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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 8/11/22 Laird Superfood, Inc. 10-Q 6/30/22 91:15M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
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12: R1 Cover Page HTML 81K
13: R2 Consolidated Balance Sheets HTML 144K
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16: R5 Consolidated Statements of Comprehensive Loss HTML 47K
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18: R7 Consolidated Statements of Cash Flows HTML 158K
19: R8 Nature of Operations and Summary of Significant HTML 160K
Accounting Policies
20: R9 Business Combination HTML 111K
21: R10 Prepaid Expenses and Other Current Assets, Net HTML 66K
22: R11 Investment securities HTML 70K
23: R12 Fair Value Measurements HTML 46K
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25: R14 Long-term Debt HTML 31K
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28: R17 Leases HTML 139K
29: R18 Deferred Tax Assets and Liabilities HTML 142K
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31: R20 Earnings per Share HTML 76K
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34: R23 Revenue Recognition HTML 268K
35: R24 Nature of Operations and Summary of Significant HTML 237K
Accounting Policies (Policies)
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Accounting Policies - Summary of Reconciliation of
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(Detail)
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Accounting Policies - Schedule of Inventory,
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Accounting Policies - Additional Information
(Detail)
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Paid and Amounts of the Assets Acquired and
Liabilities Assumed Recognized at the Acquisition
(Detail)
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the Intangible Assets Acquired and their Estimated
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Schedule of Prepaid Expenses and Other Current
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58: R47 Investment securities - Additional Information HTML 35K
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59: R48 Fair Value Measurements - Summarize Assets Subject HTML 35K
To Fair Value Measurements (Detail)
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64: R53 Goodwill and Intangible Assets, Net - Summary of HTML 51K
Intangible Assets (Detail)
65: R54 Goodwill and Intangible Assets, Net - Summary of HTML 43K
Intangible Assets (Parenthetical) (Detail)
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Future Amortization Expense of the Intangible
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69: R58 Leases - Summary of components of lease expense HTML 46K
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| 10-Q |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM i 10-Q
(Mark One)
i ☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i June 30, i 2022 /
OR
i ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: i 001-39537
i Laird Superfood, Inc.
(Exact Name of Registrant as Specified in its Charter)
i Delaware |
|
i 81-1589788 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer |
i 275 W. Lundgren Mill Drive, i Sisters, i Oregon i 97759
(Address of principal executive offices, including Zip Code)
Registrant’s telephone number, including area code: i (888) i 670-6796
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol |
|
Name of each exchange on which registered |
i Common Stock |
|
i LSF |
|
i 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. i 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). i 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 |
|
☐ |
i Non-accelerated filer |
|
☒ |
|
Smaller reporting company |
|
i ☒ |
|
|
|
|
Emerging growth company |
|
i ☒ |
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. i ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No i ☒
As of August 9, 2022 the registrant had i 9,175,812 shares of common stock, $0.001 par value per share, outstanding.
|
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Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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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:
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 Financial Statements
LAIRD SUPERFOOD, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
As of |
|
|||||
|
|
|
|
|
||||
Assets |
|
|
|
|
|
|
||
Current assets |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash |
|
$ |
i 24,544,116 |
|
|
$ |
i 23,049,234 |
|
Accounts receivable, net |
|
|
i 1,183,953 |
|
|
|
i 1,268,718 |
|
Investment securities available-for-sale |
|
|
i — |
|
|
|
i 8,635,077 |
|
Inventory |
|
|
i 8,743,811 |
|
|
|
i 10,221,343 |
|
Prepaid expenses and other current assets, net |
|
|
i 2,772,092 |
|
|
|
i 3,827,543 |
|
Deposits |
|
|
i 104,573 |
|
|
|
i 679,919 |
|
Total current assets |
|
|
i 37,348,545 |
|
|
|
i 47,681,834 |
|
Noncurrent assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
i 4,375,989 |
|
|
|
i 4,512,935 |
|
Fixed assets held-for-sale |
|
|
i 100,000 |
|
|
|
— |
|
Intangible assets, net |
|
|
i 3,210,036 |
|
|
|
i 4,838,854 |
|
Goodwill |
|
|
i — |
|
|
|
i 6,486,000 |
|
Right-of-use asset |
|
|
i 7,179,389 |
|
|
|
i 2,327,752 |
|
Total noncurrent assets |
|
|
i 14,865,414 |
|
|
|
i 18,165,541 |
|
Total assets |
|
$ |
i 52,213,959 |
|
|
$ |
i 65,847,375 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
i 413,436 |
|
|
$ |
i 888,768 |
|
Payroll liabilities |
|
|
i 1,149,368 |
|
|
|
i 814,163 |
|
Accrued expenses |
|
|
i 2,645,505 |
|
|
|
i 2,083,090 |
|
Lease liability, current portion |
|
|
i 742,669 |
|
|
|
i — |
|
Total current liabilities |
|
|
i 4,950,978 |
|
|
|
i 3,786,021 |
|
Long-term liabilities |
|
|
|
|
|
|
||
Deferred tax liability, net |
|
|
i — |
|
|
|
i 7,534 |
|
Lease liability |
|
|
i 4,269,423 |
|
|
|
i — |
|
Total long-term liabilities |
|
|
i 4,269,423 |
|
|
|
i 7,534 |
|
Total liabilities |
|
|
i 9,220,401 |
|
|
|
i 3,793,555 |
|
Stockholders’ equity |
|
|
|
|
|
|
||
Common stock, $ i i 0.001 / par value, i i 100,000,000 / shares authorized as of June 30, 2022 and December 31, 2021; i 9,535,662 and i 9,169,958 issued and outstanding at June 30, 2022, respectively; i 9,460,243 and i 9,094,539 issued and outstanding at December 31, 2021, respectively |
|
|
i 9,170 |
|
|
|
i 9,095 |
|
Additional paid-in capital |
|
|
i 117,826,024 |
|
|
|
i 117,903,455 |
|
Accumulated other comprehensive loss |
|
|
i — |
|
|
|
( i 61,016 |
) |
Accumulated deficit |
|
|
( i 74,841,636 |
) |
|
|
( i 55,797,714 |
) |
Total stockholders’ equity |
|
|
i 42,993,558 |
|
|
|
i 62,053,820 |
|
Total liabilities and stockholders’ equity |
|
$ |
i 52,213,959 |
|
|
$ |
i 65,847,375 |
|
The accompanying notes are an integral part of these consolidated financial statements.
4
LAIRD SUPERFOOD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Sales, net |
|
$ |
i 8,674,006 |
|
|
$ |
i 9,180,586 |
|
|
$ |
i 18,014,019 |
|
|
$ |
i 16,577,479 |
|
Cost of goods sold |
|
|
( i 7,096,068 |
) |
|
|
( i 6,998,695 |
) |
|
|
( i 14,486,271 |
) |
|
|
( i 12,558,194 |
) |
Gross profit |
|
|
i 1,577,938 |
|
|
|
i 2,181,891 |
|
|
|
i 3,527,748 |
|
|
|
i 4,019,285 |
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries, wages and benefits |
|
|
i 1,407,054 |
|
|
|
i 1,032,424 |
|
|
|
i 3,059,065 |
|
|
|
i 2,253,181 |
|
Stock-based compensation |
|
|
( i 259,474 |
) |
|
|
i 955,369 |
|
|
|
( i 313,969 |
) |
|
|
i 1,854,604 |
|
Professional fees |
|
|
i 562,106 |
|
|
|
i 609,448 |
|
|
|
i 1,272,231 |
|
|
|
i 953,070 |
|
Insurance expense |
|
|
i 501,079 |
|
|
|
i 500,821 |
|
|
|
i 1,113,013 |
|
|
|
i 1,023,221 |
|
Impairment of goodwill |
|
|
i — |
|
|
|
i — |
|
|
|
i 6,486,000 |
|
|
|
i — |
|
Impairment of long-lived intangible assets |
|
|
i — |
|
|
|
i — |
|
|
|
i 1,540,000 |
|
|
|
i — |
|
Impairment of fixed assets held-for-sale |
|
|
i 100,426 |
|
|
|
— |
|
|
|
i 100,426 |
|
|
|
— |
|
Gain on sale of land held-for-sale |
|
|
( i 573,818 |
) |
|
|
i — |
|
|
|
( i 573,818 |
) |
|
|
i — |
|
Other expense |
|
|
i 898,152 |
|
|
|
i 1,064,849 |
|
|
|
i 1,781,221 |
|
|
|
i 1,722,229 |
|
Total general and administrative expenses |
|
|
i 2,635,525 |
|
|
|
i 4,162,911 |
|
|
|
i 14,464,169 |
|
|
|
i 7,806,305 |
|
Research and product development |
|
|
i 116,467 |
|
|
|
i 374,852 |
|
|
|
i 220,300 |
|
|
|
i 615,539 |
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries, wages and benefits |
|
|
i 722,443 |
|
|
|
i 630,328 |
|
|
|
i 1,457,468 |
|
|
|
i 1,264,079 |
|
Stock-based compensation |
|
|
i 37,849 |
|
|
|
i 55,706 |
|
|
|
i 96,084 |
|
|
|
i 97,095 |
|
Advertising |
|
|
i 1,567,465 |
|
|
|
i 1,697,860 |
|
|
|
i 3,359,202 |
|
|
|
i 3,359,504 |
|
General marketing |
|
|
i 1,096,025 |
|
|
|
i 1,247,294 |
|
|
|
i 2,158,670 |
|
|
|
i 1,948,158 |
|
Other expense |
|
|
i 329,220 |
|
|
|
i 290,104 |
|
|
|
i 653,218 |
|
|
|
i 550,175 |
|
Total sales and marketing expenses |
|
|
i 3,753,002 |
|
|
|
i 3,921,292 |
|
|
|
i 7,724,642 |
|
|
|
i 7,219,011 |
|
Total expenses |
|
|
i 6,504,994 |
|
|
|
i 8,459,055 |
|
|
|
i 22,409,111 |
|
|
|
i 15,640,855 |
|
Operating loss |
|
|
( i 4,927,056 |
) |
|
|
( i 6,277,164 |
) |
|
|
( i 18,881,363 |
) |
|
|
( i 11,621,570 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and dividend income |
|
|
i 5,771 |
|
|
|
i 11,623 |
|
|
|
i 10,679 |
|
|
|
i 25,525 |
|
Rental income |
|
|
i 16,765 |
|
|
|
i — |
|
|
|
i 16,765 |
|
|
|
i — |
|
Loss on sale of available-for-sale debt securities |
|
|
i — |
|
|
|
i — |
|
|
|
( i 182,310 |
) |
|
|
i — |
|
Other expense |
|
|
i — |
|
|
|
i — |
|
|
|
( i 1,919 |
) |
|
|
i — |
|
Total other income (expense) |
|
|
i 22,536 |
|
|
|
i 11,623 |
|
|
|
( i 156,785 |
) |
|
|
i 25,525 |
|
Loss before income taxes |
|
|
( i 4,904,520 |
) |
|
|
( i 6,265,541 |
) |
|
|
( i 19,038,148 |
) |
|
|
( i 11,596,045 |
) |
Income tax expense |
|
|
i — |
|
|
|
( i 36,718 |
) |
|
|
( i 5,774 |
) |
|
|
( i 36,718 |
) |
Net loss |
|
$ |
( i 4,904,520 |
) |
|
$ |
( i 6,302,259 |
) |
|
$ |
( i 19,043,922 |
) |
|
$ |
( i 11,632,763 |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( i 0.54 |
) |
|
$ |
( i 0.70 |
) |
|
$ |
( i 2.09 |
) |
|
$ |
( i 1.30 |
) |
Diluted |
|
$ |
( i 0.54 |
) |
|
$ |
( i 0.70 |
) |
|
$ |
( i 2.09 |
) |
|
$ |
( i 1.30 |
) |
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted |
|
|
i i 9,132,632 / |
|
|
|
i i 8,967,797 / |
|
|
|
i i 9,114,527 / |
|
|
|
i i 8,931,736 / |
|
The accompanying notes are an integral part of these consolidated financial statements.
5
LAIRD SUPERFOOD, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Net loss |
|
$ |
( i 4,904,520 |
) |
|
$ |
( i 6,302,259 |
) |
|
$ |
( i 19,043,922 |
) |
|
$ |
( i 11,632,763 |
) |
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in unrealized losses on available-for-sale debt securities before classifications, net of tax(1) |
|
|
i — |
|
|
|
( i 3,711 |
) |
|
|
i — |
|
|
|
( i 24,001 |
) |
Amounts reclassified from accumulated other comprehensive loss |
|
|
i — |
|
|
|
i — |
|
|
|
i 61,016 |
|
|
|
i — |
|
Total other comprehensive income (loss) |
|
|
i — |
|
|
|
( i 3,711 |
) |
|
|
i 61,016 |
|
|
|
( i 24,001 |
) |
Comprehensive loss |
|
$ |
( i 4,904,520 |
) |
|
$ |
( i 6,305,970 |
) |
|
$ |
( i 18,982,906 |
) |
|
$ |
( i 11,656,764 |
) |
The accompanying notes are an integral part of these consolidated financial statements.
6
LAIRD SUPERFOOD, INC.
