UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~March 31,~~June 30, 2021

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

Commission File

Number: 001-39537

Laird Superfood, Inc.

(Exact Name of Registrant as Specified in its Charter)


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

275 W. Lundgren Mill Drive, Sisters, Oregon 97759

(Address of principal executive offices, including Zip Code)

Registrant’s telephone number, including area code:

(888) 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
Common Stock	LSF	NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to

submit such files). Yes ☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.


Large accelerated filer	☐		Accelerated filer	☐

~~Non-accelerated~~ ~~filer~~		☒
Non-accelerated filer	☒		Smaller reporting company	☒


			Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐

☒

As of ~~May 11,~~August 6, 2021 the registrant had ~~8,990,904~~9,000,431 shares of common stock, $0.001

par value per share, outstanding.

Table of Contents~~TABLE OF CONTENTS~~


TABLE OF CONTENTS
			Page
Part I.	Financial Information

Item 1.	Financial Statements		4

Balance Sheets		4

Statements of Operations		5

Statements of Comprehensive Loss		6

Statements of Convertible Preferred Stock and Stockholders’ Equity		7

Statements of Cash Flows		8

Notes to Financial Statements		9

Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations		2732

Item 4.	~~Controls~~3. Quantitative and ~~Procedures~~Qualitative Disclosures About Market Risk		3440
~~Part II.~~
~~Other Information~~Item 4. Controls and Procedures		3441
~~Item 1.~~
~~Legal Proceedings~~Part II. Other Information		3441

Item ~~1A.~~	~~Risk Factors~~1. Legal Proceedings		3441

Item 2.1A. Risk Factors		41

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3541

Item 6.	Exhibits		3642

Signatures		3743

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form

10-Q

contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements convey our current expectations or forecasts of future events and are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Any statements contained in this Quarterly Report on Form

10-Q

that are not statements of historical fact may be forward-looking statements. When we use the words “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will,” “seeks,” or the negative of these terms or other comparable terminology, we are identifying forward-looking statements.

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

our limited operating history and ability to become profitable;

our reliance on third parties for raw materials and production of some of our products;

our ability to manage our growth and scale our manufacturing and processing capabilities effectively, including our human resource requirements;

our future capital needs;

our ability to retain and grow our customer base;

our reliance on independent distributors for a substantial portion of our sales;

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

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

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

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

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

regulatory risks;

risks associated with the COVID-19 pandemic;

risks related to our international operations;

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

the other risks described herein and in our Annual Report on Form 10-K for the year ended December 31, 2020.

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.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

LAIRD SUPERFOOD, INC.

BALANCE SHEET

(Unaudited)

   As of
   March 31, 2021 December 31, 2020
Assets

Current assets

Cash and cash equivalents
   $ 51,745,417 $ 57,208,080
Accounts receivable, net
   770,155 839,659
Investment securities available-for-sale
   8,690,523 8,706,844
Inventory
   7,693,980 6,295,898
Prepaid expenses and other current assets
   2,902,784 2,847,319
Deposits
   488,823 97,674


Total current assets
   72,291,682 75,995,474


Noncurrent assets

Property and equipment, net
   3,501,718 3,513,488
Licensing agreement—intangible
   132,100 132,100
Deferred rent
   2,606,592 2,696,646


Other assets
   77,922 4,992


Total noncurrent assets
   6,318,332 6,347,226


Total assets
   $ 78,610,014 $ 82,342,700


Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable
   $ 1,600,645 $ 1,315,964
Payroll liabilities
�� 1,012,223 722,915
Accrued expenses
   857,849 704,543


Total current liabilities
   3,470,717 2,743,422


Long-term liabilities

Note payable
   51,000 51,000


Total long-term liabilities
   51,000 51,000


Total liabilities
   3,521,717 2,794,422


Commitments and contingencies (Note 8)

Stockholders’ equity

Common stock, $0.001 par value, 100,000,000 and 9,600,000 shares authorized as of March 31, 2021 and December 31, 2020; 9,285,782 and 8,921,034 issued and outstanding at March 31, 2021, respectively; 9,247,758 and 8,892,886 issued and outstanding at December 31, 2020, respectively
   8,921 8,893
Additional paid-in capital
   112,343,131 111,452,346
Accumulated other comprehensive income (loss)
   (6,083 ) 14,207
Accumulated deficit
   (37,257,672 ) (31,927,168 )


Total stockholders’ equity
   75,088,297 79,548,278


Total liabilities, convertible preferred stock and stockholders’ equity
   $ 78,610,014 $ 82,342,700

As of


June 30, 2021

December 31, 2020

Assets

Current assets

Cash and cash equivalents
   $ 34,859,650 $ 57,208,080
Accounts receivable, net
   789,642 839,659
Investment securities
available-for-sale
   8,682,330 8,706,844
Inventory
   10,782,337 6,295,898
Prepaid expenses and other current assets
, net
   2,175,604 2,847,319
Deposits
   508,484 97,674


Total current assets
   57,798,047 75,995,474


Noncurrent assets

Property and equipment, net
   3,786,144 3,513,488
Intangible assets, net
   5,073,084 137,092
Goodwill
   6,486,000 0
Deferred rent
   2,517,143 2,696,646


Total noncurrent assets
   17,862,371 6,347,226


Total assets
   $ 75,660,418 $ 82,342,700


Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable
   $ 1,571,418 $ 1,315,964
Payroll liabilities
   861,501 722,915
Accrued expenses
   1,219,863 704,543


Total current liabilities
   3,652,782 2,743,422


Long-term liabilities

Deferred tax liability, net
36,718

—

Note payable
   51,000 51,000


Total long-term liabilities
   87,718 51,000


Total liabilities
   3,740,500 2,794,422


Stockholders’ equity

Common

stock,

$0.001

par

value,

100,000,000

shares

authorized

as

of

June 30,

2021

and

December 31,
2020; 9,365,085 and 8,999,381 issued and outstanding at June 30, 2021, respectively; 9,247,758 and 8,892,886 issued and outstanding at December 31, 2020, respectively
   $ 8,999 $ 8,893
Additional
paid-in
capital
   115,480,644 111,452,346
Accumulated other comprehensive income (loss)
   (9,794 ) 14,207
Accumulated deficit
   (43,559,931 ) (31,927,168 )


Total stockholders’ equity
   71,919,918 79,548,278


Total liabilities and stockholders’ equity
   $ 75,660,418 $ 82,342,700


The accompanying notes are an integral part of these financial statements

Table of Contents
LAIRD SUPERFOOD, INC.
STATEMENTS OF OPERATIONS
(Unaudited)

   For the Quarters Ended
March 31,
   2021 2020
Sales, net
   $ 7,426,254 $ 5,483,226
Cost of goods sold
   (5,559,499 ) (3,365,609 )


Gross profit
   1,866,755 2,117,617


General and administrative

Salaries, wages and benefits
   1,205,854 816,172
Stock-based compensation
   899,235 183,203
Professional fees
   343,622 182,048
Insurance expense
   522,399 31,195
Office expense
   186,831 113,365
Occupancy
   56,521 53,431
Merchant service fees
   106,375 56,035
Netsuite subscription expense
   55,021 26,395
Other expense
   267,536 137,728


Total general and administrative expenses
   3,643,394 1,599,572


Research and product development

Salaries, wages and benefits
   70,361 74,902
Product development expense
   162,844 57,743
Stock-based compensation
   3,567 2,192
Other expense
   3,915 8,478


Total research and product development expenses
   240,687 143,315


Sales and marketing

Salaries, wages and benefits
   633,751 746,010
Stock-based compensation
   41,389 74,495
Advertising
   1,681,344 936,363
General marketing
   710,523 309,222
Amazon selling fee
   202,276 187,571
Travel expense
   8,756 70,014
Other expense
   49,040 69,141


Total sales and marketing expenses
   3,327,079 2,392,815


Total expenses
   7,211,160 4,135,702


Operating loss
   (5,344,405 ) (2,018,085 )


Other income (expense)

Interest and dividend income
   13,901 22,854


Total other income
   13,901 22,854


Loss before income taxes
   (5,330,504 ) (1,995,231 )


Benefit from income taxes
   —   —


Net loss attributable to Laird Superfood, Inc. common stockholders
   $ (5,330,504 ) $ (1,995,231 )


Net loss per share attributable to Laird Superfood, Inc common stockholders:

Basic
   $ (0.60 ) $ (0.47 )


Diluted
   $ (0.60 ) $ (0.47 )


Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted
   8,894,495 4,281,346



For the Three Months Ended
June 30,

For the Six Months Ended
June 30,


2021

2020

2021

2020

Sales, net
   $ 9,195,786 $ 5,608,830 $ 16,622,039 $ 11,092,055
Cost of goods sold
   (6,998,695 ) (4,285,128 ) (12,558,194 ) (7,650,736 )


Gross profit    2,197,091 1,323,702 4,063,845 3,441,319


General and administrative

Salaries, wages and benefits
   1,019,845 804,903 2,225,698 1,621,075
Stock-based compensation
   955,369 116,249 1,854,604 299,452
Professional fees
   609,448 191,130 953,070 373,177
Insurance expense
   500,821 25,866 1,023,221 57,061
Office expense
   206,448 108,883 393,279 222,248
Occupancy
   62,957 56,343 119,478 109,774
Merchant service fees
   151,882 89,014 258,257 145,049
Netsuite subscription expense
   74,117 30,923 129,138 57,318
Impairment on asset held for sale
   —   239,734 —   239,734
Other expense
   582,024 169,397 847,235 307,124


