issued, net of taxes		13,897		14		(14	)		—			—			—
Employee stock purchase plan shares issued		11,055		11		28,276			—			—			28,287
Recovery of short-swing profits		—		—		28,555			—			—			28,555
Net loss		—		—		—			—			(4,904,520	)		(4,904,520	)
Balances, June 30, 2022		9,169,958	$	9,170	$	117,826,024		$	—		$	(74,841,636	)	$	42,993,558
Stock-based compensation		—		—		483,426			—			—			483,426
Restricted stock units issued, net of taxes		30,512		31		(31	)		—			—			—
Net loss		—		—		—			—			(5,738,209	)		(5,738,209	)
Balances, September 30, 2022		9,200,470	$	9,201	$	118,309,419		$	—		$	(80,579,845	)	$	37,738,775

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

7

LAIRD SUPERFOOD, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities
Net loss	$	(10,306,040	)	$	(24,782,131	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization		235,025			846,356
Stock-based compensation		818,647			284,980
Provision for inventory obsolescence		1,260,580			342,178
Impairment of goodwill and other long-lived assets		—			8,126,426
Other operating activities, net		398,052			527,740
Changes in operating assets and liabilities:
Accounts receivable		(937,876	)		(417,670	)
Inventory		(1,958,157	)		1,061,152
Prepaid expenses and other current assets		1,061,879			2,242,703
Operating lease liability		(94,679	)		(556,597	)
Accounts payable		810,908			(62,080	)
Accrued expenses		(2,217,484	)		1,253,566
Net cash from operating activities		(10,929,145	)		(11,133,377	)
Cash flows from investing activities
Proceeds from sale of investment securities available-for-sale		—			8,513,783
Other investing activities, net		567,459			467,373
Net cash from investing activities		567,459			8,981,156
Cash flows from financing activities		(23,066	)		121,090
Net change in cash and cash equivalents		(10,384,752	)		(2,031,131	)
Cash, cash equivalents, and restricted cash, beginning of period		17,809,802			23,049,234
Cash, cash equivalents, and restricted cash, end of period	$	7,425,050		$	21,018,103
Supplemental disclosures of cash flow information
Right-of-use assets obtained in exchange for operating lease liabilities	$	344,382		$	5,285,330
Supplemental disclosures of non-cash investing activities
Receivable from sale of assets held-for-sale included in other current assets at the end of the period	$	126,268		$	—
Receivable from sale of assets held-for-sale included in accrued expenses at the end of the period	$	—		$	28,240
Settlement recovery from business interruption claims included in other current assets	$	158,429		$	—
Amounts reclassified from accumulated other comprehensive loss	$	—		$	61,016
Amounts reclassified from property, plant, and equipment to fixed assets held-for-sale	$	—		$	947,394
Amounts reclassified from property, plant, and equipment to intangible assets	$	—		$	153,691
Purchases of equipment included in deposits at the beginning of the period	$	—		$	372,507

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

8

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

1. Nature of Operations and Summary of Significant Accounting Policies

The accompanying unaudited consolidated condensed financial statements include the accounts of Laird Superfood, Inc., a Delaware corporation, and its wholly owned subsidiary, Picky Bars, LLC, (collectively, the “Company”, “Laird Superfood”, “we”, or "our").

Nature of Operations

Laird Superfood is an emerging consumer products platform focused on manufacturing and marketing highly differentiated, plant-based and functional foods. The core pillars of the Laird Superfood platform are Superfood Creamer coffee creamers, Hydrate hydration products and beverage enhancing supplements, harvest snacks and other food items, and functional roasted and instant coffees, teas and hot chocolate. The Company was founded in 2015.

Basis of Accounting

The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and rules and regulations of the Securities and Exchange Commission (“SEC”). Operating results include the three and nine months ended September 30, 2023 and 2022. Certain information in footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements.

Principles of Consolidation

All significant intercompany accounts and transactions have been eliminated in our accompanying unaudited consolidated condensed financial statements.

Unaudited Interim Consolidated Condensed Financial Information

In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial position and its results of operations, changes in stockholders’ equity and cash flows. The accompanying unaudited consolidated condensed financial statements and related financial information should be read in conjunction with the Company's fiscal year 2022 Form 10-K filed with the SEC on March 16, 2023. The unaudited consolidated condensed balance sheet as of December 31, 2022 was derived from the audited annual consolidated financial statements. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2023.

Use of Estimates

The preparation of the unaudited consolidated condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience, known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although management believes its estimates and assumptions are reasonable when made, they are based upon information available at the time they are made. Management evaluates the estimates and assumptions on an ongoing basis and, if necessary, makes adjustments. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions and given the subjective element of the estimates and assumptions made, actual results may differ from estimated results. The most significant estimates and judgments include those related to allowances for doubtful accounts and returns, inventory obsolescence, goodwill, intangible assets, valuation allowance for deferred taxes, reserves on prepaid expenses, the discount rates used in determining right of use assets and related lease liabilities, valuation of inventory, trade and sales promotion liabilities, and fair value of stock-based compensation.

Segment reporting

The Company currently has one operating segment. In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company considers operating segments to be components of the Company’s business for which separate financial information is available and is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Management reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has a single operating and reportable segment.

Substantially all product sales for the periods provided were derived from domestic sales.

See Note 12 for additional information regarding sales by platform within the Company’s single segment.

9

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash are highly liquid instruments with an original maturity of three months or less when purchased. For the purposes of the unaudited consolidated condensed statements of cash flows, the Company includes cash on hand, cash in clearing accounts, cash on deposit with financial institutions, investments with an original maturity of three months or less, and restricted cash in determining the total balance.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited consolidated condensed balance sheets.

	September 30,		December 31,
	2023		2022
Cash and cash equivalents	$	7,136,639	$	17,293,959
Restricted cash		288,411		515,843
Total cash, cash equivalents, and restricted cash	$	7,425,050	$	17,809,802

Amounts in restricted cash represent those that are required to be set aside by the following contractual agreements:

● On December 3, 2020, the Company entered into an agreement with Danone Manifesto Ventures, PBC, which provided the Company $298,103 in funds for the purpose of supporting three COVID-19 relief projects. As of September 30, 2023 and December 31, 2023, cash equivalents in the amount of $99,525 were restricted under this agreement. During the three and nine months ended September 30, 2023, we contributed $0 to these projects. During the three and nine months ended September 30, 2022, we contributed $1,864 and $16,703, respectively, to these projects. The restriction will be released upon the completion of the projects.

● Cash equivalents of $530,000 were pledged to secure our company credit card limits. As of  September 30, 2023 and December 31, 2022, respectively, $188,886 and $416,318 of these funds were restricted to collateralize borrowings against these company credit cards. 

Cash, cash equivalents, and restricted cash balances that exceeded the Federal Deposit Insurance Corporation (“FDIC”) insurable limits as of September 30, 2023 and December 31, 2022 totaled $416,684 and $2,747,721, respectively. The Company has never experienced any losses related to these balances. The Company’s cash, cash equivalents, and restricted cash are with what the Company believes to be a high-quality financial institution and considers the risks associated with these funds in excess of FDIC insurable limits to be low.

Accounts Receivable, net

Accounts receivable, net consists principally of trade receivables, which are recorded at the invoiced amount, net of allowances for credit loss. Trade receivables do not bear interest. Receivables are considered past due or delinquent according to contract terms. Management closely monitors outstanding balances and writes off accounts receivable as they are determined uncollectible. The primary indicators of the credit quality of our receivables are aging and payment history and are assessed on a quarterly basis. Our credit loss exposure is concentrated in our accounts receivable portfolio. Our allowance for credit losses is calculated using a loss-rate method based on historical experience and reasonable forecasts. Based on these factors, management determined an allowance for credit loss of $323,136 and $77,436 as of September 30, 2023 and December 31, 2022, respectively.

Inventory

Inventory is stated at the lower of cost or net realizable value, or the value of consideration that can be received upon sale of said product, and approximate costs determined on the first-in first-out basis and consists primarily of raw materials and packaging and finished goods and includes co-packing fees, indirect labor and allocable overhead. The following table presents the components of inventory, net of reserves, as of:

	September 30,		December 31,
	2023		2022
Raw materials and packaging	$	1,854,333	$	3,764,804
Finished goods		4,698,238		1,931,761
Total inventory, net	$	6,552,571	$	5,696,565

The Company periodically reviews the value of items in inventory and provides write-offs of inventory based on current market assessment, which are charged to cost of goods sold. For the three and nine months ended September 30, 2023, the Company recorded $881,721 and $1,260,580, respectively, of inventory obsolescence and disposal costs. For the three and nine months ended September 30, 2022, the Company recorded $236,946 and $342,178, respectively, of inventory obsolescence and disposal costs.

As of September 30, 2023 inventory reserves totaled $1,614,840. This is comprised of estimated reserves based on inventory turnover, quantities on hand, and expiration dates of $473,888, as well as raw materials and finished goods specifically identified for disposal related to a product quality issue of $838,276 and discontinued inventories of $302,676. As of December 31, 2022, inventory reserves totaled $1,545,033. This was comprised of estimated reserves based on inventory turnover, quantities on hand, and expiration dates of $746,966, reserves specifically identified for disposal related to a product quality issue of $559,042 and discontinued inventories following exit activities of $239,025.

As of September 30, 2023 and December 31, 2022, the Company had a total of $482,585 and $897,108, respectively, of prepayments for future raw materials inventory which are included in prepaid expenses and other current assets, net on the unaudited consolidated condensed balance sheets.

10

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

Property and Equipment, net

Property and equipment are valued at cost, net of accumulated depreciation. Expenditures for maintenance and repairs that do not extend the useful life or increase the value of the assets are charged to expense in the period incurred. Additions and betterments are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for depreciation purposes for furniture and factory equipment range from 3 to 7 years. The useful life for leasehold improvements is the lesser of the lease term or the useful life. Construction in progress is not depreciated until such a time that the assets are completed and placed into service.

Fixed Assets Held-for-Sale

Long-lived assets identified by the Company for sale, which have met all criteria to be classified as held for sale, are disclosed separately on the unaudited consolidated condensed balance sheets. Fixed assets held for sale are measured at the lower of the assets carrying amount or fair value less costs to sell, and depreciation is no longer recorded. See Note 4 for more information.

Leases

In accordance with ASC 842, Leases, the Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We categorize leases at their inception as either operating, finance, or short-term leases and determine if an arrangement contains an embedded lease. For arrangements that meet the definition of a lease, the Company determines the initial classification and measurement of its right-of-use asset and lease liability at the lease commencement date and, thereafter, if modified. The lease term includes any renewal options that the Company is reasonably assured to exercise. Lease agreements effective during the three and nine months ended September 30, 2023 and 2022 cover, or covered, office space, warehouse and distribution space, vehicles, and equipment. All of our long-term leases are operating leases. Operating leases are included in right-of-use assets, current lease liabilities, and long-term lease liabilities in our unaudited consolidated condensed balance sheets.

In addition to rent, the leases may require the Company to pay additional costs, such as utilities, maintenance and other operating costs, which are generally referred to as non-lease components. The Company has elected to not separate lease and non-lease components. Only the fixed costs for lease components and their associated non-lease components are accounted for as a single lease component and recognized as part of a right-of-use asset and liability. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rate. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.

Leased assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use a secured incremental borrowing rate as the discount rate for the present value of lease payments when the rate implicit in the contract is not readily determinable. For operating leases with variable payments dependent upon an index or rate that commenced subsequent to the adoption of ASC 842, Leases, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the operating lease liability as they cannot be reasonably estimated and are recognized in the period in which the obligation for those payments is incurred. Leases that have a term of twelve months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included on the unaudited consolidated condensed balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date we have the right to control the property.

We are the lessor in a sublease agreement. This lease is an operating lease and is recognized straight line over the lease term with a related sublease rental asset accounting for abatements and initial direct costs.

Revenue Recognition

The Company recognizes revenue in accordance with the five-step model as prescribed by ASC 606, Revenue from Contracts with Customers, in which the Company evaluates the transfer of promised goods or services and recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the Company satisfies a performance obligation. The Company has elected, as a practical expedient, to account for the shipping and handling as fulfillment costs, rather than as a separate performance obligation. Methodologies for determining these provisions are dependent on customer pricing and promotional practices. The Company records reductions to revenue and a refund liability for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates are based on industry-based historical data, historical sales returns, if any, analysis of credit memo data, and other factors known at the time. See Note 12 for additional information regarding revenue recognition.

Cost of Goods Sold

Cost of goods sold includes material, packaging, co-packing fees, distribution freight, indirect labor and overhead costs incurred in the storage and distribution of products sold in the period. Material costs include the cost of products purchased. In 2023, labor and overhead costs consisted of indirect labor, inbound freight for raw materials and warehouse rent, and in 2022 also included wages and benefits for manufacturing, planning, and logistics personnel, depreciation, and facility costs.

Shipping and Handling

Costs of shipping and handling related to sales revenue are included in cost of goods sold. Shipping and handling costs totaled $1,132,930 and $4,002,244, respectively, for the three and nine months ended September 30, 2023. Shipping and handling costs totaled $1,622,290 and $4,763,845 for the three and nine months ended September 30, 2022. Income generated from shipping costs billed through to customers was included in net sales in the unaudited consolidated condensed statements of operations. Shipping income totaled $214,982 and $778,051, respectively, for the three and nine months ended September 30, 2023. Shipping income totaled $289,505 and $829,107, respectively, for the three and nine months ended September 30, 2022.

11

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

Research and Product Development

Amounts spent on research and development activities are expensed as incurred as research and product development expense on the unaudited consolidated condensed statements of operations. Research and product development expense was $40,123 and $206,313, respectively, for the three and nine months ended September 30, 2023. Research and product development expense was $115,077 and $335,377, respectively, for the three and nine months ended September 30, 2022.

Advertising

Advertising costs are expensed when incurred. Advertising expenses for the three and nine months ended September 30, 2023 were $1,137,488 and $3,454,485, respectively. Advertising expenses for the three and nine months ended September 30, 2022 were $1,832,172 and $5,191,374, respectively.

Marketing

Marketing costs are expensed when incurred, and are included in other sales and marketing expenses on the unaudited consolidated condensed statements of operations. Marketing expenses for the three and nine months ended September 30, 2023 were $1,226,909 and $3,012,473, respectively. Marketing expenses for the three and nine months ended September 30, 2022 were $824,747 and $2,983,417, respectively.

Income Taxes

Income taxes provide for the tax effects of transactions reported in the unaudited consolidated condensed financial statements and consist of income taxes currently due and deferred tax assets and liabilities. The Company may also be subject to interest and penalties from taxing authorities on underpayment of income taxes. In such an event, interest and penalties are included in income tax expense. Deferred tax assets and liabilities are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to depreciable assets (use of different depreciation methods and lives for financial statement and income tax purposes), stock-based compensation, right of use assets, and net operating losses. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Due to the historical net loss position of the Company, the Company recorded a deferred tax valuation allowance of $26,661,284 and $23,928,265 as of  September 30, 2023 and  December 31, 2022, respectively.

Stock Incentive Plan

The compensation cost relating to share-based payment transactions is recognized in the unaudited consolidated condensed financial statements. The cost is measured based on the grant date fair value of the equity or liability instruments issued. Compensation cost for all employee stock awards is calculated and recognized over the employees’ service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. Compensation cost for all consultant stock awards is calculated and recognized over the consultant’s service period based on the grant date fair value of the equity or liability instruments issued. Upon exercise of stock option awards or vesting of restricted stock units ("RSUs") and market-based stock units ("MSUs"), recipients are issued shares of common stock. Pre-vesting forfeitures result in the reversal of all compensation cost as of the date of termination; post-vesting cancellation does not.

Earnings per Share

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock that were outstanding during the period. Diluted earnings per share is similarly determined, except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if all dilutive potential common stock had been issued and is calculated under the treasury stock method. Due to the Company’s net loss, all outstanding stock options, RSUs, and MSUs are anti-dilutive and excluded.

License Agreement – Indefinite Lived Intangible Asset

On August 3, 2015, the Company entered into a license agreement with the Company’s co-founder Laird Hamilton (the “LH License”). The LH License stated Mr. Hamilton’s contribution to the Company was in the form of intellectual property, granting the Company the right to use Mr. Hamilton’s name and likeness. This contribution, which was reported on the unaudited consolidated condensed balance sheets as of September 30, 2023 and December 31, 2022, was valued at $132,000 and satisfied with the issuance of 660,000 shares of common stock. The Company has determined that the intangible asset associated with the LH License has an indefinite life, as there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company.

On May 2, 2018, the Company entered into a license agreement with Gabrielle Reece, who is married to Mr. Hamilton (the “GR License”). Pursuant to the GR License, Ms. Reece granted the Company rights to her name, signature, voice, picture, image, likeness and biographical information commencing on July 1, 2015. This contribution, which is reported on the unaudited consolidated condensed balance sheets as of September 30, 2023 and December 31, 2022, was valued at $100 based on the consideration exchanged. The Company has determined that the intangible asset associated with the GR License has an indefinite life, as there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company.

On November 19, 2018, the Company executed a License and Preservation Agreement with Mr. Hamilton and Ms. Reece which superseded the predecessor license agreements with both individuals. The agreement added specific terms related to non-competition and allowable usage of the property under the license. No additional consideration was exchanged in connection with the agreement and the life of the agreement was set at 100 years.

12

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

On May 26, 2020, the Company executed a License and Preservation Agreement with Mr. Hamilton and Ms. Reece (the “2020 License”), which superseded the predecessor license and preservation agreement with both individuals. Among other modifications, the agreement (i) modified certain approval rights of Mr. Hamilton and Ms. Reece for use of their respective images, signatures, voices, and names (other than those owned by the Company), rights of publicity and common law and statutory rights to the foregoing in the Company’s products, (ii) modified certain assignment, change of control and indemnification provisions, and (iii) granted the Company the right to extend the term of the agreement for additional ten-year terms upon the expiration of the initial one-hundred year term. No additional consideration was exchanged in connection with the agreement. As indefinite-lived intangibles, the Company assesses qualitative factors each reporting period to determine whether events and circumstances exist that indicate that the fair values of the licensing agreements were less than the carrying amounts. Upon considering these factors, the Company determined it was more likely than not that the fair value of the 2020 License was not less than the carrying amount; therefore, the Company recognized no impairment for the three and nine months ended September 30, 2023 and 2022.

Definite Lived Intangible Assets, net

Definite lived intangible assets are valued at cost, net of accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for amortization purposes range between 3 and 10 years. Amortization expense is allocated to general and administrative expense. For the three and nine months ended September 30, 2023, amortization expenses were $51,721 and $155,165, respectively. For the three and nine months ended September 30, 2022, amortization expenses were $104,201 and $349,424, respectively. The Company assesses qualitative factors each reporting period to determine whether events and circumstances exist that indicate that the fair values of the definite lived intangible assets were less than the carrying amounts. There were no impairment charges in the three and nine months ended September 30, 2023. In the last month of the first quarter of 2022, management determined the sustained decline in stock price, coupled with changes in market conditions, was a triggering event. Upon considering these factors, the Company determined it was more likely than not that the fair value was less than the carrying amounts of long-lived intangible assets; therefore, the Company recognized impairment charges of $0 and $1,540,000 for the three and nine months ended September 30, 2022, respectively. See Note 5 for more information.

Goodwill

Goodwill represents the excess of purchase price over the assigned fair values of the assets acquired and liabilities assumed in conjunction with a business combination. Goodwill is reviewed for impairment annually as of December 31, or whenever events occur or circumstances change that indicate goodwill may be impaired. In testing goodwill for impairment, the Company has the option to perform a qualitative assessment to determine whether the existence of events or circumstances indicate that it is more-likely-than-not (more than 50%) that the fair value of goodwill is less than its carrying amount. When performing a qualitative assessment, the Company evaluates factors such as industry and market conditions, cost factors, overall financial performance, and other relevant entity specific events and changes. If the qualitative assessment indicates that it is more-likely-than-not that the fair value of goodwill is less than its carrying amount, or if the Company chooses not to perform the qualitative assessment, then a quantitative assessment is performed to determine the reporting unit’s fair value. If the carrying value exceeds its fair value, then an impairment loss is recognized for the amount of the excess of the carrying amount over the fair value, not to exceed the total amount of goodwill. In the last month of the first quarter of 2022, management had determined the sustained decline in stock price, coupled with a change in market conditions, was determined to be a triggering event. The Company performed a qualitative and quantitative analysis on the Company's goodwill for impairment concluding that the fair value of goodwill as calculated using a discounted cash flow model exceeds the carrying value, indicating that goodwill was impaired. The Company recorded goodwill impairment charges of $0 and $6,486,000, respectively, during the three and nine months ended September 30, 2022. There was no goodwill as of September 30, 2023 or December 31, 2022.

Employee Benefit Plan

The Company sponsors a defined contribution 401(k) plan (the “401(k) plan”) for all employees 18 years or older. The 401(k) plan was initiated on July 1, 2018. Employee contributions may be made on a before-tax basis, limited by Internal Revenue Service regulations. In 2023, the Company established a 3% safe harbor contribution to be remitted in the first quarter of 2024. As of September 30, 2023, there were $135,722 of 401(k) contribution liabilities included in accrued expenses on the unaudited consolidated condensed balance sheets. The Company recorded related expenses as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Cost of goods sold	$	2,330	$	9,624
General and administrative		16,359		76,235
Research and development		695		2,603
Sales and marketing		13,296		37,972
Total 401(k) contribution expense	$	32,680	$	126,434

JOBS Act Accounting Election

The Company qualifies as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. An emerging growth company can elect to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. Currently, the Company has elected to file as an emerging growth company defined under the JOBS Act, and as such, these unaudited consolidated condensed financial statements may not be comparable to the financial statements of companies that comply with the new or revised accounting pronouncements as of public company effective dates.

13

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

Exit and Disposal Costs

The Company follows the guidance in ASC 420, Exit or Disposal Cost Obligations, to record exit and disposal related costs. The Company recorded $8.7 million of exit and disposal costs in the fourth quarter of 2022 and insignificant residual costs in the nine months ended September 30, 2023, associated with the closure of the Sisters, Oregon manufacturing sites and subsequent transition to a co-manufacturing model for all production and fulfillment. ASC 420 requires the recognition of costs associated with exit or disposal activities when they are incurred, generally the cease-use date. Exit and disposal activities are summarized below:

● We entered into a lease termination agreement on December 12, 2022. All production activities taking place in the related properties ceased in December 2022. Pursuant to this agreement, our lease was fully terminated as of January 31, 2023, and we owed a total of $1.6 million in early lease termination costs of which $0.5 million was remitted in December 2022 and $1.1 million was satisfied in January 2023. We recognized lease termination costs, including the elimination of right of use assets net of lease liabilities, and early lease termination penalties, of $3.6 million which are included in general and administrative expenses for the year ended December 31, 2022.

● We signed an asset purchase agreement with our new co-manufacturer for the sale of the majority of our production equipment for a purchase price of $0.8 million and an agreement to sell certain leasehold improvements for $0.1 million. Certain equipment, furniture, and leasehold improvements were abandoned upon exit of the lease. The net book value of this property exceeds the recoverability of the assets. As such, we recorded impairment charges of property, plant, and equipment and internal-use production software of $3.1 million and $0.1 million, respectively, which are included in general and administrative expenses for the year ended December 31, 2022. Consideration was received in the amount of $0.7 million in the first half of 2023 and consideration receivable of $0.1 million is included in Prepaid and other current assets on the unaudited consolidated condensed balance sheets as of September 30, 2023.

● We incurred one-time termination benefits consisting of severances primarily for operations, production, and fulfillment personnel, of $0.6 million, which are included in general and administrative expenses for the year ended December 31, 2022. These were paid by January 2023. In the first quarter of 2023, we recognized a net reversal of expense of $0.1 million related to severances and forfeitures of stock-based compensation, which are included in general and administrative expenses.

● We moved the majority of our raw materials inventory to our co-manufacturer and the majority of our finished goods inventory to our third-party logistics partners. Because we no longer have storage space in our warehouses, we determined that it was not cost-effective to pay for freight and storage fees to move and house certain inventories at our third-party partners' facilities. As a result, we disposed of, or reserved for disposal, certain inventories remaining at the Sisters, Oregon facilities which were not shipped to our third-party partners' facilities, in the amount of $1.1 million, which are included in cost of goods sold for the year ended December 31, 2022. All such inventory remaining on-hand as of December 31, 2022 was disposed of in January 2023.

● We incurred other costs for moving inventory, IT setup and integration costs, repayment of property tax abatements, and other costs totaling $0.2 million, which were included in general and administrative expenses for the year ended December 31, 2022. We recognize these costs as incurred or when they become realizable.

Loss Contingencies

We may be subject to contingencies arising in the ordinary course of business, such as product liability and other product-related litigation, commercial litigation, environmental claims and proceedings, government investigations and guarantees and indemnifications. In assessing contingencies related to legal and environmental proceedings that are pending against the Company, or unasserted claims that are probable of being asserted, we record accruals for these contingencies to the extent that we conclude that a loss is both probable and reasonably estimable. If an amount within a range of loss appears to be a better estimate than any other amount within the range, we accrue that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, we accrue the lowest amount in the range. We record anticipated recoveries under existing insurance contracts when recovery is assured.

14

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

Going Concern

The unaudited consolidated condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the unaudited consolidated condensed financial statements, the Company has $7.4 million of cash and cash equivalents, and cash used in operations was $10.9 million in the nine months ended September 30, 2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Absent any other action, the Company will require additional liquidity to continue its operations over the next 12 months from the date of this Quarterly Report on Form 10-Q.

At the end of the fourth quarter of 2022, the Company transitioned to a variable cost third-party co-manufacturing business model. As part of this transition, the Company greatly reduced overhead costs while simultaneously improving margins. Cash used in operations in the first nine months of 2023 is inclusive of costs which were incurred in connection with the exit and disposal activities, annual bonus payments, discounts for replacement orders, as well as out of stock items following a product quality issue which resulted in reduced top line revenue for the impacted SKUs in the quarter. These factors exacerbate the cash used in the first half of the year. Even with a product quality issue impacting net sales and cost of goods sold we have already realized margin improvements to 26.4% in the first nine months of 2023 compared to 14.5% for fiscal year 2022. Management has specific plans to further improve gross margins, optimize marketing spend, and cut selling, general, and administrative costs later in the year which management believes will significantly reduce expected future cash outlays.

However, the Company’s cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The unaudited consolidated condensed financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

Recoveries on claims for business interruptions

In the first quarter of 2023, we discovered a product quality issue with coconut milk powder from one of our suppliers and immediately initiated a voluntary product withdrawal and contacted all impacted wholesale customers and e-commerce consumers to aggressively pull back as much as of the affected product as possible. In connection with this withdrawal, we incurred costs associated with inventory obsolescence, quality testing, and remedial discounts and replacement orders of $0.5 million in the fourth quarter of 2022 and $0.4 million in the first quarter of 2023. In addition, we implemented a robust new sensory testing program to prevent future quality issues. In the third quarter of 2023, we reached settlement with the vendor and recognized $0.2 million of recoveries which were included in cost of goods sold in the unaudited consolidated condensed statements of operations. As of September 30, 2023, $0.2 million of these recoveries were included in other current assets on the unaudited consolidated condensed balance sheets. 

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments,” as modified by subsequently issued ASUs 2018-19 (issued November 2018), 2019-04 (issued April 2019), 2019-05 (issued May 2019), 2019-11 (issued November 2019), 2020-02 (issued February 2020) and 2020-03 (issued March 2020). Topic 326 modifies the measurement and recognition of credit losses for most financial assets and certain other instruments, requiring the use of forward-looking expected credit loss models based on historical experience, current economic conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount, which may result in earlier recognition of credit losses under the new standard. It also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. The standard requires a modified retrospective approach with a cumulative effect adjustment to retained earnings. ASU 2016-13 is effective for the Company’s annual periods beginning after December 15, 2022, including interim periods within those fiscal years. We adopted ASU 2016-13 in the first quarter of 2023. The adoption had no impact on our unaudited consolidated condensed financial position, results of operations, or cash flows.

Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before the unaudited consolidated condensed financial statements are available to be issued. The Company has evaluated events and transactions subsequent to September 30, 2023 for potential recognition of disclosure in the unaudited consolidated condensed financial statements. There were no such subsequent events.

15

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

2. Prepaid Expenses and Other Current Assets

The following table presents the components of prepaid expenses and other current assets, as of:

	September 30,		December 31,
	2023		2022
Prepaid insurance	$	107,762	$	761,147
Prepaid inventory		482,585		897,108
Prepaid subscriptions and license fees		173,684		292,622
Prepaid advertising		154,033		166,872
Deposits		197,643		134,896
Other current assets		320,328		277,430
Prepaid and other current assets	$	1,436,035	$	2,530,075

3. Revolving Lines of Credit

On September 2, 2021, the Company entered into a revolving line of credit with Wells Fargo Bank National Association in a principal amount not exceeding $9,500,000. The line of credit was renewed on September 1, 2022, with a maturity date of August 31, 2023, and the available credit was reduced to $5,000,000. The line of credit was not renewed on August 31, 2023. The outstanding amounts under the line of credit had an interest rate calculated as Daily Simple Secured Overnight Financing Rate (“SOFR”) plus 1.5% per annum until paid in full. The balance on the line of credit was $0 as of September 30, 2023 and December 31, 2022. Management was in compliance with all financial covenants as of  December 31, 2022.

On August 10, 2017, the Company entered into a revolving line of credit with East Asset Management, LLC (“East”) in a principal amount not exceeding the lesser of the borrowing base or $3,000,000. The outstanding amounts under the line of credit had a fixed interest rate of 15% per annum until paid in full and the line of credit had a maturity date of August 10, 2022. The loan agreement was closed on May 19, 2022.

A secondary line of credit with East in an amount up to $200,000 was available to the Company, which was not subject to the requirements of the borrowing base. The secondary line was available with the same draw and payback conditions as the primary line. The loan agreement was closed on May 19, 2022.

East was also granted a right of first refusal on any future equity offerings by the Company to purchase up to 20% of equity in any such offerings at a 20% price per share discount, subject to certain exclusions. These rights terminated concurrently with the closure of the associated loan agreements on May 19, 2022.

16

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

4. Property and Equipment, net

Property and Equipment, net

Property and equipment, net is comprised of the following as of:

	September 30, 2023							December 31, 2022
	Gross Carrying Amount		Accumulated Depreciation			Net Carrying Amount		Gross Carrying Amount		Accumulated Depreciation			Net Carrying Amount
Factory equipment	$	—	$	—		$	—	$	66,276	$	(43,051	)	$	23,225
Furniture and office equipment		220,190		(107,393	)		112,797		318,795		(211,529	)		107,266
Leasehold improvements		46,276		(20,469	)		25,807		34,946		(15,148	)		19,798
	$	266,466	$	(127,862	)	$	138,604	$	420,017	$	(269,728	)	$	150,289

Depreciation expense was $19,772 and $79,860 for the three and nine months ended September 30, 2023, respectively. Depreciation expense was $167,794 and $496,932 for the three and nine months ended September 30, 2022, respectively.

Assets Classified as Held-for-Sale

In the first quarter of 2022, the Company entered into a vacant land real estate sale agreement for the sale of excess unused lots in Sisters, Oregon for a sales price of $1,572,512. The Company sold the land in the second quarter of 2022 resulting in a gain of $573,818 included in general and administrative expenses.

In the second quarter of 2022, the Company entered into a purchase order agreement for the sale of the intermittent motion form production line for a sales price of $100,000. The book value exceeded the fair market value and, as such, the Company recorded an impairment charge of $100,426 in the second quarter of 2022. The Company sold these assets in the third quarter of 2022 for $103,240, recording a gain of $3,240 included in general and administrative expenses.

In the fourth quarter of 2022, the Company entered into purchase agreements for the sale of the production equipment for a sales price of $800,000. The book value exceeded the fair market value and, as such, the Company recorded impairment charges of $3,105,435, included in general and administrative expenses. In the first three quarters of 2023, consideration amounting to $673,732 was received and $126,268 was receivable and included in other current assets as of September 30, 2023.

5. Goodwill and Intangible Assets, Net

Goodwill

The carrying amount of goodwill attributed to the acquisition of Picky Bars was $6,486,000 as of the acquisition date. In the last month of the first quarter of 2022, management determined the sustained decline in stock price, coupled with changes in market conditions, was a triggering event. The Company performed a qualitative and quantitative analysis on the Company's goodwill for impairment, concluding that the fair value of goodwill as calculated using a discounted cash flow model exceeds the carrying value, this indicating that goodwill is impaired. As such, the Company recorded a goodwill impairment of $0 and $6,486,000 for the three and nine months ended September 30, 2022. There was no goodwill as of September 30, 2023 or December 31, 2022.

17

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

Intangible Assets, Net

Intangible Assets, net is comprised of the following:

	September 30, 2023							December 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Trade names (10 years)	$	890,827	$	(80,175	)	$	810,652	$	890,827	$	—		$	890,827
Recipes (10 years)		330,000		(79,750	)		250,250		330,000		(55,000	)		275,000
Social media agreements (3 years)		80,000		(64,444	)		15,556		80,000		(44,444	)		35,556
Software (3 years)		131,709		(71,214	)		60,495		131,710		(40,975	)		90,735
Definite-lived intangible assets		1,432,536		(295,583	)		1,136,953		1,432,537		(140,419	)		1,292,118
Licensing agreements (indefinite)		132,100		—			132,100		132,100		—			132,100
Total intangible assets	$	1,564,636	$	(295,583	)	$	1,269,053	$	1,564,637	$	(140,419	)	$	1,424,218

The weighted-average useful life of all the Company’s intangible assets is 7.1 years.

For the three and nine months ended September 30, 2023, amortization expense was $51,721 and $155,165, respectively. For the three and nine months ended September 30, 2022, amortization expense was $104,201 and $349,424, respectively.

Definite life intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Examples include a significant adverse change in the extent or manner in which we use the asset, or an unexpected change in financial performance. When evaluating definite life intangible assets for impairment, we compare the carrying value of the asset to the asset’s estimated undiscounted future cash flows. An impairment is indicated if the estimated future cash flows are less than the carrying value of the asset. The Company considered the above factors when assessing whether the Company’s long-lived assets will be recoverable.

Based on the analysis of the qualitative factors above, management determined that there were no triggering events or impairment charges in the three and nine months ended September 30, 2023. In 2022, with changes in market conditions and developments in the forecasts for e-commerce and wholesale sales of legacy Picky Bars products were triggering events during the nine months ended September 30, 2022 and in the three months ended December 31, 2022.

The Company performed a qualitative and quantitative analysis over the period May 1, 2021 through March 31, 2022 and from March 31, 2022 through December 31, 2022 on the Company's estimates of the fair values of acquired customer relationships utilizing the Multiperiod Excess Earnings Method variation of discounted cash-flow model, which exceeded the carrying value, indicating that these assets were impaired. In the three and nine months ended September 30, 2022, the Company recorded impairment charges of $0 and $1,432,000, respectively, net of accumulated amortization. In the three months ended December 31, 2022, the Company recorded impairment charges of $344,006, net of accumulated amortization.

The Company performed a qualitative and quantitative analysis over the period May 1, 2021 through March 31, 2022 and from March 31, 2022 through December 31, 2022 on the Company's estimates of the fair values of acquired trade names utilizing the Relief From Royalty Method variation discounted cash-flow model, which exceeded the carrying value, indicating that these assets were impaired. In the three and nine months ended September 30, 2022, the Company recorded impairment charges of $0 and $108,000, respectively, net of accumulated amortization. In the three months ended December 31, 2022, the Company recorded impairment charges of $1,135,000, net of accumulated amortization.

Intangible assets are amortized using the straight-line method over estimated useful lives ranging from three to ten years. The estimated amortization expense for each of the next five years and thereafter is as follows:

2023 (excluding the nine months ended September 30, 2023)	$	51,721
2024		189,108
2025		149,994
2026		139,899
2027		139,899
Thereafter		466,332
	$	1,136,953

18

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

6. Leases

Lessee

The Company leased its warehouse space under a commercial lease with RII Lundgren Mill, LLC, dated March 1, 2018. The lease commenced March 1, 2018. The initial lease term was ten years, and the Company had the option to renew the lease for two additional five-year periods.

The Company executed a second lease for additional warehouse and office space under a commercial lease with RII Lundgren Mill, LLC, dated December 17, 2018. The lease commenced on July 1, 2019. However, for accounting purposes the lease commencement date was June 6, 2019. The initial lease term was ten years.

The Company executed a third lease for additional warehouse and office space under a commercial lease with RII Lundgren Mill, LLC, dated October 1, 2021. The lease commenced on October 1, 2021. The initial lease term was ten years.

The Company executed a lease cancellation agreement dated December 12, 2022. Under this agreement, the Company's three leases with RII Lundgren Mill, LLC, were terminated effective January 31, 2023, and the Company agreed to pay $1,550,000, of which $500,000 was remitted in 2022 and $1,050,000 was satisfied in the first quarter of 2023. The Company ceased to realize any operational benefit from the leases as of December 31, 2022, and recorded losses on lease termination consisting of the write off of the related right of use assets, net of lease liabilities, as well as the lease termination fee, for a total of $3,596,365, which were included in General and administrative expenses for the year ended December 31, 2022.

The Company assumed an operating lease in the acquisition of Picky Bars, LLC on May 3, 2021. The initial lease term is 62 months, and the Company has the option to renew the lease for two additional three-year periods.

The Company entered into a sublease agreement with Somatic Experiencing Trauma Institute with a commencement date of January 1, 2023, for a 5,257 square foot office space in Boulder, Colorado which serves as the Company's new headquarters. This lease will expire on July 1, 2027.

The components of lease expense were as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Operating leases
Operating lease cost	$	38,085	$	114,254
Variable lease cost		5,554		24,022
Operating lease expense		43,639		138,276
Short-term lease rent expense		69,630		242,817
Total rent expense	$	113,269	$	381,093

	Nine Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2022
Operating cash flows - operating leases	$	94,679	$	556,597
Right-of-use assets obtained in exchange for operating lease liabilities	$	344,382	$	5,285,330

	September 30, 2023			September 30, 2022
Weighted-average remaining lease term – operating leases (in years)		3.2			8.1
Weighted-average discount rate – operating leases		6.63	%		3.75	%

19

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

As of September 30, 2023, future minimum payments during the next five years and thereafter are as follows:

2023 (excluding the nine months ended September 30, 2023)	$	31,755
2024		138,800
2025		126,714
2026		109,145
2027		56,210
Total		462,624
Less imputed interest		(54,932	)
Operating lease liabilities	$	407,692

Lessor

The Company executed a sublease agreement of the Picky Bars, LLC operating lease on March 1, 2022. The lease commenced on April 1, 2022. The initial lease term expires on April 30, 2025. The lease meets all of the criteria of an operating lease and is accordingly recognized straight line over the lease term with a related sublease rental asset accounting for abatements and initial direct costs. The Company had $13,769 and $18,846 of sublease rental assets as of September 30, 2023 and December 31, 2022, respectively, included in prepaid and other current assets on the unaudited consolidated condensed balance sheets.

The components of rental income were as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Operating leases
Operating lease income	$	14,054	$	42,164
Variable lease income		5,318		15,953
Total rental income	$	19,372	$	58,117

	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022
Operating leases
Operating lease income	$	14,055	$	42,164
Variable lease income		5,318		15,953
Total rental income	$	19,373	$	58,117

As of September 30, 2023, future minimum payments to be received during the next five years and thereafter are as follows:

2023 (excluding the nine months ended September 30, 2023)		30,216
2024		61,640
2025		20,748
Total	$	112,604

7. Deferred Tax Assets and Liabilities

The Company had a tax net loss for the three and nine months ended September 30, 2023 and 2022, and therefore has recorded no assessment of current federal income taxes. The Company is subject to minimum state taxes for various jurisdictions as well as subject to franchise taxes considered income taxes under ASC 740, Income Taxes. A reconciliation of income tax expense at the federal statutory rate to the income tax provision at the Company's effective rate is as follows:

	Nine Months Ended
	September 30, 2023			September 30, 2022
Income tax benefit at statutory rates	$	2,184,272		$	2,968,062
Valuation allowance for deferred tax assets		(2,239,858	)		(2,947,086	)
Stock-based compensation		(16,751	)		(12,642	)
Other benefit, net		59,165			(14,108	)
Reported income tax expense	$	(13,172	)	$	(5,774	)
Effective tax rate:		0.1	%		0.0	%

20

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

The Company’s deferred tax assets consisted of the following as of:

	September 30, 2023			December 31, 2022
Noncurrent deferred tax assets:
Net operating loss carryforwards	$	20,070,340		$	17,428,266
Intangible assets		2,262,377			2,382,397
Property and equipment		1,587,209			1,660,954
Research and development credits		372,587			300,105
Accrued expenses		544,246			766,385
Right of use asset		5,652			524
Bad debt allowance		84,637			20,282
Charitable contributions		40,867			38,557
Unexercised options		1,436,395			1,136,475
Capitalized research and development costs		256,974			194,320
Total noncurrent deferred tax assets		26,661,284			23,928,265
Valuation allowance		(26,661,284	)		(23,928,265	)
Total net deferred tax assets	$	—		$	—

The Company assesses its deferred tax assets and liabilities to determine if it is more likely than not that they will be realized; if not, a valuation allowance is required to be recorded. As of September 30, 2023, the Company did not provide a current or deferred U.S. federal or state income tax provision or benefit for any of the periods presented because the Company has reported cumulative losses since inception. Management has determined that it was not more likely than not that the deferred tax assets would be realized, thus a full valuation allowance was recorded against the deferred tax assets. The Company may reduce the valuation allowance against definite-lived deferred tax assets at such a time when it becomes more likely than not that the definite-lived deferred tax assets will be realized. The Company has recorded a provision for state income taxes and a corresponding current state tax payable of approximately $9,850 and $9,803 as of September 30, 2023 and December 31, 2022, respectively. 

The changes in the valuation allowance for deferred tax assets and liabilities for the nine months ended September 30, 2023 and 2022 were net increases of $2.7 million and $5.8 million, respectively. At September 30, 2023 and December 31, 2022, the Company had net operating loss carryforwards ("NOLs") totaling approximately $137.0 million and $118.6 million, respectively. At September 30, 2023 and December 31, 2022, the Company had federal NOLs totaling approximately $1.9 million from 2017 and prior years that can be carried forward for 20 years, which begin to expire in 2036. At September 30, 2023 and December 31, 2022, the Company had federal NOLs totaling approximately $77.6 million and $67.5 million, respectively from 2018 and subsequent years that can be carried forward indefinitely. At September 30, 2023 and December 31, 2022, the Company had state NOLs totaling $57.6 million and $49.3 million, respectively, that can be carried forward for between 15 and 20 years. At September 30, 2023 and December 31, 2022, the Company had credits totaling $0.4 million and $0.3 million, respectively, that can be carried forward for between 5 and 20 years.

GAAP requires management to evaluate and report information regarding its exposure to various tax positions taken by the Company. The Company has determined whether there are any tax positions that have met the recognition threshold and has measured the Company’s exposure to those tax positions. Management believes that the Company has adequately addressed all relevant tax positions and that there are no unrecorded tax liabilities.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. U.S. and state jurisdictions have statutes of limitations that generally range from 3 to 5 years.

21

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

8. Stock Incentive Plan

The Company adopted an incentive plan (the “2020 Omnibus Incentive Plan”) on September 22, 2020, to provide for the grant of stock options, stock appreciation rights, restricted stock, RSUs, deferred stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards and cash bonus awards to Company employees, non-employee directors, and certain consultants and advisors. As of September 30, 2023, the Company is authorized to award 1,124,160 shares under the 2020 Omnibus Incentive Plan. Previously, the Company had adopted its 2018 Equity Incentive Plan and 2016 Stock Incentive Plan (together with the 2020 Omnibus Incentive Plan, the “Stock Incentive Plans”), under which the Company had issued stock options and restricted stock units. Following the effective date of the 2020 Omnibus Incentive Plan, no additional awards may be made under the 2018 Equity Incentive Plan or 2016 Stock Incentive Plan. 

Stock Options

The Stock Incentive Plans prescribe various terms and conditions for the award of options and the total number of shares authorized for this purpose. For options, the strike price is equal to the fair value of the Company’s stock price at the date of grant. Generally, options become exercisable based on years of service and vesting schedules, and expire after (i) a period of ten years from the date of grant, (ii) three months following the date of termination of employment from the Company, (iii) one year following the date of termination from the Company by reason of death or disability, (iv) the date of termination of employment for cause, or (v) the fifth anniversary of the date of the grant if it is held by a 10 percent or greater stockholder.

The following tables summarize the Company’s stock option activity:

				Weighted		Weighted
				Average		Average
	Options			Exercise Price		Contractual		Aggregate
	Activity			(per share)		Term (years)		Intrinsic Value
Balance at January 1, 2023		921,657		$	6.86		8.00	$	—
Granted		700,000		$	0.89
Exercised/released		—		$	—
Cancelled/forfeited		(360,317	)	$	3.52
Balance at September 30, 2023		1,261,340		$	4.50		8.17	$	75,000
Exercisable at September 30, 2023		672,187		$	4.69		7.53	$	9,000

				Weighted		Weighted
				Average		Average
	Options			Exercise Price		Contractual		Aggregate
	Activity			(per share)		Term (years)		Intrinsic Value
Balance at January 1, 2022		747,800		$	11.51		6.57	$	1,143,013
Granted		453,498		$	7.21
Exercised/released		(76,750	)	$	2.14
Cancelled/forfeited		(317,185	)	$	15.25
Balance at September 30, 2022		807,363		$	8.50		7.73	$	—
Exercisable at September 30, 2022		314,343		$	8.72		5.42	$	—

22

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

The Company estimates the fair value of each stock option award on the date of grant using a Black-Scholes option-pricing model. ASC 718, Compensation - Stock Compensation (“ASC 718”), requires the use of the fair-value-based method for measuring the value of stock-based compensation. The estimated fair value of each grant of stock options awarded was determined using the following assumptions:

● Expected Volatility. The expected volatility is based on the volatility of the historical stock prices of identified peer companies.

● Expected Term. Due to the lack of a public market for the trading of shares of the Company’s common stock prior to the Company’s initial public offering that closed on September 25, 2020, and the lack of sufficient Company-specific historical data, the expected term of employee stock options is determined using the “simplified” method, as prescribed in SEC Staff Accounting Bulletin No. 107, Share Based Payments, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option.

● Risk-free Interest Rate. The risk-free interest rate is based on the interest rate payable on the United States Treasury yield curve in effect at the time of grant for a period that is commensurate with the assumed expected term.

● Dividend Yield. The dividend yield is 0% because the Company has never paid, and for the foreseeable future does not expect to pay, dividends on its shares of common stock.

The inputs and assumptions used to estimate the fair value of share-based payment awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different inputs and assumptions, the Company’s share-based compensation expense could be materially different for future awards.

The grant-date fair value of stock options was estimated at the time of grant using the following weighted-average inputs and assumptions in the Black-Scholes option pricing model:

	Nine Months Ended
	September 30,
	2023			2022
Weighted-average expected volatility		59.43	%		52.36	%
Weighted-average expected term (years)		5.71			6.25
Weighted-average expected risk-free interest rate		3.87	%		2.27	%
Dividend yield		—			—
Weighted-average fair value of options granted	$	0.57		$	2.79

Restricted Stock Units

The following tables summarize the Company’s RSU activity:

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of RSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2023		504,420		$	4.22		2.94	$	2,127,734
Granted		745,000		$	0.81
Exercised/released		(154,674	)	$	4.36
Cancelled/forfeited		(260,639	)	$	2.20
Balance at September 30, 2023		834,107		$	1.77		2.18	$	1,480,161

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of RSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2022		91,438		$	32.91		2.17	$	2,982,931
Granted		452,702		$	4.70
Exercised/released		(55,634	)	$	20.62
Cancelled/forfeited		(46,240	)	$	21.63
Balance at September 30, 2022		442,266		$	6.74		2.99	$	2,980,838

The Company estimates the fair value of each restricted stock unit using the fair value of the Company’s stock on the date of grant.

23

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

Market-Based Stock Units

The following tables summarize the Company’s MSU activity:

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of MSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2023		31,083		$	43.53		0.60	$	1,353,043
Granted		600,000		$	0.08
Exercised/released		—		$	—
Cancelled/forfeited		(9,769	)	$	43.53
Balance at September 30, 2023		621,314		$	1.57		0.85	$	977,558

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of MSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2022		160,301		$	43.53		1.20	$	6,977,903
Granted		—		$	—
Exercised/released		—		$	—
Cancelled/forfeited		(129,218	)	$	43.53
Balance at September 30, 2022		31,083		$	43.53		0.73	$	1,353,043

These MSUs vest upon the 30-day weighted average stock price reaching or exceeding established targets, after reaching certain time targets. We estimate the grant-date fair value of the MSUs using a Monte Carlo simulation which requires assumptions for expected volatility, risk-free rate of return and dividend yield. Expected volatility within the index are derived using historical volatility of a selected peer group over a period equal to the length of the performance period. We base the risk-free rate of return on the yield of a zero-coupon U.S. Treasury bond with a maturity equal to the performance period and assume a 0% dividend rate. Compensation expense for these MSUs is recognized over the requisite service period regardless of whether the market conditions are satisfied.

Employee Stock Purchase Plan

On September 25, 2020, the Company established an Employee Stock Purchase Plan (“ESPP”) which allows employees of the Company to purchase common stock of the Company through accumulated payroll deductions. Offerings under this plan have a duration of six months. On the exercise date, the participant may acquire a maximum of 650 shares per participant, per offering period, at the lower of 85% of the market value of a share of our common stock on the enrollment date or the exercise date. Participants may terminate their interest in a given offering or a given exercise period by withdrawing all of their accumulated payroll deductions at any time prior to the end of the offering period. The fair value of the estimated number of shares to be issued under each offering was determined using a component valuation model. This plan was terminated in the fourth quarter of 2022.

Stock-Based Compensation

Stock-based compensation expense is recognized ratably over the requisite service period for all awards. The following tables summarize the Company’s stock-based compensation recorded as a result of applying the provisions of ASC 718 to equity awards:

	Three Months Ended		Nine Months Ended			Unrecognized Compensation Cost Related to Non-Vested Awards as of		Weighted-Average Remaining Vesting Period as of
	September 30, 2023		September 30, 2023			September 30, 2023		September 30, 2023 (years)
Stock options	$	221,106	$	382,790		$	728,426		2.59
RSUs		127,252		481,881			1,296,981		2.34
MSUs		16,578		(46,024	)		56,830		0.75
Total stock-based compensation	$	364,936	$	818,647		$	2,082,236		2.79
Cost of goods sold	$	146	$	30		$	3,450		1.87
General and administrative		195,458		617,382			1,913,478		2.49
Sales and marketing		169,332		201,235			165,308		1.25
Total stock-based compensation	$	364,936	$	818,647		$	2,082,236		2.79

24

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

	Three Months Ended		Nine Months Ended			Unrecognized Compensation Cost Related to Non-Vested Awards as of		Weighted-Average Remaining Vesting Period as of
	September 30, 2022		September 30, 2022			December 31, 2022		December 31, 2022 (years)
Stock options	$	96,897	$	283,754		$	1,173,758		3.24
RSUs		341,798		1,082,674			1,707,145		2.91
MSUs		43,380		(1,089,864	)		71,059		1.09
ESPP		1,351		8,416			—		—
Total stock-based compensation	$	483,426	$	284,980		$	2,951,962		3.07
Cost of goods sold	$	8,384	$	33,890		$	14,354		2.56
General and administrative		462,474		148,505			2,734,728		2.93
Research and product development		2,575		(3,492	)		2,517		0.73
Sales and marketing		9,993		106,077			200,363		3.84
Total stock-based compensation	$	483,426	$	284,980		$	2,951,962		3.07

There were forfeitures of MSU awards of certain members of executive leadership of $0 and $149,735 for the three and nine months ended September 30, 2023, and of $0 and $1,785,125 during the three and nine months ended September 30, 2022, respectively, representing discrete reversals of stock compensation expense to the periods.

9. Earnings per Share

Basic earnings (loss) per share is determined by dividing the net loss attributable to Laird Superfood, Inc. common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is similarly determined, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Dilutive potential common shares consist of employee stock options, RSUs, and MSUs. The dilutive effect of employee stock options, RSUs, and MSUs by the Company are calculated using the treasury stock method. Basic earnings per share is reconciled to diluted earnings per share in the following table:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net loss	$	(2,654,884	)	$	(5,738,209	)	$	(10,306,040	)	$	(24,782,131	)
Weighted average shares outstanding - basic and diluted		9,337,789			9,178,533			9,279,541			9,136,071
Basic and diluted:
Net loss per share, basic and diluted	$	(0.28	)	$	(0.63	)	$	(1.11	)	$	(2.71	)
Common stock options, restricted stock awards, and market-based stock awards excluded due to anti-dilutive effect		2,716,761			1,280,712			2,716,761			1,280,712

10. Concentrations

The Company had 85% of trade accounts receivable from three customers as of September 30, 2023. The Company had 68% of trade accounts receivable from two customers as of December 31, 2022.

The Company had no significant accounts payable concentrations due to a vendor as of September 30, 2023. The Company had 41% of accounts payable due to two vendors as of December 31, 2022.

The Company sold a substantial portion of products to three customers (50%) and three customers (46%), respectively, for the three and nine months ended September 30, 2023. As of September 30, 2023, the amount due from these customers was $2,439,551. The Company sold a substantial portion of products to two customers (21%) and no customers for the three and nine months ended September 30, 2022. As of September 30, 2022, the amount due from these customers included in accounts receivable was $1,134,994.

The Company purchased a substantial portion of products from two suppliers (52%) and two suppliers (40%), respectively, for the three and nine months ended September 30, 2023. The Company purchased a substantial portion of products from three suppliers (68%) and one supplier (48%), respectively, for the three and nine months ended September 30, 2022.

In addition, our top suppliers are in a similar geographic area, which increases the risk of significant supply disruptions from local and regional events. Vietnam geographically accounted for approximately 29% and 17%, respectively, of our total raw materials and packaging purchases for the three and nine months ended September 30, 2023. Vietnam geographically accounted for approximately 41% and 48%, respectively, of our total raw materials and packaging purchases for the three and nine months ended September 30, 2022.

25

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

11. Related Party

FASB ASC Topic 850, Related Party Disclosures, requires that information about transactions with related parties that would influence decision making shall be disclosed so that users of the financial statements can evaluate their significance. The Company conducts business with suppliers and service providers who are also stockholders of the Company. From time to time, service providers are offered shares of common stock as compensation for their services. Shares provided as compensation are calculated based on the grant date fair value of the service provided. Additional material related party transactions are noted below.

License Agreements

On May 26, 2020, the Company executed a License and Preservation Agreement which superseded the predecessor license and preservation agreement with both Mr. Hamilton and Ms. Reece. Among other modifications, the agreement (i) modified certain approval rights, (ii) modified certain assignment, change of control and indemnification provisions, and (iii) granted the Company the right to extend the term of the agreement for additional ten-year terms upon the expiration of the initial one-hundred-year term. No additional consideration was exchanged in connection with the agreement. See additional discussion related to the 2020 License in Note 1 of the unaudited consolidated condensed financial statements.

Marketing Agreements

The Company has an influencer agreement with Gabby Reece to provide certain marketing services. In connection with these services, in the three and nine months ended September 30, 2023, advertising expenses totaling $141,712 and $435,084, respectively, were included in sales and marketing expenses in the unaudited consolidated condensed statements of operations. In the three and nine months ended September 30, 2022, advertising expenses totaling $19,500 and $52,750, respectively, were included in sales and marketing expenses in the unaudited consolidated condensed statements of operations. As of September 30, 2023 and December 31, 2022, amounts payable to Gabby Reece of $56,574 and $16,500, respectively, included in related party liabilities in the unaudited consolidated condensed balance sheets.