CONSOLIDATED 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, 2022 |
|
|
i 9,094,539 |
|
|
$ |
i 9,095 |
|
|
$ |
i 117,903,455 |
|
|
$ |
( i 61,016 |
) |
|
$ |
( i 55,797,714 |
) |
|
$ |
i 62,053,820 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 10,796 |
|
|
|
— |
|
|
|
— |
|
|
|
i 10,796 |
|
Stock option exercises |
|
|
i 1,750 |
|
|
|
1 |
|
|
|
i 14,247 |
|
|
|
— |
|
|
|
— |
|
|
|
i 14,248 |
|
Restricted stock units issued |
|
|
i 5,164 |
|
|
|
5 |
|
|
|
( i 5 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 61,016 |
|
|
|
— |
|
|
|
i 61,016 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 14,139,402 |
) |
|
|
( i 14,139,402 |
) |
Balances, March 31, 2022 |
|
|
i 9,101,453 |
|
|
$ |
i 9,101 |
|
|
$ |
i 117,928,493 |
|
|
$ |
i — |
|
|
$ |
( i 69,937,116 |
) |
|
$ |
i 48,000,478 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
( i 209,242 |
) |
|
|
— |
|
|
|
— |
|
|
|
( i 209,242 |
) |
Stock option exercises |
|
|
i 43,553 |
|
|
|
i 44 |
|
|
|
i 49,956 |
|
|
|
— |
|
|
|
— |
|
|
|
i 50,000 |
|
Restricted stock units issued |
|
|
i 13,897 |
|
|
|
i 14 |
|
|
|
( i 14 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Employee stock purchase plan shares issued |
|
|
i 11,055 |
|
|
|
i 11 |
|
|
|
i 28,276 |
|
|
|
|
|
|
|
|
|
i 28,287 |
|
||
Recovery of short-swing profits |
|
|
— |
|
|
|
— |
|
|
|
i 28,555 |
|
|
|
— |
|
|
|
— |
|
|
|
i 28,555 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 4,904,520 |
) |
|
|
( i 4,904,520 |
) |
Balances, June 30, 2022 |
|
|
i 9,169,958 |
|
|
$ |
i 9,170 |
|
|
$ |
i 117,826,024 |
|
|
$ |
— |
|
|
$ |
( i 74,841,636 |
) |
|
$ |
i 42,993,558 |
|
|
|
Stockholders’ Equity |
|
|
|
|
||||||||||||||||||
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated Other Comprehensive |
|
|
Accumulated |
|
|
|
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Paid-in Capital |
|
|
Income (Loss) |
|
|
Deficit |
|
|
Total |
|
||||||
Balances, January 1, 2021 |
|
|
i 8,892,886 |
|
|
$ |
i 8,893 |
|
|
$ |
i 111,452,346 |
|
|
$ |
i 14,207 |
|
|
$ |
( i 31,927,168 |
) |
|
$ |
i 79,548,278 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 1,010,003 |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,010,003 |
|
Less: Withholding tax payments for share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
( i 188,793 |
) |
|
|
— |
|
|
|
— |
|
|
|
( i 188,793 |
) |
Stock option exercises |
|
|
i 28,148 |
|
|
|
i 28 |
|
|
|
i 151,618 |
|
|
|
— |
|
|
|
— |
|
|
|
i 151,646 |
|
Common stock issuance costs |
|
|
— |
|
|
|
— |
|
|
|
( i 82,043 |
) |
|
|
— |
|
|
|
— |
|
|
|
( i 82,043 |
) |
Other comprehensive loss, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 20,290 |
) |
|
|
— |
|
|
|
( i 20,290 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 5,330,504 |
) |
|
|
( i 5,330,504 |
) |
Balances, March 31, 2021 |
|
|
i 8,921,034 |
|
|
$ |
i 8,921 |
|
|
$ |
i 112,343,131 |
|
|
$ |
( i 6,083 |
) |
|
$ |
( i 37,257,672 |
) |
|
$ |
i 75,088,297 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 1,090,074 |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,090,074 |
|
Less: Withholding tax payments for share-based compensation |
|
|
( i 956 |
) |
|
|
( i 1 |
) |
|
|
( i 30,362 |
) |
|
|
— |
|
|
|
— |
|
|
|
( i 30,363 |
) |
Stock option exercises |
|
|
i 23,169 |
|
|
|
i 23 |
|
|
|
i 243,000 |
|
|
|
— |
|
|
|
— |
|
|
|
i 243,023 |
|
Restricted stock units issued |
|
|
i 3,000 |
|
|
|
i 3 |
|
|
|
( i 3 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common stock issued for business acquisition costs |
|
|
i 53,134 |
|
|
|
i 53 |
|
|
|
i 1,834,804 |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,834,857 |
|
Other comprehensive income, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 3,711 |
) |
|
|
— |
|
|
|
( i 3,711 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 6,302,259 |
) |
|
|
( i 6,302,259 |
) |
Balances, June 30, 2021 |
|
|
i 8,999,381 |
|
|
$ |
i 8,999 |
|
|
$ |
i 115,480,644 |
|
|
$ |
( i 9,794 |
) |
|
$ |
( i 43,559,931 |
) |
|
$ |
i 71,919,918 |
|
The accompanying notes are an integral part of these consolidated financial statements.
7
LAIRD SUPERFOOD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
|
2021 |
|
|||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
( i 19,043,922 |
) |
|
|
( i 11,632,763 |
) |
Adjustments to reconcile net loss to net cash from operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
i 329,138 |
|
|
|
i 302,261 |
|
Amortization |
|
|
i 245,223 |
|
|
|
i 103,803 |
|
Loss on disposal of equipment |
|
|
i 635 |
|
|
|
i 2,325 |
|
Gain on sale of land held-for-sale |
|
|
( i 573,818 |
) |
|
|
i — |
|
Stock-based compensation |
|
|
( i 198,446 |
) |
|
|
i 2,100,077 |
|
Provision for inventory obsolescence |
|
|
i 34,843 |
|
|
|
i 128,556 |
|
Provision for doubtful accounts |
|
|
i 60,106 |
|
|
|
— |
|
Reserve for prepaid assets |
|
|
— |
|
|
|
i 179,000 |
|
Impairment of goodwill |
|
|
i 6,486,000 |
|
|
|
i — |
|
Impairment of long-lived intangible assets |
|
|
i 1,540,000 |
|
|
|
— |
|
Impairment of fixed assets held-for-sale |
|
|
i 100,426 |
|
|
|
|
|
Deferred taxes |
|
|
( i 7,534 |
) |
|
|
i 36,718 |
|
Loss on sale of investment securities available-for-sale |
|
|
i 182,310 |
|
|
|
— |
|
Noncash lease costs |
|
|
i 530,669 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
i 24,659 |
|
|
|
i 99,047 |
|
Inventory |
|
|
i 1,442,689 |
|
|
|
( i 3,888,989 |
) |
Prepaid expenses and other current assets |
|
|
i 1,055,451 |
|
|
|
i 729,881 |
|
Operating lease liability |
|
|
( i 370,214 |
) |
|
|
i 179,503 |
|
Deposits |
|
|
i 202,839 |
|
|
|
i 2,602 |
|
Accounts payable |
|
|
( i 475,332 |
) |
|
|
i 208,131 |
|
Payroll liabilities |
|
|
i 335,205 |
|
|
|
i 129,397 |
|
Accrued expenses |
|
|
i 562,415 |
|
|
|
i 367,209 |
|
Net cash from operating activities |
|
|
( i 7,536,658 |
) |
|
|
( i 10,953,242 |
) |
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchase of property, plant, and equipment |
|
|
( i 1,121,831 |
) |
|
|
( i 522,564 |
) |
Deposits on equipment to be acquired |
|
|
— |
|
|
|
( i 407,412 |
) |
Proceeds on sale of property, plant, and equipment |
|
|
— |
|
|
|
i 700 |
|
Purchase of software |
|
|
( i 2,714 |
) |
|
|
( i 109,795 |
) |
Acquisition of a business, net of cash acquired (note 2) |
|
|
— |
|
|
|
( i 10,449,587 |
) |
Proceeds from sale of land held-for-sale |
|
|
i 1,521,212 |
|
|
|
— |
|
Proceeds from sale of investment securities available-for-sale |
|
|
i 8,513,783 |
|
|
|
— |
|
Net cash from investing activities |
|
|
i 8,910,450 |
|
|
|
( i 11,488,658 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Common stock issuance costs |
|
|
i — |
|
|
|
( i 82,043 |
) |
Recovery of short-swing profits |
|
|
i 28,555 |
|
|
|
i — |
|
Employee stock purchase plan shares issued |
|
|
i 28,287 |
|
|
|
i — |
|
Withholding tax payments for share based compensation |
|
|
i — |
|
|
|
( i 219,156 |
) |
Stock options exercised |
|
|
i 64,248 |
|
|
|
i 394,669 |
|
Net cash from financing activities |
|
|
i 121,090 |
|
|
|
i 93,470 |
|
Net change in cash and cash equivalents |
|
|
i 1,494,882 |
|
|
|
( i 22,348,430 |
) |
Cash and cash equivalents beginning of year |
|
|
i 23,049,234 |
|
|
|
i 57,208,080 |
|
Cash and cash equivalents end of year |
|
$ |
i 24,544,116 |
|
|
$ |
i 34,859,650 |
|
Supplemental disclosures of cash flow information |
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for operating lease liabilities |
|
$ |
i 5,285,330 |
|
|
$ |
i — |
|
Supplemental disclosures of non-cash information |
|
|
|
|
|
|
||
Unrealized loss on available-for-sale securities |
|
$ |
i — |
|
|
$ |
( i 24,001 |
) |
Common stock issued in connection with the acquisition of a business (note 2) |
|
$ |
i — |
|
|
$ |
i 1,834,857 |
|
Amounts reclassified from accumulated other comprehensive loss |
|
$ |
i 61,016 |
|
|
$ |
i — |
|
Amounts reclassified from property, plant, and equipment to fixed assets held-for-sale |
|
$ |
i 100,000 |
|
|
$ |
— |
|
Amounts reclassified from property, plant, and equipment to intangible assets |
|
$ |
i 153,691 |
|
|
$ |
— |
|
Purchases of equipment included in deposits at the beginning of the period |
|
$ |
i 372,507 |
|
|
$ |
i — |
|
Property and equipment held-and-used reclassified to held-for-sale |
|
$ |
i 947,394 |
|
|
$ |
i — |
|
8
The accompanying notes are an integral part of these consolidated financial statements.
9
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements include the accounts of Laird Superfood, Inc., a Delaware corporation, and its wholly owned subsidiary (collectively, the “Company” or “Laird Superfood” or "we").
Nature of Operations
Laird Superfood is an emerging consumer products platform focused on manufacturing and marketing highly differentiated, plant-based and functional foods from its headquarters in Sisters, Oregon. The core pillars of the Laird Superfood platform are currently Superfood Creamer coffee creamers, Hydrate hydration products and beverage enhancing supplements, harvest snacks and other food items, and 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 six months ended June 30, 2022 and 2021. 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.
Unaudited Interim Consolidated Financial Information
In the opinion of the Company, the accompanying unaudited consolidated 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 balance sheet as of December 31, 2021 was derived from audited annual consolidated financial statements. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2022. The accompanying unaudited consolidated financial statements and related financial information should be read in conjunction with the Company's fiscal year 2021 Form 10-K filed with the SEC on March 8, 2022.
Use of Estimates
The preparation of consolidated 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 a business combination, 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, standard cost of inventory, and fair value of stock-based compensation.
Principles of Consolidation
All significant intercompany accounts and transactions have been eliminated in our accompanying unaudited consolidated financial statements.
Business Combinations
Business combinations are accounted for under the acquisition method which requires identifiable assets acquired and liabilities assumed in the business acquired be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business. The amount by which the fair value of consideration transferred as the purchase price exceeds the net fair value of assets acquired and liabilities assumed is recorded as goodwill. The amount by which the net fair value of assets acquired, and liabilities assumed exceeds the fair value of consideration transferred as the purchase price is recorded as a bargain purchase gain. Acquisition-related transaction costs are expensed as incurred. These estimates are inherently uncertain and unpredictable. In addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill or bargain purchase gain. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s Consolidated Statements of Operations.
10
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
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 allocation of 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 16 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 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 balance sheet that sum to the total of the same such amounts shown in the statement of cash flows.
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
i 24,442,384 |
|
|
$ |
i 22,932,663 |
|
Restricted cash |
|
|
i 101,732 |
|
|
|
i 116,571 |
|
Total cash, cash equivalents, and restricted cash shown in the |
|
$ |
i 24,544,116 |
|
|
$ |
i 23,049,234 |
|
Amounts in restricted cash represent those that are required to be set aside by contractual agreement. On December 3, 2020, the Company entered into an agreement with Danone Manifesto Ventures, PBC, which provided the Company $ i 298,103 in funds for the purpose of supporting three COVID-19 relief projects. During the three and six months ended June 30, 2022 we contributed $ i 10,068 and $ i 14,839, respectively, to these projects. During the three and six months ended June 30, 2021, we contributed $ i 25,059 and $ i 80,963, respectively, to these projects. The restriction will be released upon the completion of the projects.
/Concentration of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash on deposit and cash equivalents. At times, cash and cash equivalents balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurable limits. The Company’s investment account (recognized as cash and cash equivalents) is with what the Company believes to be a high-quality issuer. The Company has never experienced any losses related to these balances. Non-interest-bearing amounts on deposit in excess of FDIC insurable limits as of June 30, 2022 and December 31, 2021 approximated $ i 15,165,524 and $ i 10,835,360, respectively.
/Accounts Receivable, net
Accounts receivable, net consists principally of trade receivables, which are recorded at the invoiced amount, net of allowances for doubtful accounts. 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 Company provides for estimated losses on accounts receivable based on prior bad debt experience and a review of existing receivables. Based on these factors, management determined an allowance for doubtful accounts of $ i 60,106 and $ i 0 as of June 30, 2022 and December 31, 2021, respectively.
/Available-for-sale Debt Securities
Our investment securities consist entirely of investment-grade debt securities, all of which are classified as available-for-sale. Available-for-sale debt securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a component of accumulated other comprehensive income. Available-for-sale securities with remaining maturities of less than one year and those identified by management at the time of purchase to be used to fund operations within one year are classified as short-term. All other available-for-sale securities are classified as long-term. We evaluate our available-for-sale securities for other-than-temporary impairment on a quarterly basis. Unrealized losses are charged against net earnings when a decline in fair value is determined to be other than temporary. We review several factors to determine whether a loss is other than temporary, such as the length and extent of the fair value decline, the financial condition and near-term prospects of the issuer and whether we have the intent to sell or will more likely than not be required to sell before the securities' anticipated recovery, which may be at maturity. Realized gains and losses are accounted for using the specific identification method. Purchases and sales are recorded on a trade date basis.
11
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
Inventory
Inventory is stated at the lower of cost or net realizable value and consists primarily of raw materials and packaging and finished goods and include direct labor and allocable overhead. i The following table presents the components of inventory as of:
|
|
|
|
|
||||
Raw materials and packaging |
|
$ |
i 4,619,052 |
|
|
$ |
i 4,771,671 |
|
Finished goods |
|
|
i 4,124,759 |
|
|
|
i 5,449,672 |
|
Total |
|
$ |
i 8,743,811 |
|
|
$ |
i 10,221,343 |
|
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 six months ended June 30, 2022, the Company recorded $ i 16,137 and $ i 34,843, respectively, in inventory obsolescence primarily related to the Company’s liquid creamer product line. For the three and six months ended June 30, 2021, the Company recorded $ i 25,952 and $ i 128,556, respectively, in inventory obsolescence related to the Company’s liquid creamer product line.
