# Laird Superfood, Inc.: Form 10-Q for the period ended Sep 30, 2021

- Company: [Laird Superfood, Inc.](/companies/lsf.md) (CIK 1650696)
- Form: 10-Q
- Filed: 2021-11-10
- Accepted by EDGAR: Nov 10, 2021, 21:35 ET
- Period: 2021-09-30
- Accession: 0000950170-21-004126
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1650696/000095017021004126/lsf-20210930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1650696/000095017021004126/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-07-01 to 2021-09-30 | $10.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2021-01-01 to 2021-09-30 | $27.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2021-07-01 to 2021-09-30 | $7.7m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2021-01-01 to 2021-09-30 | $20.2m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2021-07-01 to 2021-09-30 | $3.2m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2021-01-01 to 2021-09-30 | $7.2m | us-gaap:GrossProfit |
| Research and development | 3 months, 2021-07-01 to 2021-09-30 | $242.6k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2021-01-01 to 2021-09-30 | $858.1k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2021-07-01 to 2021-09-30 | −$5.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2021-01-01 to 2021-09-30 | −$16.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2021-07-01 to 2021-09-30 | $49.8k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2021-01-01 to 2021-09-30 | $86.5k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-07-01 to 2021-09-30 | −$5.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2021-01-01 to 2021-09-30 | −$17.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-07-01 to 2021-09-30 | −$0.59 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2021-01-01 to 2021-09-30 | −$1.90 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-07-01 to 2021-09-30 | −$0.59 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2021-01-01 to 2021-09-30 | −$1.90 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-07-01 to 2021-09-30 | 9,001,912 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2021-01-01 to 2021-09-30 | 8,954,875 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2021-01-01 to 2021-09-30 | −$14.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2021-01-01 to 2021-09-30 | $1.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2021-01-01 to 2021-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2021-09-30 | $30.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-09-30 | $53.4m | us-gaap:AssetsCurrent |
| Total assets | at 2021-09-30 | $71.4m | us-gaap:Assets |
| Current liabilities | at 2021-09-30 | $3.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2021-09-30 | $3.7m | us-gaap:Liabilities |
| Long-term debt | at 2021-09-30 | $51.0k | us-gaap:LongTermDebt |
| Shareholders' equity | at 2021-09-30 | $67.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,516 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. 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, 2020.*

### 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.

We have experienced strong sales growth since inception. Net sales increased to $10.9 million for the three months ended September 30, 2021, from $7.5 million for the three months ended September 30, 2020, representing net sales growth of 45%. Likewise, net sales increased to $27.4 million for the nine months ended September 30, 2021, from $18.5 million for the nine months ended September 30, 2020, representing net sales growth of 48%. The growth in the three and nine months ended September 30, 2021 was primarily driven by a significant expansion of our customer base in online channels as well as expansion in our product 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*. We believe that, along with a trusted brand name, 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 *lairdsuperfood.com* and *Amazon.com*. For the three months ended September 30, 2021 and 2020, the online business made up 58% and 50% of our net sales, respectively. For the nine months ended September 30, 2021 and 2020, the online business made up 60% and 54% 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 website 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 over two-thirds of *lairdsuperfood.com* sales for three and nine months ended September 30, 2021.

Our wholesale business addresses the $759 billion grocery industry, specifically the $174 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 months ended September 30, 2021 and 2020, wholesale revenue comprised 41% and 49% of our net sales, respectively. For the nine months ended September 30, 2021 and 2020, wholesale revenue comprised 38% and 44% 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. 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

### Capital Contribution

On December 3, 2020, the Company entered into an agreement with DMV for an additional capital contribution as a participant in the DMV COVID-19 Relief Fund. The agreement provided the Company with cash consideration of $298,103 for the purpose of supporting three relief projects: (1) continual sanitation rotation, (2) spend on increased labor, material and maintenance costs in the face of adversity, and (3) new/existing hospitals relief initiative. The Company has included the balance in cash and cash equivalents on the Balance Sheet as of September 30, 2021. See Note 1 for more information.