Total general and administrative expenses
   4,162,911 1,832,442 7,803,980 3,432,012


Research and product development

Salaries, wages and benefits
   116,187 72,931 186,548 147,833
Stock-based compensation
   5,385 2,192 8,952 4,384
Product development expense
   249,948 40,175 412,792 97,917
Other expense
   3,332 2,499 7,247 10,977


Total research and product development expenses
   374,852 117,797 615,539 261,111


Sales and marketing

Salaries, wages and benefits
   630,328 697,547 1,264,079 1,443,556
Stock-based compensation
   55,706 35,938 97,095 110,434
Advertising
   1,699,865 1,154,060 3,381,209 2,090,423
General marketing
   1,260,489 261,662 1,971,012 570,884
Amazon selling fee
   210,842 208,317 413,118 395,889
Travel expense
   11,604 3,950 20,360 73,964
Other expense
   67,658 34,227 116,698 103,368


Total sales and marketing expenses
   3,936,492 2,395,701 7,263,571 4,788,518


Total expenses
   8,474,255 4,345,940 15,683,090 8,481,641


Operating loss
   (6,277,164 ) (3,022,238 ) (11,619,245 ) (5,040,322 )


Other income (expense)

Interest and dividend income
   11,623 8,171 25,525 31,025
Loss on sale of fixed assets
   —   —   (2,325 ) —
Gain on sale of
available-for-sale
securities
   —   7,677 —   7,677


Total other income (expense)
   11,623 15,848 23,200 38,702


Loss before income taxes
   (6,265,541 ) (3,006,390 ) (11,596,045 ) (5,001,620 )


Income tax expense
   (36,718 ) 0—   (36,718 ) 0—


Net loss
   $ (6,302,259 ) $ (3,006,390 ) $ (11,632,763 ) $

(5,001,620 )


Less deemed dividend of beneficial conversion feature
   —   (825,366 ) —   (825,366 )
Less deemed dividend on warrant discount
   —   (179,427 ) —   (179,427 )


Net loss attributable to Laird Superfood, Inc. common stockholders
   $ (6,302,259 ) $ (4,011,183 ) $ (11,632,763 ) $ (6,006,413 )


Net loss per share attributable to Laird Superfood, Inc common stockholders:

Basic
   $ (0.70 ) $ (0.93 ) $ (1.30 ) $ (1.40 )


Diluted
   $ (0.70 ) $ (0.93 ) $ (1.30 ) $ (1.40 )


Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted
   8,967,797 4,325,265 8,931,736 4,303,305


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

Table of Contents
LAIRD SUPERFOOD, INC.
STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)

   For the Three Months Ended
March 31,
   2021 2020
Net loss
   $ (5,330,504 ) $ (1,995,231 )
Other comprehensive income (loss), net of tax

Change in unrealized gains (losses) on investment securities available-for-sale, net of tax⁽¹⁾
   (20,290 ) 31,090


Total other comprehensive income (loss)
   (20,290 ) 31,090


Comprehensive loss
   $ (5,350,794 ) $ (1,964,141 )



For the Three Months Ended

June 30,

For the Six Months Ended

June 30,


2021

2020

2021

2020

Net loss
   $ (6,302,259 ) $ (3,006,390 ) $ (11,632,763 ) $ (5,001,620 )
Other comprehensive income (loss), net of tax Change in unrealized gains (losses) on investment securities
available-for-sale,
net of tax
(1)
   (3,711 ) (13,745 ) (24,001 ) 17,345


Total other comprehensive income (loss)
   (3,711 ) (13,745 ) (24,001 ) 17,345


Comprehensive loss
   $ (6,305,970 ) $ (3,020,135 ) $ (11,656,764 ) $ (4,984,275 )


⁽¹⁾
The Company maintains a full valuation allowance related to our net deferred tax assets, primarily due to our historical net loss position. See note 911 for the estimated tax benefit deferred.
The accompanying notes are an integral part of these financial statements.

Table of Contents
LAIRD SUPERFOOD, INC.
STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(Unaudited)

Convertible Preferred Stock Stockholders’ Equity
Preferred Stock Common Stock Additional
Paid-in
Capital Accumulated Other
Comprehensive Income
(Loss) Accumulated
Deficit
Shares Amount Shares Amount Total
Balances, January 1, 2021
—   $ —   8,892,886 $ 8,893 $ 111,452,346 $ 14,207 $ (31,927,168 ) $ 79,548,278
Stock-based compensation
—   —   —   —   1,010,003 —   —   1,010,003
Withholding tax payments for share-based compensation
—   —   —   —   (188,793 ) —   —   (188,793 )
Stock option exercises
—   —   28,148 28 151,618 —   —   151,646
Common stock issuance costs
—   —   —   —   (82,043 ) —   —   (82,043 )
Other comprehensive income, net of tax
—   —   —   —   —   (20,290 ) —   (20,290 )
Net loss
—   —   —   —   —   —   (5,330,504 ) (5,330,504 )

Balances, March 31, 2021
—   $ —   8,921,034 $ 8,921 $ 112,343,131 $ (6,083 ) $ (37,257,672 ) $ 75,088,297

Convertible Preferred Stock Stockholders’ Equity
Preferred Stock Common Stock Additional
Paid-in
Capital Accumulated Other
Comprehensive Income
(Loss) Accumulated
Deficit
Shares Amount Shares Amount Total
Balances, January 1, 2020
629,186 $ 6,722,951 4,188,558 $ 4,188 $ 27,184,250 $ (226 ) $ (19,076,867 ) $ 14,834,296
Stock-based compensation
—   —   —   —   258,486 —   —   258,486
Stock option exercises
—   —   804 —   6,030 —   —   6,030
Common stock issuances
—   —   137,770 138 1,997,527 —   —   1,997,665
Less: repurchased common stock
—   —   (1,416 ) (1 ) (20,531 ) —   —   (20,532 )
Other comprehensive income, net of tax
—   —   —   —   —   31,090 —   31,090
Net loss
—   —   —   —   —   —   (1,995,231 ) (1,995,231 )

Balances, March 31, 2020
629,186 $ 6,722,951 4,325,716 $ 4,325 $ 29,425,762 $ 30,864 $ (21,072,098 ) $ 15,111,804

Convertible Preferred Stock

Stockholders’ Equity

Preferred Stock

Common Stock

Additional

Accumulated Other

Accumulated

Shares

Amount

Shares

Amount

Paid-in Capital

Comprehensive Income (Loss)

Deficit

Total

Balances, January 1, 2021
   0      $ 0      8,892,886 $ 8,893 $ 111,452,346 $ 14,207 $ (31,927,168 ) $ 79,548,278
Stock-based compensation
   —      —      —   —   1,010,003 —   —   1,010,003
Less: Withholding tax payments for share-based compensation
   —      —      —   —   (188,793 ) —   —   (188,793 )
Stock option exercises
   —      —      28,148 28 151,618 —   —   151,646
Common stock issuance costs
   —      —      —   —   (82,043 ) —   —   (82,043 )
Other comprehensive income, net of tax
   —      —      —   —   —   (20,290 ) —   (20,290 )
Net loss
   —      —      —   —   —   —   (5,330,504 ) (5,330,504 )






Balances, March 31, 2021
   0      0      8,921,034 $ 8,921 $ 112,343,131 $ (6,083 ) $ (37,257,672 ) $ 75,088,297






Stock-based compensation
   —      —      —   —   1,090,074 —   —   1,090,074
Less: Withholding tax payments for share-based compensation
   —      —      (956 ) (1 ) (30,362 ) —   —   (30,363 )
Restricted stock units issued

—

—

3,000

3

—

—

—

3

Stock option exercises
   —      —      23,169 23 242,997 —   —   243,020
Common stock issued for business acquisition costs
   —      —      53,134 53 1,834,804 —   —   1,834,857
Other comprehensive

income,

net of tax
   —      —      —   —   —   (3,711 ) —   (3,711 )
Net loss
   —      —      —   —   —   —   (6,302,259 ) (6,302,259 )






Balances, June 30, 2021
   —      —      8,999,381 $ 8,999 $ 115,480,644 $ (9,794 ) $ (43,559,931 ) $ 71,919,918






Convertible Preferred Stock

Stockholders’ Equity

Preferred Stock

Common Stock

Additional

Accumulated Other

Accumulated

Shares

Amount

Shares

Amount

Paid-in Capital

Comprehensive Income (Loss)

Deficit

Total

Balances, January 1,

2020
   314,593    $ 6,722,951 4,188,558 $ 4,188 $ 27,184,250 $ (226 ) $ (19,076,867 ) $ 8,111,345
Stock-based

compensation
   —      —   —   —   258,486 —   —   258,486
Stock option exercises
   —      —   804 —   6,030 —   —   6,030
Less: repurchased

common stock
   —      —   (1,416 ) (1 ) (20,531 ) —   —   (20,532 )
Common stock issuances
   —      —   137,770 138 1,997,527 —   —   1,997,665
Other

comprehensive

income,
net

of
tax
   —      —   —   —   —   31,090 —   31,090
Net loss
   —      —   —   —   —   —   (1,995,230 ) (1,995,230 )