As of June 30, 2022 and December 31, 2021, the Company had a total of $ i 1,238,963 and $ i 1,009,954, respectively, of prepayments for future raw materials inventory, net of reserve for prepaid assets of $ i i 179,000 / , which is included in prepaid expenses and other current assets, net on the unaudited consolidated 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 i 3 to i 10 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. For the three and six months ended June 30, 2022, depreciation expense was $ i 186,319 and $ i 329,138, respectively. For the three and six months ended June 30, 2021, depreciation expense was $ i 170,928 and $ i 302,261, respectively.
As of June 30, 2022 and December 31, 2021, the Company had a total of $ i 0 and $ i 489,325, respectively, of deposits for future equipment purchases, which is included in deposits on the unaudited consolidated balance sheets.
/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 balance sheet. 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. Fixed assets held for sale as of June 30, 2022 include the Company’s intermittent motion form (“IMF”) production line. The Company had no fixed assets held for sale as of December 31, 2021. The Company determined a fair value less costs to sell of $ i 100,000
for all assets associated with the IMF production line. As the determined fair value is less than the net carrying value of the assets, the Company recorded an impairment loss of $ i i 100,426 /
during the three and six months ended June 30, 2022.
Leases
We categorize leases at their inception as either operating or finance leases. Lease agreements cover office space, warehouse and distribution space, equipment, and vehicles. All of these 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 balance sheets.
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 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 adoption of ASU No. 2016-02, 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 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.
12
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
Revenue Recognition
The Company recognizes revenue in accordance with the five-step model as prescribed by ASU 2014-09 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 ASU 2014-09, 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 entity satisfies a performance obligation. See Note 16 for additional information regarding revenue recognition. 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 will be based on industry-based historical data, historical sales returns, if any, analysis of credit memo data, and other factors known at the time.
Cost of Goods Sold
Cost of goods sold includes material, labor, and overhead costs incurred in the storage and distribution of products sold in the period. Material costs include the cost of products purchased. Labor and overhead costs consist of indirect product costs, including wages and benefits for manufacturing, planning, and logistics personnel, depreciation, facility costs and freight.
Shipping and Handling
Costs of shipping and handling related to sales revenue are included in cost of goods sold. Shipping and handling costs totaled $ i 1,602,342 and $ i 3,141,555 for the three and six months ended June 30, 2022, respectively. Shipping and handling costs totaled $ i 1,591,952 and $ i 2,830,948 for the three and six months ended June 30, 2021, respectively. Income generated from shipping costs billed through to customers was included in Sales, net in the unaudited consolidated statements of operations. Shipping income totaled $ i 291,410 and $ i 539,602 for the three and six months ended June 30, 2022., respectively. Shipping income totaled $ i 40,750 and $ i 66,410 for the three and six months ended June 30, 2021, respectively.
/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 statements of operations. Research and product development expense was $ i 116,467 and $ i 220,300 for the three and six months ended June 30, 2022, respectively. Research and product development expense was $ i 374,852 and $ i 615,539 for the three and six months ended June 30, 2021, respectively.
/Advertising
Advertising costs are expensed when incurred. Advertising expenses for the three and six months ended June 30, 2022 was $ i 1,567,465 and $ i 3,359,202, respectively. Advertising expenses for the three and six months ended June 30, 2021 was $ i 1,697,860 and $ i 3,359,504, respectively.
/Marketing
Marketing costs are expensed when incurred. Marketing expenses for the three and six months ended June 30, 2022 were $ i 1,096,025 and $ i 2,158,670, respectively. Marketing expenses for the three and six months ended June 30, 2021 were $ i 1,247,294 and $ i 1,948,158, respectively.
/Income Taxes
Income taxes provide for the tax effects of transactions reported in the unaudited consolidated 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 $ i 17,588,981 and $ i 13,124,828 as of June 30, 2022 and December 31, 2021, respectively.
/Repurchased Stock
Management presents repurchased stock (at cost) as a reduction in stockholders’ equity to reflect the historical stock repurchase transactions more clearly. There were no stock repurchase transactions for the three and six months ended June 30, 2022 and 2021.
13
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
Stock Incentive Plan
The compensation cost relating to share-based payment transactions is recognized in the unaudited consolidated 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"), 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 stock options 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 Laird Hamilton’s contribution to the Company was in the form of intellectual property, granting the Company the right to use Laird Hamilton’s name and likeness. This contribution, which was reported on the unaudited consolidated balance sheets as of June 30, 2022 and December 31, 2021, was valued at $ i i 132,000 / and satisfied with the issuance of i 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. Please see Note 15 for more information on the Company’s related party transaction with Mr. Hamilton.
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 balance sheets as of June 30, 2022 and December 31, 2021, was valued at $ i 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. Please see Note 15 for more information on the Company’s related party transaction with Ms. Reece.
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 noncompetition 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 i 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 i 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 i i i i no / / / impairment for the three and six months ended June 30, 2022 and 2021.
/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 i 3 and i 10 years. Amortization expense is allocated to general and administrative expense. For the three and six months ended June 30, 2022, amortization expense was $ i 103,741 and $ i 245,223, respectively. For the three and six months ended June 30, 2021, amortization expense was $ i 98,533 and $ i 103,803, 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. 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 amount; therefore, the Company recognized impairment charges of $ i 0 and $ i 1,540,000 for the three and six months ended June 30, 2022, respectively. There were i i no / impairment charges in the three and six months ended June 30, 2021.
/
14
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
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 i 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, management had determined the sustained decline in stock price, coupled with 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 is impaired. The Company recorded goodwill impairment charges of $ i 0 and $ i 6,486,000 during the three and six months ended June 30, 2022. There were i i no / goodwill impairment charges in the three and six months ended June 30, 2021.
/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. For the three and six months ended June 30, 2022 and 2021, we did i i i i no / / / t match employee contributions.
/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 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.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued Leases (Topic 842) (“ASU 2016-02”), whereby a lessee will be required to recognize for all leases at the commencement date a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. A modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements must be applied. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. ASU 2016-02 is effective for the Company’s annual periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.
On January 1, 2022, we adopted ASU 2016-02 and subsequent updates, collectively referred to as Topic 842, using the modified retrospective transition method. In addition, we adopted the package of practical expedients in transition, which permits us to not reassess our prior conclusions pertaining to lease identification, lease classification and initial direct costs on leases that commenced prior to our adoption of the new standard. We also elected the ongoing practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities related to short-term leases.
The Company adopted Topic 842 using the modified retrospective transition approach provided in ASC 842-10-65-1(c)(2), which requires recognition of the cumulative effect adjustment, if any, of initially applying the standard to the opening balance of retained earnings in the period of adoption (i.e., January 1, 2022). There was no cumulative adjustment to be recognized at January 1, 2022.
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We adopted ASU 2020-04 in the first quarter of 2022. The adoption had no impact on our consolidated financial position, results of operations, or cash flows.
15
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
Recently Issued 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. The Company has not yet evaluated the potential impact of this pronouncement.
Reclassification of Prior Period Presentation
Certain prior period amounts have been reclassified for consistency with the current year presentation. As a result, certain line items have been amended in the statements of operations, statements of cash flow, and the related notes to the unaudited consolidated financial statements.
Subsequent Events
Subsequent events are events or transactions that occur after the balance sheet date but before the unaudited consolidated financial statements are available to be issued. The Company has evaluated events and transactions subsequent to June 30, 2022 for potential recognition of disclosure in the unaudited consolidated financial statements.
16
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
2. Business Combination
On i May 3, 2021, the Company entered into a definitive agreement to purchase all of the outstanding membership interest units in Picky Bars, LLC (“Picky Bars”), innovators in the healthy snack industry focused on nutritionally balanced, real-food products to fuel performance, for a debt-free purchase price of $ i 11,111,830 in cash, subject to customary working capital adjustments, and i 53,133 shares of Company common stock, subject to certain vesting conditions. The transaction closed simultaneously with execution of the agreement. Picky Bars results of operations were included in the Company’s results beginning May 2021. The fair value of the shares of common stock issued as part of the consideration paid for Picky Bars was determined on the basis of the closing price of the Company’s common stock on the acquisition date.
The following table summarizes the consideration paid for Picky Bars and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:
Consideration |
|
|
|
|
Cash |
|
$ |
i 11,111,830 |
|
Equity instruments |
|
|
i 1,834,857 |
|
Fair value of total consideration transferred |
|
$ |
i 12,946,687 |
|
Recognized amounts of identifiable assets acquired and liabilities assumed |
|
|
|
|
Cash |
|
$ |
i 662,243 |
|
Accounts receivable |
|
|
i 48,517 |
|
Prepaid expenses and other current assets |
|
|
i 237,166 |
|
Deposits |
|
|
i 6,000 |
|
Inventory |
|
|
i 726,006 |
|
Property and equipment, net |
|
|
i 55,378 |
|
Intangible assets |
|
|
i 4,930,000 |
|
Total assets acquired |
|
|
i 6,665,310 |
|
Accounts payable |
|
|
i 47,323 |
|
Accrued expenses |
|
|
i 131,661 |
|
Payroll liabilities |
|
|
i 9,189 |
|
Contract liabilities |
|
|
i 16,450 |
|
Total liabilities assumed |
|
|
i 204,623 |
|
Total identifiable net assets |
|
|
i 6,460,687 |
|
Goodwill |
|
$ |
i 6,486,000 |
|
The transaction is aligned with Laird Superfood’s strategic goals, specifically the addition of unique and innovative daily-use products across the Company’s omnichannel platform, and the acquisition of highly complementary assets such as a recurring direct-to-consumer customer base, and is expected to support continued net sales growth and improve the gross margin profile of the Company. Goodwill arising as a result of the acquisition of Picky Bars is primarily the result of synergies in business strategy, target market, and values, from expected cost savings from consolidating operations, and from the anticipated growth that the Company’s supply chain and resources will bring to Picky Bars’ operations. Operations have been fully integrated under management of the Company in Sisters, Oregon. The Company continues to operate as one segment. Our estimates of fair value of intangible assets are based upon assumptions believed to be reasonable, yet are inherently uncertain and, as a result, may differ from actual performance. During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the estimated fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill, as appropriate, in the period in which such revised estimates are identified. The measurement period is complete, and the Company recorded goodwill and intangible asset impairment charges in the first quarter of 2022 of $6,846,000 and $ i 1,540,000, respectively. See Note 9 of the notes to these consolidated unaudited financial statements.
The following table summarizes the components of the intangible assets acquired as of the acquisition date and their estimated useful lives:
|
|
Estimated Useful |
|
Fair Value |
|
|
Trade names |
|
i 10 years |
|
$ |
i 2,530,000 |
|
Customer relationships |
|
i 10 years |
|
|
i 1,990,000 |
|
Recipes |
|
i 10 years |
|
|
i 330,000 |
|
Social media agreements |
|
i 3 years |
|
|
i 80,000 |
|
Total intangible assets acquired |
|
|
|
$ |
i 4,930,000 |
|
The following unaudited pro forma summary presents the results of the Company as if the acquisition of Picky Bars had occurred on January 1 of the year of the acquisition:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||
|
|
|
|
|
||||
Net Sales |
|
$ |
i 9,618,798 |
|
|
$ |
i 18,174,961 |
|
Net Loss |
|
$ |
( i 6,444,721 |
) |
|
$ |
( i 11,946,430 |
) |
17
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
/
This unaudited pro forma financial data is included only for the purpose of illustration and does not necessarily indicate what the operating results would have been if the acquisition had occurred on January 1 of the year prior to the acquisition. Moreover, this information is not indicative of what the Company’s future operating results will be. The information prior to the acquisition is included based on prior accounting records maintained by Picky Bars. The pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Picky Bars to reflect the accrual of payroll related costs and depreciation. The unaudited pro forma financial information includes non-recurring adjustments to remove transaction costs directly attributable to the acquisition.
/3. Prepaid Expenses and Other Current Assets, Net
The following table presents the components of prepaid expenses and other current assets, net, as of:
|
|
|
|
|
||||
Prepaid insurance |
|
$ |
i 525,318 |
|
|
$ |
i 1,586,768 |
|
Prepaid inventory |
|
|
i 1,238,963 |
|
|
|
i 1,009,954 |
|
Prepaid subscriptions and license fees |
|
|
i 516,425 |
|
|
|
i 455,781 |
|
Prepaid, other |
|
|
i 252,422 |
|
|
|
i 240,657 |
|
Prepaid advertising |
|
|
i 169,275 |
|
|
|
i 253,750 |
|
Other current assets |
|
|
i 248,689 |
|
|
|
i 459,633 |
|
Total prepaid and other assets |
|
|
i 2,951,092 |
|
|
|
i 4,006,543 |
|
Reserve for prepaid inventory |
|
|
( i 179,000 |
) |
|
|
( i 179,000 |
) |
Prepaid and other assets, net |
|
$ |
i 2,772,092 |
|
|
$ |
i 3,827,543 |
|
4. Investment securities
The Company held no investment securities as of June 30, 2022. Investment securities as of December 31, 2021 consisted of the following:
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|||||
Federal agency bonds — mortgage-backed |
|
$ |
i 8,696,093 |
|
|
$ |
i — |
|
|
$ |
( i 61,016 |
) |
|
$ |
i 8,635,077 |
|
Total debt securities available-for-sale |
|
$ |
i 8,696,093 |
|
|
$ |
i — |
|
|
$ |
( i 61,016 |
) |
|
$ |
i 8,635,077 |
|
The amortized cost and estimated fair value of investment securities as of December 31, 2021, by contractual maturity, are shown below:
|
|
Available-for-sale |
|
|||||
|
Amortized |
|
|
Estimated |
|
|||
Due after one year through five years |
|
$ |
i 8,696,093 |
|
|
$ |
i 8,635,077 |
|
Total debt securities available-for-sale |
|
$ |
i 8,696,093 |
|
|
$ |
i 8,635,077 |
|
Investment securities with an estimated fair value of $ i 8,635,077 as of December 31, 2021 were pledged to secure our revolving line of credit. See Note 6 for additional information.