26

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

12. Revenue Recognition

The Company’s primary source of revenue is sales of coffee creamers, hydration and beverage enhancing supplements, harvest snacks and other food items, and coffee, tea and hot chocolate products. The Company recognizes revenue when control of the promised good is transferred to the customer and in amounts that the Company expects to collect. The timing of revenue recognition takes into consideration the various shipping terms applicable to the Company’s sales. Each delivery or shipment made to a third-party customer is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. The Company is entitled to collect the sales price under normal credit terms. Additionally, the Company estimates the impact of certain common practices employed by us and other manufacturers of consumer products, such as scan-based trading, product rebate and other pricing allowances, product returns, trade promotions, sales broker commissions and slotting fees. These estimates are recorded at the end of each reporting period.

In accordance with ASC 606, the Company disaggregates net sales from contracts with customers based on the characteristics of the products sold:

	Three Months Ended September 30,
	2023						2022
	$			% of Total			$			% of Total
Coffee creamers	$	5,795,991			63	%	$	4,716,650			53	%
Hydration and beverage enhancing supplements		1,726,512			19	%		1,061,136			12	%
Harvest snacks and other food items		1,747,873			19	%		1,935,812			22	%
Coffee, tea, and hot chocolate products		1,990,013			22	%		1,455,888			16	%
Other		132,319			1	%		437,210			5	%
Gross sales		11,392,708			124	%		9,606,696			108	%
Shipping income		214,982			2	%		289,505			3	%
Returns and discounts		(2,427,909	)		(26	)%		(1,051,356	)		(11	)%
Sales, net	$	9,179,781			100	%	$	8,844,845			100	%

	Nine Months Ended September 30,
	2023						2022
	$			% of Total			$			% of Total
Coffee creamers	$	15,550,157			62	%	$	14,866,032			55	%
Hydration and beverage enhancing supplements		3,395,671			14	%		3,815,346			14	%
Harvest snacks and other food items		5,345,915			21	%		5,336,043			20	%
Coffee, tea, and hot chocolate products		5,932,745			24	%		4,840,215			18	%
Other		287,001			1	%		1,094,924			4	%
Gross sales		30,511,489			122	%		29,952,560			111	%
Shipping income		778,051			3	%		829,107			3	%
Returns and discounts		(6,272,730	)		(25	)%		(3,922,803	)		(14	)%
Sales, net	$	25,016,810			100	%	$	26,858,864			100	%

27

LAIRD SUPERFOOD, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

 

The Company generates revenue through two channels: e-commerce and wholesale:

	Three Months Ended September 30,
	2023					2022
	$		% of Total			$		% of Total
E-commerce	$	4,842,389		53	%	$	5,808,186		66	%
Wholesale		4,337,392		47	%		3,036,659		34	%
Sales, net	$	9,179,781		100	%	$	8,844,845		100	%

	Nine Months Ended September 30,
	2023					2022
	$		% of Total			$		% of Total
E-commerce	$	13,409,443		54	%	$	16,410,956		61	%
Wholesale		11,607,367		46	%		10,447,908		39	%
Sales, net	$	25,016,810		100	%	$	26,858,864		100	%

Receivables from contracts with customers are included in accounts receivable. Contract assets include deferred cost of goods sold associated with deferred revenue and are included in finished goods inventories. Contract liabilities include deferred revenue, customer deposits, rewards programs, and refund liabilities, and are included in accrued expenses. The balances of receivables from contracts with customers, contract assets, and contract liabilities were as follow:

	January 1,			December 31,			September 30,
	2022			2022			2023
Accounts receivable, net	$	1,268,718		$	1,494,469		$	2,186,645
Contract assets	$	8,316		$	57,249		$	—
Contract liabilities	$	(467,861	)	$	(729,667	)	$	(625,557	)

28

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations is a supplement to and should be read in conjunction with the unaudited consolidated condensed financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2022. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and the section titled “Risk Factors” included herein and in our Annual Report on Form 10-K for the year ended December 31, 2022.

Overview

Laird Superfood is an emerging consumer products platform focused on manufacturing and marketing highly differentiated plant-based and functional foods. The core pillars of the Laird Superfood platform are currently Superfood Creamer coffee creamers, Functional and organic roasted and instant coffees, teas, and hot chocolate, Hydrate hydration products and beverage enhancing supplements, and Harvest snacks and other food items. Consumer preferences within the evolving food and beverage industry are shifting away from processed and sugar-laden food and beverage products, as well as those containing significant amounts of highly processed and artificial ingredients. Laird Superfood’s long-term goal is to build the first scale-level and widely recognized brand that authentically focuses on natural ingredients, nutritional density and functionality, allowing the Company to maximize penetration of a multi-billion-dollar opportunity in the grocery market.

Net sales were $9.2 million and $25.0 million, respectively, for the three and nine months ended September 30, 2023 and were $8.8 million and $26.9 million, respectively, for the three and nine months ended September 30, 2022. Wholesale net sales grew 43% in the third quarter of 2023 compared to same period prior year, driven by distribution gains in the natural and conventional channels, seasonal program expansion in the club channel, pricing actions, and velocity improvements behind our new packaging and the re-branding campaign launched earlier this year. E-commerce channel sales decreased 17% in the third quarter of 2023 driven by a planned media spend reduction across the Amazon and direct-to-consumer channels. Amazon sales were also negatively impacted by inventory out of stocks related to the product quality withdrawal issue that we experienced in the first quarter of 2023. By the end of the third quarter of 2023, we had fully mitigated the out-of-stock issue. Wholesale net sales for year-to-date ("YTD") 2023 increased by 11% compared to YTD 2022 primarily due to club sales, despite elevated trade discounts in 2023. E-commerce channel sales for YTD 2023 decreased 18% year over year driven by significant planned reductions in marketing media spend, as well as out of stocks related to the product quality withdrawal issue as we rebuilt our inventory. 

Our e-commerce business is two-pronged and consists of direct-to-consumer sales (lairdsuperfood.com and pickybars.com) and Amazon.com. For the three and nine months ended September 30, 2023, the e-commerce business made up 53% and 54% of net sales, respectively. For the three and nine months ended September 30, 2022 the e-commerce business made up 66% and 61% of net sales, respectively. Lairdsuperfood.com and pickybars.com are platforms that provide an authentic brand experience for our customers that drives engagement and provides feedback for future product development. We view our proprietary database of customers ordering directly from our website as a strategic asset, as it enhances our ability to develop a long-term relationship with these customers. Content on our websites allows Laird Superfood to educate consumers on the benefits of our products and ingredients, while providing a positive customer experience. We believe this experience leads to higher retention rates among repeat users and subscribers, as evidenced by repeat users and subscribers accounting for 87% of direct-to-consumer sales for the nine months ended September 30, 2023.

For the three and nine months ended September 30, 2023, wholesale made up 47% and 46% of our net sales, respectively. For the three and nine months ended September 30, 2022, wholesale made up 34% and 39% of our net sales, respectively. Laird Superfood products are sold through a diverse set of wholesale channels, including natural and specialty grocery, conventional grocery, club, food service, and drug stores. The diversity of our wholesale channel represents a strong competitive advantage for Laird Superfood and provides us with a larger total addressable market than would be considered normal for a food brand that is singularly focused on the grocery market.

Recent Developments

Product quality issue

In the first quarter of 2023, we discovered a product quality issue with coconut milk powder from one of our suppliers and immediately initiated a voluntary product withdrawal and contacted all impacted wholesale customers and e-commerce consumers to aggressively pull back as much as of the affected product as possible. In connection with this withdrawal, we incurred costs associated with inventory obsolescence, quality testing, and remedial discounts and replacement orders of $0.5 million in the fourth quarter of 2022 and $0.4 million in the first quarter of 2023. In addition, we implemented a robust new sensory testing program to prevent future quality issues. In the third quarter of 2023, we reached settlement with the vendor and recovered $0.2 million of these costs. 

29

Key Factors Affecting our Performance

We believe that our future performance will depend on many factors, including the following:

Ability to Grow Our Customer Base in both E-commerce and Traditional Wholesale Distribution Channels

We are currently seeking to grow our customer base through both paid and organic online channels, as well as by expanding our presence in a variety of physical wholesale distribution channels. E-commerce customer acquisitions typically occur at our websites, lairdsuperfood.com and pickybars.com, and Amazon.com. Our e-commerce customer acquisition program includes paid and unpaid social media, search, display and traditional media. Our products are also sold through a growing number of wholesale channels. Wholesale customers include grocery chains, natural food outlets, club stores, drug stores, and food service customers including coffee shops, gyms, restaurants, hospitality venues and corporate dining services, among others. Customer acquisition in physical wholesale channels depends on, among other things, paid promotions through retailers, display and traditional media.

Ability to Manage Co-Manufacturer and Third-Party Logistics Relationships

All of our production and logistics is handled by third-parties, and our performance will be highly dependent on the ability of these partners to produce and deliver our products in a timely manner and to our standards and at a reasonable cost.

Ability to Acquire and Retain Customers at a Reasonable Cost

We believe an ability to consistently acquire and retain customers at a reasonable cost relative to projected lifetime value will be a key factor affecting future performance. To accomplish this goal, we intend to balance advertising spend between online and offline channels, as well as balancing more targeted and measurable “direct response” marketing spend with advertising focused on increasing our long-term brand recognition, where success attribution is less directly measurable on a near-term basis.

Ability to Drive Repeat Usage of Our Products

We accrue substantial economic value from repeat users of our products who consistently re-order our products. The pace of our growth will be affected by the repeat usage dynamics of existing and newly acquired customers.

Ability to Expand Our Product Line

Our goal is to expand our product line over time to increase our growth opportunity and reduce product-specific risks through diversification into multiple products, each designed around daily use. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time.

Ability to Expand Gross Margins

Our overall profitability will be impacted by our ability to expand gross margins through effective sourcing of raw materials, controlling labor and shipping costs, controlling the impacts of inflationary market factors, as well as managing co-packer relationships.

Ability to Expand Operating Margins

Our ability to expand operating margins will be impacted by our ability to cover fixed general and administrative costs and variable sales and marketing costs with higher revenues and gross profit dollars.

Ability to Manage Our Global Supply Chain

Our ability to grow and meet future demand will be affected by our ability to properly plan for and source inventory from a variety of suppliers located inside and outside the United States. We may encounter difficulties in sourcing products.

Ability to Optimize Key Components of Working Capital

Our ability to reduce cash burn in the near-term and eventually generate positive cash flow will be partially impacted by our ability to effectively manage all the key working capital components that could influence our cash conversion cycle.

Components of Results of Operations

Sales, net

We sell our products indirectly to consumers through a broad set of physical wholesale channels. We also derive revenue from the sale of our products directly to consumers through our direct websites, as well as third-party online channels.

Cost of Goods Sold

Cost of goods sold includes material, packaging, co-packing fees, inbound and outbound freight costs, labor, and overhead costs incurred in the storage and distribution of products sold in the period. Material costs include the cost of products purchased. In 2023, in addition to material and packaging costs, cost of goods sold consisted of co-packers' tolling fees, third party labor to store and ship our products, indirect labor costs, and inbound and outbound freight. In 2022, it also included wages and benefits for manufacturing, planning, and logistics personnel, depreciation, and facility costs.

Operating Expenses

Our operating expenses consist of general and administrative, research and product development, and sales and marketing expenses.

30

Income Taxes

Due to our history of operating losses and expectation of future operating losses, we do not expect any significant income tax expenses and benefits for the foreseeable future.

Results of Operations

Comparison of the three months ended September 30, 2023 (“Q3 2023”) and September 30, 2022 (“Q3 2022”)

The following table summarizes our results of operations for the periods indicated:

	Three Months Ended September 30,						$			%
	2023			2022			Change			Change
Sales, net	$	9,179,781		$	8,844,845		$	334,936			4	%
Cost of goods sold		(6,332,624	)		(6,773,029	)		440,405			(7	)%
Gross profit		2,847,157			2,071,816			775,341			37	%
Gross margin		31.0	%		23.4	%
General and administrative		2,208,213			4,383,868			(2,175,655	)		(50	)%
Research and product development		40,123			115,077			(74,954	)		(65	)%
Sales and marketing		3,385,890			3,390,857			(4,967	)		(0	)%
Total operating expenses		5,634,226			7,889,802			(2,255,576	)		(29	)%
Operating loss		(2,787,069	)		(5,817,986	)		3,030,917			(52	)%
Other income		132,185			79,777			52,408			66	%
Loss before income taxes		(2,654,884	)		(5,738,209	)		3,083,325			(54	)%
Income tax expense		—			—			—			100	%
Net loss	$	(2,654,884	)	$	(5,738,209	)	$	3,083,325			(54	)%

Sales, Net

	Three Months Ended September 30,				$		%
	2023		2022		Change		Change
Sales, net	$	9,179,781	$	8,844,845	$	334,936		4	%

Net sales increased to $9.2 million in Q3 2023 from $8.8 million in Q3 2022. The increase was primarily driven by a 43% increase in the wholesale channel driven by distribution gains in the natural and conventional channels, seasonal program expansion in the club channel, pricing actions, and velocity improvements behind our new packaging and the re-branding campaign that took place earlier in the year, offset in part by elevated trade spend investment to drive growth and a 17% decline in our e-commerce channels, driven by out of stocks on Amazon and DTC related to the product quality issue experienced in the first quarter of 2023 as well as planned reductions in media spend.

Cost of Goods Sold

	Three Months Ended September 30,						$		%
	2023			2022			Change		Change
Cost of goods sold	$	(6,332,624	)	$	(6,773,029	)	$	440,405		(7	)%

Cost of goods sold decreased to $6.3 million in Q3 2023 from $6.8 million in Q3 2022 which translates to a reduction of 7% and accounts for approximately 15-basis points of gross margin expansion, reflecting the benefits of the transition to a variable cost third-party co-manufacturing business model. 

Gross Profit

	Three Months Ended September 30,				$		%
	2023		2022		Change		Change
Gross profit	$	2,847,157	$	2,071,816	$	775,341		37	%

Gross profit increased to $2.8 million in Q3 2023 from $2.1 million in Q3 2022. Gross margin improved to 31.0% in Q3 2023 from 23.4% in Q3 2022 driven by a reduction in cost of goods sold which accounted for 15-basis points of gross margin expansion due to the transition to a variable cost third-party co-manufacturing business model offset in part by elevated trade investments to grow the retail channel.

Operating Expenses

	Three Months Ended September 30,				$			%
	2023		2022		Change			Change
Operating Expenses
General and administrative	$	2,208,213	$	4,383,868	$	(2,175,655	)		(50	)%
Research and product development		40,123		115,077		(74,954	)		(65	)%
Sales and marketing		3,385,890		3,390,857		(4,967	)		(0	)%
Total operating expenses	$	5,634,226	$	7,889,802	$	(2,255,576	)		(29	)%

General and administrative expenses decreased to $2.2 million in Q3 2023 from $4.4 million in Q3 2022, primarily driven by lower personnel costs and broad, strategic reductions in spending. 

31

Research and product development expenses were $40.1 thousand and $115.1 thousand in Q3 2023 and Q3 2022, respectively, as we are focused on strengthening the performance of current product offerings and allocating fewer resources into developing new product offerings.

Sales and marketing expenses were $3.4 million in Q3 2023 and Q3 2022, as planned reductions in inefficient spending and lower personnel costs were offset by stock-based compensation expense related to strategic partnerships established in the third quarter. 

Other Income

	Three Months Ended September 30,				$		%
	2023		2022		Change		Change
Other income	$	132,185	$	79,777	$	52,408		66	%

Other income is composed of interest income and expense, rental income, income and losses related to investment securities available-for-sale, and other non-operating gains and losses. The increase in other income was driven by increases in dividend income on money market funds as interest rates rise. 

Comparison of the nine months ended September 30, 2023 (“YTD 2023”) and September 30, 2022 (“YTD 2022”)

The following table summarizes our results of operations for the periods indicated:

	Nine Months Ended September 30,						$			%
	2023			2022			Change			Change
Sales, net	$	25,016,810		$	26,858,864		$	(1,842,054	)		(7	)%
Cost of goods sold		(18,419,709	)		(21,259,300	)		2,839,591			(13	)%
Gross profit		6,597,101			5,599,564			997,537			18	%
Gross margin		26.4	%		20.8	%
General and administrative		7,822,834			18,848,037			(11,025,203	)		(58	)%
Research and product development		206,313			335,377			(129,064	)		(38	)%
Sales and marketing		9,313,110			11,115,499			(1,802,389	)		(16	)%
Total operating expenses		17,342,257			30,298,913			(12,956,656	)		(43	)%
Operating loss		(10,745,156	)		(24,699,349	)		13,954,193			(56	)%
Other income (expense)		452,288			(77,008	)		529,296			(687	)%
Loss before income taxes		(10,292,868	)		(24,776,357	)		14,483,489			(58	)%
Income tax expense		(13,172	)		(5,774	)		(7,398	)		128	%
Net loss	$	(10,306,040	)	$	(24,782,131	)	$	14,476,091			(58	)%

Sales, Net

	Nine Months Ended September 30,				$			%
	2023		2022		Change			Change
Sales, net	$	25,016,810	$	26,858,864	$	(1,842,054	)		(7	)%

Net sales decreased to $25.0 million in YTD 2023 from $26.9 million in YTD 2022. The decline was primarily due to an 18% decline in our e-commerce channels, driven by out of stocks on Amazon and DTC related to the product quality issue experienced in the first quarter of 2023, as well as planned reductions in media spending across both channels. Wholesale sales increased by 11% in YTD 2023 driven by the timing of club orders, offset by elevated trade promotional activity.

Cost of Goods Sold

	Nine Months Ended September 30,						$		%
	2023			2022			Change		Change
Cost of goods sold	$	(18,419,709	)	$	(21,259,300	)	$	2,839,591		(13	)%

Cost of goods sold decreased to $18.4 million in YTD 2023 from $21.3 million in YTD 2022 which equates to a 13% reduction and accounts for approximately 10.5-basis points of margin expansion as we realize the benefits of the transition to a variable cost third-party co-manufacturing business model.

Gross Profit

	Nine Months Ended September 30,				$		%
	2023		2022		Change		Change
Gross profit	$	6,597,101	$	5,599,564	$	997,537		18	%

Gross profit increased to $6.6 million in YTD 2023 from $5.6 million in YTD 2022. Gross margin improved to 26.4% in YTD 2023 from 20.8% in YTD 2022, driven by benefits of the transition to a variable cost third-party co-manufacturing business model and pricing, offset in part by elevated promotional spend.

Operating Expenses

	Nine Months Ended September 30,				$			%
	2023		2022		Change			Change
Operating expenses
General and administrative	$	7,822,834	$	18,848,037	$	(11,025,203	)		(58	)%
Research and product development		206,313		335,377		(129,064	)		(38	)%
Sales and marketing		9,313,110		11,115,499		(1,802,389	)		(16	)%
Total operating expenses	$	17,342,257	$	30,298,913	$	(12,956,656	)		(43	)%

General and administrative expenses decreased to $7.8 million in YTD 2023 from $18.8 million in YTD 2022, primarily due to impairment of goodwill and long-lived acquisition intangible assets of $8.0 million in the first quarter of 2022, as well as reduced personnel costs and other general and administrative expenses following the exit activities in the fourth quarter of 2022.

32

Research and product development expenses decreased to $0.2 million in YTD 2023 from $0.3 million in YTD 2022.

Sales and marketing expenses decreased to $9.3 million in YTD 2023 from $11.1 million in YTD 2022, primarily due to a planned reduction in inefficient spending and lower personnel costs.

Other Income (Expense)

	Nine Months Ended September 30,					$		%
	2023		2022			Change		Change
Other income (expense)	$	452,288	$	(77,008	)	$	529,296		(687	)%

Other income (expense) is composed of interest income and expense, rental income, income and losses related to investment securities available-for-sale, and other non-operating gains and losses. The increase in other income was driven by increases in dividend income on money market funds as interest rates rise in YTD 2023 and losses on sales of available securities in YTD 2022. 

Cash Flows

Comparison of the nine months ended September 30, 2023 and 2022:

The following table shows a summary of our cash flows for the periods presented:

	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities	$	(10,929,145	)	$	(11,133,377	)
Cash flows from investing activities		567,459			8,981,156
Cash flows from financing activities		(23,066	)		121,090
Net change in cash, cash equivalents, and restricted cash	$	(10,384,752	)	$	(2,031,131	)

Cash Flows from Operating Activities

Cash used in operating activities was $10.9 million for YTD 2023 and $11.1 million for YTD  2022. Cash burn in the first quarter of 2023 of $6.1 million was elevated by increasing accounts receivable levels due to the timing of collections of large wholesale orders and decreases in current liabilities which included $1.1 million payments in connection with the Sisters, Oregon lease exit and $0.6 million in severances and bonuses. In the second and third quarters of 2023, normalized cash used in operations was $2.4 million per quarter, the improvement driven by overall reductions in net operating losses following the change in our business model offset by increases in inventory to prepare for seasonal demand and reductions in accrued expenses. 

Cash Flows from Investing Activities

Cash provided by investing activities was $0.6 million for YTD 2023 as compared to cash provided by investing activities of $9.0 million for YTD 2022. The change is primarily due to proceeds from the sale of available-for-sale securities in the first quarter of 2022 and assets held for sale in the second quarter of 2022.

Cash Flows from Financing Activities

Cash used in financing activities was $23.1 thousand for YTD 2023 compared to $121.1 thousand of cash provided in YTD 2022, primarily related to inflows from stock option exercises.

33

Liquidity and Capital Resources

As of September 30, 2023, we had incurred accumulated net losses of $106.4 million, including operating losses of $10.7 million and $24.7 million for YTD 2023 and YTD 2022, respectively. We expect to incur additional operating losses as we continue efforts to grow our business, however, we took several strategic steps in 2023 and 2022 to optimize spending and improve gross margins in order to significantly reduce cash burn and bring the business closer to breakeven and profitability in future quarters. These steps included transitioning out of in-house manufacturing to a third-party co-manufactured model, closing manufacturing facilities and offices in Sisters, Oregon, several rounds of organizational restructuring to optimize our workforce, and reducing marketing and administrative investment through eliminating non-essential spending. We will continue to seek to optimize spending and expand gross margins. We have historically financed our operations and capital expenditures through private placements of our common stock, our initial public offering, our lines of credit, and term loans.

Our historical uses of cash have primarily consisted of cash used in operating activities to fund our operating losses and working capital needs. Cash used in operations was $10.9 million for YTD 2023 and $11.1 million for YTD  2022.

As of September 30, 2023, we had $7.4 million of cash-on-hand. As of December 31, 2022, we had $17.8 million of cash-on-hand and $5.0 million of available borrowings under our lines of credit. As of September 30, 2023, and December 31, 2022, we had no outstanding notes payable and no amounts were outstanding under our lines of credit.

Our future capital requirements will depend on many factors, including our ability to execute on our planned sales growth and the continued improvement of our operating margins, the enhancement of our product platforms, the introduction of new products, and acquisition activity. Recent and expected working and other capital requirements, in addition to the above matters, also include the items described below:

● The Company has lease arrangements for corporate office space. As of September 30, 2023, the Company had fixed lease payment obligations of $0.5 million, with $0.1 million payable within 12 months.

● As of September 30, 2023, $6.0 million of current liabilities were accrued related to short-term operating activities and personnel costs.

● Advertising and marketing expenditures were $6.5 million in YTD 2023 and $8.2 million in YTD 2022. We expect to continue to invest in these activities as part of the strategic expansion of sales volume, however, we have made strategic shifts to reduce and improve the efficacy of future customer acquisition costs.

While we expect the strategic actions outlined above to drive meaningful improvements in our operating cash flows in the future, there are critical uncertainties in forward-looking statements. Until such a time that we begin got realize the full benefits of these strategic actions, considering our recurring losses from operations, our limited cash resources on hand, and the dependence by the Company on its ability to obtain additional financing to fund its operations after the current cash resources are exhausted raise substantial doubt about our ability to continue as a going concern for the twelve months following the date of this report.

Segment Information

We have one operating segment and one reportable segment. Our Chief Executive Officer reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 1, “Summary of Significant Accounting Policies” of the Notes to the Unaudited Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2022 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s unaudited consolidated condensed financial statements. There have been no material changes to the Company’s critical accounting estimates since the 2022 Form 10-K.

Recent Accounting Pronouncements

See Recently Adopted Accounting Pronouncements in Note 1 to our unaudited consolidated condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

34

Emerging Growth Company Status

As a company with less than $1.235 billion in annual gross revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

● a requirement to have only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations;

● an exemption from the auditor attestation requirement on the effectiveness of our internal control over financial reporting;

● reduced disclosure about our executive compensation arrangements; and

● no non-binding advisory votes on executive compensation or golden parachute arrangements.

We may take advantage of these provisions until the end of the fiscal year in which the fifth anniversary of our IPO occurs, or such earlier time when we no longer qualify as an emerging growth company. We would cease to be an emerging growth company on the earlier of (1) the last day of the fiscal year (a) in which we have more than $1.235 billion in annual gross revenue or (b) in which we have more than $700 million in market value of our capital stock held by non-affiliates, or (2) the date on which we issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all these reduced burdens.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards, and therefore we will not be subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

As a smaller reporting company, we are not required to provide this information in our Quarterly Reports.

35

Item 4. Controls and Procedures.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Company management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosure.

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2023, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended of September 30, 2023, aside from those described above, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings.

We are not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.

Item 1A. Risk Factors.

The following risk factor disclosures should be read in conjunction with the risk factors described in the Company's 2022 Form 10-K and subsequent periodic filings with the SEC. We are supplementing the risk factors previously disclosed in such filings to include the following updated risk factors:

Our historical operating results indicate substantial doubt exists related to our ability to operate as a going concern.

Our unaudited consolidated condensed financial statements for the nine months ended September 30, 2023 were prepared assuming that we will continue as a going concern. The going concern basis of presentation assumes that we will continue in operation for the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from our inability to continue as a going concern. Our management concluded that our recurring losses from operations, our limited cash resources on hand and the dependence by the Company on its ability to obtain financing to fund its operations after the current cash resources are exhausted raise substantial doubt about our ability to continue as a going concern for the twelve months following the date of this report.

As reflected in the accompanying unaudited consolidated condensed financial statements, the Company had cash and cash equivalents of $7.4 million and an accumulated deficit of $106.4 million at September 30, 2023, and cash used in operations was $10.7 million in the nine months ended September 30, 2023. We expect to continue to generate operating losses for the foreseeable future. There can be no assurance that the Company will be able to raise additional funds, whether through public offerings, private placements or otherwise, on terms acceptable to the Company or at all. If we are delayed in completing or are unable to raise additional funds, we may seek to reduce our cash outflows, but there are no assurances that these reductions would be sufficient to allow us to continue to operate as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets, and the values we receive for our assets in liquidation and dissolution could be significantly lower than the values reflected in our unaudited consolidated condensed financial statements and an investor could lose all or part of its investment in our equity. In addition, the perception that we may not be able to continue as a going concern may have an adverse impact on our business due to concerns about our ability to meet our future contractual obligations or pursue additional strategic transactions.

Adverse developments affecting the financial services industry, such as recent bank failures or concerns involving liquidity, may have a material effect on the Company’s operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10 and March 12, 2023, the Federal Deposit Insurance Corporation took control and was appointed receiver of Silicon Valley Bank (“SVB”), and Signature Bank, respectively, after each bank was unable to continue their operations. These events exposed vulnerabilities in the banking sector, including legal uncertainties, significant deposit outflows, volatility and contagion risk, and caused market prices of regional bank stocks to plummet.

36

We have not experienced any adverse impact to our current and projected business operations, financial condition and results of operations as a result of the SVB, Signature Bank or other recent bank failures; however, we are unable to predict the extent or nature of the impacts of these evolving circumstances at this time. If, for example, other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened. Therefore, while it is not currently possible to predict the potential impact that the failure of SVB, Signature Bank, or other bank failures could have on economic activity or our business in particular, the failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in response to these events could adversely impact our business, financial condition and results of operations.

Although we expect to continue to assess our banking relationships as we believe necessary or appropriate, our access to cash in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect the financial institutions with which we have banking relationships, and in turn, us. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could also include factors involving financial markets or the financial services industry generally. The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. These could include, but may not be limited to, delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Not Applicable.

Item 6. Exhibits.