Balances, March 31,

2020
   314,593    6,722,951 4,325,716 $ 4,325 $ 29,425,762 $ 30,864 $ (21,072,097 ) $ 8,388,854




Stock-based compensation
   —      —   —   —   212,834 —   —   212,834
Restricted stock awards
   —      —   4,784 5 62,426 —   —   62,431
Preferred stock issuances
   383,142    10,000,006 —   —   —   —   0
Beneficial conversion

feature on
Preferred

Series
B-1
   —      (825,366 ) —   —   825,366 —   —   825,366
Deemed

dividend

of

beneficial
conversion

feature
   —      825,366 —   —   (825,366 ) —   —   (825,366 )
Allocation of preferred

series
B-1

proceeds to

warrant
   —      (825,366 ) —   —   825,366 —   —   825,366
Deemed dividend on

warrant discount
   —      179,427 —   —   (179,427 ) —   —   (179,427 )
Preferred stock issuance

costs
   —      (147,721 ) —   —   —   —   —   0
Other

comprehensive

income,

net

of
tax
   —      —   —   —   —   (13,745 ) —   (13,745 )
Net loss
   —      —   —   —   —   —   (3,006,390 ) (3,006,390 )




Balances, June 30, 2020
   697,735    15,929,297 4,330,500 $ 4,330 $ 30,346,961 $ 17,119 $ (24,078,487 ) $ 6,289,923




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

Table of Contents
LAIRD SUPERFOOD, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)

   For the Quarter Ended
March 31,
   2021 2020
Cash flows used in operating activities

Net loss
   $ (5,330,504 ) $ (1,995,231 )
Adjustments to reconcile net loss to net cash from operating activities:

Depreciation
   131,333 114,901
Amortization
   5,270 2,524
Loss on disposal of equipment
   2,325 —
Stock-based compensation
   1,010,003 258,486
Provision for excess and obsolete inventory
   102,604 —
Changes in operating assets and liabilities:

Accounts receivable
   69,504 (1,259,099 )
Accrued investment income receivable
   (3,969 ) 4,847
Inventory
   (1,500,686 ) 271,028
Prepaid expenses and other current assets
   (55,465 ) (357,734 )
Deferred rent
   90,054 90,622
Deposits
   (391,149 ) (17,191 )
Accounts payable
   284,681 340,271
Payroll liabilities
   289,308 142,208
Accrued expenses
   153,306 60,604


Net cash from operating activities
   $ (5,143,385 ) $ (2,343,764 )


Cash flows used in investing activities

Purchase of property and equipment
   (122,588 ) (115,669 )
Purchase of software
   (78,200 ) —
Proceeds from sale of property, equipment, and software
   700 —


Net cash from investing activities
   $ (200,088 ) $ (115,669 )


Cash flows from financing activities

Issuance of common stock
   —   1,997,665
Common stock issuance costs
   (82,043 ) —
Common stock repurchases
   —   (20,532 )
Withholding tax payments for share based compensation
   (188,793 ) —
Stock options exercised
   151,646 6,030


Net cash from financing activities
   $ (119,190 ) $ 1,983,163


Net change in cash and cash equivalents
   (5,462,663 ) (476,270 )
Cash and cash equivalents beginning of period
   57,208,080 1,004,109


Cash and cash equivalents end of period
   $ 51,745,417 $ 527,839


Supplemental disclosures of non-cash information

Unrealized gain (loss) on available-for-sale securities
   $ (20,290 ) $ 31,090



For the Six Months Ended June 30,


2021

2020

Cash flows used in operating activities

Net loss
   $ (11,632,763 ) $ (5,001,620 )
Adjustments to reconcile net loss to net cash from operating activities:

Depreciation
   302,261 229,284
Amortization
   103,803 5,048
Loss on disposal of equipment
   2,325 —
Stock-based compensation
   2,100,077 471,320
Provision for inventory obsolescenc
e

18,266

—

Reserve for prepaid assets

179,000

—

Restricted stock awards
   —   62,431
Impairment on asset held for sale
   —   239,734
Gain on sale of investment securities
available-for-sale
   —   7,677
Changes in operating assets and liabilities:

Accounts receivable
   98,534 (324,211 )
Accrued investment income receivable
   513 —
Inventory
   (3,778,699 ) (1,048,010 )
Prepaid expenses and other current assets
   729,881 (371,883 )
Deferred rent
   179,503 180,677
Deposits
   2,602 10,941
Accounts payable
   208,131 568,088
Payroll liabilities
   129,397 167,576
Accrued expenses
   367,209 155,943
Deferred taxe
s

36,718

—



Net cash from operating activities    (10,953,242 ) (4,647,005 )


Cash flows used in (provided by) investing activities

Purchase of property, plant, and equipment
   (522,564 ) (312,746 )
Proceeds from sale of property, equipment, and software

700

—

Deposits on equipment to be acquired
   (407,412 ) (319,174 )
Purchase of software
   (109,795 ) —
Acquisiton of a business, net of cash acquired (note
2
)
   (10,449,587 ) —
Sale of investment securities
available-for-sale
   —   513,544
Proceeds from maturities of investment securities
available-for-sale
   —   475,000


Net cash from investing activities
   (11,488,658 ) 356,624


Cash flows from financing activities

Issuance of common stock
   —   1,997,665
Issuance of preferred stock
   —   10,000,006
Common stock issuance costs
   (82,043 ) —
Preferred stock issuance costs
   —   (147,721 )
Withholding tax payments for share based compensation
   (219,156 ) —
Restricted stock units issue
d

3

—

Repurchased common stock
   —   (20,532 )
Stock options exercised
   394,666 6,030


Net cash from financing activities    93,470 11,835,448


Net change in cash and cash equivalents
   (22,348,430 ) 7,545,067
Cash and cash equivalents beginning of period    57,208,080 1,004,109


Cash and cash equivalents end of period    $ 34,859,650 $ 8,549,176


Supplemental disclosures of
non-cash
information

Unrealized gain (loss) on
available-for-sale
securities
   $ (24,001 ) $ 17,345


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

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
1.
~~Nature of Operations and Summary of Significant Accounting Policies~~
1. Nature of Operations and Summary of Significant Accounting Policies
The accompanying unaudited interim financial statements include the accounts of Laird Superfood, Inc. (the “Company” or “Laird Superfood” or “we”), a Delaware corporation. On July 3, 2018, the Company entered into a plan of conversion and was converted from a corporation under the laws of the State of Oregon to a corporation under the laws of the State of Delaware with an updated par value of $0.001 per share of common stock.
Nature of Operations
Laird Superfood ~~Inc.~~ 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.
Initial Public Offering
On September 25, 2020, the Company completed its initial public offering (“IPO”), in which the Company issued and sold 3,047,500 shares of its common stock at a public offering price of $22 per share, including 397,500 shares of common stock upon the exercise of the underwriter’s option to purchase additional shares. After underwriting discounts and commissions and other offering costs, net proceeds from the IPO were approximately $61,966,237. Offering costs of approximately $1,350,815 were recognized as a reduction of
additional-paid-in
capital.
Upon the closing of the IPO, all outstanding shares of the Company’s preferred stock converted into shares of common stock, consisting of (i)
162,340
outstanding shares of Series
A-1
convertible preferred stock converting into
324,680
aggregate shares of common stock, (ii)
152,253
outstanding shares of Series
A-2
convertible preferred stock converting into
304,506
aggregate shares of common stock, and (iii)
383,142
outstanding shares of Series
B-1
convertible preferred stock converting into
766,284
aggregate shares of common stock.
Concurrent Private Placement
Danone Manifesto Ventures, PBC (“DMV”) purchased 90,910 shares of our common stock in a private placement immediately subsequent to the consummation of the IPO for a total purchase price of $2,000,020, at a price per share of $22.
Basis of Accounting
The financial statements include the accounts of the Company. 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 ~~March 31,~~June 30, 2021 and 2020. 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 financial information~~
Interim Financial Information
In the opinion of the Company, the accompanying unaudited interim 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, 2020 was derived from audited annual financial statements. Operating results for the three and six months ended ~~March 31,~~June 30, 2021 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2021. The accompanying unaudited interim financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the fiscal year ended December 31, 2020.
9

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
Use of Estimates
The preparation of 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 impact allowances for doubtful accounts and returns, inventory obsolescence, the fair value of and/or potential impairment of goodwill and intangible assets, the fair value of assets acquired and liabilities assumed in business combinations, valuation allowance for deferred taxes, reserves on prepaid expenses, and fair value of stock-based compensation.

~~LAIRD SUPERFOOD, INC.~~

~~Notes~~

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 ~~Unaudited Financial~~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 Statements
of Operations.

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 as a whole 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 1517 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.