The Company recorded sales of available-for-sale debt securities during the three and six months ended June 30, 2022 of $ i 0 and $ i 8,513,783, respectively, and recognized a loss on the sale of $ i 182,310 in the first quarter of 2022. The Company recorded i i no / sales or maturities of available-for-sale securities during the three and six months ended June 30, 2021.
/5. Fair Value Measurements
Factors used in determining the fair value of our assets and liabilities are summarized into three broad categories:
The factors or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
18
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
The Company held no assets subject to fair value measurements as of June 30, 2022. i The following tables summarize assets subject to fair value measurements as of December 31, 2021:
Fair Value as of December 31, 2021 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
Federal agency bonds — mortgage-backed |
|
$ |
i — |
|
|
$ |
i 8,635,077 |
|
|
$ |
i — |
|
The Company believes the carrying amounts of Cash and cash equivalents, Accounts receivable, Prepaid expenses and other current assets, Deposits, Other Assets, Accounts payable, Payroll liabilities and Accrued expenses are a reasonable approximation of the fair value of those financial instruments because of the nature of the underlying transactions and the short-term maturities involved.
The Company believes that fair values of U.S. Agency Bonds issued by the Federal Home Loan Mortgage Corporation are determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. agency bonds are included in the Level 2 fair value hierarchy.
/6. 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 $ i 9,500,000.
The line of credit has a maturity date of i August 31, 2022. The outstanding amounts under the line of credit have an interest rate calculated as Daily i Simple
Secured Overnight Financing Rate (“SOFR”) plus i 1.5% per annum / until paid in full. The balance on the line of credit was $ i i 0 /
as of June, 30 2022 and December 31, 2021. Management was in compliance with all financial covenants as of June 30, 2022 and December 31, 2021.
On February 5, 2019, the Company entered into a revolving line of credit with First Interstate Bank (“FIB”) in a principal amount not exceeding $ i 5,000,000. The line of credit was secured by the Company’s investment account held at FIB. The outstanding amounts under the line of credit had an interest rate calculated as i LIBOR plus i 2.0% / per annum until paid in full. The loan agreement was renewed by the Company on March 1, 2021 and was closed on September 23, 2021.
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 $ i 3,000,000. Upon the mutual agreement of the Company and East, the primary revolving line of credit may be expanded to $ i 10,000,000, subject to an increase in the borrowing base. The borrowing base was comprised of (a) up to i 90% of eligible accounts receivable aged i 90 days or less from due date utilizing the average of a trailing three months of actual book value, plus (b) up to i 90% of inventory and prepaid inventory book values utilizing the average of a trailing three months of actual book value. The outstanding amounts under the line of credit had a fixed interest rate of i 15% per annum until paid in full and the line of credit has a maturity date of i August 10, 2022. In the event of default, the interest rate would increase to i 20% while such default exists. The line of credit was secured by a security interest in accounts receivable and inventory. The balance on the line of credit was $ i 0 as of December 31, 2021. Management was in compliance with all financial covenants as of December 31, 2021. The loan agreement was closed on May 19, 2022.
A secondary line of credit with East in an amount up to $ i 200,000 was available to the Company, which was not subject to the requirements of the borrowing base. The secondary line of credit was secured by a security interest in the Company’s accounts receivable and inventory. The secondary line was available with the same draw and payback conditions as the primary line. The balance on the line of credit was $ i 0 as of December 31, 2021. 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 i 20% of equity in any such offerings at a i 20% price per share discount, excluding (a) shares representing, in the aggregate, not more than i five percent of the Company’s issued and outstanding capital stock on a fully-diluted basis, issued to employees, consultants or directors pursuant to incentive plans; (b) shares issued for consideration other than cash pursuant to a merger, consolidation, strategic alliance, acquisition or similar business combination; (c) shares issued in connection with any distribution, dividend, conversion or recapitalization; (d) shares issued pursuant to any bona fide arms’ length equipment loan or leasing agreement, real property leasing agreement, or debt financing from a financial institution; (e) shares issued in connection with strategic transactions involving the Company and other entities, such as joint ventures, manufacturing, marketing or distribution agreements (provided that in the case of clauses (d) and (e), such issuance represents i ten percent or more of the Company’s issued and outstanding capital stock on a fully-diluted basis); and (f) shares issued pursuant to a registration statement filed under the Securities Act of 1933, as amended, in connection with an initial public offering. These rights terminated concurrently with the closure of the associated loan agreements on May 19, 2022.
/7. Long-term Debt
City of Sisters
On May 30, 2017, the Company entered into a forgivable loan agreement with the City of Sisters in the amount of $ i 51,000. This forgivable loan was issued to help the Company expand its business operations in the city of Sisters, Oregon through eligible jobs. The Company had until May 30, 2020 to create jobs for i 30 full-time employees with an average annual salary of $ i 40,000 per person, and, once created and filled, the Company must maintain those jobs for an additional period of i three years for the loan to be converted to a grant. If the requirements were not met, the Company would have been required to pay the loan in full, including interest of i eight percent per annum on the unpaid principal amount. The Company created the eligible jobs as of April 1, 2018, and the loan was converted to a grant effective December 8, 2021.
/
19
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
8. Property and Equipment, net and Land Classified as Held-for-Sale
Property and Equipment, net
Property i and equipment, net is comprised of the following as of:
|
|
|
|
|
||||
Factory equipment |
|
$ |
i 4,216,861 |
|
|
$ |
i 3,278,035 |
|
Land |
|
|
i — |
|
|
|
i 947,394 |
|
Furniture and office equipment |
|
|
i 716,721 |
|
|
|
i 592,316 |
|
Leasehold improvements |
|
|
i 1,183,555 |
|
|
|
i 993,581 |
|
Construction in progress |
|
|
i 5,993 |
|
|
|
i 148,984 |
|
|
|
|
i 6,123,130 |
|
|
|
i 5,960,310 |
|
Accumulated depreciation |
|
|
( i 1,747,141 |
) |
|
|
( i 1,447,375 |
) |
Property and equipment, net |
|
$ |
i 4,375,989 |
|
|
$ |
i 4,512,935 |
|
Depreciation expense was $ i 186,319 and $ i 329,138 for the three and six months ended June 30, 2022, respectively. Depreciation expense was $ i 170,928 and $ i 302,261 for the three and six months ended June 30, 2021, respectively.
Fixed Assets Classified as Held-for-Sale
The Company entered into a purchase order agreement for the sale of the intermittent motion form (“IMF”) production line for a sales price of $ i 100,000. The book value exceeded the fair market value and, as such, the Company recorded an impairment charge of $ i i 100,426 / for the three and six months ended June 30, 2022.
Land Classified as Held-for-Sale
On March 25, 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 $ i 1,572,512. During the three months ended June 30, 2022, the Company sold the land resulting in a gain of $ i 573,818.
/9. Goodwill and Intangible Assets, Net
Goodwill
Goodwill represents the excess of purchase price over the assigned fair values of the assets acquired and liabilities assumed in connection with the acquisition of Picky Bars. The carrying amount of goodwill attributed to the acquisition of Picky Bars was $ i 6,486,000 as of the acquisition date.
Goodwill is reviewed for impairment annually at December 31. 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 i 50%) that the fair value of a reporting unit 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 the reporting unit 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 reporting unit’s carrying value exceeds its fair value, then an impairment loss is recognized for the amount of the excess of the carrying amount over the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit.
In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing. The Company considered the current and expected future economic and market conditions and their impact on the Company, as well as the current market capitalization.
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 $ i 0 and $ i 6,486,000 for the three and six months ended June 30, 2022, respectively.
20
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
Intangible Assets, Net
Intangible Assets, net is comprised of the following:
|
|
|
|
|
||||
Trade names ( i 10 years) |
|
$ |
i 2,190,083 |
|
|
$ |
i 2,530,000 |
|
Customer relationships ( i 10 years) |
|
|
i 371,898 |
|
|
|
i 1,990,000 |
|
Recipes ( i 10 years) |
|
|
i 330,000 |
|
|
|
i 330,000 |
|
Social media agreements ( i 3 years) |
|
|
i 80,000 |
|
|
|
i 80,000 |
|
Software ( i 3- i 15 years) |
|
|
i 345,067 |
|
|
|
i 188,662 |
|
Amortizable intangible assets |
|
|
i 3,317,048 |
|
|
|
i 5,118,662 |
|
Accumulated amortization |
|
|
( i 239,112 |
) |
|
|
( i 411,908 |
) |
Amortizable intangible assets, net |
|
|
i 3,077,936 |
|
|
|
i 4,706,754 |
|
Licensing agreements (indefinite) |
|
|
i 132,100 |
|
|
|
i 132,100 |
|
Total Intangible assets, net |
|
$ |
i 3,210,036 |
|
|
$ |
i 4,838,854 |
|
The weighted-average useful life of all the Company’s intangible assets is i 8.2 years.
For the three and six months ended June 30, 2022, amortization expense was $ i 103,741 and $ i 245,223, respectively. For the three and six months ended June 30, 2021, amortization expense was $ i 98,533 and $ i 103,803, respectively.
During the three and six months ended June 30, 2022, the Company assessed whether a triggering event has occurred which would require interim impairment testing long-lived intangible assets for impairment. In the first quarter of 2022, the Company determined that a triggering event had occurred which would require an interim impairment test to be performed. In conjunction with the goodwill qualitative and quantitative assessment performed, the Company performed a quantitative assessment of intangible assets acquired in the business combination with Picky Bars, and recorded impairment of the related long-lived intangible assets of $ i 0 and $ i 1,540,000 for the three and six months ended June 30, 2022, respectively.
Intangible assets are amortized using the i straight-line method over estimated useful lives ranging from three to i fifteen years. i The estimated amortization expense for each of the next five years and thereafter is as follows:
2022 (excluding the six months ended June 30, 2022) |
|
$ |
i 208,264 |
|
2023 |
|
|
i 415,746 |
|
2024 |
|
|
i 359,875 |
|
2025 |
|
|
i 306,502 |
|
2026 |
|
|
i 296,407 |
|
Thereafter |
|
|
i 1,491,142 |
|
|
|
$ |
i 3,077,936 |
|
10. Leases
In February 2016, the FASB issued new accounting guidance on leases. Effective January 1, 2022, we adopted the standard using the modified retrospective method, under which we elected the package of practical expedients and transition provisions allowing us to bring our existing operating leases onto the unaudited consolidated balance sheet without adjusting comparative periods.
Lessee
In accordance
with Topic 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. The Company determines if an arrangement is a lease or contains an embedded lease at inception. 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.
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.
21
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
The Company currently leases its warehouse space under a commercial lease with RII Lundgren Mill, LLC, dated March 1, 2018. The lease commenced March 1, 2018 with monthly payments of $ i 6,475,
to escalate after 24 months by the lesser of i 3% or the Consumer Price Index (“CPI”) adjustment. The initial lease term is ten years, and the Company has the option to renew the lease for two additional five-year periods. The landlord has paid for many tenant improvements and the Company has committed to reimbursing the landlord, in additional
rents, for specific improvements. On November 20, 2018, the Company completed the reimbursement of $ i 797,471. The Company also issued the landlord i 2,000
stock options on April 15, 2018 with a strike price of $ i 7.50 per share in conjunction with this lease agreement.
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 with monthly payments of $ i 12,784, to escalate after 24 months by the lesser of i 3%
or the CPI adjustment. However, for accounting purposes the lease commencement date was June 6, 2019. The initial lease term is ten years, and the Company has the option to renew the lease for two additional five-year periods. The landlord has paid for many tenant improvements and the Company has committed to reimbursing the landlord, in additional rents, for specific improvements. On December 20, 2018, the Company completed the initial reimbursement of $ i 1,202,529.
The Company made the final reimbursement in the amount of $ i 1,399,001 on December 31, 2019.
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 with monthly payments of $ i 38,869, to escalate after 24 months by the lesser of i 3% or the CPI adjustment. The initial lease term is ten years, and the Company has the option to renew the lease for two additional five-year periods.
The Company assumed an operating lease in the acquisition of Picky Bars, LLC on May 3, 2021. The Company pays monthly rent of $ i 4,609, which escalates by i 3% in months 15, 27, 39, and 51. The initial lease term is i 62 months, and the Company has the option to renew the lease for two additional three-year periods.
The components of lease expense were as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||
Operating leases |
|
|
|
|
|
|
||
Operating lease cost |
|
$ |
i 267,106 |
|
|
$ |
i 534,213 |
|
Variable lease cost |
|
|
i 27,635 |
|
|
|
i 80,638 |
|
Operating lease expense |
|
|
i 294,741 |
|
|
|
i 614,851 |
|
Short-term lease rent expense |
|
|
i 68,957 |
|
|
|
i 103,498 |
|
Total rent expense |
|
$ |
i 363,698 |
|
|
$ |
i 718,349 |
|
|
|
Six Months Ended |
|
|
Operating cash flows - operating leases |
|
$ |
i 370,214 |
|
Right-of-use assets obtained in exchange for operating lease liabilities |
|
$ |
i 5,285,330 |
|
|
|
|
||
Weighted-average remaining lease term – operating leases (in years) |
|
|
i 8.3 |
|
Weighted-average discount rate – operating leases |
|
|
i 3.75 |
% |
As of June 30, 2022, future minimum payments during the next five years and thereafter are as follows:
2022 (excluding the six months ended June 30, 2022) |
|
$ |
i 373,554 |
|
2023 |
|
|
i 748,282 |
|
2024 |
|
|
i 750,077 |
|
2025 |
|
|
i 709,185 |
|
2026 |
|
|
i 688,437 |
|
Thereafter |
|
|
i 2,605,668 |
|
Total |
|
|
i 5,875,203 |
|
Less imputed interest |
|
|
( i 863,111 |
) |
Operating lease liabilities |
|
$ |
i 5,012,092 |
|
22
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
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 sublessee pays monthly rent of $ i 4,889 beginning August 1, 2022, to escalate after 12 months by i 3%. The initial lease term expires on i 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 $ i 16,852 and $ i 0 of sublease rental assets as of June 30, 2022 and December 31, 2021, respectively, included in prepaid and other current assets on the unaudited consolidated balance sheets.