### Two-for-One Stock Split

Our board of directors and stockholders approved a two-for-one split of our common stock, which was effected on August 19, 2020. The split divided each outstanding share of our common stock into two shares of common stock and correspondingly adjusted the conversion prices of our convertible preferred stock. No fractional shares were issued in connection with the split. All references to common stock, options to purchase common stock, restricted stock, share data, per share data and related information have been retroactively adjusted, where applicable, in this Quarterly Report to reflect the split of our common stock, and the corresponding adjustment of the conversion prices of our preferred stock, as if it had occurred at the beginning of the earliest period presented.

### Workforce Housing

On April 20, 2021, the Audit Committee of the Company’s board of directors consented to Mr. Hodge, CEO, pledging up to 150,000 of his shares of the Company’s common stock as collateral to a line of credit in support of Mr. Hodge individually developing workforce housing in Sisters, Oregon, where the Company is headquartered.

### Picky Bars Acquisition

On May 3, 2021, the Company acquired Picky Bars, LLC (“Picky Bars”), an innovator in the healthy snack industry focused on nutritionally balanced, real-food products, for a cash-free, debt free purchase price of $11.1 million, subject to customary working capital adjustments, and 53,133 shares of Company common stock, subject to certain vesting conditions.

### CEO Transition

On August 5, 2021, Paul Hodge, Jr. informed the Company’s Board of Directors that he intends to transition to a non-executive role and step down as President and Chief Executive Officer upon identifying an appropriate successor. The Board of Directors has commenced a search for his replacement. Mr. Hodge intends to remain a director of the Company.

### Revolving Credit Facility

On September 2, 2021, the Company entered into a revolving line of credit with Wells Fargo Bank National Association ("Wells Fargo") in a principal amount not exceeding $9,500,000. The line of credit has a maturity date of August 31, 2022. The outstanding amounts under the line of credit have an interest rate calculated as Daily Simple Secured Overnight Financing Rate plus 1.5% per annum until paid in full. As of September 30, 2021, the commitment was active but draws on the line were restricted as no assets has been transferred as collateral. The Company could have drawn on the line had assets been transferred.

### 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 growing 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 website *lairdsuperfood.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, as well as spreading other production-related costs over greater manufacturing volumes.

### 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. As an example, one of our suppliers entered voluntary receivership in June 2021, and we may be unable to find a suitable replacement supplier on substantially similar terms or at all.

### 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 website, 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.

We continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC and higher expenses for insurance, investor relations and professional services. We expect our general and administrative expenses will increase as our business grows.

### Benefit from Income Taxes

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

### Results of Operations

### Comparison of the three months ended September 30, 2021 (“Q3 2021”) and September 30, 2020 (“Q3 2020”)

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

|  | For the Three Months Ended September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Sales, net | $10,865,914 | $7,490,642 | $3,375,272 | 45% |
| Cost of goods sold | (7,667,075) | (5,734,144) | (1,932,931) | 34% |
| Gross profit | 3,198,839 | 1,756,498 | 1,442,341 | 82% |
| Gross Margin | 29.4% | 23.4% |  |  |
| General and administrative | 4,254,124 | 2,218,819 | 2,035,305 | 92% |
| Research and product development | 242,604 | 102,879 | 139,725 | 136% |
| Sales and marketing | 4,014,753 | 2,816,630 | 1,198,123 | 43% |
| Total expenses | 8,511,481 | 5,138,328 | 3,373,153 | 66% |
| Operating loss | (5,312,642) | (3,381,830) | (1,930,812) | 57% |
| Other income | 10,721 | 26,746 | (16,025) | (60%) |
| Loss before income taxes | (5,301,921) | (3,355,084) | (1,946,837) | 58% |
| Income tax expense | (49,777) | — | (49,777) | 0% |
| Net loss | $(5,351,698) | $(3,355,084) | $(1,996,614) | 60% |

34

#### Sales, Net

|  | For the Three Months Ended September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Sales, net | $10,865,914 | $7,490,642 | $3,375,272 | 45% |

Net sales increased to $10.9 million in Q3 2021 from $7.5 million in Q3 2020. This increase was due to growth in our online and wholesale channels, primarily caused by an increase in sales volume as well as the acquisition of Picky Bars. Products introduced after Q3 2020 including Activate Daily Greens, Activate Immune Support, Aloha Plant Milk, Baking Mixes, Functional Coffees, Guava Orange Hydrate, OatMac Superfood Creamers, Pili Nuts, Renew Protein, Renew Rest & Recover, and Picky Bars products accounted for $3.5 million of gross sales in Q3 2021. The increase in sales is offset by a $0.6 million decrease in sales of mushroom coffee due to the timing of club store test placements for functional coffees in Q3 2020.