   March 31,
2021    March 31,
2020
Cash and cash equivalents
   $ 51,503,218    $ 527,839
Restricted cash
   242,199    —




Total cash, cash equivalents, and restricted cash show in the statement of cash flows
   $ 51,745,417    $ 527,839

June 30,

December 31,


2021

2020

Cash and cash equivalents
   $

34,706,429    $

56,973,896
Restricted cash
   153,221    234,184




Total cash, cash equivalents, and restricted cash shown in the statement of cash flows
   $ 34,859,650    $ 57,208,080




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 DMV, which provided the Company $298,103 in funds for the purpose of supporting three
COVID-19
relief projects. During the three and six months ended ~~March 31,~~June 30, 2021, we contributed ~~$55,904~~$25,059 and $80,963, respectively, to these projects. The restriction will be released upon the completion of the projects.
10

Table of Contents
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 ~~broker.~~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 ~~March 31,~~June 30, 2021 and December 31, 2020 approximated ~~$6,402,956~~$6,441,487 and $6,639,821, 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 no0 allowance for doubtful accounts was required as of ~~March 31,~~June 30, 2021 and December 31, 2020.
Investments
Investment securities that are not classified as either
held-to-maturity
securities or trading securities are classified as
available-for-sale
securities and are reported at fair value, with unrealized gains and losses excluded from earnings and reported as other comprehensive income or loss, net of income taxes. Management determines the appropriate classification of securities at the time of purchase. Investment securities are valued utilizing quoted prices in active markets. Gains and losses on the sales of
available-for-sale
securities are determined using the specific-identification method.

~~LAIRD SUPERFOOD, INC.~~

~~Notes to Unaudited Financial Statements~~

Inventory

Inventory is stated at the lower of cost
(first-in,
first-out)
or net realizable value and consists primarily of raw materials and packaging and finished goods. AsThe following table presents the components of ~~March 31, 2021 and December 31, 2020,~~ inventory, ~~was comprised of the following:~~

   March 31,
2021    December 31,
2020
Raw Materials and Packaging
   $ 3,412,135    $ 4,109,706
Finished Goods
   4,281,845    2,186,192




Total
   $ 7,693,890    $ 6,295,898




net, as of:

June 30,

December 31,


2021

2020

Raw materials and packaging
   $

5,556,668    $ 4,109,706
Finished goods
   5,243,915    2,186,192




Total gross inventory
   10,800,603    6,295,898
Provision for inventory obsolescence
   (18,266 )    —




Total inventory, net of reserve
   $ 10,782,337    $ 6,295,898




The Company periodically reviews the value of items in inventory and provides write-offs of inventory based on current market ~~assessments,~~assessment, which are charged to cost of goods sold. For the three and six months ended ~~March 31,~~June 30, 2021, the Company recorded ~~$102,604~~$25,952 and $128,556, respectively, in inventory obsolescence primarily related to the Company’s liquid creamer product ~~line which was launched in the second quarter of 2020.~~line. For the three and six months ended ~~March 31,~~June 30, 2020, ~~there was no~~the Company recorded $189,040 in inventory ~~obsolescence.~~
obsolescence related to the Company’s liquid creamer product line.
As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company had a total of ~~$1,060,840~~
$1,039,248 and $958,166,
respectively, of prepayments for future raw materials inventory, net of reserve for prepaid assets of $179,000, which is included in prepaid expenses and other current assets, net on the balance sheets.
Property and Equipment, net
Property and equipment are valued at cost, net of accumulated depreciation. Expenditures for maintenance and repairs that do not extend the useful life or increase the value of the assets are charged to expense in the period incurred. Additions and betterments are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for depreciation purposes for furniture and factory equipment range from 3 to 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. Depreciation expense is allocated to general and administrative expenses and cost of goods sold upon the sale of inventory. For the three and six months ended ~~March 31,~~June 30, 2021, depreciation expense was $170,928 and $302,261, respectively. For the three and six months ended June 30, 2020, depreciation expense was ~~$131,333~~$114,383 and ~~$114,901,~~$229,284, respectively.
As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company had a total of ~~$391,149~~$407,412 and $0, respectively, of deposits for future equipment purchases, which is included in deposits on the balance sheets.
11

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
Deferred Rent
Deferred rent includes tenant improvement costs that were incurred by the landlord, RII Lundgren Mill, LLC, in the
build-out
of the Company’s leased space and were reimbursed by the Company. These amounts are treated as additional rents and are expensed straight-line over the life of the lease.
Revenue Recognition
The Company recognizes revenue in accordance with the five-step model as prescribed by ASC Topic 606
,
Revenue from Contracts with a Customer,
in which the Company evaluates the transfer of promised goods or services and recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC Topic 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. See Note 1517 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 ~~will record~~records reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates ~~will be~~are 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.

~~LAIRD SUPERFOOD, INC.~~

~~Notes to Unaudited Financial Statements~~

Shipping and Handling

Costs of shipping and handling related to sales revenue are included in cost of goods sold. Shipping and handling costs totaled ~~$1,238,996~~$1,591,952 and ~~$634,641~~$2,830,948 for the three and six months ended ~~March 31,~~June 30, 2021, respectively. Shipping and handling costs totaled $954,295 and $1,588,937 for the three and six months ended June 30, 2020, respectively. Income generated from shipping costs billed through to customers was included in Sales, net in the statements of operations. Shipping income totaled ~~$25,659~~$40,750 and ~~$151,551~~$66,410 for the three and six months ended ~~March 31,~~June 30, 2021, respectively. Shipping income totaled $43,793 and $195,345 for the three and six months ended June 30, 2020, respectively.

Research and Product Development

Amounts spent on research and development activities are expensed as incurred as research and product development expense on the statements of operations. Research and product development expense was ~~$240,687~~$374,852 and ~~$143,315~~$615,539 for the three and six months ended ~~March 31,~~June 30, 2021, respectively. Research and product development expense was $117,797 and $261,111 for the three and six months ended June 30, 2020, respectively.

Advertising

Advertising ~~and marketing~~ costs are expensed when incurred. Advertising ~~and marketing~~ expenses for the three and six months ended ~~March 31,~~June 30, 2021 was

$1,699,865 and $3,381,209,

respectively. Advertising expenses for the three and six months ended June 30, 2020 was ~~$2,391,867~~

$1,154,060 and ~~$1,245,585,~~$2,090,423, respectively.

Marketing

Marketing costs are expensed when incurred. Marketing expenses for the three and six months ended June 30, 2021 were $1,260,489 and $1,971,012, respectively. Marketing expenses for the three and six months ended June 30, 2020 were $261,662 and $570,884, respectively.

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
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. 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) 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 full deferred tax valuation allowance of ~~$8,953,186~~$11,238,942 and ~~$7,563,110~~
$7,563,110 as of ~~March 31,~~June 30
, 2021
and December 31
, 2020
, 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 no0 stock repurchase transactions for the three and six months ended ~~March 31,~~June 30, 2021. There were stock repurchases of $20,532 in the three and six months ended ~~March 31,~~June 30, 2020.
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 option awards or vesting of restricted stock units, recipients are issued shares of common stock.
Pre-vesting
forfeitures result in the reversal of all compensation cost as of the date of ~~termination,~~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 and preferred stock had been issued and ~~are~~is calculated under the treasury stock method. Due to the Company’s net loss, all stock options and convertible preferred stock are anti-dilutive and excluded.

~~LAIRD SUPERFOOD, INC.~~

~~Notes to Unaudited Financial Statements~~

Stock Split

The Company’s board of directors and stockholders approved a
2-for-1
split of the Company’s common stock, which was effected on August 19, 2020. The split divided each share of the Company’s issued and outstanding common stock into two shares of common stock and correspondingly adjusted the conversion prices of its convertible preferred stock. No fractional shares were issued in connection with the split. The split was effective upon filing of the Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation on August 19, 2020. The Company has reflected the effect of the
2-for-1
split of its common stock (and the corresponding adjustment of the conversion prices of its preferred stock) in these financial statements as if it had occurred at the beginning of the earliest period presented.

Warrants

Issued and detachable stock warrants are classified as equity or liability instruments based on the specific terms of the underlying warrant agreement. In circumstances where debt or equity is issued with detachable warrants, the proceeds from issuance are allocated to each instrument based on an acceptable method, which generally involves determining the fair value of one or more of the instruments. In conjunction with the Company’s initial public offering, the warrant outstanding was cancelled. See additional information in Note ~~11.~~
13.