The components of rental income were as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||
Operating leases |
|
|
|
|
|
|
||
Operating lease income |
|
$ |
i 14,055 |
|
|
$ |
i 14,055 |
|
Variable lease income |
|
|
i 2,710 |
|
|
|
i 2,710 |
|
Total rental income |
|
$ |
i 16,765 |
|
|
$ |
i 16,765 |
|
As of June 30, 2022, future minimum payments to be received during the next five years and thereafter are as follows:
2022 (excluding the six months ended June 30, 2022) |
|
$ |
i 24,447 |
|
2023 |
|
|
i 59,845 |
|
2024 |
|
|
i 61,640 |
|
2025 |
|
|
i 20,748 |
|
2026 |
|
|
i — |
|
Thereafter |
|
|
i — |
|
Total |
|
$ |
i 166,680 |
|
11. Deferred Tax Assets and Liabilities
The Company had a tax net loss for the three and six months ended June 30, 2022 and 2021, 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. i 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 for six months ended June 30, 2022 and 2021:
|
|
Six months ended, |
|
|||||
|
|
|
|
|
||||
|
|
|
|
|
|
|
||
Income tax benefit at statutory rates |
|
$ |
( i 4,008,649 |
) |
|
$ |
( i 2,442,880 |
) |
Valuation allowance for deferred tax assets |
|
|
i 3,847,819 |
|
|
|
i 3,002,400 |
|
Stock-based compensation |
|
|
i 21,935 |
|
|
|
i 59,074 |
|
Other (benefit) expense, net |
|
|
i 133,121 |
|
|
|
( i 655,312 |
) |
Reported income tax expense |
|
|
( i 5,774 |
) |
|
|
( i 36,718 |
) |
Effective tax rate: |
|
|
i 0.00 |
% |
|
|
i 0.00 |
% |
23
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
The Company’s deferred tax assets and liabilities consisted of the following as of:
|
|
|
|
|
||||
Noncurrent deferred tax assets: |
|
|
|
|
|
|
||
Net operating loss carryforwards |
|
$ |
i 14,939,806 |
|
|
$ |
i 11,999,882 |
|
Intangible assets |
|
|
i 1,839,669 |
|
|
|
i 17,951 |
|
Property and equipment |
|
|
i 434,731 |
|
|
|
i 686,601 |
|
Research and development credits |
|
|
i 223,613 |
|
|
|
i 165,216 |
|
Accrued expenses |
|
|
i 47,660 |
|
|
|
i 98,296 |
|
Bad debt reserve |
|
|
i 9,462 |
|
|
|
i — |
|
Charitable contributions |
|
|
i 39,807 |
|
|
|
i 38,447 |
|
Unexercised options |
|
|
i 583,813 |
|
|
|
i 679,688 |
|
Total noncurrent deferred tax assets |
|
|
i 18,118,561 |
|
|
|
i 13,686,081 |
|
Noncurrent deferred tax liabilities: |
|
|
|
|
|
|
||
Right of use asset |
|
|
i 529,580 |
|
|
|
i 568,787 |
|
Total noncurrent deferred tax liabilities |
|
|
i 529,580 |
|
|
|
i 568,787 |
|
Net noncurrent deferred tax assets |
|
|
i 17,588,981 |
|
|
|
i 13,117,294 |
|
Valuation allowance |
|
|
( i 17,588,981 |
) |
|
|
( i 13,124,828 |
) |
Total net noncurrent deferred tax liabilities |
|
$ |
i — |
|
|
$ |
( i 7,534 |
) |
The Company assesses its deferred tax assets and liabilities to determine if it is more likely than not they will be realized; if not, a valuation allowance is required to be recorded. During the six months ended June 30, 2022, the Company recorded an indefinite-lived deferred tax asset of $ i 1.5 million to account for the book vs. tax basis difference related to the goodwill intangible asset acquired in the Picky Bars acquisition. During the six months ended June 30, 2022, the goodwill relating to the Picky Bars stock acquisition was fully impaired for GAAP. Due to the impairment, there is a deferred tax asset associated with the indefinite-lived intangible asset. The valuation allowance is increased by the indefinite-lived intangible assets. Previously, there was an indefinite-lived deferred tax liability that was excluded from sources of future taxable income, as the timing of its reversal cannot be predicted due to the indefinite life of the goodwill and U.S. federal net operating losses (“NOLs”). A naked credit resulted due to indefinite-lived deferred tax liability's inability to reduce the valuation allowance for U.S. federal income tax purposes
As of June 30, 2022, 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 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 $ i 13 thousand.
The change in the valuation allowance for deferred tax assets and liabilities for the six months ended June 30, 2022 was a net increase of $ i 4.5 million. At June 30, 2022 and December 31, 2021, the Company had NOLs totaling approximately $ i 90.0 million and $ i 72.6 million, respectively. At June 30, 2022 and December 31, 2021, the Company had federal NOLs totaling approximately $ i 1.9 million from 2017 and prior years that can be carried forward for i 20 years, which begin to expire in 2036. At June 30, 2022 and December 31, 2021, the Company had federal NOLs totaling approximately $ i 58.1 million and $ i 46.2 million, respectively from 2018 and subsequent years that can be carried forward i indefinitely. At June 30, 2022 and December 31, 2021, the Company had state NOLs totaling $ i 30.1 million and $ i 24.5 million, respectively, that can be carried forward for between i 15 and i 20 years. At June 30, 2022 and December 31, 2021, the Company had credits totaling $ i 0.5 million and $ i 0.4 million, respectively, that can be carried forward for between i 5 and i 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 i 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 i 3 to i 5 years.
/
24
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
12. 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, restricted stock units, 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, employees of the Company’s affiliates, non-employee directors and certain consultants and advisors. The Company is authorized to award i 1,355,715 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. The Stock Incentive Plans were established to provide eligible individuals with an incentive to contribute to the Company’s success and to operate and manage the Company’s business in a manner that will provide for its long-term growth and profitability and that will benefit the Company’s shareholders and other stakeholders, including employees and customers. The Stock Incentive Plans are also intended to provide a means of recruiting, rewarding, and retaining key personnel.
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 market 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 i ten years from the date of grant, (ii) i three months following the date of termination of employment from the Company, (iii) i 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:
|
|
Options |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
Balance at January 1, 2022 |
|
|
i 747,800 |
|
|
$ |
i 11.51 |
|
|
|
i 6.57 |
|
|
$ |
i 1,143,013 |
|
Granted |
|
|
i 453,498 |
|
|
|
i 7.21 |
|
|
|
|
|
|
|
||
Exercised/released |
|
|
( i 76,750 |
) |
|
|
i 2.14 |
|
|
|
|
|
|
|
||
Cancelled/forfeited |
|
|
( i 192,283 |
) |
|
|
i 17.05 |
|
|
|
|
|
|
|
||
Balance at June 30, 2022 |
|
|
i 932,265 |
|
|
$ |
i 9.02 |
|
|
|
i 7.81 |
|
|
$ |
— |
|
Exercisable at June 30, 2022 |
|
|
i 419,565 |
|
|
$ |
i 9.76 |
|
|
|
i 5.82 |
|
|
$ |
— |
|
|
|
Options |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
Balance at January 1, 2021 |
|
|
i 887,640 |
|
|
$ |
i 9.65 |
|
|
|
i 6.42 |
|
|
$ |
i 33,433,274 |
|
Granted |
|
|
i 54,883 |
|
|
|
i 42.27 |
|
|
|
|
|
|
|
||
Exercised/released |
|
|
( i 50,602 |
) |
|
|
i 8.06 |
|
|
|
|
|
|
|
||
Cancelled/forfeited |
|
|
( i 38,500 |
) |
|
|
i 9.27 |
|
|
|
|
|
|
|
||
Balance at June 30, 2021 |
|
|
i 853,421 |
|
|
$ |
i 11.87 |
|
|
|
i 7.17 |
|
|
$ |
i 15,365,736 |
|
Exercisable at June 30, 2021 |
|
|
i 579,449 |
|
|
$ |
i 7.84 |
|
|
|
i 6.50 |
|
|
$ |
i 12,763,447 |
|
25
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated 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 during the three and six months ended June 30, 2022 and 2021 was determined using the following assumptions:
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.
For the six months ended June 30, 2022 and 2021, 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:
|
|
For the Six Months Ended |
|
|||||
|
|
|
|
2021 |
|
|||
Weighted-average expected volatility |
|
|
i 52.36 |
% |
|
|
i 52.08 |
% |
Weighted-average expected term (years) |
|
|
i 6.25 |
|
|
|
i 6.23 |
|
Weighted-average expected risk-free interest rate |
|
|
i 2.27 |
% |
|
|
i 0.70 |
% |
Dividend yield |
|
|
i — |
|
|
|
i — |
|
Weighted-average fair value of options granted |
|
$ |
i 2.79 |
|
|
$ |
i 20.95 |
|
Restricted Stock Units
The following tables summarize the Company’s RSU activity during the six months ended June 30, 2022 and 2021:
|
|
Number of RSUs |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
Balance at January 1, 2022 |
|
|
i 91,438 |
|
|
$ |
i 32.91 |
|
|
|
i 2.17 |
|
|
$ |
i 2,982,931 |
|
Granted |
|
|
i 445,702 |
|
|
|
i 4.74 |
|
|
|
|
|
|
|
||
Exercised/released |
|
|
( i 19,061 |
) |
|
|
i 26.92 |
|
|
|
|
|
|
|
||
Cancelled/forfeited |
|
|
( i 27,845 |
) |
|
|
i 31.01 |
|
|
|
|
|
|
|
||
Balance at June 30, 2022 |
|
|
i 490,234 |
|
|
$ |
i 7.64 |
|
|
|
i 3.26 |
|
|
$ |
i 3,747,835 |
|
|
|
Number of RSUs |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
Balance at January 1, 2021 |
|
|
i 57,187 |
|
|
$ |
i 33.16 |
|
|
|
i 2.08 |
|
|
$ |
i 1,896,221 |
|
Granted |
|
|
i 45,745 |
|
|
|
i 39.99 |
|
|
|
|
|
|
|
||
Exercised/released |
|
|
( i 3,000 |
) |
|
|
i 47.99 |
|
|
|
|
|
|
|
||
Cancelled/forfeited |
|
|
( i 2,742 |
) |
|
|
i 25.67 |
|
|
|
|
|
|
|
||
Balance at June 30, 2021 |
|
|
i 97,190 |
|
|
$ |
i 36.13 |
|
|
|
i 2.30 |
|
|
$ |
i 3,511,288 |
|
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.
26
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
Market-Based Stock Units
The following tables summarize the Company’s market-based stock unit ("MSU") activity during the six months ended June 30, 2022 and 2021:
|
|
Number of MSUs |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
Balance at January 1, 2022 |
|
|
i 160,301 |
|
|
$ |
i 43.53 |
|
|
|
i 1.20 |
|
|
$ |
i 6,977,903 |
|
Granted |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Exercised/released |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Cancelled/forfeited |
|
|
( i 129,218 |
) |
|
|
i 43.53 |
|
|
|
|
|
|
|
||
Balance at June 30, 2022 |
|
|
i 31,083 |
|
|
$ |
i 43.53 |
|
|
|
i 0.87 |
|
|
$ |
i 1,353,043 |
|
|
|
Number of MSUs |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
Balance at January 1, 2021 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
Granted |
|
|
i 189,608 |
|
|
|
i 43.53 |
|
|
|
|
|
|
|
||
Exercised/released |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Cancelled/forfeited |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance at June 30, 2021 |
|
|
i 189,608 |
|
|
$ |
i 43.53 |
|
|
|
i 1.56 |
|
|
$ |
i 8,253,636 |
|
These MSUs vest upon the i 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 volatilities within the index are derived using historical volatilities 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 i 0% dividend rate. Compensation expense for these MSUs is recognized over the requisite service period regardless of whether the market conditions are satisfied. The Company estimates the fair value of MSUs on the grant date using a Monte Carlo simulation.
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 shares at the lower of i 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 is determined using a component valuation model. We estimate that i 16,000 shares of common stock will be issued in accordance with the plan to those enrollees in the enrollment period commencing on May 1, 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 |
|
|
Six months ended |
|
|
Unrecognized compensation cost related to non-vested awards as of June 30, 2022 |
|
|
Weighted-average remaining vesting period as of June 30, 2022 (years) |
|
||||
Stock options |
|
$ |
i 80,408 |
|
|
$ |
i 186,857 |
|
|
$ |
i 1,375,558 |
|
|
|
i 3.35 |
|
RSUs |
|
|
i 377,538 |
|
|
|
i 740,876 |
|
|
|
i 2,916,680 |
|
|
|
i 3.03 |
|
MSUs |
|
|
( i 668,782 |
) |
|
|
( i 1,133,244 |
) |
|
|
i 151,153 |
|
|
|
i 1.59 |
|
ESPP |
|
|
i 1,594 |
|
|
|
i 7,065 |
|
|
|
— |
|
|
|
— |
|
Total stock based compensation |
|
$ |
( i 209,242 |
) |
|
$ |
( i 198,446 |
) |
|
$ |
i 4,443,392 |
|
|
|
i 3.08 |
|
27
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
|
|
Three months ended |
|
|
Six months ended |
|
|
Unrecognized compensation cost related to non-vested awards as of December 31, 2021 |
|
|
Weighted-average remaining vesting period as of June 30, 2021 (years) |
|
||||
Stock options |
|
$ |
i 189,967 |
|
|
$ |
i 463,039 |
|
|
$ |
i 1,638,717 |
|
|
|
i 2.35 |
|
RSUs |
|
|
i 376,885 |
|
|
|
i 728,329 |
|
|
|
i 2,282,174 |
|
|
|
i 2.30 |
|
MSUs |
|
|
i 508,079 |
|
|
|
i 893,565 |
|
|
|
i 1,927,898 |
|
|
|
i 2.59 |
|
ESPP |
|
|
i 15,143 |
|
|
|
i 15,144 |
|
|
|
— |
|
|
|
— |
|
Total stock based compensation |
|
|
i 1,090,074 |
|
|
|
i 2,100,077 |
|
|
|
i 5,848,789 |
|
|
|
i 2.41 |
|
During the three and six months ended June 30, 2022, there were forfeitures of MSU awards of certain members of executive leadership of $ i 901,801 and $ i 1,785,125, respectively, representing discrete reversals of stock compensation expense to the periods. There were i i no / such forfeitures of MSUs in the three and six months ended June 30, 2021.