37

The documents set forth below are filed herewith or incorporated herein by reference to the location indicated.

		Incorporated by Reference
Exhibit Number	Description	Form	File No.	Exhibit	Filing Date	Filed / Furnished Herewith
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).					*
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).					*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.					**
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.					**
101.INS	Inline XBRL Instance Document					*
101.SCH	Inline XBRL Taxonomy Extension Schema Document					*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document					*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document					*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document					*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document					*
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** The certifications attached as Exhibit 32.1 and 32.2 are not deemed filed with the SEC and are not incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such.

38

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Laird Superfood, Inc.
	(Registrant)
Date: November 9, 2023	/s/ Jason Vieth
	Jason Vieth
	President and Chief Executive Officer
Date: November 9, 2023	/s/ Anya Hamill
	Anya Hamill
	Chief Financial Officer

39

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Jason Vieth, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Laird Superfood, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2023	By:	/s/ Jason Vieth
		Jason Vieth.
		President and Chief Executive Officer and Director (principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Anya Hamill, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Laird Superfood, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2023	By:	/s/ Anya Hamill
		Anya Hamill
		Chief Financial Officer (principal financial and accounting officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Laird Superfood, Inc. (the “Company”) for the period ending September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2023	By:	/s/ Jason Vieth
		Jason Vieth
		Chief Executive Officer (principal executive officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Laird Superfood, Inc. (the “Company”) for the period ending September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2023	By:	/s/ Anya Hamill
		Anya Hamill
		Chief Financial Officer (principal financial and accounting officer)

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2023	Nov. 07, 2023
Document Information [Line Items]
Entity Central Index Key	0001650696
Entity Registrant Name	Laird Superfood, Inc.
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2023
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Transition Report	false
Entity File Number	001-39537
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	81-1589788
Entity Address, Address Line One	5303 Spine Road, Suite 204
Entity Address, City or Town	Boulder
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80301
City Area Code	541
Local Phone Number	588-3600
Title of 12(b) Security	Common Stock
Trading Symbol	LSF
Security Exchange Name	NYSEAMER
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		9,349,445

XML

Consolidated Condensed Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Current assets
Cash, cash equivalents, and restricted cash	$ 7,425,050	$ 17,809,802
Accounts receivable, net	2,186,645	1,494,469
Inventory, net	6,552,571	5,696,565
Prepaid expenses and other current assets, net	1,436,035	2,530,075
Total current assets	17,600,301	27,530,911
Noncurrent assets
Property and equipment, net	138,604	150,289
Fixed assets held-for-sale	0	800,000
Intangible assets, net	1,136,953	1,292,118
Related party license agreements	132,100	132,100
Right-of-use assets	386,118	133,922
Total noncurrent assets	1,793,775	2,508,429
Total assets	19,394,076	30,039,340
Current liabilities
Accounts payable	1,869,458	1,080,267
Accrued expenses	4,059,799	6,295,640
Related party liabilities	56,574	16,500
Lease liabilities, current portion	129,274	59,845
Total current liabilities	6,115,105	7,452,252
Lease liabilities	278,418	76,076
Total liabilities	6,393,523	7,528,328
Stockholders’ equity
Common stock, $0.001 par value, 100,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 9,709,347 and 9,343,643 issued and outstanding at September 30, 2023, respectively; and 9,576,117 and 9,210,414 issued and outstanding at December 31, 2022, respectively.	9,344	9,210
Additional paid-in capital	119,432,281	118,636,834
Accumulated deficit	(106,441,072)	(96,135,032)
Total stockholders’ equity	13,000,553	22,511,012
Total liabilities and stockholders’ equity	$ 19,394,076	$ 30,039,340

XML

Consolidated Condensed Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	9,709,347	9,576,117
Common stock, shares outstanding (in shares)	9,343,643	9,210,414

XML

Consolidated Condensed Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Sales, net	$ 9,179,781	$ 8,844,845	$ 25,016,810	$ 26,858,864
Cost of goods sold	(6,332,624)	(6,773,029)	(18,419,709)	(21,259,300)
Gross profit	2,847,157	2,071,816	6,597,101	5,599,564
General and administrative
Impairment of goodwill and other long-lived assets	0	0	0	8,126,426
Other expense	2,208,213	4,383,868	7,822,834	10,721,611
Total general and administrative expenses	2,208,213	4,383,868	7,822,834	18,848,037
Research and product development	40,123	115,077	206,313	335,377
Sales and marketing
Advertising	1,137,488	1,832,172	3,454,485	5,191,374
Related party marketing agreements	141,712	19,500	435,084	52,750
Other expense	2,106,690	1,539,185	5,423,541	5,871,375
Total sales and marketing expenses	3,385,890	3,390,857	9,313,110	11,115,499
Total operating expenses	5,634,226	7,889,802	17,342,257	30,298,913
Operating loss	(2,787,069)	(5,817,986)	(10,745,156)	(24,699,349)
Other income (expense)	132,185	79,777	452,288	(77,008)
Loss before income taxes	(2,654,884)	(5,738,209)	(10,292,868)	(24,776,357)
Income tax expense	0	0	(13,172)	(5,774)
Net loss	$ (2,654,884)	$ (5,738,209)	$ (10,306,040)	$ (24,782,131)
Net loss per share:
Basic (in dollars per share)	$ (0.28)	$ (0.63)	$ (1.11)	$ (2.71)
Net loss per share, basic and diluted (in dollars per share)	$ (0.28)	$ (0.63)	$ (1.11)	$ (2.71)
Weighted average shares outstanding - basic and diluted (in shares)	9,337,789	9,178,533	9,279,541	9,136,071

XML

Consolidated Condensed Statements of Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Net loss	$ (2,654,884)	$ (5,738,209)	$ (10,306,040)	$ (24,782,131)
Amounts reclassified from accumulated other comprehensive loss	0	0	0	61,016
Total other comprehensive income	0	0	0	61,016
Comprehensive loss	$ (2,654,884)	$ (5,738,209)	$ (10,306,040)	$ (24,721,115)

XML

Consolidated Condensed Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock Outstanding [Member]	Additional Paid-in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
Balances (in shares) at Dec. 31, 2021	9,094,539
Balances at Dec. 31, 2021	$ 9,095	$ 117,903,455	$ (61,016)	$ (55,797,714)	$ 62,053,820
Stock-based compensation	$ 0	10,796	0	0	10,796
Restricted stock units issued, net of taxes (in shares)	5,164
Restricted stock units issued, net of taxes	$ 5	(5)	0	0	0
Net loss	$ 0	0	0	(14,139,402)	(14,139,402)
Balances (in shares) at Mar. 31, 2022	9,101,453
Balances at Mar. 31, 2022	$ 9,101	117,928,493	0	(69,937,116)	48,000,478
Stock option exercises (in shares)	1,750
Stock option exercises	$ 1	14,247	0	0	14,248
Amounts reclassified from accumulated other comprehensive loss	$ 0	0	61,016	0	61,016
Balances (in shares) at Dec. 31, 2021	9,094,539
Balances at Dec. 31, 2021	$ 9,095	117,903,455	(61,016)	(55,797,714)	62,053,820
Net loss					(24,782,131)
Balances (in shares) at Sep. 30, 2022	9,200,470
Balances at Sep. 30, 2022	$ 9,201	118,309,419	0	(80,579,845)	$ 37,738,775
Stock option exercises (in shares)					76,750
Amounts reclassified from accumulated other comprehensive loss					$ 61,016
Balances (in shares) at Mar. 31, 2022	9,101,453
Balances at Mar. 31, 2022	$ 9,101	117,928,493	0	(69,937,116)	48,000,478
Stock-based compensation	$ 0	(209,242)	0	0	(209,242)
Restricted stock units issued, net of taxes (in shares)	13,897
Restricted stock units issued, net of taxes	$ 14	(14)	0	0	0
Net loss	$ 0	0	0	(4,904,520)	(4,904,520)
Balances (in shares) at Jun. 30, 2022	9,169,958
Balances at Jun. 30, 2022	$ 9,170	117,826,024	0	(74,841,636)	42,993,558
Stock option exercises (in shares)	43,553
Stock option exercises	$ 44	49,956	0	0	50,000
Employee stock purchase plan shares issued (in shares)	11,055
Employee stock purchase plan shares issued	$ 11	28,276	0	0	28,287
Recovery of short-swing profits	0	28,555	0	0	28,555
Stock-based compensation	$ 0	483,426	0	0	483,426
Restricted stock units issued, net of taxes (in shares)	30,512
Restricted stock units issued, net of taxes	$ 31	(31)	0	0	0
Net loss	$ 0	0	0	(5,738,209)	(5,738,209)
Balances (in shares) at Sep. 30, 2022	9,200,470
Balances at Sep. 30, 2022	$ 9,201	118,309,419	0	(80,579,845)	37,738,775
Amounts reclassified from accumulated other comprehensive loss					0
Balances (in shares) at Dec. 31, 2022	9,210,414
Balances at Dec. 31, 2022	$ 9,210	118,636,834	0	(96,135,032)	22,511,012
Stock-based compensation	$ 0	147,635			147,635
Restricted stock units issued, net of taxes (in shares)	9,086
Restricted stock units issued, net of taxes	$ 10	(4,420)	0	0	(4,410)
Net loss	$ 0	0	0	(4,143,910)	(4,143,910)
Balances (in shares) at Mar. 31, 2023	9,219,500
Balances at Mar. 31, 2023	$ 9,220	118,780,049	0	(100,278,942)	18,510,327
Balances (in shares) at Dec. 31, 2022	9,210,414
Balances at Dec. 31, 2022	$ 9,210	118,636,834	0	(96,135,032)	22,511,012
Net loss					(10,306,040)
Balances (in shares) at Sep. 30, 2023	9,343,643
Balances at Sep. 30, 2023	$ 9,344	119,432,281	0	(106,441,072)	$ 13,000,553
Stock option exercises (in shares)					(0)
Amounts reclassified from accumulated other comprehensive loss					$ 0
Balances (in shares) at Mar. 31, 2023	9,219,500
Balances at Mar. 31, 2023	$ 9,220	118,780,049	0	(100,278,942)	18,510,327
Stock-based compensation	$ 0	306,076	0	0	306,076
Restricted stock units issued, net of taxes (in shares)	114,662
Restricted stock units issued, net of taxes	$ 115	(14,842)	0	0	(14,727)
Net loss	$ 0	0	0	(3,507,246)	(3,507,246)
Balances (in shares) at Jun. 30, 2023	9,334,162
Balances at Jun. 30, 2023	$ 9,335	119,071,283	0	(103,786,188)	15,294,430
Stock-based compensation	$ 0	364,936	0	0	364,936
Restricted stock units issued, net of taxes (in shares)	9,481
Restricted stock units issued, net of taxes	$ 9	(3,938)	0	0	(3,929)
Net loss	$ 0	0	0	(2,654,884)	(2,654,884)
Balances (in shares) at Sep. 30, 2023	9,343,643
Balances at Sep. 30, 2023	$ 9,344	$ 119,432,281	$ 0	$ (106,441,072)	13,000,553
Amounts reclassified from accumulated other comprehensive loss					$ 0

XML

Consolidated Condensed Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended				9 Months Ended		12 Months Ended
	Sep. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Cash flows from operating activities
Net loss	$ (2,654,884)	$ (4,143,910)	$ (5,738,209)	$ (14,139,402)	$ (10,306,040)	$ (24,782,131)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization					235,025	846,356
Stock-based compensation					818,647	284,980
Provision for inventory obsolescence	881,721		236,946		1,260,580	342,178	$ 1,100,000
Impairment of goodwill and other long-lived assets	0		0		0	8,126,426
Other operating activities, net					398,052	527,740
Changes in operating assets and liabilities:
Accounts receivable					(937,876)	(417,670)
Inventory					(1,958,157)	1,061,152
Prepaid expenses and other current assets					1,061,879	2,242,703
Operating lease liability					(94,679)	(556,597)
Accounts payable					810,908	(62,080)
Accrued expenses					(2,217,484)	1,253,566
Net cash from operating activities					(10,929,145)	(11,133,377)
Cash flows from investing activities
Proceeds from sale of investment securities available-for-sale					0	8,513,783
Other investing activities, net					567,459	467,373
Net cash from investing activities					567,459	8,981,156
Cash flows from financing activities					(23,066)	121,090
Net change in cash and cash equivalents					(10,384,752)	(2,031,131)
Cash, cash equivalents, and restricted cash, beginning of period		$ 17,809,802		$ 23,049,234	17,809,802	23,049,234	23,049,234
Cash, cash equivalents, and restricted cash, end of period	$ 7,425,050		$ 21,018,103		7,425,050	21,018,103	$ 17,809,802
Supplemental disclosures of cash flow information
Right-of-use assets obtained in exchange for operating lease liabilities					344,382	5,285,330
Supplemental disclosures of non-cash investing activities
Receivable from sale of assets held-for-sale included in other current assets at the end of the period					126,268	0
Receivable from sale of assets held-for-sale included in accrued expenses at the end of the period					0	28,240
Settlement recovery from business interruption claims included in other current assets					158,429	0
Amounts reclassified from accumulated other comprehensive loss					0	61,016
Amounts reclassified from property, plant, and equipment to fixed assets held-for-sale					0	947,394
Amounts reclassified from property, plant, and equipment to intangible assets					0	153,691
Purchases of equipment included in deposits at the beginning of the period					$ 0	$ 372,507

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

1. Nature of Operations and Summary of Significant Accounting Policies

The accompanying unaudited consolidated condensed financial statements include the accounts of Laird Superfood, Inc., a Delaware corporation, and its wholly owned subsidiary, Picky Bars, LLC, (collectively, the “Company”, “Laird Superfood”, “we”, or "our").

Nature of Operations

Laird Superfood is an emerging consumer products platform focused on manufacturing and marketing highly differentiated, plant-based and functional foods. The core pillars of the Laird Superfood platform are Superfood Creamer coffee creamers, Hydrate hydration products and beverage enhancing supplements, harvest snacks and other food items, and functional roasted and instant coffees, teas and hot chocolate. The Company was founded in 2015.

Basis of Accounting

The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and rules and regulations of the Securities and Exchange Commission (“SEC”). Operating results include the three and nine months ended September 30, 2023 and 2022. Certain information in footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements.

Principles of Consolidation

All significant intercompany accounts and transactions have been eliminated in our accompanying unaudited consolidated condensed financial statements.

Unaudited Interim Consolidated Condensed Financial Information

In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial position and its results of operations, changes in stockholders’ equity and cash flows. The accompanying unaudited consolidated condensed financial statements and related financial information should be read in conjunction with the Company's fiscal year 2022 Form 10-K filed with the SEC on March 16, 2023. The unaudited consolidated condensed balance sheet as of December 31, 2022 was derived from the audited annual consolidated financial statements. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2023.

Use of Estimates

The preparation of the unaudited consolidated condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience, known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although management believes its estimates and assumptions are reasonable when made, they are based upon information available at the time they are made. Management evaluates the estimates and assumptions on an ongoing basis and, if necessary, makes adjustments. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions and given the subjective element of the estimates and assumptions made, actual results may differ from estimated results. The most significant estimates and judgments include those related to allowances for doubtful accounts and returns, inventory obsolescence, goodwill, intangible assets, valuation allowance for deferred taxes, reserves on prepaid expenses, the discount rates used in determining right of use assets and related lease liabilities, valuation of inventory, trade and sales promotion liabilities, and fair value of stock-based compensation.

Segment reporting

The Company currently has one operating segment. In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company considers operating segments to be components of the Company’s business for which separate financial information is available and is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Management reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has a single operating and reportable segment.

Substantially all product sales for the periods provided were derived from domestic sales.

See Note 12 for additional information regarding sales by platform within the Company’s single segment.

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash are highly liquid instruments with an original maturity of three months or less when purchased. For the purposes of the unaudited consolidated condensed statements of cash flows, the Company includes cash on hand, cash in clearing accounts, cash on deposit with financial institutions, investments with an original maturity of three months or less, and restricted cash in determining the total balance.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited consolidated condensed balance sheets.

	September 30,		December 31,
	2023		2022
Cash and cash equivalents	$	7,136,639	$	17,293,959
Restricted cash		288,411		515,843
Total cash, cash equivalents, and restricted cash	$	7,425,050	$	17,809,802

Amounts in restricted cash represent those that are required to be set aside by the following contractual agreements:

● On December 3, 2020, the Company entered into an agreement with Danone Manifesto Ventures, PBC, which provided the Company $298,103 in funds for the purpose of supporting three COVID-19 relief projects. As of September 30, 2023 and December 31, 2023, cash equivalents in the amount of $99,525 were restricted under this agreement. During the three and nine months ended September 30, 2023, we contributed $0 to these projects. During the three and nine months ended September 30, 2022, we contributed $1,864 and $16,703, respectively, to these projects. The restriction will be released upon the completion of the projects.

● Cash equivalents of $530,000 were pledged to secure our company credit card limits. As of  September 30, 2023 and December 31, 2022, respectively, $188,886 and $416,318 of these funds were restricted to collateralize borrowings against these company credit cards. 

Cash, cash equivalents, and restricted cash balances that exceeded the Federal Deposit Insurance Corporation (“FDIC”) insurable limits as of September 30, 2023 and December 31, 2022 totaled $416,684 and $2,747,721, respectively. The Company has never experienced any losses related to these balances. The Company’s cash, cash equivalents, and restricted cash are with what the Company believes to be a high-quality financial institution and considers the risks associated with these funds in excess of FDIC insurable limits to be low.

Accounts Receivable, net

Accounts receivable, net consists principally of trade receivables, which are recorded at the invoiced amount, net of allowances for credit loss. Trade receivables do not bear interest. Receivables are considered past due or delinquent according to contract terms. Management closely monitors outstanding balances and writes off accounts receivable as they are determined uncollectible. The primary indicators of the credit quality of our receivables are aging and payment history and are assessed on a quarterly basis. Our credit loss exposure is concentrated in our accounts receivable portfolio. Our allowance for credit losses is calculated using a loss-rate method based on historical experience and reasonable forecasts. Based on these factors, management determined an allowance for credit loss of $323,136 and $77,436 as of September 30, 2023 and December 31, 2022, respectively.

Inventory

Inventory is stated at the lower of cost or net realizable value, or the value of consideration that can be received upon sale of said product, and approximate costs determined on the first-in first-out basis and consists primarily of raw materials and packaging and finished goods and includes co-packing fees, indirect labor and allocable overhead. The following table presents the components of inventory, net of reserves, as of:

	September 30,		December 31,
	2023		2022
Raw materials and packaging	$	1,854,333	$	3,764,804
Finished goods		4,698,238		1,931,761
Total inventory, net	$	6,552,571	$	5,696,565

The Company periodically reviews the value of items in inventory and provides write-offs of inventory based on current market assessment, which are charged to cost of goods sold. For the three and nine months ended September 30, 2023, the Company recorded $881,721 and $1,260,580, respectively, of inventory obsolescence and disposal costs. For the three and nine months ended September 30, 2022, the Company recorded $236,946 and $342,178, respectively, of inventory obsolescence and disposal costs.

As of September 30, 2023 inventory reserves totaled $1,614,840. This is comprised of estimated reserves based on inventory turnover, quantities on hand, and expiration dates of $473,888, as well as raw materials and finished goods specifically identified for disposal related to a product quality issue of $838,276 and discontinued inventories of $302,676. As of December 31, 2022, inventory reserves totaled $1,545,033. This was comprised of estimated reserves based on inventory turnover, quantities on hand, and expiration dates of $746,966, reserves specifically identified for disposal related to a product quality issue of $559,042 and discontinued inventories following exit activities of $239,025.

As of September 30, 2023 and December 31, 2022, the Company had a total of $482,585 and $897,108, respectively, of prepayments for future raw materials inventory which are included in prepaid expenses and other current assets, net on the unaudited consolidated condensed balance sheets.

Property and Equipment, net

Property and equipment are valued at cost, net of accumulated depreciation. Expenditures for maintenance and repairs that do not extend the useful life or increase the value of the assets are charged to expense in the period incurred. Additions and betterments are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for depreciation purposes for furniture and factory equipment range from 3 to 7 years. The useful life for leasehold improvements is the lesser of the lease term or the useful life. Construction in progress is not depreciated until such a time that the assets are completed and placed into service.

Fixed Assets Held-for-Sale

Long-lived assets identified by the Company for sale, which have met all criteria to be classified as held for sale, are disclosed separately on the unaudited consolidated condensed balance sheets. Fixed assets held for sale are measured at the lower of the assets carrying amount or fair value less costs to sell, and depreciation is no longer recorded. See Note 4 for more information.

Leases

In accordance with ASC 842, Leases, the Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We categorize leases at their inception as either operating, finance, or short-term leases and determine if an arrangement contains an embedded lease. For arrangements that meet the definition of a lease, the Company determines the initial classification and measurement of its right-of-use asset and lease liability at the lease commencement date and, thereafter, if modified. The lease term includes any renewal options that the Company is reasonably assured to exercise. Lease agreements effective during the three and nine months ended September 30, 2023 and 2022 cover, or covered, office space, warehouse and distribution space, vehicles, and equipment. All of our long-term leases are operating leases. Operating leases are included in right-of-use assets, current lease liabilities, and long-term lease liabilities in our unaudited consolidated condensed balance sheets.

In addition to rent, the leases may require the Company to pay additional costs, such as utilities, maintenance and other operating costs, which are generally referred to as non-lease components. The Company has elected to not separate lease and non-lease components. Only the fixed costs for lease components and their associated non-lease components are accounted for as a single lease component and recognized as part of a right-of-use asset and liability. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rate. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.

Leased assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use a secured incremental borrowing rate as the discount rate for the present value of lease payments when the rate implicit in the contract is not readily determinable. For operating leases with variable payments dependent upon an index or rate that commenced subsequent to the adoption of ASC 842, Leases, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the operating lease liability as they cannot be reasonably estimated and are recognized in the period in which the obligation for those payments is incurred. Leases that have a term of twelve months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included on the unaudited consolidated condensed balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date we have the right to control the property.

We are the lessor in a sublease agreement. This lease is an operating lease and is recognized straight line over the lease term with a related sublease rental asset accounting for abatements and initial direct costs.

Revenue Recognition

The Company recognizes revenue in accordance with the five-step model as prescribed by ASC 606, Revenue from Contracts with Customers, in which the Company evaluates the transfer of promised goods or services and recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the Company satisfies a performance obligation. The Company has elected, as a practical expedient, to account for the shipping and handling as fulfillment costs, rather than as a separate performance obligation. Methodologies for determining these provisions are dependent on customer pricing and promotional practices. The Company records reductions to revenue and a refund liability for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates are based on industry-based historical data, historical sales returns, if any, analysis of credit memo data, and other factors known at the time. See Note 12 for additional information regarding revenue recognition.

Cost of Goods Sold

Cost of goods sold includes material, packaging, co-packing fees, distribution freight, indirect labor and overhead costs incurred in the storage and distribution of products sold in the period. Material costs include the cost of products purchased. In 2023, labor and overhead costs consisted of indirect labor, inbound freight for raw materials and warehouse rent, and in 2022 also included wages and benefits for manufacturing, planning, and logistics personnel, depreciation, and facility costs.

Shipping and Handling

Costs of shipping and handling related to sales revenue are included in cost of goods sold. Shipping and handling costs totaled $1,132,930 and $4,002,244, respectively, for the three and nine months ended September 30, 2023. Shipping and handling costs totaled $1,622,290 and $4,763,845 for the three and nine months ended September 30, 2022. Income generated from shipping costs billed through to customers was included in net sales in the unaudited consolidated condensed statements of operations. Shipping income totaled $214,982 and $778,051, respectively, for the three and nine months ended September 30, 2023. Shipping income totaled $289,505 and $829,107, respectively, for the three and nine months ended September 30, 2022.

Research and Product Development

Amounts spent on research and development activities are expensed as incurred as research and product development expense on the unaudited consolidated condensed statements of operations. Research and product development expense was $40,123 and $206,313, respectively, for the three and nine months ended September 30, 2023. Research and product development expense was $115,077 and $335,377, respectively, for the three and nine months ended September 30, 2022.

Advertising

Advertising costs are expensed when incurred. Advertising expenses for the three and nine months ended September 30, 2023 were $1,137,488 and $3,454,485, respectively. Advertising expenses for the three and nine months ended September 30, 2022 were $1,832,172 and $5,191,374, respectively.

Marketing

Marketing costs are expensed when incurred, and are included in other sales and marketing expenses on the unaudited consolidated condensed statements of operations. Marketing expenses for the three and nine months ended September 30, 2023 were $1,226,909 and $3,012,473, respectively. Marketing expenses for the three and nine months ended September 30, 2022 were $824,747 and $2,983,417, respectively.

Income Taxes

Income taxes provide for the tax effects of transactions reported in the unaudited consolidated condensed financial statements and consist of income taxes currently due and deferred tax assets and liabilities. The Company may also be subject to interest and penalties from taxing authorities on underpayment of income taxes. In such an event, interest and penalties are included in income tax expense. Deferred tax assets and liabilities are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to depreciable assets (use of different depreciation methods and lives for financial statement and income tax purposes), stock-based compensation, right of use assets, and net operating losses. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Due to the historical net loss position of the Company, the Company recorded a deferred tax valuation allowance of $26,661,284 and $23,928,265 as of  September 30, 2023 and  December 31, 2022, respectively.

Stock Incentive Plan

The compensation cost relating to share-based payment transactions is recognized in the unaudited consolidated condensed financial statements. The cost is measured based on the grant date fair value of the equity or liability instruments issued. Compensation cost for all employee stock awards is calculated and recognized over the employees’ service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. Compensation cost for all consultant stock awards is calculated and recognized over the consultant’s service period based on the grant date fair value of the equity or liability instruments issued. Upon exercise of stock option awards or vesting of restricted stock units ("RSUs") and market-based stock units ("MSUs"), recipients are issued shares of common stock. Pre-vesting forfeitures result in the reversal of all compensation cost as of the date of termination; post-vesting cancellation does not.

Earnings per Share

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock that were outstanding during the period. Diluted earnings per share is similarly determined, except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if all dilutive potential common stock had been issued and is calculated under the treasury stock method. Due to the Company’s net loss, all outstanding stock options, RSUs, and MSUs are anti-dilutive and excluded.

License Agreement – Indefinite Lived Intangible Asset

On August 3, 2015, the Company entered into a license agreement with the Company’s co-founder Laird Hamilton (the “LH License”). The LH License stated Mr. Hamilton’s contribution to the Company was in the form of intellectual property, granting the Company the right to use Mr. Hamilton’s name and likeness. This contribution, which was reported on the unaudited consolidated condensed balance sheets as of September 30, 2023 and December 31, 2022, was valued at $132,000 and satisfied with the issuance of 660,000 shares of common stock. The Company has determined that the intangible asset associated with the LH License has an indefinite life, as there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company.

On May 2, 2018, the Company entered into a license agreement with Gabrielle Reece, who is married to Mr. Hamilton (the “GR License”). Pursuant to the GR License, Ms. Reece granted the Company rights to her name, signature, voice, picture, image, likeness and biographical information commencing on July 1, 2015. This contribution, which is reported on the unaudited consolidated condensed balance sheets as of September 30, 2023 and December 31, 2022, was valued at $100 based on the consideration exchanged. The Company has determined that the intangible asset associated with the GR License has an indefinite life, as there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company.

On November 19, 2018, the Company executed a License and Preservation Agreement with Mr. Hamilton and Ms. Reece which superseded the predecessor license agreements with both individuals. The agreement added specific terms related to non-competition and allowable usage of the property under the license. No additional consideration was exchanged in connection with the agreement and the life of the agreement was set at 100 years.

On May 26, 2020, the Company executed a License and Preservation Agreement with Mr. Hamilton and Ms. Reece (the “2020 License”), which superseded the predecessor license and preservation agreement with both individuals. Among other modifications, the agreement (i) modified certain approval rights of Mr. Hamilton and Ms. Reece for use of their respective images, signatures, voices, and names (other than those owned by the Company), rights of publicity and common law and statutory rights to the foregoing in the Company’s products, (ii) modified certain assignment, change of control and indemnification provisions, and (iii) granted the Company the right to extend the term of the agreement for additional ten-year terms upon the expiration of the initial one-hundred year term. No additional consideration was exchanged in connection with the agreement. As indefinite-lived intangibles, the Company assesses qualitative factors each reporting period to determine whether events and circumstances exist that indicate that the fair values of the licensing agreements were less than the carrying amounts. Upon considering these factors, the Company determined it was more likely than not that the fair value of the 2020 License was not less than the carrying amount; therefore, the Company recognized no impairment for the three and nine months ended September 30, 2023 and 2022.