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
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 balance sheets as of ~~March 31,~~June 30, 2021 and December 31, 2020, was valued at $132,000 and satisfied with the issuance of 660,000 shares of common stock. The Company has determined that the intangible asset associated with the LH License has an indefinite life, as there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company. Please see Note 1416 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 balance sheets as of ~~March 31,~~June 30, 2021 and December 31, 2020, was valued at $100 based on the consideration exchanged. The Company has determined that the intangible asset associated with the GR License has an indefinite life, as there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the Company. Please see Note 1416 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 100 years.
On May 26, 2020,
the Company executed a License and Preservation Agreement with Mr. Hamilton, and Ms. Reece (the “2020 License”), which superseded the predecessor license and preservation agreement with both individuals. Among other modifications, the agreement (i) modified certain approval rights of Mr. Hamilton and Ms. Reece for use of their respective images, signatures, voices, and names (other than those owned by the Company), rights of publicity and common law and statutory rights to the foregoing in the Company’s products, (ii) modified certain assignment, change of control and indemnification provisions, and (iii) granted the Company the right to extend the term of the agreement for additional~~ten-year~~
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 values of the 2020 License were not less than the carrying amounts; therefore, the Company recognized no
0
impairment for the three and six months ended ~~March 31,~~June 30, 2021 and 2020.
Definite Lived Intangible Assets, net
Definite lived intangible assets are valued at cost, net of accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for amortization purposes range between 3 and 10 years. Amortization expense is allocated to general and administrative expense. For the three and six months ended June 30, 2021, amortization expense was $98,533 and $103,803, respectively. For the three and six months ended June 30, 2020, amortization expense was $2,524 and $5,048, respectively.
Goodwill
Goodwill represents the excess of purchase price over the assigned fair values of the assets acquired and liabilities assumed in conjunction with a business combination. Goodwill is reviewed for impairment annually as of December 31, or whenever events occur or circumstances change that indicate goodwill may be impaired. In testing goodwill for impairment, the Company has the option to perform a qualitative assessment to determine whether the existence of events or circumstances indicate that it is
more-likely-than-not
(more than 50%) that the fair value of goodwill is less than its carrying amount. When performing a qualitative assessment, the Company evaluates factors such as industry and market conditions, cost factors, overall financial performance, and other relevant entity specific events and changes. If the qualitative assessment indicates that it is
more-likely-than-not
that the fair value of goodwill is less than its carrying amount, or if the Company chooses not to perform the qualitative assessment, then a quantitative assessment is performed to determine the reporting unit’s fair value. If the carrying value exceeds its fair value, then an impairment loss is recognized for the amount of the excess of the carrying amount over the fair value, not to exceed the total amount of goodwill.
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 ~~March 31,~~June 30, 2021 and 2020, we did ~~not~~0t match employee contributions.

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
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 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
There were no new accounting pronouncements adopted in the three and months ended ~~March 31,~~June 30, 2021 and 2020, respectively.
Recently Issued 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, 2020, and interim periods within fiscal years beginning after December 15, 2021. The adoption of the new standard is expected to result in the recognition of additional lease liabilities and
right-of-use
assets as of January 1, 2022. The Company is evaluating the potential impact of this pronouncement.
In June 2016, the FASB issued ASU
No. 2016-13, ~~“Financial~~
“Financial Instruments – Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments,” as modified by subsequently issued ASUs
2018-19 ~~(issued~~
(issued November 2018),
2019-04 ~~(issued~~
(issued April 2019),
2019-05 ~~(issued~~
(issued May 2019),
2019-11 ~~(issued~~
(issued November 2019),
2020-02 ~~(issued~~
(issued February 2020) and
2020-03 ~~(issued~~
(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. These reclassifications had no effect on the reported results of operations or cash flows.
Subsequent Events
Subsequent events are events or transactions that occur after the balance sheet date but before the financial statements are available to be issued. The Company has evaluated events and transactions subsequent to ~~March 31,~~June 30, 2021 for potential recognition of disclosure in the financial statements.
15
Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
2. Business Combination
On 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 ~~cash-free,~~ debt-free purchase price of ~~$10,053,142~~
$11,111,830 in cash, subject to customary working capital adjustments and 53,133 shares of Company common stock, subject to certain vesting conditions. The transaction closed simultaneously with execution of the agreement. ~~Because the acquisition occurred subsequent to March 31, 2021, no~~Picky Bars results of operations were included in the Company’s results beginning May 2021. Acquisition costs of Picky Bars in the amounts of $179,390 and $278,140
are included in ~~our condensed statements~~professional and legal fees the Company’s statement of operations for the three and six months ended ~~March 31, 2021. It is currently impractical to disclose a preliminary purchase price allocation, or pro forma financial information combining both entities as~~June 30, 2021, respectively. The fair value of the ~~earliest period presented~~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
   $ 11,111,830
Equity instruments
   1,834,857


Far value of total consideration transferred
   $ 12,946,687


Recognized amounts of identifiable assets acquired and liabilities assumed

Cas
h

$
662,243

Accounts receivable
   48,517
Prepaid expenses and other current assets
   243,166
Inventory
   726,006
Property, Plant, & Equipment
   55,378
Intangible assets
   4,930,000


Total assets acquired
   6,665,310


Accounts payable
   47,323
Accrued expenses
   131,661
Payroll liabilities
   9,189
Contract liabilities
   16,450


Total liabilities assumed
   204,623


Total identifiable net assets
   6,460,687


Goodwill
   $ 6,486,000


Goodwill arising as a result of the acquisition of Picky Bars is primarily the result of synergies in ~~these financial statements.~~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 continued with Picky Bars’ previous management and workforce at the Oregon facilities. The Company continues to operate as one segment. ~~The~~Our estimates of fair value 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, ~~will be accounted for~~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 ~~accordance with ASC 805,~~ ~~Business Combinations~~.
the period in which such revised estimates are identified.

1
6

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
2.
~~Prepaid Expenses and Other Current Assets~~
The following table summarizes the components of the intangible assets acquired and their estimated useful lives:

Estimated Useful
Life

Fair Value

Trade names
   10 years    $ 2,530,000
Customer relationships
   10 years    1,990,000
Recipes
   10 years    330,000
Social media agreements
   3 years    80,000


Total intangible assets acquired
      $ 4,930,000


Picky Bar operations contributed net sales of $984,433 to the Company’s continuing operations for the three and six
months ended June 30,
2021. Picky Bar operations contributed net loss of $64,978 to the Company’s continuing operations for the three and six
months ended June 30,
2021.
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 prior to the acquisition (in thousands):

For the Three Months Ended June 30,

For the Six Months Ended June 30,


2021

2020

2021

2020

Net Sales
   $ 9,633,998    $ 6,673,166    $ 18,219,521    $ 12,975,718
Net Loss
   (6,125,020 )    (3,966,013 )    (11,418,183 )    (5,934,893 )
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:

June 30,

December 31,


2021

2020

Prepaid insurance
   $ 432,784    $ 1,446,189
Prepaid inventory
   1,218,248    958,166
Prepaid subscriptions and license fees
   325,252    225,567
Prepaid, other
   196,838    152,323
Prepaid consulting
   0      13,963
Prepaid advertising
   125,000    0
Other current assets
   56,482    51,111




Total prepaid and other assets
   2,354,604    2,847,319
Reserve for prepaid inventory
   (179,000 )    —




Prepaid and other assets, net
   $ 2,175,604    $ 2,847,319

17
Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
Reserve for prepaid assets
The Company made prepaid deposits for inventory in the amount of $296,873
with one specific supplier. Based on recent information from this supplier, the Company considers it doubtful that full delivery of prepaid inventory will occur. The Company is currently negotiating a resolution and considers it likely that a portion of the inventory will be delivered. The Company’s reasonable estimate of undelivered inventory is a range between
$
0
and $
179,000
,
with no amount within that range a better estimate than any other amount. Accordingly, the Company recorded a reserve for prepaid assets of
$
179,000
as of ~~March 31, 2021 and December 31, 2020:~~

   March 31,
2021    December 31,
2020
Prepaid insurance
   $ 1,060,840    $ 1,446,189
Prepaid inventory
   943,083    958,166
Prepaid subscriptions and license fees
   389,431    225,567
Prepaid advertising
   310,700    —
Prepaid, other
   141,169    152,323
Other current assets
   57,561    51,111
Prepaid consulting
   —      13,963




   $ 2,902,784    $ 2,847,319




3.
~~Investment securities~~
June 30, 2021.
4. Investment securities
Investment securities as of ~~March 31,~~June 30, 2021 and December 31, 2020 consisted of the following:

   Amortized cost    Gross unrealized
gains    Gross unrealized
losses    Estimated
fair value
March 31, 2021

Federal agency bonds – mortgage-backed
   $ 8,696,606    $ 586    $ (6,669 )    $ 8,690,523








Total investment securities available-for-sale
   $ 8,696,606    $ 586    $ (6,669 )    $ 8,690,523








   Amortized cost    Gross unrealized
gains    Gross unrealized
losses    Estimated
fair value
December 31, 2020

Federal agency bonds – mortgage-backed
   $ 8,692,637    $ 14,207    $ —      $ 8,706,844








Total investment securities available-for-sale
   $ 8,692,637    $ 14,207    $ —      $ 8,706,844









Gross unrealized

Gross unrealized

Estimated fair


Amortized cost

gains

losses

value

June 30, 2021

Federal agency bonds – mortgage-backed
   $ 8,692,124    $ 0      $ (9,794 )    $ 8,682,330








Total investment securities
available-for-sale
   $ 8,692,124    $ 0      $ (9,794 )    $ 8,682,330








December 31, 2020

Federal agency bonds – mortgage-backed
   $ 8,692,637    $ 14,207    $ —      $ 8,706,844








Total investment securities
available-for-sale
   $ 8,692,637    $ 14,207    $ —      $ 8,706,844








The amortized cost and estimated fair value of investment securities as of ~~March 31,~~June 30, 2021, by contractual maturity, are shown below:

   Available-for-sale
March 31, 2021    Amortized cost    Estimated
fair value
Due after one year through five years
   $ 8,696,606    $ 8,690,523




Total investment securities available-for-sale
   $ 8,696,606    $ 8,690,523





Available-for-sale


Amortized cost

Estimated fair
value

June 30, 2021

Due after one year through five years
   $ 8,692,124    $ 8,682,330




Total investment securities
available-for-sale
   $ 8,692,124    $ 8,682,330





Available-for-sale


Amortized cost

Estimated fair
value

December 31, 2020

Due after one year through five years
   $ 8,692,637    $ 8,706,844




Total investment securities
available-for-sale
   $ 8,692,637    $ 8,706,844




18
Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
Investment securities with an estimated fair value of ~~$8,690,523~~$8,682,330 and $8,706,844 as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively, were pledged to secure our revolving line of credit. See Note 56 for additional information.
The Company recorded no0 sales or maturities of available for sale securities during the three and six months ended ~~March 31, 2021~~June 30, 2021. The Company recorded $513,544 and $475,000 of sales and maturities of available for sale securities, respectively, during the three and six months ended June 30, 2020.