#### Cost of Goods Sold

|  | For the Three Months Ended September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of goods sold | $(7,667,075) | $(5,734,144) | $(1,932,931) | 34% |

Cost of goods sold increased to $7.7 million in Q3 2021 from $5.7 million in Q3 2020, primarily due to sales growth in the 2021 period, elevated inbound and outbound shipping costs, increased personnel costs, and increased co-packing costs primarily associated with our liquid creamer product line.

#### Gross Profit

|  | For the Three Months Ended September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Gross profit | $3,198,839 | $1,756,498 | $1,442,341 | 82% |

Gross profit increased to $3.2 million in Q3 2021 from $1.8 million in Q3 2020, primarily due to sales growth in the 2021 period. Gross margins increased to 29.4% in Q3 2021 from 23.4% in Q3 2020, primarily due to optimization of direct to consumer shipping costs, improvements in liquid creamer distribution and disposals, and operational efficiency improvements.

#### Operating Expenses

| Operating expenses | For the Three Months Ended September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| General and administrative | $4,254,124 | $2,218,819 | $2,035,305 | 92% |
| Research and product development | 242,604 | 102,879 | 139,725 | 136% |
| Sales and marketing | 4,014,753 | 2,816,630 | 1,198,123 | 43% |
| Total operating expenses | $8,511,481 | $5,138,328 | $3,373,153 | 66% |

General and administrative expense increased to $4.3 million in Q3 2021 from $2.2 million in Q3 2020, primarily due to stock-based compensation, personnel costs, insurance expense, professional fees, and amortization of intangible assets.

Research and product development expense increased to $0.2 million in Q3 2021 from $0.1 million in Q3 2020, primarily due to costs incurred to bring new products to market.

Sales and marketing expense increased to $4.0 million in Q3 2021 from $2.8 million in Q3 2020, primarily due to advertising expense and marketing fees.

#### Other Income (Expense)

|  | For the Three Months Ended September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Other income | $10,721 | $26,746 | $(16,025) | (60%) |

Other income is composed of interest income and dividend income related to investment securities available-for-sale as well as other non-operating costs. Other income decreased to $11 thousand of income in Q3 2021 from $27 thousand of income in Q3 2020, primarily due to declining interest rates as well as realized gains on the sale of available for sale securities in Q3 2020.

### Comparison of the nine months ended September 30, 2021 (“YTD 2021”) and September 30, 2020 (“YTD 2020”)

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

|  | For the Nine Months Ended September 30, September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Sales, net | $27,443,394 | $18,498,497 | $8,944,897 | 48% |
| Cost of goods sold | (20,225,269) | (13,384,880) | (6,840,389) | 51% |
| Gross profit | 7,218,125 | 5,113,617 | 2,104,508 | 41% |
| Gross Margin | 26.3% | 27.6% |  |  |
| General and administrative | 12,060,429 | 5,650,832 | 6,409,597 | 113% |
| Research and product development | 858,143 | 363,990 | 494,153 | 136% |
| Sales and marketing | 11,233,765 | 7,520,947 | 3,712,818 | 49% |
| Total expenses | 24,152,337 | 13,535,769 | 10,616,568 | 78% |
| Operating loss | (16,934,212) | (8,422,152) | (8,512,060) | 101% |
| Other income | 36,246 | 65,448 | (29,202) | (45%) |
| Loss before income taxes | (16,897,966) | (8,356,704) | (8,541,262) | 102% |
| Income tax expense | (86,495) | — | (86,495) | 100% |
| Net loss | $(16,984,461) | $(8,356,704) | $(8,627,757) | 103% |