Definite Lived Intangible Assets, net

Definite lived intangible assets are valued at cost, net of accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for amortization purposes range between 3 and 10 years. Amortization expense is allocated to general and administrative expense. For the three and nine months ended September 30, 2023, amortization expenses were $51,721 and $155,165, respectively. For the three and nine months ended September 30, 2022, amortization expenses were $104,201 and $349,424, respectively. The Company assesses qualitative factors each reporting period to determine whether events and circumstances exist that indicate that the fair values of the definite lived intangible assets were less than the carrying amounts. There were no impairment charges in the three and nine months ended September 30, 2023. In the last month of the first quarter of 2022, management determined the sustained decline in stock price, coupled with changes in market conditions, was a triggering event. Upon considering these factors, the Company determined it was more likely than not that the fair value was less than the carrying amounts of long-lived intangible assets; therefore, the Company recognized impairment charges of $0 and $1,540,000 for the three and nine months ended September 30, 2022, respectively. See Note 5 for more information.

Goodwill

Goodwill represents the excess of purchase price over the assigned fair values of the assets acquired and liabilities assumed in conjunction with a business combination. Goodwill is reviewed for impairment annually as of December 31, or whenever events occur or circumstances change that indicate goodwill may be impaired. In testing goodwill for impairment, the Company has the option to perform a qualitative assessment to determine whether the existence of events or circumstances indicate that it is more-likely-than-not (more than 50%) that the fair value of goodwill is less than its carrying amount. When performing a qualitative assessment, the Company evaluates factors such as industry and market conditions, cost factors, overall financial performance, and other relevant entity specific events and changes. If the qualitative assessment indicates that it is more-likely-than-not that the fair value of goodwill is less than its carrying amount, or if the Company chooses not to perform the qualitative assessment, then a quantitative assessment is performed to determine the reporting unit’s fair value. If the carrying value exceeds its fair value, then an impairment loss is recognized for the amount of the excess of the carrying amount over the fair value, not to exceed the total amount of goodwill. In the last month of the first quarter of 2022, management had determined the sustained decline in stock price, coupled with a change in market conditions, was determined to be a triggering event. The Company performed a qualitative and quantitative analysis on the Company's goodwill for impairment concluding that the fair value of goodwill as calculated using a discounted cash flow model exceeds the carrying value, indicating that goodwill was impaired. The Company recorded goodwill impairment charges of $0 and $6,486,000, respectively, during the three and nine months ended September 30, 2022. There was no goodwill as of September 30, 2023 or December 31, 2022.

Employee Benefit Plan

The Company sponsors a defined contribution 401(k) plan (the “401(k) plan”) for all employees 18 years or older. The 401(k) plan was initiated on July 1, 2018. Employee contributions may be made on a before-tax basis, limited by Internal Revenue Service regulations. In 2023, the Company established a 3% safe harbor contribution to be remitted in the first quarter of 2024. As of September 30, 2023, there were $135,722 of 401(k) contribution liabilities included in accrued expenses on the unaudited consolidated condensed balance sheets. The Company recorded related expenses as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Cost of goods sold	$	2,330	$	9,624
General and administrative		16,359		76,235
Research and development		695		2,603
Sales and marketing		13,296		37,972
Total 401(k) contribution expense	$	32,680	$	126,434

JOBS Act Accounting Election

The Company qualifies as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. An emerging growth company can elect to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. Currently, the Company has elected to file as an emerging growth company defined under the JOBS Act, and as such, these unaudited consolidated condensed financial statements may not be comparable to the financial statements of companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Exit and Disposal Costs

The Company follows the guidance in ASC 420, Exit or Disposal Cost Obligations, to record exit and disposal related costs. The Company recorded $8.7 million of exit and disposal costs in the fourth quarter of 2022 and insignificant residual costs in the nine months ended September 30, 2023, associated with the closure of the Sisters, Oregon manufacturing sites and subsequent transition to a co-manufacturing model for all production and fulfillment. ASC 420 requires the recognition of costs associated with exit or disposal activities when they are incurred, generally the cease-use date. Exit and disposal activities are summarized below:

● We entered into a lease termination agreement on December 12, 2022. All production activities taking place in the related properties ceased in December 2022. Pursuant to this agreement, our lease was fully terminated as of January 31, 2023, and we owed a total of $1.6 million in early lease termination costs of which $0.5 million was remitted in December 2022 and $1.1 million was satisfied in January 2023. We recognized lease termination costs, including the elimination of right of use assets net of lease liabilities, and early lease termination penalties, of $3.6 million which are included in general and administrative expenses for the year ended December 31, 2022.

● We signed an asset purchase agreement with our new co-manufacturer for the sale of the majority of our production equipment for a purchase price of $0.8 million and an agreement to sell certain leasehold improvements for $0.1 million. Certain equipment, furniture, and leasehold improvements were abandoned upon exit of the lease. The net book value of this property exceeds the recoverability of the assets. As such, we recorded impairment charges of property, plant, and equipment and internal-use production software of $3.1 million and $0.1 million, respectively, which are included in general and administrative expenses for the year ended December 31, 2022. Consideration was received in the amount of $0.7 million in the first half of 2023 and consideration receivable of $0.1 million is included in Prepaid and other current assets on the unaudited consolidated condensed balance sheets as of September 30, 2023.

● We incurred one-time termination benefits consisting of severances primarily for operations, production, and fulfillment personnel, of $0.6 million, which are included in general and administrative expenses for the year ended December 31, 2022. These were paid by January 2023. In the first quarter of 2023, we recognized a net reversal of expense of $0.1 million related to severances and forfeitures of stock-based compensation, which are included in general and administrative expenses.

● We moved the majority of our raw materials inventory to our co-manufacturer and the majority of our finished goods inventory to our third-party logistics partners. Because we no longer have storage space in our warehouses, we determined that it was not cost-effective to pay for freight and storage fees to move and house certain inventories at our third-party partners' facilities. As a result, we disposed of, or reserved for disposal, certain inventories remaining at the Sisters, Oregon facilities which were not shipped to our third-party partners' facilities, in the amount of $1.1 million, which are included in cost of goods sold for the year ended December 31, 2022. All such inventory remaining on-hand as of December 31, 2022 was disposed of in January 2023.

● We incurred other costs for moving inventory, IT setup and integration costs, repayment of property tax abatements, and other costs totaling $0.2 million, which were included in general and administrative expenses for the year ended December 31, 2022. We recognize these costs as incurred or when they become realizable.

Loss Contingencies

We may be subject to contingencies arising in the ordinary course of business, such as product liability and other product-related litigation, commercial litigation, environmental claims and proceedings, government investigations and guarantees and indemnifications. In assessing contingencies related to legal and environmental proceedings that are pending against the Company, or unasserted claims that are probable of being asserted, we record accruals for these contingencies to the extent that we conclude that a loss is both probable and reasonably estimable. If an amount within a range of loss appears to be a better estimate than any other amount within the range, we accrue that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, we accrue the lowest amount in the range. We record anticipated recoveries under existing insurance contracts when recovery is assured.

Going Concern

The unaudited consolidated condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the unaudited consolidated condensed financial statements, the Company has $7.4 million of cash and cash equivalents, and cash used in operations was $10.9 million in the nine months ended September 30, 2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Absent any other action, the Company will require additional liquidity to continue its operations over the next 12 months from the date of this Quarterly Report on Form 10-Q.

At the end of the fourth quarter of 2022, the Company transitioned to a variable cost third-party co-manufacturing business model. As part of this transition, the Company greatly reduced overhead costs while simultaneously improving margins. Cash used in operations in the first nine months of 2023 is inclusive of costs which were incurred in connection with the exit and disposal activities, annual bonus payments, discounts for replacement orders, as well as out of stock items following a product quality issue which resulted in reduced top line revenue for the impacted SKUs in the quarter. These factors exacerbate the cash used in the first half of the year. Even with a product quality issue impacting net sales and cost of goods sold we have already realized margin improvements to 26.4% in the first nine months of 2023 compared to 14.5% for fiscal year 2022. Management has specific plans to further improve gross margins, optimize marketing spend, and cut selling, general, and administrative costs later in the year which management believes will significantly reduce expected future cash outlays.

However, the Company’s cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The unaudited consolidated condensed financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

Recoveries on claims for business interruptions

In the first quarter of 2023, we discovered a product quality issue with coconut milk powder from one of our suppliers and immediately initiated a voluntary product withdrawal and contacted all impacted wholesale customers and e-commerce consumers to aggressively pull back as much as of the affected product as possible. In connection with this withdrawal, we incurred costs associated with inventory obsolescence, quality testing, and remedial discounts and replacement orders of $0.5 million in the fourth quarter of 2022 and $0.4 million in the first quarter of 2023. In addition, we implemented a robust new sensory testing program to prevent future quality issues. In the third quarter of 2023, we reached settlement with the vendor and recognized $0.2 million of recoveries which were included in cost of goods sold in the unaudited consolidated condensed statements of operations. As of September 30, 2023, $0.2 million of these recoveries were included in other current assets on the unaudited consolidated condensed balance sheets. 

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments,” as modified by subsequently issued ASUs 2018-19 (issued November 2018), 2019-04 (issued April 2019), 2019-05 (issued May 2019), 2019-11 (issued November 2019), 2020-02 (issued February 2020) and 2020-03 (issued March 2020). Topic 326 modifies the measurement and recognition of credit losses for most financial assets and certain other instruments, requiring the use of forward-looking expected credit loss models based on historical experience, current economic conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount, which may result in earlier recognition of credit losses under the new standard. It also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. The standard requires a modified retrospective approach with a cumulative effect adjustment to retained earnings. ASU 2016-13 is effective for the Company’s annual periods beginning after December 15, 2022, including interim periods within those fiscal years. We adopted ASU 2016-13 in the first quarter of 2023. The adoption had no impact on our unaudited consolidated condensed financial position, results of operations, or cash flows.

Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before the unaudited consolidated condensed financial statements are available to be issued. The Company has evaluated events and transactions subsequent to September 30, 2023 for potential recognition of disclosure in the unaudited consolidated condensed financial statements. There were no such subsequent events.

XML

Note 2 - Prepaid Expense and Other Current Assets

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Other Current Assets [Text Block]

2. Prepaid Expenses and Other Current Assets

The following table presents the components of prepaid expenses and other current assets, as of:

	September 30,		December 31,
	2023		2022
Prepaid insurance	$	107,762	$	761,147
Prepaid inventory		482,585		897,108
Prepaid subscriptions and license fees		173,684		292,622
Prepaid advertising		154,033		166,872
Deposits		197,643		134,896
Other current assets		320,328		277,430
Prepaid and other current assets	$	1,436,035	$	2,530,075

XML

Note 3 - Revolving Lines of Credit

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Debt Disclosure [Text Block]

3. Revolving Lines of Credit

On September 2, 2021, the Company entered into a revolving line of credit with Wells Fargo Bank National Association in a principal amount not exceeding $9,500,000. The line of credit was renewed on September 1, 2022, with a maturity date of August 31, 2023, and the available credit was reduced to $5,000,000. The line of credit was not renewed on August 31, 2023. The outstanding amounts under the line of credit had an interest rate calculated as Daily Simple Secured Overnight Financing Rate (“SOFR”) plus 1.5% per annum until paid in full. The balance on the line of credit was $0 as of September 30, 2023 and December 31, 2022. Management was in compliance with all financial covenants as of  December 31, 2022.

On August 10, 2017, the Company entered into a revolving line of credit with East Asset Management, LLC (“East”) in a principal amount not exceeding the lesser of the borrowing base or $3,000,000. The outstanding amounts under the line of credit had a fixed interest rate of 15% per annum until paid in full and the line of credit had a maturity date of August 10, 2022. The loan agreement was closed on May 19, 2022.

A secondary line of credit with East in an amount up to $200,000 was available to the Company, which was not subject to the requirements of the borrowing base. The secondary line was available with the same draw and payback conditions as the primary line. The loan agreement was closed on May 19, 2022.

East was also granted a right of first refusal on any future equity offerings by the Company to purchase up to 20% of equity in any such offerings at a 20% price per share discount, subject to certain exclusions. These rights terminated concurrently with the closure of the associated loan agreements on May 19, 2022.

XML

Note 4 - Property and Equipment, Net

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

4. Property and Equipment, net

Property and Equipment, net

Property and equipment, net is comprised of the following as of:

	September 30, 2023							December 31, 2022
	Gross Carrying Amount		Accumulated Depreciation			Net Carrying Amount		Gross Carrying Amount		Accumulated Depreciation			Net Carrying Amount
Factory equipment	$	—	$	—		$	—	$	66,276	$	(43,051	)	$	23,225
Furniture and office equipment		220,190		(107,393	)		112,797		318,795		(211,529	)		107,266
Leasehold improvements		46,276		(20,469	)		25,807		34,946		(15,148	)		19,798
	$	266,466	$	(127,862	)	$	138,604	$	420,017	$	(269,728	)	$	150,289

Depreciation expense was $19,772 and $79,860 for the three and nine months ended September 30, 2023, respectively. Depreciation expense was $167,794 and $496,932 for the three and nine months ended September 30, 2022, respectively.

Assets Classified as Held-for-Sale

In the first quarter of 2022, the Company entered into a vacant land real estate sale agreement for the sale of excess unused lots in Sisters, Oregon for a sales price of $1,572,512. The Company sold the land in the second quarter of 2022 resulting in a gain of $573,818 included in general and administrative expenses.

In the second quarter of 2022, the Company entered into a purchase order agreement for the sale of the intermittent motion form production line for a sales price of $100,000. The book value exceeded the fair market value and, as such, the Company recorded an impairment charge of $100,426 in the second quarter of 2022. The Company sold these assets in the third quarter of 2022 for $103,240, recording a gain of $3,240 included in general and administrative expenses.

In the fourth quarter of 2022, the Company entered into purchase agreements for the sale of the production equipment for a sales price of $800,000. The book value exceeded the fair market value and, as such, the Company recorded impairment charges of $3,105,435, included in general and administrative expenses. In the first three quarters of 2023, consideration amounting to $673,732 was received and $126,268 was receivable and included in other current assets as of September 30, 2023.

XML

Note 5 - Goodwill and Intangible Assets, Net

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

5. Goodwill and Intangible Assets, Net

Goodwill

The carrying amount of goodwill attributed to the acquisition of Picky Bars was $6,486,000 as of the acquisition date. In the last month of the first quarter of 2022, management determined the sustained decline in stock price, coupled with changes in market conditions, was a triggering event. The Company performed a qualitative and quantitative analysis on the Company's goodwill for impairment, concluding that the fair value of goodwill as calculated using a discounted cash flow model exceeds the carrying value, this indicating that goodwill is impaired. As such, the Company recorded a goodwill impairment of $0 and $6,486,000 for the three and nine months ended September 30, 2022. There was no goodwill as of September 30, 2023 or December 31, 2022.

Intangible Assets, Net

Intangible Assets, net is comprised of the following:

	September 30, 2023							December 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Trade names (10 years)	$	890,827	$	(80,175	)	$	810,652	$	890,827	$	—		$	890,827
Recipes (10 years)		330,000		(79,750	)		250,250		330,000		(55,000	)		275,000
Social media agreements (3 years)		80,000		(64,444	)		15,556		80,000		(44,444	)		35,556
Software (3 years)		131,709		(71,214	)		60,495		131,710		(40,975	)		90,735
Definite-lived intangible assets		1,432,536		(295,583	)		1,136,953		1,432,537		(140,419	)		1,292,118
Licensing agreements (indefinite)		132,100		—			132,100		132,100		—			132,100
Total intangible assets	$	1,564,636	$	(295,583	)	$	1,269,053	$	1,564,637	$	(140,419	)	$	1,424,218

The weighted-average useful life of all the Company’s intangible assets is 7.1 years.

For the three and nine months ended September 30, 2023, amortization expense was $51,721 and $155,165, respectively. For the three and nine months ended September 30, 2022, amortization expense was $104,201 and $349,424, respectively.

Definite life intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Examples include a significant adverse change in the extent or manner in which we use the asset, or an unexpected change in financial performance. When evaluating definite life intangible assets for impairment, we compare the carrying value of the asset to the asset’s estimated undiscounted future cash flows. An impairment is indicated if the estimated future cash flows are less than the carrying value of the asset. The Company considered the above factors when assessing whether the Company’s long-lived assets will be recoverable.

Based on the analysis of the qualitative factors above, management determined that there were no triggering events or impairment charges in the three and nine months ended September 30, 2023. In 2022, with changes in market conditions and developments in the forecasts for e-commerce and wholesale sales of legacy Picky Bars products were triggering events during the nine months ended September 30, 2022 and in the three months ended December 31, 2022.

The Company performed a qualitative and quantitative analysis over the period May 1, 2021 through March 31, 2022 and from March 31, 2022 through December 31, 2022 on the Company's estimates of the fair values of acquired customer relationships utilizing the Multiperiod Excess Earnings Method variation of discounted cash-flow model, which exceeded the carrying value, indicating that these assets were impaired. In the three and nine months ended September 30, 2022, the Company recorded impairment charges of $0 and $1,432,000, respectively, net of accumulated amortization. In the three months ended December 31, 2022, the Company recorded impairment charges of $344,006, net of accumulated amortization.

The Company performed a qualitative and quantitative analysis over the period May 1, 2021 through March 31, 2022 and from March 31, 2022 through December 31, 2022 on the Company's estimates of the fair values of acquired trade names utilizing the Relief From Royalty Method variation discounted cash-flow model, which exceeded the carrying value, indicating that these assets were impaired. In the three and nine months ended September 30, 2022, the Company recorded impairment charges of $0 and $108,000, respectively, net of accumulated amortization. In the three months ended December 31, 2022, the Company recorded impairment charges of $1,135,000, net of accumulated amortization.

Intangible assets are amortized using the straight-line method over estimated useful lives ranging from three to ten years. The estimated amortization expense for each of the next five years and thereafter is as follows:

2023 (excluding the nine months ended September 30, 2023)	$	51,721
2024		189,108
2025		149,994
2026		139,899
2027		139,899
Thereafter		466,332
	$	1,136,953

XML

Note 6 - Leases

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Leases [Text Block]

6. Leases

Lessee

The Company leased its warehouse space under a commercial lease with RII Lundgren Mill, LLC, dated March 1, 2018. The lease commenced March 1, 2018. The initial lease term was ten years, and the Company had the option to renew the lease for two additional five-year periods.

The Company executed a second lease for additional warehouse and office space under a commercial lease with RII Lundgren Mill, LLC, dated December 17, 2018. The lease commenced on July 1, 2019. However, for accounting purposes the lease commencement date was June 6, 2019. The initial lease term was ten years.

The Company executed a third lease for additional warehouse and office space under a commercial lease with RII Lundgren Mill, LLC, dated October 1, 2021. The lease commenced on October 1, 2021. The initial lease term was ten years.

The Company executed a lease cancellation agreement dated December 12, 2022. Under this agreement, the Company's three leases with RII Lundgren Mill, LLC, were terminated effective January 31, 2023, and the Company agreed to pay $1,550,000, of which $500,000 was remitted in 2022 and $1,050,000 was satisfied in the first quarter of 2023. The Company ceased to realize any operational benefit from the leases as of December 31, 2022, and recorded losses on lease termination consisting of the write off of the related right of use assets, net of lease liabilities, as well as the lease termination fee, for a total of $3,596,365, which were included in General and administrative expenses for the year ended December 31, 2022.

The Company assumed an operating lease in the acquisition of Picky Bars, LLC on May 3, 2021. The initial lease term is 62 months, and the Company has the option to renew the lease for two additional three-year periods.

The Company entered into a sublease agreement with Somatic Experiencing Trauma Institute with a commencement date of January 1, 2023, for a 5,257 square foot office space in Boulder, Colorado which serves as the Company's new headquarters. This lease will expire on July 1, 2027.

The components of lease expense were as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Operating leases
Operating lease cost	$	38,085	$	114,254
Variable lease cost		5,554		24,022
Operating lease expense		43,639		138,276
Short-term lease rent expense		69,630		242,817
Total rent expense	$	113,269	$	381,093

	Nine Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2022
Operating cash flows - operating leases	$	94,679	$	556,597
Right-of-use assets obtained in exchange for operating lease liabilities	$	344,382	$	5,285,330

	September 30, 2023			September 30, 2022
Weighted-average remaining lease term – operating leases (in years)		3.2			8.1
Weighted-average discount rate – operating leases		6.63	%		3.75	%

As of September 30, 2023, future minimum payments during the next five years and thereafter are as follows:

2023 (excluding the nine months ended September 30, 2023)	$	31,755
2024		138,800
2025		126,714
2026		109,145
2027		56,210
Total		462,624
Less imputed interest		(54,932	)
Operating lease liabilities	$	407,692

Lessor

The Company executed a sublease agreement of the Picky Bars, LLC operating lease on March 1, 2022. The lease commenced on April 1, 2022. The initial lease term expires on April 30, 2025. The lease meets all of the criteria of an operating lease and is accordingly recognized straight line over the lease term with a related sublease rental asset accounting for abatements and initial direct costs. The Company had $13,769 and $18,846 of sublease rental assets as of September 30, 2023 and December 31, 2022, respectively, included in prepaid and other current assets on the unaudited consolidated condensed balance sheets.

The components of rental income were as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Operating leases
Operating lease income	$	14,054	$	42,164
Variable lease income		5,318		15,953
Total rental income	$	19,372	$	58,117

	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022
Operating leases
Operating lease income	$	14,055	$	42,164
Variable lease income		5,318		15,953
Total rental income	$	19,373	$	58,117

As of September 30, 2023, future minimum payments to be received during the next five years and thereafter are as follows:

2023 (excluding the nine months ended September 30, 2023)		30,216
2024		61,640
2025		20,748
Total	$	112,604

XML

Note 7 - Deferred Tax Assets and Liabilities

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

7. Deferred Tax Assets and Liabilities

The Company had a tax net loss for the three and nine months ended September 30, 2023 and 2022, and therefore has recorded no assessment of current federal income taxes. The Company is subject to minimum state taxes for various jurisdictions as well as subject to franchise taxes considered income taxes under ASC 740, Income Taxes. A reconciliation of income tax expense at the federal statutory rate to the income tax provision at the Company's effective rate is as follows:

	Nine Months Ended
	September 30, 2023			September 30, 2022
Income tax benefit at statutory rates	$	2,184,272		$	2,968,062
Valuation allowance for deferred tax assets		(2,239,858	)		(2,947,086	)
Stock-based compensation		(16,751	)		(12,642	)
Other benefit, net		59,165			(14,108	)
Reported income tax expense	$	(13,172	)	$	(5,774	)
Effective tax rate:		0.1	%		0.0	%

The Company’s deferred tax assets consisted of the following as of:

	September 30, 2023			December 31, 2022
Noncurrent deferred tax assets:
Net operating loss carryforwards	$	20,070,340		$	17,428,266
Intangible assets		2,262,377			2,382,397
Property and equipment		1,587,209			1,660,954
Research and development credits		372,587			300,105
Accrued expenses		544,246			766,385
Right of use asset		5,652			524
Bad debt allowance		84,637			20,282
Charitable contributions		40,867			38,557
Unexercised options		1,436,395			1,136,475
Capitalized research and development costs		256,974			194,320
Total noncurrent deferred tax assets		26,661,284			23,928,265
Valuation allowance		(26,661,284	)		(23,928,265	)
Total net deferred tax assets	$	—		$	—

The Company assesses its deferred tax assets and liabilities to determine if it is more likely than not that they will be realized; if not, a valuation allowance is required to be recorded. As of September 30, 2023, the Company did not provide a current or deferred U.S. federal or state income tax provision or benefit for any of the periods presented because the Company has reported cumulative losses since inception. Management has determined that it was not more likely than not that the deferred tax assets would be realized, thus a full valuation allowance was recorded against the deferred tax assets. The Company may reduce the valuation allowance against definite-lived deferred tax assets at such a time when it becomes more likely than not that the definite-lived deferred tax assets will be realized. The Company has recorded a provision for state income taxes and a corresponding current state tax payable of approximately $9,850 and $9,803 as of September 30, 2023 and December 31, 2022, respectively. 

The changes in the valuation allowance for deferred tax assets and liabilities for the nine months ended September 30, 2023 and 2022 were net increases of $2.7 million and $5.8 million, respectively. At September 30, 2023 and December 31, 2022, the Company had net operating loss carryforwards ("NOLs") totaling approximately $137.0 million and $118.6 million, respectively. At September 30, 2023 and December 31, 2022, the Company had federal NOLs totaling approximately $1.9 million from 2017 and prior years that can be carried forward for 20 years, which begin to expire in 2036. At September 30, 2023 and December 31, 2022, the Company had federal NOLs totaling approximately $77.6 million and $67.5 million, respectively from 2018 and subsequent years that can be carried forward indefinitely. At September 30, 2023 and December 31, 2022, the Company had state NOLs totaling $57.6 million and $49.3 million, respectively, that can be carried forward for between 15 and 20 years. At September 30, 2023 and December 31, 2022, the Company had credits totaling $0.4 million and $0.3 million, respectively, that can be carried forward for between 5 and 20 years.

GAAP requires management to evaluate and report information regarding its exposure to various tax positions taken by the Company. The Company has determined whether there are any tax positions that have met the recognition threshold and has measured the Company’s exposure to those tax positions. Management believes that the Company has adequately addressed all relevant tax positions and that there are no unrecorded tax liabilities.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. U.S. and state jurisdictions have statutes of limitations that generally range from 3 to 5 years.

XML

Note 8 - Stock Incentive Plan

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

8. Stock Incentive Plan

The Company adopted an incentive plan (the “2020 Omnibus Incentive Plan”) on September 22, 2020, to provide for the grant of stock options, stock appreciation rights, restricted stock, RSUs, deferred stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards and cash bonus awards to Company employees, non-employee directors, and certain consultants and advisors. As of September 30, 2023, the Company is authorized to award 1,124,160 shares under the 2020 Omnibus Incentive Plan. Previously, the Company had adopted its 2018 Equity Incentive Plan and 2016 Stock Incentive Plan (together with the 2020 Omnibus Incentive Plan, the “Stock Incentive Plans”), under which the Company had issued stock options and restricted stock units. Following the effective date of the 2020 Omnibus Incentive Plan, no additional awards may be made under the 2018 Equity Incentive Plan or 2016 Stock Incentive Plan. 

Stock Options

The Stock Incentive Plans prescribe various terms and conditions for the award of options and the total number of shares authorized for this purpose. For options, the strike price is equal to the fair value of the Company’s stock price at the date of grant. Generally, options become exercisable based on years of service and vesting schedules, and expire after (i) a period of ten years from the date of grant, (ii) three months following the date of termination of employment from the Company, (iii) one year following the date of termination from the Company by reason of death or disability, (iv) the date of termination of employment for cause, or (v) the fifth anniversary of the date of the grant if it is held by a 10 percent or greater stockholder.

The following tables summarize the Company’s stock option activity:

				Weighted		Weighted
				Average		Average
	Options			Exercise Price		Contractual		Aggregate
	Activity			(per share)		Term (years)		Intrinsic Value
Balance at January 1, 2023		921,657		$	6.86		8.00	$	—
Granted		700,000		$	0.89
Exercised/released		—		$	—
Cancelled/forfeited		(360,317	)	$	3.52
Balance at September 30, 2023		1,261,340		$	4.50		8.17	$	75,000
Exercisable at September 30, 2023		672,187		$	4.69		7.53	$	9,000

				Weighted		Weighted
				Average		Average
	Options			Exercise Price		Contractual		Aggregate
	Activity			(per share)		Term (years)		Intrinsic Value
Balance at January 1, 2022		747,800		$	11.51		6.57	$	1,143,013
Granted		453,498		$	7.21
Exercised/released		(76,750	)	$	2.14
Cancelled/forfeited		(317,185	)	$	15.25
Balance at September 30, 2022		807,363		$	8.50		7.73	$	—
Exercisable at September 30, 2022		314,343		$	8.72		5.42	$	—

The Company estimates the fair value of each stock option award on the date of grant using a Black-Scholes option-pricing model. ASC 718, Compensation - Stock Compensation (“ASC 718”), requires the use of the fair-value-based method for measuring the value of stock-based compensation. The estimated fair value of each grant of stock options awarded was determined using the following assumptions:

● Expected Volatility. The expected volatility is based on the volatility of the historical stock prices of identified peer companies.