~~LAIRD SUPERFOOD, INC.~~

~~Notes to Unaudited Financial Statements~~

Fair Value Measurements

Factors used in determining the fair value of our assets and liabilities are summarized into three broad categories:

Level 1 – quoted prices in active markets for identical securities as of the reporting date;

Level 2 – other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds and credit risk; and

Level 3 – significant inputs that are generally less observable than objective sources, including our own assumptions in determining fair value.

The factors or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following tables summarize assets subject to fair value measurements:

Fair Value as of March 31, 2021    Level 1    Level 2    Level 3
Federal agency bonds - mortgage-backed
   $ —      $ 8,690,523    $ —

Fair Value as of December 31, 2020    Level 1    Level 2    Level 3
Federal agency bonds - mortgage-backed
   $ —      $ 8,706,844    $ —

Fair Value as of June 30, 2021

Level 1

Level 2

Level 3

Federal agency bonds—mortgage-backed
   $ 0      $ 8,682,330    $ 0
Fair Value as of December 31, 2020

Level 1

Level 2

Level 3

Federal agency bonds—mortgage-backed
   $ —      $ 8,706,844    $ 0
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.
As of December 31, 2020, the Company classified fixed assets as held for sale which was included in Level 3 fair value.
5.
~~Revolving Lines of Credit~~
6. Revolving Lines of Credit
On February 5, 2019, the Company entered into a revolving line of credit with First Interstate Bank (“FIB”) in a principal amount not exceeding $5,000,000. The line of credit is secured by the Company’s investment account held at FIB. The outstanding amounts under the line of credit have an interest rate calculated as LIBOR plus 2.0% per annum until paid in full. The loan agreement was renewed by the Company on March 1, 2021 and has a maturity date of February 5, 2023. The balance on the line of credit was $0 as of ~~March 31,~~June 30, 2021 and December 31, 2020. Management was in compliance with all financial covenants as of ~~March 31,~~June 30, 2021 and December 31, 2020.
19
Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
On August 10, 2017, the Company entered into a revolving line of credit with East Asset Management, LLC (“East”) in a principal amount not exceeding the lesser of the borrowing base or $3,000,000. Upon the mutual agreement of the Company and East, the primary revolving line of credit may be expanded to $10,000,000, subject to an increase in the borrowing base. The borrowing base is comprised of (a) up to 90% of eligible accounts receivable aged 90 days or less from due date utilizing the average of a trailing three months of actual book value, plus (b) up to 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 have a fixed interest rate of 15% per annum until paid in full and the line of credit has a maturity date of August 10, 2022. In the event of default, the interest rate would increase to 20% while such default exists. The line of credit is secured by a security interest in accounts receivable and inventory. The balance on the line of credit was $0 as of both ~~March 31,~~June 30, 2021 and December 31, 2020. Management was in compliance with all financial covenants as of ~~March 31,~~June 30, 2021 and December 31, 2020.
A secondary line of credit with East in an amount up to $200,000 is available to the Company, which is not subject to the requirements of the borrowing base. The secondary line of credit is secured by a security interest in the Company’s accounts receivable and inventory. The secondary line is available with the same draw and payback conditions as the primary line. The balance on the ~~secondary~~ line of credit was $0 as of both ~~March 31,~~June 30, 2021 and December 31,
2020.

~~LAIRD SUPERFOOD, INC.~~

~~Notes to Unaudited Financial Statements~~

East was also granted a right of first refusal on any future equity offerings by the Company to purchase up to 20% of equity in any such offerings at a 20% price per share discount, excluding (a) shares representing, in the aggregate, not more than ~~five~~ 5
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 ~~ten~~
10 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.

Long-term Debt

The following table presents the components of long-term debt:

   March 31,
2021    December 31,
2020
Forgivable loan, City of Sisters
   $ 51,000    $ 51,000




Long-term debt
   $ 51,000    $ 51,000

June 30,

December 31,


2021

2020

Forgivable loan, City of Sisters
   $ 51,000    $ 51,000




Long-term debt
   $ 51,000    $ 51,000




City of Sisters
On May 30, 2017, the Company entered into a forgivable loan agreement with the City of Sisters in the amount of $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 30 full-time employees with an average annual salary of $40,000 per person, and, once created and filled, the Company must maintain those jobs for an additional period of three years for the loan to be converted to a grant. If the requirements are not met, the Company is required to pay the loan in full, including interest of 8 percent per annum on the unpaid principal amount. The Company created the eligible jobs as of April 1, 2018.
20
Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
7.
8.
Property and Equipment, Net
Property and equipment, net is comprised of the following as of:

June 30,

December 31,


2021

2020

Factory equipment
   $ 2,711,014    $ 2,668,839
Land
   947,394    947,394
Furniture and office equipment
   563,488    532,116
Leasehold improvements
   509,450    259,504
Construction in progress
   273,556    —




   5,004,902    4,407,854
Accumulated depreciation
   (1,218,758 )    (894,366 )




Property and equipment, net
   $ 3,786,144    $ 3,513,488




Depreciation expense
was $
170,928
and $
302,261
for the
three
and
six
months ended June
30
,
2021
, respectively. Depreciation expense was $
114,383
and $
229,284
for the
three
and
six
months ended June
30
,
2020
, respectively
.
9.
Goodwill and Intangible Assets, Net
Goodwill
Goodwill represents the excess of ~~March 31,~~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
$6,486,000 and $0 as of June 30, 2021 and December 31, ~~2020:~~

   March 31,
2021    December 31,
2020
Factory equipment
   $ 2,749,057    $ 2,668,839
Land
   947,394    947,394
Furniture and office equipment
   531,232    532,116
Leasehold improvements
   276,553    259,504
Construction in progress
   16,666    —




   4,250,902    4,407,853
Accumulated depreciation
   (1,019,184 )    (894,365 )




Property and equipment, net
   $ 3,501,718    $ 3,513,488




2020, respectively.

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 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 forecasts. The Company determined that a triggering event has not occurred which would require an interim impairment test to be performed.

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
Intangible Assets, Net
Intangible Assets, net is comprised of the following:

June 30,

December 31,


2021

2020

Trade names (10 years)
   $ 2,530,000    $ —
Customer relationships (10 years)
   1,990,000    —
Recipes (10 years)
   330,000    —
Social media agreements (3 years)
   80,000    —
Software (3-15 years)

141,602

31,807

Amortizable intangible assets
   5,071,602    31,807
Accumulated amortization
   (130,618 )    (26,815 )




Amortizable intangible assets, net
   4,940,984    4,992
Licensing agreements (indefinite)
   132,100    132,100




Total Intangible assets, net
   $ 5,073,084    $ 137,092




The weighted-average useful life of all the Company’s intangible assets is 9.7 years.
For the three and six months ended June 30, 2021, amortization expense was
$
98,533
and $
103,803
, respectively. For the three and six months ended June 30, 2020, amortization expense was
$
10,870
and $
20,371
,
respectively.
Intangible assets are amortized using the straight-line method over estimated useful lives ranging from three to fifteen
years
.
The estimated amortization expense for each of the next five years and thereafter is as follows:
2021
   $ 275,671
2022
   549,198
2023
   547,882
2024
   499,059
2025
   485,118
Thereafter
   2,584,057


   $ 4,940,984


8.
10.
Commitments and Contingencies
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 ~~$6,475,~~$
6,475
, to escalate after 24 months by the lesser of 3%
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 ~~$797,471.~~$
797,471
. The Company also issued the landlord
2,000
stock options on April 15, 2018 with a strike price of ~~$7.50~~ $
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 ~~$12,784,~~$
12,784
, to escalate after 24 months by the lesser of 3%
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 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 ~~$1,202,529.~~$
1,202,529
. The Company made the final reimbursement in the amount of ~~$1,399,001~~ $
1,399,001
on December 31, 2019.
22
Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
On May 26, 2019, the Company executed and commenced an agricultural license agreement for the lease of agricultural land in Hanalei, Hawaii with PRW Princeville Development Company LLC (the “Hanalei Agricultural License”). Total monthly payments were the greater of ~~$1,000~~
$1,000
or eight percent of total monthly gross sales of the business done and/or generated on, in, into or from the premises. The initial lease term was five years, with one option to extend the term by five years. The agreement was subsequently amended on September 19, 2019 to include a termination clause if the storefront and property in the Hanalei, Hawaii ~~retail lease,~~Lease, discussed below, is not executed. The amendment also expanded the permitted access to include access through other property to the public roadway. On November 3, 2020, the Company and PRW Princeville Development Company LLC entered a termination and release agreement, terminating the Hanalei Agricultural License effective as of October 30, 2020.
On May 26, 2019, the Company executed a license agreement with PRW Princeville Development Company LLC for storefront and property in Hanalei, Hawaii (the “Hanalei Retail License”). Initially, total monthly payments were the greater of
$1,000
or eight percent of total monthly gross sales of the business done and/or generated on, in, into or from the property. The initial lease term was five years, with one option to extend the term by five years. The agreement commenced upon receipt of applicable permits. The agreement was subsequently amended on September 19, 2019 to extend the initial permitting period from January 1, 2020 to July 1, 2020, and the payment terms to include the monthly minimum lease payment due the first of the month, with a reconciliation to gross sales in the subsequent month. The agreement was subsequently amended on July 23, 2020 to extend the initial permitting period from July 1, 2020 to April 15, 2021. On November 3, 2020, the Company and PRW Princeville Development Company LLC entered a termination and release agreement, terminating the Hanalei Retail License effective as of October 30, 2020.
On of January 1, 2021, the Company entered into a lease agreement with PX2, LLC (“PX2”) for warehousing, distribution, and related industrial purposes. Under this agreement, the cost of rent which the Company will pay to PX2 is solely the reimbursement of utilities relating to the Company’s use (i.e., electric, janitorial, insurance, and other bills, which are estimated to be de minimis and not greater than $1,000 per month). This lease expires on
December 31, ~~2021.~~
2021