There were i i no / payroll taxes withheld from stock-based compensation during the three and six months ended June 30, 2022. During the three and six months ended June 30, 2021, there were $ i 30,363 and $ i 219,156, respectively, of payroll taxes withheld from stock-based compensation which were remitted directly to the tax authorities on the behalf of the recipients of the awards.
/13. Earnings per Share
Basic earnings (loss) per share is determined by dividing net loss attributable to Laird Superfood, Inc. common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings 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 and preferred shares had been issued. Dilutive potential common shares consist of employee stock options and restricted stock units. The dilutive effect of employee stock options and restricted stock units issued by the Company and is calculated using the treasury stock method. Because the Company was in a loss position for all periods presented, all stock options and restricted stock units are anti-dilutive and excluded. i The computation of basic and diluted earnings (loss) per share is set forth in the following table:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Net loss |
|
$ |
( i 4,904,520 |
) |
|
$ |
( i 6,302,259 |
) |
|
$ |
( i 19,043,922 |
) |
|
$ |
( i 11,632,763 |
) |
Weighted average shares outstanding- basic and diluted |
|
|
i i 9,132,632 / |
|
|
|
i i 8,967,797 / |
|
|
|
i i 9,114,527 / |
|
|
|
i i 8,931,736 / |
|
Common stock options, restricted stock awards, and market-based stock awards excluded due to anti-dilutive effect |
|
|
i 1,453,582 |
|
|
|
i 950,611 |
|
|
|
i 1,453,582 |
|
|
|
i 950,611 |
|
Basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share, basic and diluted |
|
$ |
( i i 0.54 / |
) |
|
$ |
( i i 0.70 / |
) |
|
$ |
( i i 2.09 / |
) |
|
$ |
( i i 1.30 / |
) |
28
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
14. Concentrations
The Company had i 43% of trade accounts receivable from i two customers as of June 30, 2022. The Company had i 57% of trade accounts receivable from i three customers as of December 31, 2021.
The Company had i 29% of accounts payable due to i two vendors as of June 30, 2022. The Company had i 12% of accounts payable due to i one vendor as of December 31, 2021.
The Company sold a substantial portion of products to i two customers ( i 21%) and i one customer ( i 12%) for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, the amount due from these customers was $556,117. The Company sold a substantial portion of products to i two customers ( i 29%) and i three customers ( i 34%) for the three and six months ended June 30, 2021, respectively. As of June 30, 2021, the amount due from these customers included in accounts receivable was $ i 464,127.
The Company purchased a substantial portion of products from i three suppliers ( i 51%) and i two suppliers ( i 64%) for the three and six months ended June 30, 2022, respectively. The Company purchased a substantial portion of products from one supplier ( i 48%) and one supplier ( i 49%) for the three and six months ended June 30, 2021, respectively.
In addition, our top suppliers are in a similar geographic area, which increases the risk of significant supply disruptions from local and regional events. Indonesia, Sri Lanka, and Vietnam geographically accounted for approximately i 51% and i 64% of our total raw materials and packaging purchases for the three and six months ended June 30, 2022, respectively. Sri Lanka, Indonesia, and Vietnam geographically accounted for approximately i 56% and i 63% of our total raw materials and packaging purchases for the three and six months ended June 30, 2021, respectively.
/15. Related Party
FASB ASC Topic 850, Related Party Disclosures, requires that information about transactions with related parties that would make a difference in 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 fair value of the service provided and the most recent equity offering price (or market price post-IPO) per share. 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 i ten-year terms upon the expiration of the initial i 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 financial statements.
Shareholder Contribution
On December 3, 2020, Danone Manifesto Ventures, PBC, one of the Company's largest shareholders, provided the Company $ i 298,103 in funds for the purpose of supporting three COVID-19 relief projects.
Social Media Marketing Agreements
The Company entered into a social media marketing agreement with Lauren Thomas and Stephanie Bruce, former co-owners of Picky Bars, to provide certain marketing services on an annual basis, for $ i i 40,000 / each per annum. The Company entered into a social media marketing agreements with Jesse Thomas, former co-owner of Picky Bars, to provide certain marketing services at no cost to the Company.
Recovery of Short-Swing Profits
In the second quarter of 2022, the Company recorded $ i 28,555 related to the recovery of short-swing profits from one of the Company’s shareholders under Section 16(b) of the Securities Exchange Act of 1934, as amended. The Company recognized these related party proceeds as an increase to additional paid-in capital in the accompanying unaudited consolidated balance sheet as of June 30, 2022 as well as cash proceeds as cash provided by financing activities in the accompanying unaudited consolidated statement of cash flows for six months ended June 30, 2022.
/16. 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 or service 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 collection of 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.
29
LAIRD SUPERFOOD, INC.
Notes to Unaudited Consolidated Financial Statements
In accordance with ASC Topic 606, the Company disaggregates net sales from contracts with customers based on the characteristics of the products sold:
|
|
Three Months Ended June 30, |
|
|||||||||||||
|
|
|
|
2021 |
|
|||||||||||
|
|
$ |
|
|
% of Total |
|
|
$ |
|
|
% of Total |
|
||||
Coffee creamers |
|
$ |
i 4,694,975 |
|
|
|
i 54 |
% |
|
$ |
i 5,078,739 |
|
|
|
i 55 |
% |
Hydration and beverage enhancing supplements |
|
|
i 1,296,779 |
|
|
|
i 15 |
% |
|
|
i 1,752,820 |
|
|
|
i 19 |
% |
Harvest snacks and other food items |
|
|
i 1,713,441 |
|
|
|
i 20 |
% |
|
|
i 1,344,802 |
|
|
|
i 15 |
% |
Coffee, tea, and hot chocolate products |
|
|
i 1,568,142 |
|
|
|
i 18 |
% |
|
|
i 1,661,130 |
|
|
|
i 18 |
% |
Other |
|
|
i 419,390 |
|
|
|
i 5 |
% |
|
|
i 76,232 |
|
|
|
i 1 |
% |
Gross sales |
|
|
i 9,692,727 |
|
|
|
i 112 |
% |
|
|
i 9,913,723 |
|
|
|
i 108 |
% |
Shipping income |
|
|
i 291,410 |
|
|
|
i 3 |
% |
|
|
i 40,750 |
|
|
|
i 0 |
% |
Returns and discounts |
|
|
( i 1,310,131 |
) |
|
|
( i 15 |
)% |
|
|
( i 773,887 |
) |
|
|
( i 8 |
)% |
Sales, net |
|
$ |
i 8,674,006 |
|
|
|
i 100 |
% |
|
$ |
i 9,180,586 |
|
|
|
i 100 |
% |
|
|
Six Months Ended June 30, |
|
|||||||||||||
|
|
|
|
2021 |
|
|||||||||||
|
|
$ |
|
|
% of Total |
|
|
$ |
|
|
% of Total |
|
||||
Coffee creamers |
|
$ |
i 10,149,382 |
|
|
|
i 56 |
% |
|
$ |
i 10,100,387 |
|
|
|
i 61 |
% |
Hydration and beverage enhancing supplements |
|
|
i 2,754,210 |
|
|
|
i 15 |
% |
|
|
i 2,982,875 |
|
|
|
i 18 |
% |
Harvest snacks and other food items |
|
|
i 3,400,232 |
|
|
|
i 19 |
% |
|
|
i 1,487,705 |
|
|
|
i 9 |
% |
Coffee, tea, and hot chocolate products |
|
|
i 3,384,327 |
|
|
|
i 19 |
% |
|
|
i 3,562,222 |
|
|
|
i 21 |
% |
Other |
|
|
i 657,713 |
|
|
|
i 4 |
% |
|
|
i 127,168 |
|
|
|
i 1 |
% |
Gross sales |
|
|
i 20,345,864 |
|
|
|
i 113 |
% |
|
|
i 18,260,357 |
|
|
|
i 110 |
% |
Shipping income |
|
|
i 539,602 |
|
|
|
i 3 |
% |
|
|
i 66,410 |
|
|
|
i 0 |
% |
Returns and discounts |
|
|
( i 2,871,447 |
) |
|
|
( i 16 |
)% |
|
|
( i 1,749,288 |
) |
|
|
( i 10 |
)% |
Sales, net |
|
$ |
i 18,014,019 |
|
|
|
i 100 |
% |
|
$ |
i 16,577,479 |
|
|
|
i 100 |
% |
The Company generates revenue through three channels: online, wholesale, and food service:
|
|
For the Three Months Ended June 330, |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||
|
|
$ |
|
|
% of Total |
|
|
$ |
|
|
% of Total |
|
||||
Online |
|
$ |
i 5,178,819 |
|
|
|
i 60 |
% |
|
$ |
i 5,799,104 |
|
|
|
i 63 |
% |
Wholesale |
|
|
i 3,341,573 |
|
|
|
i 39 |
% |
|
|
i 3,220,030 |
|
|
|
i 35 |
% |
Food service |
|
|
i 153,614 |
|
|
|
i 2 |
% |
|
|
i 161,452 |
|
|
|
i 2 |
% |
Sales, net |
|
$ |
i 8,674,006 |
|
|
|
i 100 |
% |
|
$ |
i 9,180,586 |
|
|
|
i 100 |
% |
|
|
For the Six Months Ended June 30, |
|
|||||||||||||
|
|
|
|
2021 |
|
|||||||||||
|
|
$ |
|
|
% of Total |
|
|
$ |
|
|
% of Total |
|
||||
Online |
|
$ |
i 10,602,770 |
|
|
|
i 59 |
% |
|
$ |
i 10,161,509 |
|
|
|
i 61 |
% |
Wholesale |
|
|
i 7,136,643 |
|
|
|
i 40 |
% |
|
|
i 6,113,727 |
|
|
|
i 37 |
% |
Food service |
|
|
i 274,606 |
|
|
|
i 2 |
% |
|
|
i 302,243 |
|
|
|
i 2 |
% |
Sales, net |
|
$ |
i 18,014,019 |
|
|
|
i 100 |
% |
|
$ |
i 16,577,479 |
|
|
|
i 100 |
% |
Contract assets (deferred costs of goods sold associated with deferred revenue), contract liabilities (deferred revenue, customer deposits, rewards programs), and refund liabilities (accrued returns) have been estimated and recorded as of June 30, 2022. Contract assets included in finished goods inventories were $ i 0 and $ i 5,283 as of June 30, 2022 and December 31, 2021, respectively. Contract liabilities and refund liabilities included in accrued expenses were $ i 10,314 and $ i 29,925 as of June 30, 2022 and December 31, 2021, respectively. Receivables from contracts with customers are included in Accounts receivable, net on the Company’s consolidated balance sheets. As of June 30, 2022 and December 31, 2021, Accounts receivable, net included, $ i 1,183,953 and $ i 1,268,718, respectively, of receivables from contracts with customers.
/
30
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 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, 2021. 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 in our Annual Report on Form 10-K for the year ended December 31, 2021.
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, Hydrate hydration products and beverage enhancing supplements, Harvest snacks and other food items, and roasted and instant coffees, teas and hot chocolate. 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 decreased to $8.7 million for the three months ended June 30, 2022 from $9.2 million for the three months ended June 30, 2021. The decline was driven primarily by challenging results in our online direct to consumer ("DTC") channel as we significantly reduced inefficient marketing spend, spending less on direct media for the DTC channel versus the prior period. These changes allowed us to create a better performing marketing mix across all digital channels and make critical investments in building our brand for future success. Online segment sales were also negatively impacted by a broader pull back in consumer spending due to inflationary concerns. Despite these factors, we saw growth in our Amazon.com sales, reflecting a momentum driven by changes we are making with regard to our approach on Amazon.com, where we saw an increase in new consumers versus the same period a year ago. Our wholesale channel sales also grew year over year driven by new distribution gains across several key retailers in natural, conventional, drug, and club channels. Net sales increased to $18.0 million for the six months ended June 30, 2022, from $16.6 million for the six months ended June 30, 2021, representing net sales growth of 9%. The growth was primarily driven by an expansion of our customer base in DTC channels as well as new distribution gains in wholesale channels combined with new products offerings.
Our omnichannel distribution strategy has three key components: online, wholesale and food service. In aggregate, this omnichannel strategy provides us with a diverse set of customers and wholesale partners, along with an opportunity to develop a direct relationship with our customers at lairdsuperfood.com and pickybars.com. We believe that, along with trusted brand names, extensive proprietary distribution is a critical long-term and sustainable barrier to entry in the food industry.
Our online business is two pronged and consists of direct-to-consumer sales (lairdsuperfood.com and pickybars.com) and Amazon.com. For the three months ended June 30, 2022 and 2021, the online business made up 60% and 63% of our net sales, respectively. For the six months ended June 30, 2022 and 2021, the online business made up 59% and 61% of our net sales, respectively.Lairdsuperfood.com is a platform that provides an authentic brand experience for our customers that drives engagement and provides feedback for future product development. We view our growing 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 approximately three-fourths of direct-to-consumer sales for the three and six months ended June 30, 2022.
Our wholesale business addresses the $800 billion grocery industry, specifically the $259 billion Natural, Organic and Functional Foods and Beverages sub-segment, which has been increasing its proportion of the grocery industry, as well as many non-grocery retail channels. For the three and six months ended June 30, 2022, wholesale made up 39% and 40% of our net sales, respectively. For the three and six months ended June 30, 2021, wholesale made up 35% and 37% of our net sales, respectively. Laird Superfood products are sold through a diverse set of retail channels, including conventional, natural and specialty grocery, club, outdoor and drug stores. We currently estimate our products are in approximately 8,000 retail door locations with over 36,000 points of distribution and we believe the long-term potential store base exceeds 20,000 retail locations in the United States. The diversity of our retail 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
Executive Transitions
Effective January 31, 2022, the Company’s Board of Directors appointed Jason Vieth as the Company’s President and Chief Executive Officer and elected Mr. Vieth as a director of the Company. Mr. Vieth joined the Company from Sovos Brands, Inc., where he most recently served as executive vice president and group general manager of the Breakfast and Snacks segment. Before joining Sovos Brands in January 2020, Mr. Vieth served as chief executive officer of Poppi, a producer of prebiotic soda, from April 2019 to January 2020 and president of Life Time Fitness’ Life Cafe from April 2017 to April 2019 and held various management positions for WhiteWave Foods Company from January 2008 to April 2017. Mr. Vieth replaced Paul Hodge, who stepped down as President and Chief Executive Officer and a director of the Company upon Mr. Vieth’s appointment.