● Expected Term. Due to the lack of a public market for the trading of shares of the Company’s common stock prior to the Company’s initial public offering that closed on September 25, 2020, and the lack of sufficient Company-specific historical data, the expected term of employee stock options is determined using the “simplified” method, as prescribed in SEC Staff Accounting Bulletin No. 107, Share Based Payments, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option.

● Risk-free Interest Rate. The risk-free interest rate is based on the interest rate payable on the United States Treasury yield curve in effect at the time of grant for a period that is commensurate with the assumed expected term.

● Dividend Yield. The dividend yield is 0% because the Company has never paid, and for the foreseeable future does not expect to pay, dividends on its shares of common stock.

The inputs and assumptions used to estimate the fair value of share-based payment awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different inputs and assumptions, the Company’s share-based compensation expense could be materially different for future awards.

The grant-date fair value of stock options was estimated at the time of grant using the following weighted-average inputs and assumptions in the Black-Scholes option pricing model:

	Nine Months Ended
	September 30,
	2023			2022
Weighted-average expected volatility		59.43	%		52.36	%
Weighted-average expected term (years)		5.71			6.25
Weighted-average expected risk-free interest rate		3.87	%		2.27	%
Dividend yield		—			—
Weighted-average fair value of options granted	$	0.57		$	2.79

Restricted Stock Units

The following tables summarize the Company’s RSU activity:

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of RSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2023		504,420		$	4.22		2.94	$	2,127,734
Granted		745,000		$	0.81
Exercised/released		(154,674	)	$	4.36
Cancelled/forfeited		(260,639	)	$	2.20
Balance at September 30, 2023		834,107		$	1.77		2.18	$	1,480,161

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of RSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2022		91,438		$	32.91		2.17	$	2,982,931
Granted		452,702		$	4.70
Exercised/released		(55,634	)	$	20.62
Cancelled/forfeited		(46,240	)	$	21.63
Balance at September 30, 2022		442,266		$	6.74		2.99	$	2,980,838

The Company estimates the fair value of each restricted stock unit using the fair value of the Company’s stock on the date of grant.

Market-Based Stock Units

The following tables summarize the Company’s MSU activity:

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of MSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2023		31,083		$	43.53		0.60	$	1,353,043
Granted		600,000		$	0.08
Exercised/released		—		$	—
Cancelled/forfeited		(9,769	)	$	43.53
Balance at September 30, 2023		621,314		$	1.57		0.85	$	977,558

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of MSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2022		160,301		$	43.53		1.20	$	6,977,903
Granted		—		$	—
Exercised/released		—		$	—
Cancelled/forfeited		(129,218	)	$	43.53
Balance at September 30, 2022		31,083		$	43.53		0.73	$	1,353,043

These MSUs vest upon the 30-day weighted average stock price reaching or exceeding established targets, after reaching certain time targets. We estimate the grant-date fair value of the MSUs using a Monte Carlo simulation which requires assumptions for expected volatility, risk-free rate of return and dividend yield. Expected volatility within the index are derived using historical volatility of a selected peer group over a period equal to the length of the performance period. We base the risk-free rate of return on the yield of a zero-coupon U.S. Treasury bond with a maturity equal to the performance period and assume a 0% dividend rate. Compensation expense for these MSUs is recognized over the requisite service period regardless of whether the market conditions are satisfied.

Employee Stock Purchase Plan

On September 25, 2020, the Company established an Employee Stock Purchase Plan (“ESPP”) which allows employees of the Company to purchase common stock of the Company through accumulated payroll deductions. Offerings under this plan have a duration of six months. On the exercise date, the participant may acquire a maximum of 650 shares per participant, per offering period, at the lower of 85% of the market value of a share of our common stock on the enrollment date or the exercise date. Participants may terminate their interest in a given offering or a given exercise period by withdrawing all of their accumulated payroll deductions at any time prior to the end of the offering period. The fair value of the estimated number of shares to be issued under each offering was determined using a component valuation model. This plan was terminated in the fourth quarter of 2022.

Stock-Based Compensation

Stock-based compensation expense is recognized ratably over the requisite service period for all awards. The following tables summarize the Company’s stock-based compensation recorded as a result of applying the provisions of ASC 718 to equity awards:

	Three Months Ended		Nine Months Ended			Unrecognized Compensation Cost Related to Non-Vested Awards as of		Weighted-Average Remaining Vesting Period as of
	September 30, 2023		September 30, 2023			September 30, 2023		September 30, 2023 (years)
Stock options	$	221,106	$	382,790		$	728,426		2.59
RSUs		127,252		481,881			1,296,981		2.34
MSUs		16,578		(46,024	)		56,830		0.75
Total stock-based compensation	$	364,936	$	818,647		$	2,082,236		2.79
Cost of goods sold	$	146	$	30		$	3,450		1.87
General and administrative		195,458		617,382			1,913,478		2.49
Sales and marketing		169,332		201,235			165,308		1.25
Total stock-based compensation	$	364,936	$	818,647		$	2,082,236		2.79

	Three Months Ended		Nine Months Ended			Unrecognized Compensation Cost Related to Non-Vested Awards as of		Weighted-Average Remaining Vesting Period as of
	September 30, 2022		September 30, 2022			December 31, 2022		December 31, 2022 (years)
Stock options	$	96,897	$	283,754		$	1,173,758		3.24
RSUs		341,798		1,082,674			1,707,145		2.91
MSUs		43,380		(1,089,864	)		71,059		1.09
ESPP		1,351		8,416			—		—
Total stock-based compensation	$	483,426	$	284,980		$	2,951,962		3.07
Cost of goods sold	$	8,384	$	33,890		$	14,354		2.56
General and administrative		462,474		148,505			2,734,728		2.93
Research and product development		2,575		(3,492	)		2,517		0.73
Sales and marketing		9,993		106,077			200,363		3.84
Total stock-based compensation	$	483,426	$	284,980		$	2,951,962		3.07

There were forfeitures of MSU awards of certain members of executive leadership of $0 and $149,735 for the three and nine months ended September 30, 2023, and of $0 and $1,785,125 during the three and nine months ended September 30, 2022, respectively, representing discrete reversals of stock compensation expense to the periods.

XML

Note 9 - Earnings Per Share

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Earnings Per Share [Text Block]

9. Earnings per Share

Basic earnings (loss) per share is determined by dividing the net loss attributable to Laird Superfood, Inc. common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is similarly determined, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Dilutive potential common shares consist of employee stock options, RSUs, and MSUs. The dilutive effect of employee stock options, RSUs, and MSUs by the Company are calculated using the treasury stock method. Basic earnings per share is reconciled to diluted earnings per share in the following table:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net loss	$	(2,654,884	)	$	(5,738,209	)	$	(10,306,040	)	$	(24,782,131	)
Weighted average shares outstanding - basic and diluted		9,337,789			9,178,533			9,279,541			9,136,071
Basic and diluted:
Net loss per share, basic and diluted	$	(0.28	)	$	(0.63	)	$	(1.11	)	$	(2.71	)
Common stock options, restricted stock awards, and market-based stock awards excluded due to anti-dilutive effect		2,716,761			1,280,712			2,716,761			1,280,712

XML

Note 10 - Concentrations

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

10. Concentrations

The Company had 85% of trade accounts receivable from three customers as of September 30, 2023. The Company had 68% of trade accounts receivable from two customers as of December 31, 2022.

The Company had no significant accounts payable concentrations due to a vendor as of September 30, 2023. The Company had 41% of accounts payable due to two vendors as of December 31, 2022.

The Company sold a substantial portion of products to three customers (50%) and three customers (46%), respectively, for the three and nine months ended September 30, 2023. As of September 30, 2023, the amount due from these customers was $2,439,551. The Company sold a substantial portion of products to two customers (21%) and no customers for the three and nine months ended September 30, 2022. As of September 30, 2022, the amount due from these customers included in accounts receivable was $1,134,994.

The Company purchased a substantial portion of products from two suppliers (52%) and two suppliers (40%), respectively, for the three and nine months ended September 30, 2023. The Company purchased a substantial portion of products from three suppliers (68%) and one supplier (48%), respectively, for the three and nine months ended September 30, 2022.

In addition, our top suppliers are in a similar geographic area, which increases the risk of significant supply disruptions from local and regional events. Vietnam geographically accounted for approximately 29% and 17%, respectively, of our total raw materials and packaging purchases for the three and nine months ended September 30, 2023. Vietnam geographically accounted for approximately 41% and 48%, respectively, of our total raw materials and packaging purchases for the three and nine months ended September 30, 2022.

XML

Note 11 - Related Party

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

11. Related Party

FASB ASC Topic 850, Related Party Disclosures, requires that information about transactions with related parties that would influence decision making shall be disclosed so that users of the financial statements can evaluate their significance. The Company conducts business with suppliers and service providers who are also stockholders of the Company. From time to time, service providers are offered shares of common stock as compensation for their services. Shares provided as compensation are calculated based on the grant date fair value of the service provided. Additional material related party transactions are noted below.

License Agreements

On May 26, 2020, the Company executed a License and Preservation Agreement which superseded the predecessor license and preservation agreement with both Mr. Hamilton and Ms. Reece. Among other modifications, the agreement (i) modified certain approval rights, (ii) modified certain assignment, change of control and indemnification provisions, and (iii) granted the Company the right to extend the term of the agreement for additional ten-year terms upon the expiration of the initial one-hundred-year term. No additional consideration was exchanged in connection with the agreement. See additional discussion related to the 2020 License in Note 1 of the unaudited consolidated condensed financial statements.

Marketing Agreements

The Company has an influencer agreement with Gabby Reece to provide certain marketing services. In connection with these services, in the three and nine months ended September 30, 2023, advertising expenses totaling $141,712 and $435,084, respectively, were included in sales and marketing expenses in the unaudited consolidated condensed statements of operations. In the three and nine months ended September 30, 2022, advertising expenses totaling $19,500 and $52,750, respectively, were included in sales and marketing expenses in the unaudited consolidated condensed statements of operations. As of September 30, 2023 and December 31, 2022, amounts payable to Gabby Reece of $56,574 and $16,500, respectively, included in related party liabilities in the unaudited consolidated condensed balance sheets.

XML

Note 12 - Revenue Recognition

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

12. Revenue Recognition

The Company’s primary source of revenue is sales of coffee creamers, hydration and beverage enhancing supplements, harvest snacks and other food items, and coffee, tea and hot chocolate products. The Company recognizes revenue when control of the promised good is transferred to the customer and in amounts that the Company expects to collect. The timing of revenue recognition takes into consideration the various shipping terms applicable to the Company’s sales. Each delivery or shipment made to a third-party customer is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. The Company is entitled to collect the sales price under normal credit terms. Additionally, the Company estimates the impact of certain common practices employed by us and other manufacturers of consumer products, such as scan-based trading, product rebate and other pricing allowances, product returns, trade promotions, sales broker commissions and slotting fees. These estimates are recorded at the end of each reporting period.

In accordance with ASC 606, the Company disaggregates net sales from contracts with customers based on the characteristics of the products sold:

	Three Months Ended September 30,
	2023						2022
	$			% of Total			$			% of Total
Coffee creamers	$	5,795,991			63	%	$	4,716,650			53	%
Hydration and beverage enhancing supplements		1,726,512			19	%		1,061,136			12	%
Harvest snacks and other food items		1,747,873			19	%		1,935,812			22	%
Coffee, tea, and hot chocolate products		1,990,013			22	%		1,455,888			16	%
Other		132,319			1	%		437,210			5	%
Gross sales		11,392,708			124	%		9,606,696			108	%
Shipping income		214,982			2	%		289,505			3	%
Returns and discounts		(2,427,909	)		(26	)%		(1,051,356	)		(11	)%
Sales, net	$	9,179,781			100	%	$	8,844,845			100	%

	Nine Months Ended September 30,
	2023						2022
	$			% of Total			$			% of Total
Coffee creamers	$	15,550,157			62	%	$	14,866,032			55	%
Hydration and beverage enhancing supplements		3,395,671			14	%		3,815,346			14	%
Harvest snacks and other food items		5,345,915			21	%		5,336,043			20	%
Coffee, tea, and hot chocolate products		5,932,745			24	%		4,840,215			18	%
Other		287,001			1	%		1,094,924			4	%
Gross sales		30,511,489			122	%		29,952,560			111	%
Shipping income		778,051			3	%		829,107			3	%
Returns and discounts		(6,272,730	)		(25	)%		(3,922,803	)		(14	)%
Sales, net	$	25,016,810			100	%	$	26,858,864			100	%

The Company generates revenue through two channels: e-commerce and wholesale:

	Three Months Ended September 30,
	2023					2022
	$		% of Total			$		% of Total
E-commerce	$	4,842,389		53	%	$	5,808,186		66	%
Wholesale		4,337,392		47	%		3,036,659		34	%
Sales, net	$	9,179,781		100	%	$	8,844,845		100	%

	Nine Months Ended September 30,
	2023					2022
	$		% of Total			$		% of Total
E-commerce	$	13,409,443		54	%	$	16,410,956		61	%
Wholesale		11,607,367		46	%		10,447,908		39	%
Sales, net	$	25,016,810		100	%	$	26,858,864		100	%

Receivables from contracts with customers are included in accounts receivable. Contract assets include deferred cost of goods sold associated with deferred revenue and are included in finished goods inventories. Contract liabilities include deferred revenue, customer deposits, rewards programs, and refund liabilities, and are included in accrued expenses. The balances of receivables from contracts with customers, contract assets, and contract liabilities were as follow:

	January 1,			December 31,			September 30,
	2022			2022			2023
Accounts receivable, net	$	1,268,718		$	1,494,469		$	2,186,645
Contract assets	$	8,316		$	57,249		$	—
Contract liabilities	$	(467,861	)	$	(729,667	)	$	(625,557	)

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Accounting

The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and rules and regulations of the Securities and Exchange Commission (“SEC”). Operating results include the three and nine months ended September 30, 2023 and 2022. Certain information in footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

All significant intercompany accounts and transactions have been eliminated in our accompanying unaudited consolidated condensed financial statements.

Comparability of Prior Year Financial Data, Policy [Policy Text Block]

Unaudited Interim Consolidated Condensed Financial Information

In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial position and its results of operations, changes in stockholders’ equity and cash flows. The accompanying unaudited consolidated condensed financial statements and related financial information should be read in conjunction with the Company's fiscal year 2022 Form 10-K filed with the SEC on March 16, 2023. The unaudited consolidated condensed balance sheet as of December 31, 2022 was derived from the audited annual consolidated financial statements. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2023.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of the unaudited consolidated condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience, known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although management believes its estimates and assumptions are reasonable when made, they are based upon information available at the time they are made. Management evaluates the estimates and assumptions on an ongoing basis and, if necessary, makes adjustments. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions and given the subjective element of the estimates and assumptions made, actual results may differ from estimated results. The most significant estimates and judgments include those related to allowances for doubtful accounts and returns, inventory obsolescence, goodwill, intangible assets, valuation allowance for deferred taxes, reserves on prepaid expenses, the discount rates used in determining right of use assets and related lease liabilities, valuation of inventory, trade and sales promotion liabilities, and fair value of stock-based compensation.

Segment Reporting, Policy [Policy Text Block]

Segment reporting

The Company currently has one operating segment. In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company considers operating segments to be components of the Company’s business for which separate financial information is available and is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Management reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has a single operating and reportable segment.

Substantially all product sales for the periods provided were derived from domestic sales.

See Note 12 for additional information regarding sales by platform within the Company’s single segment.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash are highly liquid instruments with an original maturity of three months or less when purchased. For the purposes of the unaudited consolidated condensed statements of cash flows, the Company includes cash on hand, cash in clearing accounts, cash on deposit with financial institutions, investments with an original maturity of three months or less, and restricted cash in determining the total balance.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited consolidated condensed balance sheets.

	September 30,		December 31,
	2023		2022
Cash and cash equivalents	$	7,136,639	$	17,293,959
Restricted cash		288,411		515,843
Total cash, cash equivalents, and restricted cash	$	7,425,050	$	17,809,802

Amounts in restricted cash represent those that are required to be set aside by the following contractual agreements:

● On December 3, 2020, the Company entered into an agreement with Danone Manifesto Ventures, PBC, which provided the Company $298,103 in funds for the purpose of supporting three COVID-19 relief projects. As of September 30, 2023 and December 31, 2023, cash equivalents in the amount of $99,525 were restricted under this agreement. During the three and nine months ended September 30, 2023, we contributed $0 to these projects. During the three and nine months ended September 30, 2022, we contributed $1,864 and $16,703, respectively, to these projects. The restriction will be released upon the completion of the projects.

● Cash equivalents of $530,000 were pledged to secure our company credit card limits. As of  September 30, 2023 and December 31, 2022, respectively, $188,886 and $416,318 of these funds were restricted to collateralize borrowings against these company credit cards. 

Cash, cash equivalents, and restricted cash balances that exceeded the Federal Deposit Insurance Corporation (“FDIC”) insurable limits as of September 30, 2023 and December 31, 2022 totaled $416,684 and $2,747,721, respectively. The Company has never experienced any losses related to these balances. The Company’s cash, cash equivalents, and restricted cash are with what the Company believes to be a high-quality financial institution and considers the risks associated with these funds in excess of FDIC insurable limits to be low.

Accounts Receivable [Policy Text Block]

Accounts Receivable, net

Accounts receivable, net consists principally of trade receivables, which are recorded at the invoiced amount, net of allowances for credit loss. Trade receivables do not bear interest. Receivables are considered past due or delinquent according to contract terms. Management closely monitors outstanding balances and writes off accounts receivable as they are determined uncollectible. The primary indicators of the credit quality of our receivables are aging and payment history and are assessed on a quarterly basis. Our credit loss exposure is concentrated in our accounts receivable portfolio. Our allowance for credit losses is calculated using a loss-rate method based on historical experience and reasonable forecasts. Based on these factors, management determined an allowance for credit loss of $323,136 and $77,436 as of September 30, 2023 and December 31, 2022, respectively.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is stated at the lower of cost or net realizable value, or the value of consideration that can be received upon sale of said product, and approximate costs determined on the first-in first-out basis and consists primarily of raw materials and packaging and finished goods and includes co-packing fees, indirect labor and allocable overhead. The following table presents the components of inventory, net of reserves, as of:

	September 30,		December 31,
	2023		2022
Raw materials and packaging	$	1,854,333	$	3,764,804
Finished goods		4,698,238		1,931,761
Total inventory, net	$	6,552,571	$	5,696,565

The Company periodically reviews the value of items in inventory and provides write-offs of inventory based on current market assessment, which are charged to cost of goods sold. For the three and nine months ended September 30, 2023, the Company recorded $881,721 and $1,260,580, respectively, of inventory obsolescence and disposal costs. For the three and nine months ended September 30, 2022, the Company recorded $236,946 and $342,178, respectively, of inventory obsolescence and disposal costs.

As of September 30, 2023 inventory reserves totaled $1,614,840. This is comprised of estimated reserves based on inventory turnover, quantities on hand, and expiration dates of $473,888, as well as raw materials and finished goods specifically identified for disposal related to a product quality issue of $838,276 and discontinued inventories of $302,676. As of December 31, 2022, inventory reserves totaled $1,545,033. This was comprised of estimated reserves based on inventory turnover, quantities on hand, and expiration dates of $746,966, reserves specifically identified for disposal related to a product quality issue of $559,042 and discontinued inventories following exit activities of $239,025.

As of September 30, 2023 and December 31, 2022, the Company had a total of $482,585 and $897,108, respectively, of prepayments for future raw materials inventory which are included in prepaid expenses and other current assets, net on the unaudited consolidated condensed balance sheets.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment, net

Property and equipment are valued at cost, net of accumulated depreciation. Expenditures for maintenance and repairs that do not extend the useful life or increase the value of the assets are charged to expense in the period incurred. Additions and betterments are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for depreciation purposes for furniture and factory equipment range from 3 to 7 years. The useful life for leasehold improvements is the lesser of the lease term or the useful life. Construction in progress is not depreciated until such a time that the assets are completed and placed into service.

Assets, Held for Sale [Policy Text Block]

Fixed Assets Held-for-Sale

Long-lived assets identified by the Company for sale, which have met all criteria to be classified as held for sale, are disclosed separately on the unaudited consolidated condensed balance sheets. Fixed assets held for sale are measured at the lower of the assets carrying amount or fair value less costs to sell, and depreciation is no longer recorded. See Note 4 for more information.

Lessee, Leases [Policy Text Block]

Leases

In accordance with ASC 842, Leases, the Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We categorize leases at their inception as either operating, finance, or short-term leases and determine if an arrangement contains an embedded lease. For arrangements that meet the definition of a lease, the Company determines the initial classification and measurement of its right-of-use asset and lease liability at the lease commencement date and, thereafter, if modified. The lease term includes any renewal options that the Company is reasonably assured to exercise. Lease agreements effective during the three and nine months ended September 30, 2023 and 2022 cover, or covered, office space, warehouse and distribution space, vehicles, and equipment. All of our long-term leases are operating leases. Operating leases are included in right-of-use assets, current lease liabilities, and long-term lease liabilities in our unaudited consolidated condensed balance sheets.

In addition to rent, the leases may require the Company to pay additional costs, such as utilities, maintenance and other operating costs, which are generally referred to as non-lease components. The Company has elected to not separate lease and non-lease components. Only the fixed costs for lease components and their associated non-lease components are accounted for as a single lease component and recognized as part of a right-of-use asset and liability. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rate. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.

Leased assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use a secured incremental borrowing rate as the discount rate for the present value of lease payments when the rate implicit in the contract is not readily determinable. For operating leases with variable payments dependent upon an index or rate that commenced subsequent to the adoption of ASC 842, Leases, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the operating lease liability as they cannot be reasonably estimated and are recognized in the period in which the obligation for those payments is incurred. Leases that have a term of twelve months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included on the unaudited consolidated condensed balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date we have the right to control the property.

We are the lessor in a sublease agreement. This lease is an operating lease and is recognized straight line over the lease term with a related sublease rental asset accounting for abatements and initial direct costs.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

The Company recognizes revenue in accordance with the five-step model as prescribed by ASC 606, Revenue from Contracts with Customers, in which the Company evaluates the transfer of promised goods or services and recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the Company satisfies a performance obligation. The Company has elected, as a practical expedient, to account for the shipping and handling as fulfillment costs, rather than as a separate performance obligation. Methodologies for determining these provisions are dependent on customer pricing and promotional practices. The Company records reductions to revenue and a refund liability for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates are based on industry-based historical data, historical sales returns, if any, analysis of credit memo data, and other factors known at the time. See Note 12 for additional information regarding revenue recognition.

Cost of Goods and Service [Policy Text Block]

Cost of Goods Sold

Cost of goods sold includes material, packaging, co-packing fees, distribution freight, indirect labor and overhead costs incurred in the storage and distribution of products sold in the period. Material costs include the cost of products purchased. In 2023, labor and overhead costs consisted of indirect labor, inbound freight for raw materials and warehouse rent, and in 2022 also included wages and benefits for manufacturing, planning, and logistics personnel, depreciation, and facility costs.

Shipping And Handling [Policy Text Block]

Shipping and Handling

Costs of shipping and handling related to sales revenue are included in cost of goods sold. Shipping and handling costs totaled $1,132,930 and $4,002,244, respectively, for the three and nine months ended September 30, 2023. Shipping and handling costs totaled $1,622,290 and $4,763,845 for the three and nine months ended September 30, 2022. Income generated from shipping costs billed through to customers was included in net sales in the unaudited consolidated condensed statements of operations. Shipping income totaled $214,982 and $778,051, respectively, for the three and nine months ended September 30, 2023. Shipping income totaled $289,505 and $829,107, respectively, for the three and nine months ended September 30, 2022.

Research and Development Expense, Policy [Policy Text Block]

Research and Product Development

Amounts spent on research and development activities are expensed as incurred as research and product development expense on the unaudited consolidated condensed statements of operations. Research and product development expense was $40,123 and $206,313, respectively, for the three and nine months ended September 30, 2023. Research and product development expense was $115,077 and $335,377, respectively, for the three and nine months ended September 30, 2022.

Advertising Cost [Policy Text Block]

Advertising

Advertising costs are expensed when incurred. Advertising expenses for the three and nine months ended September 30, 2023 were $1,137,488 and $3,454,485, respectively. Advertising expenses for the three and nine months ended September 30, 2022 were $1,832,172 and $5,191,374, respectively.

Marketing Costs [Policy Text Block]

Marketing

Marketing costs are expensed when incurred, and are included in other sales and marketing expenses on the unaudited consolidated condensed statements of operations. Marketing expenses for the three and nine months ended September 30, 2023 were $1,226,909 and $3,012,473, respectively. Marketing expenses for the three and nine months ended September 30, 2022 were $824,747 and $2,983,417, respectively.

Income Tax, Policy [Policy Text Block]

Income Taxes

Income taxes provide for the tax effects of transactions reported in the unaudited consolidated condensed financial statements and consist of income taxes currently due and deferred tax assets and liabilities. The Company may also be subject to interest and penalties from taxing authorities on underpayment of income taxes. In such an event, interest and penalties are included in income tax expense. Deferred tax assets and liabilities are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to depreciable assets (use of different depreciation methods and lives for financial statement and income tax purposes), stock-based compensation, right of use assets, and net operating losses. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Due to the historical net loss position of the Company, the Company recorded a deferred tax valuation allowance of $26,661,284 and $23,928,265 as of  September 30, 2023 and  December 31, 2022, respectively.

Share-Based Payment Arrangement [Policy Text Block]

Stock Incentive Plan

The compensation cost relating to share-based payment transactions is recognized in the unaudited consolidated condensed financial statements. The cost is measured based on the grant date fair value of the equity or liability instruments issued. Compensation cost for all employee stock awards is calculated and recognized over the employees’ service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. Compensation cost for all consultant stock awards is calculated and recognized over the consultant’s service period based on the grant date fair value of the equity or liability instruments issued. Upon exercise of stock option awards or vesting of restricted stock units ("RSUs") and market-based stock units ("MSUs"), recipients are issued shares of common stock. Pre-vesting forfeitures result in the reversal of all compensation cost as of the date of termination; post-vesting cancellation does not.

Earnings Per Share, Policy [Policy Text Block]

Earnings per Share

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock that were outstanding during the period. Diluted earnings per share is similarly determined, except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if all dilutive potential common stock had been issued and is calculated under the treasury stock method. Due to the Company’s net loss, all outstanding stock options, RSUs, and MSUs are anti-dilutive and excluded.

Goodwill and Intangible Assets, Intangible Assets, Indefinite-Lived, Policy [Policy Text Block]

License Agreement – Indefinite Lived Intangible Asset

On August 3, 2015, the Company entered into a license agreement with the Company’s co-founder Laird Hamilton (the “LH License”). The LH License stated Mr. Hamilton’s contribution to the Company was in the form of intellectual property, granting the Company the right to use Mr. Hamilton’s name and likeness. This contribution, which was reported on the unaudited consolidated condensed balance sheets as of September 30, 2023 and December 31, 2022, was valued at $132,000 and satisfied with the issuance of 660,000 shares of common stock. The Company has determined that the intangible asset associated with the LH License has an indefinite life, as there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company.

On May 2, 2018, the Company entered into a license agreement with Gabrielle Reece, who is married to Mr. Hamilton (the “GR License”). Pursuant to the GR License, Ms. Reece granted the Company rights to her name, signature, voice, picture, image, likeness and biographical information commencing on July 1, 2015. This contribution, which is reported on the unaudited consolidated condensed balance sheets as of September 30, 2023 and December 31, 2022, was valued at $100 based on the consideration exchanged. The Company has determined that the intangible asset associated with the GR License has an indefinite life, as there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company.