.
~~LAIRD SUPERFOOD, INC.~~
~~Notes to Unaudited Financial Statements~~
The following table sets forth the amounts of our significant contractual obligations and commitments with definitive payment terms as of ~~March 31,~~June 30, 2021:

Payments Due by Period    Operating
Leases⁽¹⁾    Note Payable    Total
2021
   $ 178,997    $ 51,000    $ 229,997
2022
   244,622    —      244,622
2023
   251,960    —      251,960
2024
   259,519    —      259,519
2025
   267,305    —      267,305
Thereafter
   863,932    —      863,932






   $ 2,066,335    $ 51,000    $ 2,117,335






Payments Due by Period

Operating Leases
(1)

Note Payable

Total

2021    $ 119,423    $ 51,000    $ 170,423
2022
   243,236    0      243,236
2023
   250,534    0      250,534
2024
   258,049    0      258,049
2025
   265,791    0      265,791
Thereafter
   860,498    0      860,498






   $ 1,997,531    $ 51,000    $ 2,048,531






⁽¹⁾
Operating lease obligations related to our manufacturing facility leases dated March 1, 2018 and December 17, 2018.
Rent expense is allocated to general and administrative expenses and cost of goods sold upon the sale of inventory. Rent expense was $279,865 and $530,955 for the three and six months ended ~~March 31,~~June 30, 2021, respectively. Rent expense was $203,485 and $375,664 for the three and six months ended June 30, 2020, ~~was $251,090 and $172,180,~~ respectively.
23
Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
9.
11.
Deferred Tax Assets and Liabilities
The Company had a tax net loss for the three and six months ended ~~March 31,~~June 30, 2021 and 2020, and therefore expects no assessment of income taxes for such periods. Additionally, the net deferred tax assets are fully allowed for as of ~~March 31,~~June 30, 2021 and December 31, 2020. Due to the full valuation allowance during 2020 and as of ~~March 31,~~June 30, 2021 there was no provision for, or benefit from, income taxes reported for the three and six months ended ~~March 31,~~June 30, 2021 and 2020. The Company’s deferred tax assets and liabilities consisted of the following as of ~~March 31,~~June 30, 2021 and December 31, 2020:

   March 31,
2021    December 31,
2020
Noncurrent deferred tax assets:

Federal net operating loss carryforwards
   $ 6,385,696    $ 5,332,738
State net operating loss carryforwards
   2,548,054    2,112,119
Federal depreciation and amortization
   346,060    458,203
State depreciation and amortization
   166,329    213,359
Accrued—PTO
   80,283    75,702
Other
   137,996    106,526




Total noncurrent deferred tax assets
   9,664,418    8,298,647
Noncurrent deferred tax liabilities:

Federal depreciation and amortization
   $ —      $ —
State depreciation and amortization
   —      —
Deferred rent asset
   711,232    735,537




Total noncurrent deferred tax liabilities
   711,232    735,537
Net noncurrent deferred tax assets
   $ 8,953,186    $ 7,563,110
Valuation allowance
   (8,953,186 )    (7,563,110 )




Total net noncurrent deferred tax assets
   $ —      $ —

~~LAIRD SUPERFOOD, INC.~~

~~Notes to Unaudited Financial Statements~~

June 30,

December 31,


2020

2020

Noncurrent deferred tax assets
:

Net operating loss carryforwards
   $ 11,084,791    $ 7,444,857
Property and equipment
   582,680    671,562
Research and development credits
   135,783    106,526
Accrued expenses
   86,601    75,702
Charitable contributions
   30,681    —
Inventory reserve
   4,982    —




Total noncurrent deferred tax assets
   11,925,518    8,298,647
Noncurrent deferred tax liabilities:

Deferred rent asset
   $ 686,576    $ 735,537
Intangible assets
   36,718    —




Total noncurrent deferred tax liabilities
   723,294    735,537
Net noncurrent deferred tax assets
   $ 11,202,224    $ 7,563,110
Valuation allowance
   (11,238,942 )    (7,563,110 )




Total net noncurrent deferred tax liabilities
   $ (36,718 )    $ —




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. ~~Based on this guidance,~~During the six months ended June 30, 2021, the Company ~~provided~~recorded a deferred tax liability of $36,718 to account for the book vs. tax basis difference related to the goodwill intangible asset acquired in the Picky Bars acquisition, also known as a “naked credit.” The deferred tax liability must be excluded from sources of future taxable income, as the timing of its reversal cannot be predicted due to the indefinite life of the goodwill. As such, this deferred tax liability cannot be used to reduce the valuation allowance for U.S. federal income tax purposes.
Apart from the $36,718 deferred tax expense mentioned above, as of June 30, 2021, 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 ~~amount.~~valuation allowance was recorded. The ~~net increase~~Company may reduce the valuation allowance against deferred tax assets at such time when it becomes more likely than not that the deferred tax assets will be realized.
The change in the valuation allowance for deferred tax assets and liabilities for the three and six months ended ~~March 31,~~June 30, 2021 was a net increase of $2,285,756 and ~~December 31, 2020 was $1,390,076 and $977,988,~~$3,675,832, respectively. ~~This valuation allowance included the estimated tax asset of $1,277 related to the unrealized loss on investment securities~~ ~~available-for-sale~~ ~~as of March 31, 2021. As of March 31,~~At June 30, 2021 and December 31, 2020, the Company had U.S. federal net operating losses (“NOLs”) totaling approximately ~~$32,923,866~~$38,555,519 and $27,528,486, respectively. The Company had federal NOLs ~~as of March 31,~~at June 30, 2021 ~~and December 31, 2020~~ totaling approximately $1,868,077 from 2017 and prior years that can be carried forward for 20 years, which begin to expire in 2036. ~~As of March 31,~~At June 30, 2021 and December 31, 2020, the Company had federal NOLs totaling approximately ~~$31,055,789~~$36,687,442 and $25,660,409, respectively from 2018 ~~through 2021~~and future years that can be carried forward indefinitely.
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 no0 unrecorded tax liabilities.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. U.S. and state jurisdictions have statutes of limitations that generally range from 3 to 5 years.
~~10.~~
~~Stock Incentive Plan~~
24
Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited 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 ~~1,000,000~~ 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.
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 ten years from the date of grant, (ii) three months following the date of termination of employment from the Company, (iii) one year following the date of termination from the Company by reason of death or disability, (iv) the date of termination of employment for cause, or (v) the fifth anniversary of the date of the grant if it is held by a 10 percent or greater stockholder.
The following ~~table summarizes~~tables summarize the Company’s stock option activity during the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020:

   March 31, 2021
   Options Activity    Weighted
Average Exercise
Price (per share)    Weighted Average
Remaining Contractual
Term (years)    Aggregate
intrinsic value
Balance at January 1, 2021
   887,640    $ 9.65    6.42    $ 33,433,274
Granted
   44,068    45.53
Exercised/released
   (28,148 )    6.16
Cancelled/forfeited
   (2,750 )    11.71








Balance at March 31, 2021
   900,810    $ 11.42    6.35    $ 23,488,929








Exercisable at March 31, 2021
   543,598    $ 7.55    5.19    $ 16,264,671

~~LAIRD SUPERFOOD, INC.~~

~~Notes to Unaudited Financial Statements~~

   March 31, 2020
   Options Activity    Weighted
Average Exercise
Price (per share)    Weighted Average
Remaining Contractual
Term (years)    Aggregate
intrinsic
value
Balance at January 1, 2020
   788,528    $ 8.42    7.17    $ 4,799,381
Granted
   44,000    14.50
Exercised/released
   (804 )    7.50
Cancelled/forfeited
   (584 )    9.00








Balance at March 31, 2020
   831,140    $ 8.74    7.07    $ 4,790,541








Exercisable at March 31, 2020
   461,032    $ 6.31    5.63    $ 3,779,313

June 30, 2021

         Weighted Average
      Weighted Average    Remaining
   Options    Exercise Price    Contractual Term    Aggregate
   Activity    (per share)    (years)    Intrinsic Value
Balance at January 1, 2021
   887,640    $ 9.65    6.42    $