31
On April 1, 2022, Andrew Judd was appointed as Chief Commercial Officer, responsible for the commercial strategy and the development of the Company. Mr. Judd oversees marketing, sales, product development, and customer experience to drive business growth and expand market share. Mr. Judd is an experienced marketing leader focused on building exceptional teams and go-to-market models that build brands and businesses. He has led teams across brand marketing, insights, and creative services from large strategic CPG enterprises to emerging high-growth brands. Most recently, he was CMO of Yasso. Before that he served as CMO of ONE Brands and VP Marketing for the Boulder Brands business unit of Pinnacle Foods. Previous roles included leading the management of the So Delicious brand at WhiteWave, Category Director for ice cream, iced coffee, blended beverages and value-added milk portfolio at Saputo Dairy Foods, and various roles at Campbell Soup Company.
On May 13, 2022, Valerie Ells notified the Company of her resignation as Chief Financial Officer of the Company, effective June 30, 2022. In connection with Ms. Ells’ resignation, Ms. Ells and the Company entered into an independent contractor agreement on May 17, 2022 pursuant to which Ms. Ells will provide consulting services to the Company as needed and directed effective from the time of her resignation through August 31, 2022.
On May 17, 2022, the Company’s Board of Directors appointed Anya Kochetova Hamill as the Company’s interim Chief Financial Officer, effective July 1, 2022.
Ms. Hamill possesses more than 20 years of strategic finance experience in both public consumer packaged goods and private equity backed emerging companies in the natural foods and beverages space. Ms. Hamill joined the Company as Vice President, Financial Planning and Analysis in April 2022 from Little Secrets Chocolate, where she served as chief financial officer from September 2018. Previously, Ms. Hamill served as director,
financial planning and analysis at Renewable Energy Systems Americas from March 2018 through September 2018, as the senior director of finance, premium yogurt at Danone North America from May 2017 through March 2018, and as senior director of finance, plant based beverage and food and various other finance positions at WhiteWave Foods from March 2003 through March 2018. Ms. Hamill holds an MBA with a finance concentration from Leeds School of Business at the University of Colorado and a Bachelor of Arts from Saint-Petersburg State University of Engineering and Economics.
Proceeds from Insurance Settlement
In 2021, the Company experienced loss of product for which related costs were presented in costs of goods sold and operating losses in the unaudited consolidated statements of operations and cash flows for the year ended December 31, 2021. The Company entered into discussions with the counterparty at that time to seek resolution; however, no amounts to be recovered were reasonably estimable or certain to be collected. In February 2022, the Company settled with the co-manufacturer and recovered costs of $205 thousand related to lost product, shipping costs, labor, and overhead. These amounts are presented as an offset to costs of goods sold and operating losses in the unaudited consolidated unaudited statements of operations and cash flows for the six months ended June 30, 2022.
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 Online 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 retail distribution channels. Online customer acquisitions typically occur at our direct websites, lairdsuperfood.com and pickybars.com, and Amazon.com. Our online customer acquisition program includes paid and unpaid social media, search, display and traditional media. Our products are also sold through a growing number of physical retail channels. Wholesale customers include grocery chains, natural food outlets, club stores, and drug stores, and food service customers include coffee shops, gyms, restaurants, hospitality venues and corporate dining services, among others. Customer acquisition in physical retail channels depends on, among other things, paid promotions through retailers, display and traditional media.
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 life-time 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 substantially 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 spreading other production-related costs over greater manufacturing volumes.
32
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 and Expand Production In-line with Demand
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
Our cost of goods sold consists primarily of raw material costs, labor costs directly related to producing our products, including wages and benefits, shipping costs, lease expenses and other factory overhead costs related to various aspects of production, warehousing and shipping.
Operating Expenses
Our operating expenses consist of general and administrative, research and product development, and sales and marketing expenses.
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 June 30, 2022 (“Q2 2022”) and June 30, 2021 (“Q2 2021”)
The following table summarizes our results of operations for the periods indicated:
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2021 |
|
|
Change |
|
|
Change |
|
|||||
Sales, net |
|
$ |
8,674,006 |
|
|
$ |
9,180,586 |
|
|
$ |
(506,580 |
) |
|
|
(6 |
)% |
Cost of goods sold |
|
|
(7,096,068 |
) |
|
|
(6,998,695 |
) |
|
|
(97,373 |
) |
|
|
1 |
% |
Gross profit |
|
|
1,577,938 |
|
|
|
2,181,891 |
|
|
|
(603,953 |
) |
|
|
(28 |
)% |
Gross margin |
|
|
18.2 |
% |
|
|
23.8 |
% |
|
|
|
|
|
|
||
General and administrative |
|
|
2,635,525 |
|
|
|
4,162,911 |
|
|
|
(1,527,386 |
) |
|
|
(37 |
)% |
Research and product development |
|
|
116,467 |
|
|
|
374,852 |
|
|
|
(258,385 |
) |
|
|
(69 |
)% |
Sales and marketing |
|
|
3,753,002 |
|
|
|
3,921,292 |
|
|
|
(168,290 |
) |
|
|
(4 |
)% |
Total expenses |
|
|
6,504,994 |
|
|
|
8,459,055 |
|
|
|
(1,954,061 |
) |
|
|
(23 |
)% |
Operating loss |
|
|
(4,927,056 |
) |
|
|
(6,277,164 |
) |
|
|
1,350,108 |
|
|
|
(22 |
)% |
Total other income (expense) |
|
|
22,536 |
|
|
|
11,623 |
|
|
|
10,913 |
|
|
|
94 |
% |
Loss before income taxes |
|
|
(4,904,520 |
) |
|
|
(6,265,541 |
) |
|
|
1,361,021 |
|
|
|
(22 |
)% |
Income tax expense |
|
|
— |
|
|
|
(36,718 |
) |
|
|
36,718 |
|
|
|
(100 |
)% |
Net loss |
|
$ |
(4,904,520 |
) |
|
$ |
(6,302,259 |
) |
|
$ |
1,397,739 |
|
|
|
(22 |
)% |
Sales, Net
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2021 |
|
|
$ |
|
|
% |
|
|||||
Sales, net |
|
$ |
8,674,006 |
|
|
$ |
9,180,586 |
|
|
$ |
(506,580 |
) |
|
|
(6 |
)% |
Net sales decreased to $8.7 million in Q2 2022 from $9.2 million in Q2 2021. The decline was primarily due to elevated level of discounts in our direct to consumer channel to acquire new and retain existing customers in light of overall inflation and following the price increase and removal of free shipping for orders under $40 (forty) dollars. This was in part offset by growth in our wholesale channel driven by distribution gains in Grocery and Club. New sales promotions drove an increase in discounts of $0.5 million offsetting net revenue growth.
33
Cost of Goods Sold
|
|
Three Months Ended June 30, |
|
|
2022 v. 2021 Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Costs of goods sold |
|
$ |
(7,096,068 |
) |
|
$ |
(6,998,695 |
) |
|
$ |
(97,373 |
) |
|
|
1 |
% |
Cost of goods sold increased to $7.1 million in Q2 2022 from $7.0 million in Q2 2021, primarily due to inflationary pressures in costs for materials, ocean freight, inbound and outbound shipping, labor and energy, combined with a higher overhead cost in anticipation of growth that did not materialize in the quarter. This was offset in part by a decrease in labor costs due to gained efficiencies and organizational restructure which took place earlier in the second quarter.
Gross Profit
|
|
Three Months Ended June 30, |
|
|
2022 v. 2021 Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Gross Profit |
|
$ |
1,577,938 |
|
|
$ |
2,181,891 |
|
|
$ |
(603,953 |
) |
|
|
(28 |
)% |
Gross profit decreased to $1.6 million in Q2 2022 from $2.2 million in Q2 2021. Gross margin was 18.2% in Q2 2022 compared to 23.8% in Q2 2021. The margin decrease was driven primarily by elevated promotional activity in the online channels, as well as overall inflation in raw materials, packaging, inbound and outbound freight, partially offset by lower labor costs resulting from rightsizing of the organization in Q2 2022.
Operating Expenses
|
|
Three Months Ended June 30, |
|
|
2022 v. 2021 Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and Administrative |
|
$ |
2,635,525 |
|
|
$ |
4,162,911 |
|
|
$ |
(1,527,386 |
) |
|
|
(37 |
)% |
Research and Product Development |
|
|
116,467 |
|
|
|
374,852 |
|
|
|
(258,385 |
) |
|
|
(69 |
)% |
Sales and Marketing |
|
|
3,753,002 |
|
|
|
3,921,292 |
|
|
|
(168,290 |
) |
|
|
(4 |
)% |
Total Operating Expenses |
|
$ |
6,504,994 |
|
|
$ |
8,459,055 |
|
|
$ |
(1,954,061 |
) |
|
|
(23 |
)% |
General and administrative expense decreased to $2.6 million in Q2 2022 from $4.2 million in Q2 2021, primarily due reversals of stock-based compensation as the result of forfeitures of equity awards by former executive officers ($1.2 million decrease). See Note 12 to our unaudited consolidated financial statements included elsewhere in this Form 10-Q for more information. This was in part offset by increases in personnel costs driven primarily by severances of former executive officers and onboarding costs of new executive officers.
Research and product development expense decreased to $0.1 million in Q2 2022 from $0.4 million in Q2 2021, primarily due to costs incurred to bring new products to market in Q2 2021, which costs were not repeated in Q2 2022.
Sales and marketing expense decreased to $3.8 million in Q2 2022 from $3.9 million in Q2 2021, primarily due to reduced advertising expense.
Other Income (Expense)
|
|
Three Months Ended June 30, |
|
|
2022 v. 2021 Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Other income |
|
$ |
22,536 |
|
|
$ |
11,623 |
|
|
$ |
10,913 |
|
|
|
94 |
% |
Other income is composed of interest income, gains and losses on sales of equipment, and income and losses related to investment securities available-for-sale. Other income increased to $22.5 thousand of income in Q2 2022 from $11.6 thousand of income in Q2 2021, primarily due to gains on the sale of land held-for-sale in Q2 2022.
34
Comparison of the six months ended June 30, 2022 (“YTD 2022”) and June 30, 2021 (“YTD 2021”)
The following table summarizes our results of operations for the periods indicated:
|
|
Six Months Ended June 30, |
|
|
$ |
|
|
% |
|
|||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
||||
Sales, net |
|
$ |
18,014,019 |
|
|
$ |
16,577,479 |
|
|
$ |
1,436,540 |
|
|
|
9 |
% |
Cost of goods sold |
|
|
(14,486,271 |
) |
|
|
(12,558,194 |
) |
|
|
(1,928,077 |
) |
|
|
15 |
% |
Gross profit |
|
|
3,527,748 |
|
|
|
4,019,285 |
|
|
|
(491,537 |
) |
|
|
(12 |
)% |
Gross margin |
|
|
19.6 |
% |
|
|
24.2 |
% |
|
|
|
|
|
|
||
General and administrative |
|
|
14,464,169 |
|
|
|
7,806,305 |
|
|
|
6,657,864 |
|
|
|
85 |
% |
Research and product development |
|
|
220,300 |
|
|
|
615,539 |
|
|
|
(395,239 |
) |
|
|
(64 |
)% |
Sales and marketing |
|
|
7,724,642 |
|
|
|
7,219,011 |
|
|
|
505,631 |
|
|
|
7 |
% |
Total expenses |
|
|
22,409,111 |
|
|
|
15,640,855 |
|
|
|
6,768,256 |
|
|
|
43 |
% |
Operating loss |
|
|
(18,881,363 |
) |
|
|
(11,621,570 |
) |
|
|
(7,259,793 |
) |
|
|
62 |
% |
Total other income (expense) |
|
|
(156,785 |
) |
|
|
25,525 |
|
|
|
(182,310 |
) |
|
|
(714 |
)% |
Loss before income taxes |
|
|
(19,038,148 |
) |
|
|
(11,596,045 |
) |
|
|
(7,442,103 |
) |
|
|
64 |
% |
Income tax expense |
|
|
(5,774 |
) |
|
|
(36,718 |
) |
|
|
30,944 |
|
|
|
(84 |
)% |
Net loss |
|
$ |
(19,043,922 |
) |
|
$ |
(11,632,763 |
) |
|
$ |
(7,411,159 |
) |
|
|
64 |
% |
Sales, Net
|
|
Six Months Ended June 30, |
|
|
2022 v. 2021 Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Sales, net |
|
$ |
18,014,019 |
|
|
$ |
16,577,479 |
|
|
$ |
1,436,540 |
|
|
|
9 |
% |
Net sales increased to $18.0 million in YTD 2022 from $16.6 million in YTD 2021. This increase was due to sales attributable to the acquisition of Picky Bars ($1.9 million increase). Excluding Picky acquisition, net sales declined by 3% for the six months ended June 30, 2022 as the growth in wholesale channel was more than offset by declines in our online business. The decline in online segment was largely attributable to reduced marketing spend, elevated discounts and overall pull back in consumer spending in light of rising inflation. Sales promotions drove an increase in discounts of $1.1 million offsetting net revenue growth.
Cost of Goods Sold
|
|
Six Months Ended June 30, |
|
|
2022 v. 2021 Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Costs of goods sold |
|
$ |
(14,486,271 |
) |
|
$ |
(12,558,194 |
) |
|
$ |
(1,928,077 |
) |
|
|
15 |
% |
Cost of goods sold increased to $14.5 million in YTD 2022 from $12.6 million in YTD 2021, primarily due to sales growth and the corresponding increase in consumables ($1.8 million increase) due to inflationary pressures in costs of raw materials and packaging, inbound and outbound freight expenses ($0.6 million increase), offset in part by decrease in labor costs due to gained efficiencies and organizational rightsizing ($0.6 million decrease).