On November 19, 2018, the Company executed a License and Preservation Agreement with Mr. Hamilton and Ms. Reece which superseded the predecessor license agreements with both individuals. The agreement added specific terms related to non-competition and allowable usage of the property under the license. No additional consideration was exchanged in connection with the agreement and the life of the agreement was set at 100 years.

On May 26, 2020, the Company executed a License and Preservation Agreement with Mr. Hamilton and Ms. Reece (the “2020 License”), which superseded the predecessor license and preservation agreement with both individuals. Among other modifications, the agreement (i) modified certain approval rights of Mr. Hamilton and Ms. Reece for use of their respective images, signatures, voices, and names (other than those owned by the Company), rights of publicity and common law and statutory rights to the foregoing in the Company’s products, (ii) modified certain assignment, change of control and indemnification provisions, and (iii) granted the Company the right to extend the term of the agreement for additional ten-year terms upon the expiration of the initial one-hundred year term. No additional consideration was exchanged in connection with the agreement. As indefinite-lived intangibles, the Company assesses qualitative factors each reporting period to determine whether events and circumstances exist that indicate that the fair values of the licensing agreements were less than the carrying amounts. Upon considering these factors, the Company determined it was more likely than not that the fair value of the 2020 License was not less than the carrying amount; therefore, the Company recognized no impairment for the three and nine months ended September 30, 2023 and 2022.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Definite Lived Intangible Assets, net

Definite lived intangible assets are valued at cost, net of accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for amortization purposes range between 3 and 10 years. Amortization expense is allocated to general and administrative expense. For the three and nine months ended September 30, 2023, amortization expenses were $51,721 and $155,165, respectively. For the three and nine months ended September 30, 2022, amortization expenses were $104,201 and $349,424, respectively. The Company assesses qualitative factors each reporting period to determine whether events and circumstances exist that indicate that the fair values of the definite lived intangible assets were less than the carrying amounts. There were no impairment charges in the three and nine months ended September 30, 2023. In the last month of the first quarter of 2022, management determined the sustained decline in stock price, coupled with changes in market conditions, was a triggering event. Upon considering these factors, the Company determined it was more likely than not that the fair value was less than the carrying amounts of long-lived intangible assets; therefore, the Company recognized impairment charges of $0 and $1,540,000 for the three and nine months ended September 30, 2022, respectively. See Note 5 for more information.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

Goodwill represents the excess of purchase price over the assigned fair values of the assets acquired and liabilities assumed in conjunction with a business combination. Goodwill is reviewed for impairment annually as of December 31, or whenever events occur or circumstances change that indicate goodwill may be impaired. In testing goodwill for impairment, the Company has the option to perform a qualitative assessment to determine whether the existence of events or circumstances indicate that it is more-likely-than-not (more than 50%) that the fair value of goodwill is less than its carrying amount. When performing a qualitative assessment, the Company evaluates factors such as industry and market conditions, cost factors, overall financial performance, and other relevant entity specific events and changes. If the qualitative assessment indicates that it is more-likely-than-not that the fair value of goodwill is less than its carrying amount, or if the Company chooses not to perform the qualitative assessment, then a quantitative assessment is performed to determine the reporting unit’s fair value. If the carrying value exceeds its fair value, then an impairment loss is recognized for the amount of the excess of the carrying amount over the fair value, not to exceed the total amount of goodwill. In the last month of the first quarter of 2022, management had determined the sustained decline in stock price, coupled with a change in market conditions, was determined to be a triggering event. The Company performed a qualitative and quantitative analysis on the Company's goodwill for impairment concluding that the fair value of goodwill as calculated using a discounted cash flow model exceeds the carrying value, indicating that goodwill was impaired. The Company recorded goodwill impairment charges of $0 and $6,486,000, respectively, during the three and nine months ended September 30, 2022. There was no goodwill as of September 30, 2023 or December 31, 2022.

Pension and Other Postretirement Plans, Nonpension Benefits, Policy [Policy Text Block]

Employee Benefit Plan

The Company sponsors a defined contribution 401(k) plan (the “401(k) plan”) for all employees 18 years or older. The 401(k) plan was initiated on July 1, 2018. Employee contributions may be made on a before-tax basis, limited by Internal Revenue Service regulations. In 2023, the Company established a 3% safe harbor contribution to be remitted in the first quarter of 2024. As of September 30, 2023, there were $135,722 of 401(k) contribution liabilities included in accrued expenses on the unaudited consolidated condensed balance sheets. The Company recorded related expenses as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Cost of goods sold	$	2,330	$	9,624
General and administrative		16,359		76,235
Research and development		695		2,603
Sales and marketing		13,296		37,972
Total 401(k) contribution expense	$	32,680	$	126,434

Jobs Act Election [Policy Text Block]

JOBS Act Accounting Election

The Company qualifies as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. An emerging growth company can elect to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. Currently, the Company has elected to file as an emerging growth company defined under the JOBS Act, and as such, these unaudited consolidated condensed financial statements may not be comparable to the financial statements of companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Costs Associated with Exit or Disposal Activities or Restructurings, Policy [Policy Text Block]

Exit and Disposal Costs

The Company follows the guidance in ASC 420, Exit or Disposal Cost Obligations, to record exit and disposal related costs. The Company recorded $8.7 million of exit and disposal costs in the fourth quarter of 2022 and insignificant residual costs in the nine months ended September 30, 2023, associated with the closure of the Sisters, Oregon manufacturing sites and subsequent transition to a co-manufacturing model for all production and fulfillment. ASC 420 requires the recognition of costs associated with exit or disposal activities when they are incurred, generally the cease-use date. Exit and disposal activities are summarized below:

● We entered into a lease termination agreement on December 12, 2022. All production activities taking place in the related properties ceased in December 2022. Pursuant to this agreement, our lease was fully terminated as of January 31, 2023, and we owed a total of $1.6 million in early lease termination costs of which $0.5 million was remitted in December 2022 and $1.1 million was satisfied in January 2023. We recognized lease termination costs, including the elimination of right of use assets net of lease liabilities, and early lease termination penalties, of $3.6 million which are included in general and administrative expenses for the year ended December 31, 2022.

● We signed an asset purchase agreement with our new co-manufacturer for the sale of the majority of our production equipment for a purchase price of $0.8 million and an agreement to sell certain leasehold improvements for $0.1 million. Certain equipment, furniture, and leasehold improvements were abandoned upon exit of the lease. The net book value of this property exceeds the recoverability of the assets. As such, we recorded impairment charges of property, plant, and equipment and internal-use production software of $3.1 million and $0.1 million, respectively, which are included in general and administrative expenses for the year ended December 31, 2022. Consideration was received in the amount of $0.7 million in the first half of 2023 and consideration receivable of $0.1 million is included in Prepaid and other current assets on the unaudited consolidated condensed balance sheets as of September 30, 2023.

● We incurred one-time termination benefits consisting of severances primarily for operations, production, and fulfillment personnel, of $0.6 million, which are included in general and administrative expenses for the year ended December 31, 2022. These were paid by January 2023. In the first quarter of 2023, we recognized a net reversal of expense of $0.1 million related to severances and forfeitures of stock-based compensation, which are included in general and administrative expenses.

● We moved the majority of our raw materials inventory to our co-manufacturer and the majority of our finished goods inventory to our third-party logistics partners. Because we no longer have storage space in our warehouses, we determined that it was not cost-effective to pay for freight and storage fees to move and house certain inventories at our third-party partners' facilities. As a result, we disposed of, or reserved for disposal, certain inventories remaining at the Sisters, Oregon facilities which were not shipped to our third-party partners' facilities, in the amount of $1.1 million, which are included in cost of goods sold for the year ended December 31, 2022. All such inventory remaining on-hand as of December 31, 2022 was disposed of in January 2023.

● We incurred other costs for moving inventory, IT setup and integration costs, repayment of property tax abatements, and other costs totaling $0.2 million, which were included in general and administrative expenses for the year ended December 31, 2022. We recognize these costs as incurred or when they become realizable.

Contingent Liability Reserve Estimate, Policy [Policy Text Block]

Loss Contingencies

We may be subject to contingencies arising in the ordinary course of business, such as product liability and other product-related litigation, commercial litigation, environmental claims and proceedings, government investigations and guarantees and indemnifications. In assessing contingencies related to legal and environmental proceedings that are pending against the Company, or unasserted claims that are probable of being asserted, we record accruals for these contingencies to the extent that we conclude that a loss is both probable and reasonably estimable. If an amount within a range of loss appears to be a better estimate than any other amount within the range, we accrue that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, we accrue the lowest amount in the range. We record anticipated recoveries under existing insurance contracts when recovery is assured.

Going Concern [Policy Text Block]

Going Concern

The unaudited consolidated condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the unaudited consolidated condensed financial statements, the Company has $7.4 million of cash and cash equivalents, and cash used in operations was $10.9 million in the nine months ended September 30, 2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Absent any other action, the Company will require additional liquidity to continue its operations over the next 12 months from the date of this Quarterly Report on Form 10-Q.

At the end of the fourth quarter of 2022, the Company transitioned to a variable cost third-party co-manufacturing business model. As part of this transition, the Company greatly reduced overhead costs while simultaneously improving margins. Cash used in operations in the first nine months of 2023 is inclusive of costs which were incurred in connection with the exit and disposal activities, annual bonus payments, discounts for replacement orders, as well as out of stock items following a product quality issue which resulted in reduced top line revenue for the impacted SKUs in the quarter. These factors exacerbate the cash used in the first half of the year. Even with a product quality issue impacting net sales and cost of goods sold we have already realized margin improvements to 26.4% in the first nine months of 2023 compared to 14.5% for fiscal year 2022. Management has specific plans to further improve gross margins, optimize marketing spend, and cut selling, general, and administrative costs later in the year which management believes will significantly reduce expected future cash outlays.

However, the Company’s cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The unaudited consolidated condensed financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

Recoveries on Claims for Business Interruptions [Policy Text Block]

Recoveries on claims for business interruptions

In the first quarter of 2023, we discovered a product quality issue with coconut milk powder from one of our suppliers and immediately initiated a voluntary product withdrawal and contacted all impacted wholesale customers and e-commerce consumers to aggressively pull back as much as of the affected product as possible. In connection with this withdrawal, we incurred costs associated with inventory obsolescence, quality testing, and remedial discounts and replacement orders of $0.5 million in the fourth quarter of 2022 and $0.4 million in the first quarter of 2023. In addition, we implemented a robust new sensory testing program to prevent future quality issues. In the third quarter of 2023, we reached settlement with the vendor and recognized $0.2 million of recoveries which were included in cost of goods sold in the unaudited consolidated condensed statements of operations. As of September 30, 2023, $0.2 million of these recoveries were included in other current assets on the unaudited consolidated condensed balance sheets. 

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments,” as modified by subsequently issued ASUs 2018-19 (issued November 2018), 2019-04 (issued April 2019), 2019-05 (issued May 2019), 2019-11 (issued November 2019), 2020-02 (issued February 2020) and 2020-03 (issued March 2020). Topic 326 modifies the measurement and recognition of credit losses for most financial assets and certain other instruments, requiring the use of forward-looking expected credit loss models based on historical experience, current economic conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount, which may result in earlier recognition of credit losses under the new standard. It also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. The standard requires a modified retrospective approach with a cumulative effect adjustment to retained earnings. ASU 2016-13 is effective for the Company’s annual periods beginning after December 15, 2022, including interim periods within those fiscal years. We adopted ASU 2016-13 in the first quarter of 2023. The adoption had no impact on our unaudited consolidated condensed financial position, results of operations, or cash flows.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before the unaudited consolidated condensed financial statements are available to be issued. The Company has evaluated events and transactions subsequent to September 30, 2023 for potential recognition of disclosure in the unaudited consolidated condensed financial statements. There were no such subsequent events.

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2023

Notes Tables

Schedule of Cash and Cash Equivalents [Table Text Block]

	September 30,		December 31,
	2023		2022
Cash and cash equivalents	$	7,136,639	$	17,293,959
Restricted cash		288,411		515,843
Total cash, cash equivalents, and restricted cash	$	7,425,050	$	17,809,802

Schedule of Inventory, Current [Table Text Block]

	September 30,		December 31,
	2023		2022
Raw materials and packaging	$	1,854,333	$	3,764,804
Finished goods		4,698,238		1,931,761
Total inventory, net	$	6,552,571	$	5,696,565

Defined Contribution Plan Disclosures [Table Text Block]

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Cost of goods sold	$	2,330	$	9,624
General and administrative		16,359		76,235
Research and development		695		2,603
Sales and marketing		13,296		37,972
Total 401(k) contribution expense	$	32,680	$	126,434

XML

Note 2 - Prepaid Expense and Other Current Assets (Tables)

9 Months Ended

Sep. 30, 2023

Notes Tables

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block]

	September 30,		December 31,
	2023		2022
Prepaid insurance	$	107,762	$	761,147
Prepaid inventory		482,585		897,108
Prepaid subscriptions and license fees		173,684		292,622
Prepaid advertising		154,033		166,872
Deposits		197,643		134,896
Other current assets		320,328		277,430
Prepaid and other current assets	$	1,436,035	$	2,530,075

XML

Note 4 - Property and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2023

Notes Tables

Property, Plant and Equipment [Table Text Block]

	September 30, 2023							December 31, 2022
	Gross Carrying Amount		Accumulated Depreciation			Net Carrying Amount		Gross Carrying Amount		Accumulated Depreciation			Net Carrying Amount
Factory equipment	$	—	$	—		$	—	$	66,276	$	(43,051	)	$	23,225
Furniture and office equipment		220,190		(107,393	)		112,797		318,795		(211,529	)		107,266
Leasehold improvements		46,276		(20,469	)		25,807		34,946		(15,148	)		19,798
	$	266,466	$	(127,862	)	$	138,604	$	420,017	$	(269,728	)	$	150,289

XML

Note 5 - Goodwill and Intangible Assets, Net (Tables)

9 Months Ended

Sep. 30, 2023

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	September 30, 2023							December 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Trade names (10 years)	$	890,827	$	(80,175	)	$	810,652	$	890,827	$	—		$	890,827
Recipes (10 years)		330,000		(79,750	)		250,250		330,000		(55,000	)		275,000
Social media agreements (3 years)		80,000		(64,444	)		15,556		80,000		(44,444	)		35,556
Software (3 years)		131,709		(71,214	)		60,495		131,710		(40,975	)		90,735
Definite-lived intangible assets		1,432,536		(295,583	)		1,136,953		1,432,537		(140,419	)		1,292,118
Licensing agreements (indefinite)		132,100		—			132,100		132,100		—			132,100
Total intangible assets	$	1,564,636	$	(295,583	)	$	1,269,053	$	1,564,637	$	(140,419	)	$	1,424,218

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

2023 (excluding the nine months ended September 30, 2023)	$	51,721
2024		189,108
2025		149,994
2026		139,899
2027		139,899
Thereafter		466,332
	$	1,136,953

XML

Note 6 - Leases (Tables)

9 Months Ended

Sep. 30, 2023

Notes Tables

Lease, Cost [Table Text Block]

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Operating leases
Operating lease cost	$	38,085	$	114,254
Variable lease cost		5,554		24,022
Operating lease expense		43,639		138,276
Short-term lease rent expense		69,630		242,817
Total rent expense	$	113,269	$	381,093

	Nine Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2022
Operating cash flows - operating leases	$	94,679	$	556,597
Right-of-use assets obtained in exchange for operating lease liabilities	$	344,382	$	5,285,330

	September 30, 2023			September 30, 2022
Weighted-average remaining lease term – operating leases (in years)		3.2			8.1
Weighted-average discount rate – operating leases		6.63	%		3.75	%

Lessee, Operating Lease, Liability, to be Paid, Maturity [Table Text Block]

2023 (excluding the nine months ended September 30, 2023)	$	31,755
2024		138,800
2025		126,714
2026		109,145
2027		56,210
Total		462,624
Less imputed interest		(54,932	)
Operating lease liabilities	$	407,692

Operating Lease, Lease Income [Table Text Block]

	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Operating leases
Operating lease income	$	14,054	$	42,164
Variable lease income		5,318		15,953
Total rental income	$	19,372	$	58,117

	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022
Operating leases
Operating lease income	$	14,055	$	42,164
Variable lease income		5,318		15,953
Total rental income	$	19,373	$	58,117

Lessor, Operating Lease, Payment to be Received, Maturity [Table Text Block]

2023 (excluding the nine months ended September 30, 2023)		30,216
2024		61,640
2025		20,748
Total	$	112,604

XML

Note 7 - Deferred Tax Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2023

Notes Tables

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Nine Months Ended
	September 30, 2023			September 30, 2022
Income tax benefit at statutory rates	$	2,184,272		$	2,968,062
Valuation allowance for deferred tax assets		(2,239,858	)		(2,947,086	)
Stock-based compensation		(16,751	)		(12,642	)
Other benefit, net		59,165			(14,108	)
Reported income tax expense	$	(13,172	)	$	(5,774	)
Effective tax rate:		0.1	%		0.0	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	September 30, 2023			December 31, 2022
Noncurrent deferred tax assets:
Net operating loss carryforwards	$	20,070,340		$	17,428,266
Intangible assets		2,262,377			2,382,397
Property and equipment		1,587,209			1,660,954
Research and development credits		372,587			300,105
Accrued expenses		544,246			766,385
Right of use asset		5,652			524
Bad debt allowance		84,637			20,282
Charitable contributions		40,867			38,557
Unexercised options		1,436,395			1,136,475
Capitalized research and development costs		256,974			194,320
Total noncurrent deferred tax assets		26,661,284			23,928,265
Valuation allowance		(26,661,284	)		(23,928,265	)
Total net deferred tax assets	$	—		$	—

XML

Note 8 - Stock Incentive Plan (Tables)

9 Months Ended

Sep. 30, 2023

Notes Tables

Share-Based Payment Arrangement, Option, Activity [Table Text Block]

				Weighted		Weighted
				Average		Average
	Options			Exercise Price		Contractual		Aggregate
	Activity			(per share)		Term (years)		Intrinsic Value
Balance at January 1, 2023		921,657		$	6.86		8.00	$	—
Granted		700,000		$	0.89
Exercised/released		—		$	—
Cancelled/forfeited		(360,317	)	$	3.52
Balance at September 30, 2023		1,261,340		$	4.50		8.17	$	75,000
Exercisable at September 30, 2023		672,187		$	4.69		7.53	$	9,000

				Weighted		Weighted
				Average		Average
	Options			Exercise Price		Contractual		Aggregate
	Activity			(per share)		Term (years)		Intrinsic Value
Balance at January 1, 2022		747,800		$	11.51		6.57	$	1,143,013
Granted		453,498		$	7.21
Exercised/released		(76,750	)	$	2.14
Cancelled/forfeited		(317,185	)	$	15.25
Balance at September 30, 2022		807,363		$	8.50		7.73	$	—
Exercisable at September 30, 2022		314,343		$	8.72		5.42	$	—

Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Nine Months Ended
	September 30,
	2023			2022
Weighted-average expected volatility		59.43	%		52.36	%
Weighted-average expected term (years)		5.71			6.25
Weighted-average expected risk-free interest rate		3.87	%		2.27	%
Dividend yield		—			—
Weighted-average fair value of options granted	$	0.57		$	2.79

Share-Based Payment Arrangement, Restricted Stock Unit, Activity [Table Text Block]

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of RSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2023		504,420		$	4.22		2.94	$	2,127,734
Granted		745,000		$	0.81
Exercised/released		(154,674	)	$	4.36
Cancelled/forfeited		(260,639	)	$	2.20
Balance at September 30, 2023		834,107		$	1.77		2.18	$	1,480,161

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of RSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2022		91,438		$	32.91		2.17	$	2,982,931
Granted		452,702		$	4.70
Exercised/released		(55,634	)	$	20.62
Cancelled/forfeited		(46,240	)	$	21.63
Balance at September 30, 2022		442,266		$	6.74		2.99	$	2,980,838

Share-Based Payment Arrangement, Activity [Table Text Block]

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of MSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2023		31,083		$	43.53		0.60	$	1,353,043
Granted		600,000		$	0.08
Exercised/released		—		$	—
Cancelled/forfeited		(9,769	)	$	43.53
Balance at September 30, 2023		621,314		$	1.57		0.85	$	977,558

				Weighted Average		Weighted Average
				Grant Date Fair		Remaining Vesting		Aggregate
	Number of MSUs			Value (per share)		Term (years)		Fair Value
Balance at January 1, 2022		160,301		$	43.53		1.20	$	6,977,903
Granted		—		$	—
Exercised/released		—		$	—
Cancelled/forfeited		(129,218	)	$	43.53
Balance at September 30, 2022		31,083		$	43.53		0.73	$	1,353,043

Share-Based Payment Arrangement, Cost by Plan [Table Text Block]

	Three Months Ended		Nine Months Ended			Unrecognized Compensation Cost Related to Non-Vested Awards as of		Weighted-Average Remaining Vesting Period as of
	September 30, 2023		September 30, 2023			September 30, 2023		September 30, 2023 (years)
Stock options	$	221,106	$	382,790		$	728,426		2.59
RSUs		127,252		481,881			1,296,981		2.34
MSUs		16,578		(46,024	)		56,830		0.75
Total stock-based compensation	$	364,936	$	818,647		$	2,082,236		2.79
Cost of goods sold	$	146	$	30		$	3,450		1.87
General and administrative		195,458		617,382			1,913,478		2.49
Sales and marketing		169,332		201,235			165,308		1.25
Total stock-based compensation	$	364,936	$	818,647		$	2,082,236		2.79

	Three Months Ended		Nine Months Ended			Unrecognized Compensation Cost Related to Non-Vested Awards as of		Weighted-Average Remaining Vesting Period as of
	September 30, 2022		September 30, 2022			December 31, 2022		December 31, 2022 (years)
Stock options	$	96,897	$	283,754		$	1,173,758		3.24
RSUs		341,798		1,082,674			1,707,145		2.91
MSUs		43,380		(1,089,864	)		71,059		1.09
ESPP		1,351		8,416			—		—
Total stock-based compensation	$	483,426	$	284,980		$	2,951,962		3.07
Cost of goods sold	$	8,384	$	33,890		$	14,354		2.56
General and administrative		462,474		148,505			2,734,728		2.93
Research and product development		2,575		(3,492	)		2,517		0.73
Sales and marketing		9,993		106,077			200,363		3.84
Total stock-based compensation	$	483,426	$	284,980		$	2,951,962		3.07

XML

Note 9 - Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2023

Notes Tables

Schedule of Earnings Per Share, Basic, by Common Class, Including Two Class Method [Table Text Block]

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net loss	$	(2,654,884	)	$	(5,738,209	)	$	(10,306,040	)	$	(24,782,131	)
Weighted average shares outstanding - basic and diluted		9,337,789			9,178,533			9,279,541			9,136,071
Basic and diluted:
Net loss per share, basic and diluted	$	(0.28	)	$	(0.63	)	$	(1.11	)	$	(2.71	)
Common stock options, restricted stock awards, and market-based stock awards excluded due to anti-dilutive effect		2,716,761			1,280,712			2,716,761			1,280,712

XML

Note 12 - Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2023

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended September 30,
	2023						2022
	$			% of Total			$			% of Total
Coffee creamers	$	5,795,991			63	%	$	4,716,650			53	%
Hydration and beverage enhancing supplements		1,726,512			19	%		1,061,136			12	%
Harvest snacks and other food items		1,747,873			19	%		1,935,812			22	%
Coffee, tea, and hot chocolate products		1,990,013			22	%		1,455,888			16	%
Other		132,319			1	%		437,210			5	%
Gross sales		11,392,708			124	%		9,606,696			108	%
Shipping income		214,982			2	%		289,505			3	%
Returns and discounts		(2,427,909	)		(26	)%		(1,051,356	)		(11	)%
Sales, net	$	9,179,781			100	%	$	8,844,845			100	%

	Nine Months Ended September 30,
	2023						2022
	$			% of Total			$			% of Total
Coffee creamers	$	15,550,157			62	%	$	14,866,032			55	%
Hydration and beverage enhancing supplements		3,395,671			14	%		3,815,346			14	%
Harvest snacks and other food items		5,345,915			21	%		5,336,043			20	%
Coffee, tea, and hot chocolate products		5,932,745			24	%		4,840,215			18	%
Other		287,001			1	%		1,094,924			4	%
Gross sales		30,511,489			122	%		29,952,560			111	%
Shipping income		778,051			3	%		829,107			3	%
Returns and discounts		(6,272,730	)		(25	)%		(3,922,803	)		(14	)%
Sales, net	$	25,016,810			100	%	$	26,858,864			100	%

Disaggregation of Revenue Based on Channels [Table Text Block]

	Three Months Ended September 30,
	2023					2022
	$		% of Total			$		% of Total
E-commerce	$	4,842,389		53	%	$	5,808,186		66	%
Wholesale		4,337,392		47	%		3,036,659		34	%
Sales, net	$	9,179,781		100	%	$	8,844,845		100	%

	Nine Months Ended September 30,
	2023					2022
	$		% of Total			$		% of Total
E-commerce	$	13,409,443		54	%	$	16,410,956		61	%
Wholesale		11,607,367		46	%		10,447,908		39	%
Sales, net	$	25,016,810		100	%	$	26,858,864		100	%

Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]

	January 1,			December 31,			September 30,
	2022			2022			2023
Accounts receivable, net	$	1,268,718		$	1,494,469		$	2,186,645
Contract assets	$	8,316		$	57,249		$	—
Contract liabilities	$	(467,861	)	$	(729,667	)	$	(625,557	)