#### Sales, Net

|  | For the Nine Months Ended September 30, September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Sales, net | $27,443,394 | $18,498,497 | $8,944,897 | 48% |

Net sales increased to $27.4 million in YTD 2021 from $18.5 million in YTD 2020. This increase was due to growth in our online and wholesale channels, primarily caused by an increase in sales volume as well as the acquisition of Picky Bars. Products introduced after YTD 2020, including Activate Daily Greens, Activate Immune Support, Aloha Plant Milk, Baking Mixes, Functional Coffees, Guava Orange Hydrate, OatMac Superfood Creamers, Pili Nuts, Renew Protein, Renew Rest & Recover, and Picky Bars products, accounted for $6.1 million of gross sales in YTD 2021.

#### Cost of Goods Sold

|  | For the Nine Months Ended September 30, September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of goods sold | $(20,225,269) | $(13,384,880) | $(6,840,389) | 51% |

Cost of goods sold increased to $20.2 million in YTD 2021 from $13.4 million in YTD 2020, primarily due to sales growth in the 2021 period, elevated inbound and outbound shipping costs, increased personnel costs, and increased co-packing costs primarily associated with our liquid creamer product line.

#### Gross Profit

|  | For the Nine Months Ended September 30, September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Gross profit | $7,218,125 | $5,113,617 | $2,104,508 | 41% |

Gross profit increased to $7.2 million in YTD 2021 from $5.1 million in YTD 2020. Gross margins decreased to 26.3% in YTD 2021 from 27.6% in YTD 2020 primarily due to the full period impact from the launch of a free shipping initiative for direct online purchases made on lairdsuperfood.com combined with increased co packing and distribution expenses associated with our liquid creamer product line, partially offset by optimization of direct to consumer shipping costs.

#### Operating Expenses

| Operating expenses | For the Nine Months Ended September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| General and administrative | $12,060,429 | $5,650,832 | $6,409,597 | 113% |
| Research and product development | 858,143 | 363,990 | 494,153 | 136% |
| Sales and marketing | 11,233,765 | 7,520,947 | 3,712,818 | 49% |
| Total operating expenses | $24,152,337 | $13,535,769 | $10,616,568 | 78% |

General and administrative expense increased to $12.1 million in YTD 2021 from $5.7 million in YTD 2020, primarily due to stock-based compensation, personnel costs, insurance expense, professional fees, reserve against prepaid assets, and amortization of intangible assets.

Research and product development expense increased to $0.9 million in YTD 2021 from $0.4 million in YTD 2020, primarily due to costs incurred to bring new products to market.

Sales and marketing expense increased to $11.2 million in YTD 2021 from $7.5 million in YTD 2020, primarily due to advertising expense and marketing fees.

#### Other Income

|  | For the Nine Months Ended September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Other income | $36,246 | $65,448 | $(29,202) | (45%) |

Other income is composed of interest income and dividend income related to investment securities available-for-sale as well as other non-operating costs. Other income decreased to $36 thousand of income in YTD 2021 from $65 thousand of income in YTD 2020, primarily the result of declining interest rates in YTD 2021, as well as realized gains on the sale of available for sale securities in YTD 2020.

### Liquidity and Capital Resources

As of September 30, 2021, we had incurred accumulated net losses of $48.9 million, including operating losses of $5.3 million and $3.4 million for Q3 2021 and Q3 2020, respectively, and $16.9 million and $8.4 million for YTD 2021 and YTD 2020, respectively. We expect to incur additional operating losses as we continue efforts to grow our business, and we expect to incur additional expenses associated with being a public company. We have historically financed our operations and capital expenditures through private placements of our preferred stock and common stock, our initial public offering ("IPO"), 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 September 30, 2021, we had $39.7 million of cash-on-hand and investments and $15.1 million of available borrowings under our lines of credit. As of December 31, 2020, we had $65.9 million of cash-on-hand and investments and $11.1 million of available borrowings under our lines of credit. As of September 30, 2021, and December 31, 2020, we had $51 thousand outstanding under our forgivable loans with the City of Sisters, Oregon and no amounts were outstanding under our lines of credit.