Gross Profit
|
|
Six Months Ended June 30, |
|
|
2022 v. 2021 Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Gross Profit |
|
$ |
3,527,748 |
|
|
$ |
4,019,285 |
|
|
$ |
(491,537 |
) |
|
|
(12 |
)% |
Gross profit decreased to $3.5 million in YTD 2022 from $4.0 million in YTD 2021. Gross margin was 19.6% in YTD 2022 compared to 24.2% in YTD 2021. The margin decrease is driven by elevated promotional activity, and general inflationary pressures on raw materials, packaging and freight.
Operating Expenses
|
|
Six Months Ended June 30, |
|
|
2022 v. 2021 Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and Administrative |
|
$ |
14,464,169 |
|
|
$ |
7,806,305 |
|
|
$ |
6,657,864 |
|
|
|
85 |
% |
Research and Product Development |
|
|
220,300 |
|
|
|
615,539 |
|
|
|
(395,239 |
) |
|
|
(64 |
)% |
Sales and Marketing |
|
|
7,724,642 |
|
|
|
7,219,011 |
|
|
|
505,631 |
|
|
|
7 |
% |
Total Operating Expenses |
|
$ |
22,409,111 |
|
|
$ |
15,640,855 |
|
|
$ |
6,768,256 |
|
|
|
43 |
% |
General and administrative expense increased to $14.5 million in YTD 2022 from $7.8 million in YTD 2021, primarily due to impairment of goodwill and intangible assets recorded in YTD 2022 of $6.5 million and $1.5 million, respectively. See Note 9 to our unaudited consolidated financial statements included elsewhere in this Form 10-Q for more information. Excluding, cost of impairment of goodwill and intangible assets, general and administrative expenses decreased by $0.7 million driven by reduced stock based compensation.
Research and product development expense decreased to $0.2 million in YTD 2022 from $0.6 million in YTD 2021, primarily due to costs incurred to bring new products to market in YTD 2021, which costs were not repeated in YTD 2022.
35
Sales and marketing expense increased to $7.7 million in YTD 2022 from $7.2 million in YTD 2021, primarily due to advertising expense and marketing fees.
Other Income (Expense)
|
|
Six Months Ended June 30, |
|
|
2022 v. 2021 Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Other income (expense) |
|
$ |
(156,785 |
) |
|
$ |
25,525 |
|
|
$ |
(182,310 |
) |
|
|
(714 |
)% |
Other income (expense) is composed of interest income, rental income, income and losses related to investment securities available-for-sale, and other non-operating gains and losses. Other income (expense) decreased to $(156.8) thousand of expense in YTD 2022 from $25.5 thousand of income in YTD 2021, primarily due to gain on the sale of land held-for sale in in Q2 2022, offset by realized losses on the sale of available for sale securities in Q1 2022.
Liquidity and Capital Resources
As of June 30, 2022, we had incurred accumulated net losses of $74.8 million, including operating losses of $18.9 million and $11.6 million for YTD 2022 and YTD 2021, respectively. We expect to incur additional operating losses as we continue efforts to grow our business. We have historically financed our operations and capital expenditures through private placements of our preferred stock and common stock, our initial public offering, as well as 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.
As of June 30, 2022, we had $24.5 million of cash-on-hand and $9.5 million of available borrowings under our lines of credit. As of December 31, 2021, we had $31.7 million of cash-on-hand and investments and $19.7 million of available borrowings under our lines of credit. As of June 30, 2022, and December 31, 2021, 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 growth rate, the timing and extent of spending to support research and development efforts, the continued expansion of sales and marketing activities, 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:
We expect to continue to incur operating losses for the foreseeable future and may require additional capital resources to continue to grow our business. We believe our cash, cash equivalents, our expected cash flow generated from operations and our expected financing activities will satisfy our working and other capital requirements for the next 12 months and beyond based on our current business plans.
Cash Flows
Comparison of the six months ended June 30, 2022 and 2021:
The following table shows a summary of our cash flows for the periods presented:
|
|
For the Six Months Ended |
|
|||||
|
|
|
||||||
|
|
|
|
2021 |
|
|||
Cash flows from operating activities |
|
$ |
(7,536,658 |
) |
|
$ |
(10,953,242 |
) |
Cash flows from investing activities |
|
|
8,910,450 |
|
|
|
(11,488,658 |
) |
Cash flows from financing activities |
|
|
121,090 |
|
|
|
93,470 |
|
Net change in cash |
|
$ |
1,494,882 |
|
|
$ |
(22,348,430 |
) |
Cash Flows from Operating Activities
Cash used in operating activities was $7.5 million for YTD 2022 as compared to $11.0 million used in YTD 2021. The change is driven by operating net losses, decreasing inventory levels, and decreasing prepaid expenses.
Cash Flows from Investing Activities
36
Cash provided by investing activities was $8.9 million for YTD 2022 as compared to cash used in investing activities of $11.5 million for YTD 2021. The change is primarily due to proceeds from the sale of available-for-sale securities in YTD 2022 and cash used in the acquisition of Picky Bars in YTD 2021.
Cash Flows from Financing Activities
Cash provided by financing activities was $121 thousand and $93 thousand for YTD 2022 and YTD 2021, respectively, primarily related to inflows from stock option exercises.
Segment Information
We have one operating segment and one reportable segment, as our Chief Executive Officer reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance.
Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) 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,” to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q describes the significant accounting policies and methods used in the preparation of the Company’s unaudited consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Revenue Recognition
We recognize revenue for the sale of our product at the point in time when our performance obligation has been satisfied and control of the product has transferred to our customer, which generally occurs upon shipment or delivery to a customer based on terms of the sale. Revenue is measured by the transaction price, which is defined as the amount of consideration we expect to receive in exchange for providing goods to customers. The transaction price is adjusted for estimates of known or expected variable consideration, which includes consumer incentives, trade promotions, and allowances, such as coupons, discounts, rebates, incentives, cooperative advertising, and other programs. Variable consideration related to these programs is recorded as a reduction to revenue based on amounts we expect to pay.
The transaction price contains estimates of known or expected variable consideration. We base these estimates on current performance, historical utilization, and projected redemption rates of each program. We review and update these estimates regularly until the incentives or product returns are realized and the impact of any adjustments are recognized in the period the adjustments are identified. As of June 30, 2022 and December 31, 2021, variable consideration estimates represent $0.4 million and $0.3 million, respectively, of accrued expenses on the unaudited consolidated balance sheets.
During the three and six months ended June 30, 2022, there was not, and we do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize revenue. As noted above, estimates are made based on historical experience and other factors. Typically, programs that are offered have a short duration and, historically, the difference between actual experience compared to estimated redemptions and performance has not been significant to the quarterly or annual consolidated financial statements. However, if the level of redemption rates or performance were to vary significantly from estimates, we may be exposed to gains or losses that could be material. We have not made any material changes in the accounting methodology used to recognize revenue during the past three fiscal years.
Business Combinations
We account for acquired businesses using the acquisition method of accounting, which requires that once control of a business is obtained, 100% of the assets acquired and liabilities assumed, including amounts attributed to noncontrolling interests, be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
We use various models to determine the value of assets acquired and liabilities assumed such as net realizable value to value inventory, cost method and market approach to value property, and multi-period excess earnings to value intangibles and discounted cash flow to value goodwill.
For significant acquisitions we may use independent third-party valuation specialists to assist us in determining the fair value of assets acquired and liabilities assumed.
Significant judgment is often required in estimating the fair value of assets acquired and liabilities assumed, particularly intangible assets. We make estimates and assumptions about projected future cash flows including sales growth, operating margins, attrition rates, and discount rates based on historical results, business plans, expected synergies, perceived risk and marketplace data considering the perspective of marketplace participants. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may be considered to have indefinite useful lives.
While management believes those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions, which could result in subsequent impairments. During the year ended December 31, 2021, we had a material business combination with Picky Bars. See Note 2 to our unaudited consolidated financial statements included elsewhere in this Form 10-Q for more information.
37
Impairment of Goodwill and Long-Lived Assets
Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, the fair value of the reporting unit may be more-likely-than-not less than its carrying amount or if significant changes to macro-economic factors related to the reporting unit have occurred that could materially impact fair value, a quantitative goodwill impairment test would be required. The quantitative test compares the fair value of a reporting unit with its carrying amount. Upon performing the quantitative test, if the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill. During the three and six months ended June 30, 2022, impairment charges for goodwill were $0 and $6.5 million, respectively. There were no impairment charges for goodwill in the three and six months ended June 30, 2021.
Long-lived assets and definite life intangibles 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, a change in its physical condition, or an unexpected change in financial performance. When evaluating long-lived assets and definite life intangibles 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. For assets held for sale, we compare the carrying value of the disposal group to fair value. The impairment is the excess of the carrying value over the fair value of the asset. During the three and six months ended June 30, 2022, there were impairment charges for long-lived assets of $0.1 and $1.6 million, respectively. There were no impairment charges for long-lived assets in the three and six months ended June 30, 2021. See Note 9 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Stock Based Compensation
Compensation cost relating to share-based payment transactions is measured based on the grant date fair value of the equity or liability instruments issued. The fair value of the compensation is estimated utilizing valuation methods including Black-Scholes and Monte Carlo, and 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. While there is inherent uncertainty in the estimated fair value of the awards, management believes that the expectations and assumptions are reasonable.
Income Taxes
The Company assesses its deferred tax assets and liabilities to determine if it is more likely than not they will be realized; if not, a valuation allowance is required to be recorded. See Note 11 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
See Recently Issued Accounting Pronouncements in Note 1 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
Emerging Growth Company Status
As a company with less than $1.07 billion in 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:
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 $1.07 billion in annual 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.
38
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.
In designing and evaluating 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.
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 June 30, 2022, 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 June 30, 2022.
Material Weakness in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the preparation of financial statements for the three months ended March 31, 2022, our management identified a material weakness in the Company’s internal control over financial reporting, relating to a miscalculation of basic and diluted net loss per share caused by a formula error. Our independent registered public accounting firm identified this error, and the error was corrected by management. We believe our failure to identify this error resulted from a material weakness related to ineffective operation of management review controls related to financial reporting due to staffing constraints.
Remediation Measures
In the three months ended June 30, 2022, with the oversight of senior management and our audit committee, we have taken steps to remediate the underlying causes of the identified material weakness, primarily through the hiring of additional accounting and finance resources; the development and implementation of additional formal, documented policies and procedures; and improved processes and management review control activities. Given the routine nature of the error that gave rise to the material weakness in the first quarter of 2022, we believe the actions described above will be sufficient to remediate the identified material weakness and strengthen our internal control over financial reporting. However, the new and enhanced controls have not operated for a sufficient amount of time to conclude that the material weakness has been remediated. We will continue to monitor the operating effectiveness of these controls and will make any further changes management determines appropriate.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended of June 30, 2022, aside from those described above, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
39
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.
There have been no material changes with respect to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
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
None.
40
Item 6. Exhibits.
The documents set forth below are filed herewith or incorporated herein by reference to the location indicated.
|
|
|
|
|
|
|||||||
Exhibit Number |
|
Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
Filed / |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
Amended and Restated Certificate of Incorporation of Laird Superfood, Inc. |
|
8-K |
|
|
3.1 |
|
9/25/2020 |
|
|
|
|
|
|
|
|
|
|
|
|||||
3.2 |
|
|
8-K |
|
|
3.2 |
|
9/25/2020 |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1 |
|
|
8-K |
|
|
10.1 |
|
4/13/2022 |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2 |
|
Independent Contractor Agreement between the Company and Valerie Ells, dated May 17, 2022. |
|
8-K |
|
|
10.1 |
|
5/18/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.3 |
|
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
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** 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 Form10-Q, irrespective of any general incorporation language contained in such.
41
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.
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Laird Superfood, Inc. |
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(Registrant) |
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Date: August 11, 2022 |
/s/ Jason Vieth |
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President and Chief Executive Officer |
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Date: August 11, 2022 |
/s/ Anya Hamill |
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Chief Financial Officer |
42
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 4/30/25 | ||||
| 12/31/22 | ||||
| 12/15/22 | ||||
| 8/31/22 | ||||
| Filed on: | 8/11/22 | |||
| 8/10/22 | 8-K, SC 13G/A | |||
| 8/9/22 | ||||
| 8/1/22 | ||||
| 7/1/22 | 3, 4 | |||
| For Period end: | 6/30/22 | 3, 4 | ||
| 5/19/22 | 8-K | |||
| 5/17/22 | ||||
| 5/13/22 | 8-K | |||
| 5/1/22 | ||||
| 4/1/22 | ||||
| 3/31/22 | 10-Q | |||
| 3/25/22 | ||||
| 3/8/22 | 10-K, 8-K | |||
| 3/1/22 | ||||
| 1/31/22 | 3, 4, 8-K | |||
| 1/1/22 | ||||
| 12/31/21 | 10-K, 10-K/A | |||
| 12/15/21 | ||||
| 12/8/21 | 8-K | |||
| 10/1/21 | ||||
| 9/23/21 | ||||
| 9/2/21 | ||||
| 6/30/21 | 10-Q | |||
| 5/3/21 | 8-K | |||
| 3/31/21 | 10-Q | |||
| 3/1/21 | ||||
| 1/1/21 | ||||
| 12/3/20 | ||||
| 9/25/20 | 4, 8-K | |||
| 9/22/20 | 3, EFFECT, S-1/A | |||
| 5/30/20 | ||||
| 5/26/20 | ||||
| 12/31/19 | ||||
| 7/1/19 | ||||
| 6/6/19 | ||||
| 2/5/19 | ||||
| 12/20/18 | ||||
| 12/17/18 | ||||
| 11/20/18 | ||||
| 11/19/18 | ||||
| 7/1/18 | ||||
| 5/2/18 | ||||
| 4/15/18 | ||||
| 4/1/18 | ||||
| 3/1/18 | ||||
| 8/10/17 | ||||
| 5/30/17 | ||||
| 8/3/15 | ||||
| 7/1/15 | ||||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 3/16/23 Laird Superfood, Inc. 10-K 12/31/22 103:17M Donnelley … Solutions/FA |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 5/18/22 Laird Superfood, Inc. 8-K:5,7,9 5/13/22 12:189K Donnelley … Solutions/FA 4/13/22 Laird Superfood, Inc. 8-K:5,9 4/08/22 11:166K Donnelley … Solutions/FA 9/25/20 Laird Superfood, Inc. 8-K:3,5,8,9 9/23/20 4:228K Donnelley … Solutions/FA |