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details Textual) - USD ($)	1 Months Ended		3 Months Ended				6 Months Ended	9 Months Ended		12 Months Ended
	Jan. 31, 2023	Dec. 31, 2022	Sep. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2023	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Dec. 03, 2020
Cash Collateral for Borrowed Securities			$ 530,000					$ 530,000
Cash, Uninsured Amount		$ 2,747,721	416,684		$ 2,747,721			416,684		$ 2,747,721
Accounts Receivable, Allowance for Credit Loss, Current		77,436	323,136		77,436			323,136		77,436
Inventory Write-down			881,721			$ 236,946		1,260,580	$ 342,178	1,100,000
Inventory Valuation Reserves		1,545,033	1,614,840		1,545,033			1,614,840		1,545,033
Disposal Group, Including Discontinued Operation, Inventory, Current		239,025	302,676		239,025			302,676		239,025
Advances on Inventory Purchases		897,108	482,585		897,108			482,585		897,108
Cost of Goods and Services Sold			6,332,624			6,773,029		18,419,709	21,259,300
Revenue from Contract with Customer, Excluding Assessed Tax			9,179,781			8,844,845		25,016,810	26,858,864
Research and Development Expense			40,123			115,077		206,313	335,377
Advertising Expense			1,137,488			1,832,172		3,454,485	5,191,374
Marketing Expense			1,226,909			824,747		3,012,473	2,983,417
Deferred Tax Assets, Valuation Allowance		23,928,265	26,661,284		23,928,265			26,661,284		23,928,265
Amortization of Intangible Assets			51,721			104,201		155,165	349,424
Impairment of Intangible Assets, Finite-Lived			0			0		0	1,540,000
Goodwill, Impairment Loss						0			6,486,000
Goodwill		0	0		0			0		0
Operating Lease, Cancellation Payment	$ 1,550,000
Operating Lease, Payment of Cancellation Fee	$ 1,100,000	500,000		$ 1,050,000
Gain (Loss) on Termination of Lease										(3,596,365)
Asset, Held-for-Sale, Not Part of Disposal Group		800,000	0		800,000			0		800,000
Receivable From Sale of Assets Held-for-Sale Included in Other Current Assets								126,268	0
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents		17,809,802	7,425,050		17,809,802			7,425,050		$ 17,809,802
Net Cash Provided by (Used in) Operating Activities								$ (10,929,145)	(11,133,377)
Quality Improvement Percentage Impact on Cost of Goods Sold								26.40%		14.50%
Costs Associated With Inventory Obsolescence, Quality Testing and Remedial Discounts and Replacement Orders				400,000	500,000
General and Administrative Expense [Member]
Severance Costs				$ (100,000)						$ 600,000
Restructuring Charges										200,000
Cost of Goods Sold [Member]
Amount Recognized From Settlement With Vendors			200,000
Production Equipment [Member]
Asset, Held-for-Sale, Not Part of Disposal Group		800,000			800,000					800,000
Impairment of Long-Lived Assets to be Disposed of					3,105,435
Proceeds from Sale of Productive Assets							$ 700,000	$ 673,732
Receivable From Sale of Assets Held-for-Sale Included in Other Current Assets							$ 100,000	126,268
Leasehold Improvements [Member]
Asset, Held-for-Sale, Not Part of Disposal Group		100,000			100,000					100,000
Software and Software Development Costs [Member]
Impairment of Long-Lived Assets to be Disposed of					100,000
Sisters, Oregon Manufacturing Site [Member]
Business Exit Costs					8,700,000
Other Current Assets [Member]
Recoveries From Vendors for Business Interruptions			200,000					$ 200,000
The 401K Plan [Member]
Defined Contribution Plan, Employer Matching Contribution, Percent of Match								3.00%
The 401K Plan [Member] | Accrued Expenses [Member]
Liability, Defined Benefit Pension Plan, Current			135,722					$ 135,722
Shipping and Handling [Member]
Cost of Goods and Services Sold			1,132,930			1,622,290		4,002,244	4,763,845
Revenue from Contract with Customer, Excluding Assessed Tax			$ 214,982			289,505		$ 778,051	829,107
Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)			3 years					3 years
Finite-Lived Intangible Asset, Useful Life (Year)			3 years					3 years
Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)			7 years					7 years
Finite-Lived Intangible Asset, Useful Life (Year)			10 years					10 years
Disposal Group, Not Discontinued Operations [Member]
Inventory Valuation Reserves		559,042	$ 838,276		559,042			$ 838,276		559,042
Raw Materials [Member]
Inventory Valuation Reserves		746,966	473,888		746,966			473,888		746,966
Advances on Inventory Purchases		897,108	482,585		897,108			482,585		897,108
Credit Card [Member]
Cash Collateral for Borrowed Securities		416,318	188,886		416,318			188,886		416,318
Dano Manifesto Ventures PBC [Member]
Restricted Cash and Cash Equivalents			99,525					99,525			$ 298,103
Restricted Cash Contributed			0			1,864		0	16,703
Laird Hamilton [Member] | License Agreement Terms [Member]
Indefinite-Lived Intangible Assets (Excluding Goodwill)		132,000	132,000		132,000			$ 132,000		132,000
Stock Issued During Period, Shares, Issued for Services (in shares)								660,000
Gabrielle Reece [Member] | License Agreement Terms [Member]
Indefinite-Lived Intangible Assets (Excluding Goodwill)		$ 100	100		$ 100			$ 100		$ 100
Laird Hamilton and Gabrielle Riece [Member] | License Agreement Terms [Member]
Term of License Agreement (Year)								100 years
Additional Term of License Agreement (Year)								10 years
Impairment of Intangible Assets, Indefinite-Lived (Excluding Goodwill)			$ 0			$ 0		$ 0	$ 0

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies - Schedule of Cash and Cash Equivalents (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Cash and cash equivalents	$ 7,136,639	$ 17,293,959
Restricted cash	288,411	515,843
Total cash, cash equivalents, and restricted cash	$ 7,425,050	$ 17,809,802

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies- Schedule of Inventory (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Raw materials and packaging	$ 1,854,333	$ 3,764,804
Finished goods	4,698,238	1,931,761
Total inventory, net	$ 6,552,571	$ 5,696,565

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies - Employee Benefit Plan Cost (Details) - The 401K Plan [Member] - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2023
Defined Contribution Plan, Cost	$ 32,680	$ 126,434
Cost of Goods Sold [Member]
Defined Contribution Plan, Cost	2,330	9,624
General and Administrative Expense [Member]
Defined Contribution Plan, Cost	16,359	76,235
Research and Development Expense [Member]
Defined Contribution Plan, Cost	695	2,603
Selling and Marketing Expense [Member]
Defined Contribution Plan, Cost	$ 13,296	$ 37,972

XML

Note 2 - Prepaid Expenses and Other Current Assets - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Prepaid insurance	$ 107,762	$ 761,147
Prepaid inventory	482,585	897,108
Prepaid subscriptions and license fees	173,684	292,622
Prepaid advertising	154,033	166,872
Deposits	197,643	134,896
Other current assets	320,328	277,430
Prepaid and other current assets	$ 1,436,035	$ 2,530,075

XML

Note 3 - Revolving Lines of Credit (Details Textual) - Revolving Credit Facility [Member] - USD ($)	Sep. 01, 2022	Sep. 30, 2023	Dec. 31, 2022	Sep. 02, 2021	Aug. 10, 2017
Wells Fargo National Association Line of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 5,000,000			$ 9,500,000
Long-Term Line of Credit		$ 0	$ 0
Wells Fargo National Association Line of Credit [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	1.50%
East Asset Management, LLC [Member]
Line of Credit Facility, Maximum Borrowing Capacity					$ 3,000,000
Debt Instrument, Interest Rate, Stated Percentage					15.00%
Percentage Of Equity Offerings Eligible To Be Subscribed For By The Lender		20.00%
Debt Instrument, Price per Share Discount		20.00%
Second Line With East Asset Management, LLC [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 200,000

XML

Note 4 - Property and Equipment, Net (Details Textual) - USD ($)	3 Months Ended					6 Months Ended	9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Sep. 30, 2023	Sep. 30, 2022
Depreciation	$ 19,772		$ 167,794				$ 79,860	$ 496,932
Proceeds from Sale, Property, Held-for-Sale					$ 1,572,512
Gain (Loss) on Sale of Assets and Asset Impairment Charges				$ 573,818
Asset, Held-for-Sale, Not Part of Disposal Group	$ 0	$ 800,000					0
Receivable From Sale of Assets Held-for-Sale Included in Other Current Assets							126,268	$ 0
Intermittent Motion Form [Member]
Proceeds from Sale, Property, Held-for-Sale			103,240
Gain (Loss) on Sale of Assets and Asset Impairment Charges			$ 3,240
Asset, Held-for-Sale, Not Part of Disposal Group				100,000
Impairment of Long-Lived Assets to be Disposed of				$ 100,426
Production Equipment [Member]
Asset, Held-for-Sale, Not Part of Disposal Group		800,000
Impairment of Long-Lived Assets to be Disposed of		$ 3,105,435
Proceeds from Sale of Productive Assets						$ 700,000	673,732
Receivable From Sale of Assets Held-for-Sale Included in Other Current Assets						$ 100,000	$ 126,268

XML

Note 4 - Property and Equipment, Net - Schedule of Property and Equipment, Net (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Gross carrying amount	$ 266,466	$ 420,017
Accumulated depreciation	(127,862)	(269,728)
Property and equipment, net	138,604	150,289
Factory Equipment [Member]
Gross carrying amount	0	66,276
Accumulated depreciation	0	(43,051)
Property and equipment, net	0	23,225
Factory and Office Equipment [Member]
Gross carrying amount	220,190	318,795
Accumulated depreciation	(107,393)	(211,529)
Property and equipment, net	112,797	107,266
Leasehold Improvements [Member]
Gross carrying amount	46,276	34,946
Accumulated depreciation	(20,469)	(15,148)
Property and equipment, net	$ 25,807	$ 19,798

XML

Note 5 - Goodwill and Intangible Assets, Net (Details Textual) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	May 03, 2021
Goodwill	$ 0	$ 0		$ 0
Goodwill, Impairment Loss			$ 0		$ 6,486,000
Amortization of Intangible Assets	51,721		$ 104,201	155,165	$ 349,424
Customer Relationships [Member]
Impairment of Intangible Assets (Excluding Goodwill)	0	$ 344,006		1,432,000
Trade Names [Member]
Finite-Lived Intangible Asset, Useful Life (Year)		10 years
Impairment of Intangible Assets (Excluding Goodwill)	$ 0	$ 1,135,000		$ 108,000
Weighted Average [Member]
Finite-Lived Intangible Asset, Useful Life (Year)	7 years 1 month 6 days			7 years 1 month 6 days
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life (Year)	3 years			3 years
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life (Year)	10 years			10 years
Picky Bars [Member]
Goodwill						$ 6,486,000

XML

Note 5 - Goodwill and Intangible Assets, Net - Schedule of Intangible Assets (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Gross carrying amount	$ 1,432,536	$ 1,432,537
Accumulated amortization	(295,583)	(140,419)
Net carrying amount	1,136,953	1,292,118
Total gross intangible assets	1,564,636	1,564,637
Total intangible assets	1,269,053	1,424,218
Licensing Agreements [Member]
Licensing agreements (indefinite)	132,100	$ 132,100
Trade Names [Member]
Finite useful life (Year)		10 years
Gross carrying amount	890,827	$ 890,827
Accumulated amortization	(80,175)	0
Net carrying amount	810,652	$ 890,827
Recipes [Member]
Finite useful life (Year)		10 years
Gross carrying amount	330,000	$ 330,000
Accumulated amortization	(79,750)	(55,000)
Net carrying amount	250,250	275,000
Social Media Agreement [Member]
Gross carrying amount	80,000	80,000
Accumulated amortization	(64,444)	(44,444)
Net carrying amount	15,556	35,556
Computer Software, Intangible Asset [Member]
Gross carrying amount	131,709	131,710
Accumulated amortization	(71,214)	(40,975)
Net carrying amount	$ 60,495	$ 90,735

XML

Note 5 - Goodwill and Intangible Assets, Net - Schedule of Intangible Assets (Details) (Parentheticals)	Dec. 31, 2022
Trade Names [Member]
Finite useful life (Year)	10 years
Recipes [Member]
Finite useful life (Year)	10 years

XML

Note 5 - Goodwill and Intangible Assets, Net - Schedule of Future Amortization Expense (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
2023 (excluding the nine months ended September 30, 2023)	$ 51,721
2024	189,108
2025	149,994
2026	139,899
2027	139,899
Thereafter	466,332
Finite-Lived Intangible Assets, Net	$ 1,136,953	$ 1,292,118

XML

Note 6 - Leases (Details Textual)					1 Months Ended		3 Months Ended	12 Months Ended
	Oct. 01, 2021	May 03, 2021	Jul. 01, 2019	Mar. 01, 2018	Jan. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Sep. 30, 2023 USD ($)	Jan. 01, 2023 ft²
Operating Lease, Cancellation Payment					$ 1,550,000
Operating Lease, Payment of Cancellation Fee					$ 1,100,000	$ 500,000	$ 1,050,000
Gain (Loss) on Termination of Lease								$ (3,596,365)
Sublease Rental Assets						$ 18,846		$ 18,846	$ 13,769
Commericial Lease with RII Lundgren Mill, LLC [Member]
Operating Lease, Term (Year)				10 years
Second Commercial Lease with RII Lundgren Mill, LLC [Member]
Operating Lease, Term (Year)			10 years
Third Commercial Lease with RII Lundgren Mill, LLC [Member]
Operating Lease, Term (Year)	10 years
Picky Bars, LLC Lease [Member]
Operating Lease, Term (Year)		62 months
Somatic Experiencing Trauma Institute Sublease [Member]
Area of Real Estate Property (Square Foot) | ft²										5,257

XML

Note 6 - Leases - Lease Costs (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2023	Sep. 30, 2022
Operating lease cost	$ 38,085	$ 114,254
Variable lease cost	5,554	24,022
Operating lease expense	43,639	138,276
Short-term lease rent expense	69,630	242,817
Total rent expense	$ 113,269	381,093
Operating cash flows - operating leases		94,679	$ 556,597
Right-of-use assets obtained in exchange for operating lease liabilities		$ 344,382	$ 5,285,330
Weighted-average remaining lease term – operating leases (in years) (Year)	3 years 2 months 12 days	3 years 2 months 12 days	8 years 1 month 6 days
Weighted-average discount rate – operating leases	6.63%	6.63%	3.75%

XML

Note 6 - Leases - Future Minimum Lease Payments (Details)	Sep. 30, 2023 USD ($)
2023 (excluding the nine months ended September 30, 2023)	$ 31,755
2024	138,800
2025	126,714
2026	109,145
2027	56,210
Total	462,624
Less imputed interest	(54,932)
Operating lease liabilities	$ 407,692

XML

Note 6 - Leases - Lease Income (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Operating lease income	$ 14,054	$ 14,055	$ 42,164	$ 42,164
Variable lease income	5,318	5,318	15,953	15,953
Total rental income	$ 19,372	$ 19,373	$ 58,117	$ 58,117

XML

Note 6 - Leases - Future Minimum Lease Income (Details)	Sep. 30, 2023 USD ($)
2023 (excluding the nine months ended September 30, 2023)	$ 30,216
2024	61,640
2025	20,748
Total	$ 112,604

XML

Note 7 - Deferred Tax Assets and Liabilities (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount	$ 2,700,000	$ 5,800,000
Operating Loss Carryforwards	137,000,000		$ 118,600,000
Tax Credit Carryforward, Amount	400,000		300,000
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued	0
State and Local Jurisdiction [Member]
Taxes Payable, Current	9,850		9,803
Operating Loss Carryforwards	57,600,000		49,300,000
Domestic Tax Authority [Member] | Expiring in 2036 [Member]
Operating Loss Carryforwards	1,900,000
Domestic Tax Authority [Member] | Indefinite Carryforward [Member]
Operating Loss Carryforwards	$ 77,600,000		$ 67,500,000

XML

Note 7 - Deferred Tax Assets and Liabilities - Income Tax Reconciliation (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income tax benefit at statutory rates			$ 2,184,272	$ 2,968,062
Valuation allowance for deferred tax assets			(2,239,858)	(2,947,086)
Stock-based compensation			(16,751)	(12,642)
Other benefit, net			59,165	(14,108)
Reported income tax expense	$ 0	$ 0	$ (13,172)	$ (5,774)
Effective tax rate:			0.10%	0.00%

XML

Note 7 - Deferred Tax Assets and Liabilities - Schedule of Deferred Tax Assets (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Net operating loss carryforwards	$ 20,070,340	$ 17,428,266
Intangible assets	2,262,377	2,382,397
Property and equipment	1,587,209	1,660,954
Research and development credits	372,587	300,105
Accrued expenses	544,246	766,385
Right of use asset	5,652	524
Bad debt allowance	84,637	20,282
Charitable contributions	40,867	38,557
Unexercised options	1,436,395	1,136,475
Capitalized research and development costs	256,974	194,320
Total noncurrent deferred tax assets	26,661,284	23,928,265
Valuation allowance	(26,661,284)	(23,928,265)
Total net deferred tax assets	$ 0	$ 0

XML

Note 8 - Stock Incentive Plan (Details Textual) - USD ($)		3 Months Ended		9 Months Ended
	May 01, 2021	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Common Stock, Shares Authorized (in shares)		100,000,000		100,000,000		100,000,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Expiration Period (Year)				10 years
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Dividend Rate				0.00%	0.00%
Market Based Stock Units [Member]
Shares Issued, Value, Share-Based Payment Arrangement, Forfeited		$ 0	$ 0	$ 149,735	$ 1,785,125
Stock Incentive Plan Two Thousand and Twenty [Member]
Common Stock, Shares Authorized (in shares)		1,124,160		1,124,160
Stock Incentive Plan Two Thousand and Twenty [Member] | Performance Based Restricted Stock Unit Agreement [Member]
Assumed Dividend Rate Percentage on Stock		0.00%		0.00%
Employee Stock Purchase Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Dividend Rate				0.00%
Maximum Number of Shares Acquire Per Participants (in shares)	650
Share-Based Compensation Arrangement by Share-Based Payment Award, Purchase Price of Common Stock, Percent	85.00%

XML

Note 8 - Stock Incentive Plan - Stock Option Activity (Details) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Balance, options (in shares)	921,657			747,800
Balance, options, weighted average exercise price (in dollars per share)	$ 6.86			$ 11.51
Balance, options, weighted average contractual term (Year)	8 years 2 months 1 day	7 years 8 months 23 days	8 years	6 years 6 months 25 days
Balance, options, aggregate intrinsic value	$ 75,000	$ 0	$ 0	$ 1,143,013
Granted, options (in shares)	700,000	453,498
Granted, options, weighted average exercise price (in dollars per share)	$ 0.89	$ 7.21
Exercised/released, options (in shares)	0	(76,750)
Exercised/released, options, weighted average exercise price (in dollars per share)	$ 0	$ 2.14
Cancelled/forfeited, options (in shares)	(360,317)	(317,185)
Cancelled/forfeited, options, weighted average exercise price (in dollars per share)	$ 3.52	$ 15.25
Balance, options (in shares)	1,261,340	807,363	921,657
Balance, options, weighted average exercise price (in dollars per share)	$ 4.5	$ 8.5	$ 6.86
Exercisable, options (in shares)	672,187	314,343
Exercisable, options, weighted average exercise price (in dollars per share)	$ 4.69	$ 8.72
Exercisable, options, weighted average contractual term (Year)	7 years 6 months 10 days	5 years 5 months 1 day
Exercisable, options, aggregate intrinsic value	$ 9,000	$ 0

XML

Note 8 - Stock Incentive Plan - Schedule of Stock Option Valuation Assumptions (Details) - $ / shares	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Weighted-average expected volatility	59.43%	52.36%
Weighted-average expected term (years) (Year)	5 years 8 months 15 days	6 years 3 months
Weighted-average expected risk-free interest rate	3.87%	2.27%
Dividend yield	0.00%	0.00%
Weighted-average fair value of options granted (in dollars per share)	$ 0.57	$ 2.79

XML

Note 8 - Stock Incentive Plan - RSU Activities (Details) - Restricted Stock Units (RSUs) [Member] - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Balance, other than options (in shares)	504,420	91,438	91,438
Balance, other than options, weighted average grant date fair value (in dollars per share)	$ 4.22	$ 32.91	$ 32.91
Balance, other than options, weighted average vesting term (Year)	2 years 2 months 4 days	2 years 11 months 26 days	2 years 11 months 8 days	2 years 2 months 1 day
Balance, other than options, aggregate fair value	$ 1,480,161	$ 2,980,838	$ 2,127,734	$ 2,982,931
Granted, other than options (in shares)	745,000	452,702
Granted, other than options, weighted average grant date fair value (in dollars per share)	$ 0.81	$ 4.7
Exercised/released, other than options (in shares)	(154,674)	(55,634)
Exercised/released, other than options, weighted average grant date fair value (in dollars per share)	$ 4.36	$ 20.62
Cancelled/forfeited, other than options (in shares)	(260,639)	(46,240)
Cancelled/forfeited, other than options, weighted average grant date fair value (in dollars per share)	$ 2.2	$ 21.63
Balance, other than options (in shares)	834,107	442,266	504,420	91,438
Balance, other than options, weighted average grant date fair value (in dollars per share)	$ 1.77	$ 6.74	$ 4.22	$ 32.91

XML

Note 8 - Stock Incentive Plan - MSU Activities (Details) - Market Based Stock Units [Member] - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Balance, other than options (in shares)	31,083	160,301	160,301
Balance, other than options, weighted average grant date fair value (in dollars per share)	$ 43.53	$ 43.53	$ 43.53
Balance, other than options, weighted average vesting term (Year)	10 months 6 days	8 months 23 days	7 months 6 days	1 year 2 months 12 days
Balance, other than options, aggregate fair value	$ 977,558	$ 1,353,043	$ 1,353,043	$ 6,977,903
Granted, other than options (in shares)	600,000	0
Granted, other than options, weighted average grant date fair value (in dollars per share)	$ 0.08	$ 0
Exercised/released, other than options (in shares)	0	0
Exercised/released, other than options, weighted average grant date fair value (in dollars per share)	$ 0	$ 0
Cancelled/forfeited, other than options (in shares)	(9,769)	(129,218)
Cancelled/forfeited, other than options, weighted average grant date fair value (in dollars per share)	$ 43.53	$ 43.53
Balance, other than options (in shares)	621,314	31,083	31,083	160,301
Balance, other than options, weighted average grant date fair value (in dollars per share)	$ 1.57	$ 43.53	$ 43.53	$ 43.53

XML

Note 8 - Stock Incentive Plan - Schedule of Stock Based Compensation (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Total stock-based compensation	$ 364,936	$ 483,426	$ 818,647	$ 284,980
Unrecognized compensation cost	2,082,236	2,951,962	$ 2,082,236	$ 2,951,962
Vesting period (Year)			2 years 9 months 14 days	3 years 25 days
Employee Stock Purchase Plan [Member]
Total stock-based compensation		1,351		$ 8,416
Unrecognized compensation cost		0		0
Share-Based Payment Arrangement, Option [Member]
Total stock-based compensation	221,106	96,897	$ 382,790	283,754
Unrecognized compensation cost	728,426	1,173,758	$ 728,426	$ 1,173,758
Vesting period (Year)			2 years 7 months 2 days	3 years 2 months 26 days
Restricted Stock Units (RSUs) [Member]
Total stock-based compensation	127,252	341,798	$ 481,881	$ 1,082,674
Unrecognized compensation cost	1,296,981	1,707,145	$ 1,296,981	$ 1,707,145
Vesting period (Year)			2 years 4 months 2 days	2 years 10 months 28 days
Market Based Stock Units [Member]
Total stock-based compensation	16,578	43,380	$ (46,024)	$ (1,089,864)
Unrecognized compensation cost	56,830	71,059	$ 56,830	$ 71,059
Vesting period (Year)			9 months	1 year 1 month 2 days
Award With Cost to be Recognized in Cost of Goods Sold [Member]
Total stock-based compensation	146	8,384	$ 30	$ 33,890
Unrecognized compensation cost	3,450	14,354	$ 3,450	$ 14,354
Vesting period (Year)			1 year 10 months 13 days	2 years 6 months 21 days
Award With Cost to be Recognized in General and Administrative [Member]
Total stock-based compensation	195,458	462,474	$ 617,382	$ 148,505
Unrecognized compensation cost	1,913,478	2,734,728	$ 1,913,478	$ 2,734,728
Vesting period (Year)			2 years 5 months 26 days	2 years 11 months 4 days
Award With Cost to be Recognized in Sales and Marketing [Member]
Total stock-based compensation	169,332	9,993	$ 201,235	$ 106,077
Unrecognized compensation cost	$ 165,308	200,363	$ 165,308	$ 200,363
Vesting period (Year)			1 year 3 months	3 years 10 months 2 days
Award With Cost to be Recognized in Research and Product Development [Member]
Total stock-based compensation		2,575		$ (3,492)
Unrecognized compensation cost		$ 2,517		$ 2,517
Vesting period (Year)				8 months 23 days

XML

Note 9 - Earnings Per Share (Details) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2023	Sep. 30, 2022
Net loss	$ (2,654,884)	$ (3,507,246)	$ (4,143,910)	$ (5,738,209)	$ (4,904,520)	$ (14,139,402)	$ (10,306,040)	$ (24,782,131)
Weighted average shares outstanding - basic and diluted (in shares)	9,337,789			9,178,533			9,279,541	9,136,071
Net loss per share, basic and diluted (in dollars per share)	$ (0.28)			$ (0.63)			$ (1.11)	$ (2.71)
Common stock options, restricted stock awards, and market-based stock awards excluded due to anti-dilutive effect (in shares)	2,716,761			1,280,712			2,716,761	1,280,712

XML

Note 10 - Concentrations (Details Textual)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Dec. 31, 2022
Liabilities, Total [Member] | Vendors Concentration Risk Member [Member] | Accounts Payable [Member]
Concentration Risk, Percentage			0.00%	41.00%
Number of Vendor				2
Cost of Goods and Service Benchmark [Member] | Supplier Concentration Risk [Member]
Number of Suppliers	2	3	2	1
Cost of Goods and Service Benchmark [Member] | Supplier Concentration Risk [Member] | INDONESIA
Concentration Risk, Percentage	29.00%	41.00%	17.00%	48.00%
Cost of Goods and Service Benchmark [Member] | Supplier Concentration Risk [Member] | Two Suppliers [Member]
Concentration Risk, Percentage	52.00%		40.00%
Cost of Goods and Service Benchmark [Member] | Supplier Concentration Risk [Member] | Three Suppliers [Member]
Concentration Risk, Percentage		68.00%
Cost of Goods and Service Benchmark [Member] | Supplier Concentration Risk [Member] | One Supplier [Member]
Concentration Risk, Percentage				48.00%
Three Customers [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Concentration Risk, Percentage			85.00%
Number of Customers			3
Three Customers [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Concentration Risk, Percentage	50.00%		46.00%
Number of Customers	3		3
Receivables from Customers	$ 2,439,551		$ 2,439,551
Two Customers [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Concentration Risk, Percentage					68.00%
Number of Customers					2
Two Customers [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Concentration Risk, Percentage		21.00%
Number of Customers		2		0
Receivables from Customers		$ 1,134,994		$ 1,134,994

XML

Note 11 - Related Party (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Advertising Expense	$ 1,137,488	$ 1,832,172	$ 3,454,485	$ 5,191,374
Accounts Payable, Current	1,869,458		1,869,458		$ 1,080,267
Gabby Reece [Member]
Advertising Expense	141,712	$ 19,500	435,084	$ 52,750
Accounts Payable, Current	$ 56,574		$ 56,574		$ 16,500

XML

Note 12 - Revenue Recognition - Disaggregation of Revenue (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenue	$ 9,179,781	$ 8,844,845	$ 25,016,810	$ 26,858,864
Percentage of revenue	100.00%	100.00%	100.00%	100.00%
Coffee Creamer [Member]
Revenue	$ 5,795,991	$ 4,716,650	$ 15,550,157	$ 14,866,032
Percentage of revenue	63.00%	53.00%	62.00%	55.00%
Hydration and Beverage Enhancing Supplements [Member]
Revenue	$ 1,726,512	$ 1,061,136	$ 3,395,671	$ 3,815,346
Percentage of revenue	19.00%	12.00%	14.00%	14.00%
Harvest Snacks and Other Food Items [Member]
Revenue	$ 1,747,873	$ 1,935,812	$ 5,345,915	$ 5,336,043
Percentage of revenue	19.00%	22.00%	21.00%	20.00%
Coffee Tea and Hot Chocolate Products [Member]
Revenue	$ 1,990,013	$ 1,455,888	$ 5,932,745	$ 4,840,215
Percentage of revenue	22.00%	16.00%	24.00%	18.00%
Other [Member]
Revenue	$ 132,319	$ 437,210	$ 287,001	$ 1,094,924
Percentage of revenue	1.00%	5.00%	1.00%	4.00%
Gross Sales [Member]
Revenue	$ 11,392,708	$ 9,606,696	$ 30,511,489	$ 29,952,560
Percentage of revenue	124.00%	108.00%	122.00%	111.00%
Shipping Income [Member]
Revenue	$ 214,982	$ 289,505	$ 778,051	$ 829,107
Percentage of revenue	2.00%	3.00%	3.00%	3.00%
Returns and Discount [Member]
Revenue	$ (2,427,909)	$ (1,051,356)	$ (6,272,730)	$ (3,922,803)
Percentage of revenue	(26.00%)	(11.00%)	(25.00%)	(14.00%)

XML

Note 12 - Revenue Recognition - Disaggregation of Revenue Based on Channels (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenue from Contract with Customer, Excluding Assessed Tax	$ 9,179,781	$ 8,844,845	$ 25,016,810	$ 26,858,864
Percentage of revenue	100.00%	100.00%	100.00%	100.00%
Online [Member]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 4,842,389	$ 5,808,186	$ 13,409,443	$ 16,410,956
Percentage of revenue	53.00%	66.00%	54.00%	61.00%
Wholesale [Member]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 4,337,392	$ 3,036,659	$ 11,607,367	$ 10,447,908
Percentage of revenue	47.00%	34.00%	46.00%	39.00%

XML

Note 12 - Revenue Recognition - Summary of Receivables (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022	Jan. 01, 2022
Accounts receivable, net	$ 2,186,645	$ 1,494,469	$ 1,268,718
Contract assets	0	57,249	8,316
Contract liabilities	$ (625,557)	$ (729,667)	$ (467,861)