We currently have an approximately 26,000 square foot warehouse under construction by a third party adjacent to our current buildings which we intend to lease and have purchased five adjoining lots providing opportunity for expansion of our campus if needed. 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. 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 that current cash and cash equivalents will be sufficient to fund our operations and capital requirements for at least the next 12 months following the date of this report. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. In addition, if additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all.

### Cash Flows

### Comparison of the nine months ended September 30, 2021 and 2020:

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

|  | For the Nine Months Ended September 30, 2021 | 2020 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Cash flows from operating activities | $(14,242,999) | $(7,097,896) | $(7,145,103) | 101% |
| Cash flows from investing activities | (12,092,290) | 4,116,695 | (16,208,985) | (394%) |
| Cash flows from financing activities | 184,747 | 74,924,777 | (74,740,030) | (100%) |
| Net change in cash and cash equivalents | $(26,150,542) | $71,943,576 | $(98,094,118) | (136%) |

#### Cash Flows from Operating Activities

Cash used in operating activities was $14.2 million for YTD 2021 as compared to $7.1 million for YTD 2020, both of which are primarily the result of the operating losses for the periods as well as increasing inventory levels.

#### Cash Flows from Investing Activities

Cash used in investing activities was $12.1 million for YTD 2021 as compared to cash provided of $4.1 million for YTD 2020. The change is primarily due to the acquisition of Picky Bars in YTD 2021 and proceeds from maturities of available-for-sale investments in YTD 2020.

#### Cash Flows from Financing Activities

Cash provided by financing activities was $0.2 million for YTD 2021 compared to cash provided of $74.9 million for YTD 2020. Cash provided for YTD 2021 primarily related to stock option exercises, partially offset by payroll tax payments withheld from stock-based compensation and common stock issuance costs, while cash provided for YTD 2020 primarily related to the initial public offering.

### Critical Accounting Policies and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these unaudited interim financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and share-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 1 to our unaudited interim financial statements included elsewhere in this Quarterly Report on Form 10-Q, we believe the following accounting policies are the most critical to the judgments and estimates used in the preparation of our financial statements.

### Revenue Recognition

We recognize revenue in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 606, *Revenue from Contracts with Customers (“*ASC 606”), which we adopted January 1, 2019. Under ASC 606, we recognize revenue in accordance with a five-step model in which we evaluate the transfer of promised goods or services and recognize revenue when our customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to be entitled to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that we determine are within the scope of ASC 606, we perform 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. We have elected, as a practical expedient, to account for the shipping and handling as fulfillment costs, rather than as a separate performance obligation. Revenue is reported net of applicable provisions for discounts, returns and allowances. Methodologies for determining these provisions are dependent on customer pricing and promotional practices. We will record reductions to revenue 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.

### Stock Incentive Plan

The compensation cost relating to share-based payment transactions is recognized in the 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 awards, recipients are issued shares of common stock.

### Income Taxes

Income taxes provide for the tax effects of transactions reported in the financial statements and consist of income taxes currently due and deferred tax assets and liabilities. We 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) 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, we recorded a full deferred tax valuation allowance as of September 30, 2021 and December 31, 2020.

### Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

### Recent Accounting Pronouncements

See *Recently Issued Accounting Pronouncements* in Note 1 to our unaudited interim 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:

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

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

reduced disclosure about our executive compensation arrangements; and

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

We may take advantage of these provisions until the end of the fiscal year in which the fifth anniversary of our IPO occurs, or such earlier time when we no longer qualify as an emerging growth company. We would cease to be an emerging growth company on the earlier of (1) the last day of the fiscal year (a) in which we have more than $1.07 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.

## Controls and procedures

As filed, 1,638 characters.

### 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

We acquired Picky Bars on May 3, 2021. We have extended oversight and monitoring processes that support internal control over financial reporting to include the acquired operations. Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2021.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended of September 30, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Nov 10, 2021.
Source: SEC EDGAR, the filing index for accession 0000950170-21-004126. Last ingested by Listed: Oct 24, 2026, 15:14 ET. No prices; not investment advice.