33,433,274
Granted
   54,883    42.27
Exercised/released
   (50,602 )    8.06
Cancelled/forfeited
   (38,500 )    9.27








Balance at June 30, 2021
   853,421    $ 11.87    7.17    $ 15,365,736








Exercisable at June 30, 2021
   579,449    $ 7.84    6.50    $ 12,763,447









June 30, 2020

         Weighted Average
      Weighted Average    Remaining
   Options    Exercise Price    Contractual Term    Aggregate
   Activity    (per share)    (years)    Intrinsic Value
Balance at January 1, 2020
   788,528    $ 8.42    7.17    $ 4,799,381
Granted
   151,579    13.47
Exercised/released
   (805 )    7.50
Cancelled/forfeited
   (16,498 )    10.97








Balance at June 30, 2020
   922,804    $ 9.20    7.07    $ 3,553,415








Exercisable at June 30, 2020
   514,756    $ 6.86    5.72    $ 3,186,683








The stock-based compensation expense is recognized ratably over the requisite service period for all awards. As a result of applying the provisions of ASC 718, “Compensation- Stock Compensation” (“ASC 718”), the Company recognized stock compensation expense of ~~$1,010,003~~$1,090,074 and ~~$258,486~~$2,100,077 for the three and six months ended ~~March 31,~~June 30, 2021, respectively. The Company recognized stock compensation expense of $212,834 and $471,320 for the three and six months ended June 30, 2020, respectively.
25
Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
In the three and six months ended ~~March 31,~~June 30, 2021, ~~and 2020,~~ there were ~~$188,793~~$30,363 and ~~$0,~~$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.
There were 0 payroll taxes withheld from stock-based compensation for remittance directly to the tax authorities on the behalf of the recipients of the awards during the three and six months ended June 30, 2020.
As of ~~March 31,~~June 30, 2021 and December 31
, 2020, there was ~~$2,655,329~~ $
2,222,830
and ~~$1,990,834,~~$
1,990,834
, respectively, of total unrecognized compensation cost related to
non-vested
stock option share-based compensation arrangements with a remaining weighted-average vesting period of ~~3.19~~
2.35
years.
During the three and six months ended ~~March 31,~~June 30, 2021, wethe Company granted ~~21,766~~ 21,292
and
43,068
restricted stock units, respectively, to ~~seven~~146 employees
. As a result of applying the provisions of ASC 718 to these issuances, the Company recorded stock-based compensation expense of $376,885
and $
728,329 in the three and six months ended June 30, 2021, respectively. As of June 30, 2021 and December 31, 2020, there was $2,665,113 and $1,613,520, respectively, of total unrecognized compensation cost related to
non-vested
restricted stock units with a remaining weighted-average vesting period of 2.30 years.
During the three and six months ended June 30, 2021, the Company granted 189,608 market-based stock units (“MSUs”) to 8 employees based on the agreed upon amounts in the ~~2021 employment~~market-based restricted stock unit agreements. As a result of applying the provisions of ASC 718 to these issuances, the Company recorded stock-based compensation expense of ~~$39,478 in the three months ended March 31, 2021. As of March 31, 2021~~$508,079 and ~~December 31, 2020, there was $2,119,650 and $1,613,520, respectively, of total unrecognized compensation cost related to~~ ~~non-vested~~ ~~restricted stock units with a remaining weighted-average vesting period of 3.21 years.~~
During the three months ended March 31, 2021, we granted 189,608 market-based stock units (“MSUs”) to eight employees based on the agreed upon amounts in their respective market-based restricted stock unit agreements. As a result of applying the provisions of ASC 718 to these issuances we recorded stock-based compensation expense of $385,486$893,565 for the three and six months ended ~~March 31, 2021.~~June 30, 2021, respectively. These MSUs vest upon the
30-day ~~trading volume of the~~
weighted average stock price reaching or exceeding established targets, after reaching certain time targets. As of ~~March 31,~~June 30, 2021 and December 31, 2020, there was ~~$3,884,514~~$3,376,435 and $0, respectively, of total unrecognized compensation cost related to
non-vested
MSUs with a remaining weighted-average vesting period of ~~1.82~~2.59 years. 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 0%
dividend rate. Compensation expense for these ~~PSUs~~MSUs is recognized over the requisite service period regardless of whether the market conditions are satisfied.
On May 1, 2021, the Company enacted an enrollment period under its 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
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 2,969 shares of common stock will be issued in accordance with the plan to those enrollees in the May 1, 2021 enrollment period. As a result of applying the provisions of ASC 718 to these issuances, the Company recorded stock-based compensation expense of $15,144 for the three and six months ended June 30, 2021, respectively.
ASC 718 requires the use of the fair-value-based method for measuring the value of stock-based compensation. ~~We estimate~~The Company estimates the fair value of each stock option award on the date of grant using a Black-Scholes option-pricing model, the MSUs on the grant date using a Monte Carlo simulation, and each restricted stock unit is estimated using the fair value of the Company’s stock on the date of grant. The estimated fair value of each grant of stock options awarded during the three and six months ended ~~March 31,~~June 30, 2021 and 2020 was determined using the following assumptions:
•
~~Expected Term.~~ Due to the lack of a public market for the trading of shares of the Company’s common stock prior to the Company’s IPO that closed on September 25, 2020, and the lack of sufficient Company-specific historical data, the expected term of employee stock options is determined using the “simplified” method, as prescribed in SEC Staff Accounting Bulletin (“SAB”) No. 107 (“SAB 107”), whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option.
•
~~Risk-free Interest Rate.~~ ~~The risk-free interest rate is based on the interest rate payable on United States Treasury yield curve in effect at the time of grant for a period that is commensurate with the assumed expected term.~~
•
~~Dividend Yield.~~ ~~The dividend yield is 0% because the Company has never paid, and for the foreseeable future does not expect to pay, dividend on its shares of common stock.~~
•
~~Expected Volatility~~~~. The expected volatility is based on the volatility of the historical stock prices of identified peer companies.~~

Expected Term.

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

Risk-free Interest Rate.

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

Dividend Yield.

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

Expected Volatility

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

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
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 ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, 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 Three Months Ended
March 31,
   2021 2020
Weighted-average expected volatility
   51.92 % 68.25 %
Weighted-average expected term (years)
   6.25 6.25
Weighted-average expected risk-free interest rate
   0.63 % 1.19 %
Dividend yield
   0.00 % 0.00 %


Weighted-average fair value of options granted
   $ 21.50 $ 18.10

For the Six Months Ended

June 30,


2021

2020

Weighted-average expected volatility
   52.08 % 69.88 %
Weighted-average expected term (years)
   6.23 6.23
Weighted-average expected risk-free interest rate
   0.70 % 0.74 %
Dividend yield
   0.00 % 0.00 %


Weighted-average fair value of options granted
   $ 20.95 $ 8.42
~~11.~~
13.
Preferred Stock
On September 25, 2020, the Company completed its IPO in which the Company issued and sold 3,047,500 shares of its common stock at a public offering price of $22 per share. Upon the closing of the IPO, all outstanding shares of the Company’s preferred stock converted into shares of common stock, consisting of (i) 162,340 outstanding shares of Series
A-1
convertible preferred stock converting into 324,680 aggregate shares of common stock, (ii) 152,253 outstanding shares of Series
A-2
convertible preferred stock converting into 304,506 aggregate shares of common stock, and (iii) 383,142 outstanding shares of Series
B-1
convertible preferred stock converting into 766,284 aggregate shares of common stock.
As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company is authorized to issue 5,000,000 shares of preferred stock, par value $0.001 per share, and there were no0 shares of preferred stock issued or outstanding.
Series
A-1
and
A-2
Preferred Stock
Effective November 19, 2018, the
Company executed a capital transaction of ~~$25,000,000~~ $
25,000,000
with a private investor, with ~~$15,000,000~~ $
15,000,000
funded at the closing date and an additional ~~$10,000,000~~ $
10,000,000
to be funded one year following the execution. The additional tranche was determined to be embedded in the initial agreement and not subject to bifurcation accounting. The investing entity received Series
A-1
preferred stock, carrying certain standard protective provisions.
In conjunction with this equity infusion, in November and December 2018, the Company further sold to existing stockholders an additional $7,000,000 of shares of Series
A-1
and
A-2
preferred stock.
All shares of Series
A-1
and
A-2
preferred stock issued were convertible into common stock at any time at the option of the holder, or mandatorily convertible into common stock upon the event of an initial public offering. The Series
A-1
and
A-2
preferred stock were redeemable upon the occurrence of a deemed liquidation event. The Company determined that this redemption feature requires classification of both Series
A-1
and
A-2
preferred stock as mezzanine equity in our balance sheet as of December 31, 2019.
Shares of Series
A-2
preferred stock were issued at a 20% discount, based on preexisting terms in a line of credit agreement with East. As a result, the $673,133 was recorded as a reduction to additional
paid-in-capital
in 2018 and was considered a deemed dividend increasing the net loss attributable to common stockholders.
On November 18, 2019, the Company negotiated the repurchase of 609,013 shares of Series
A-1
preferred stock from a private investor for $7,500,000, or $12.32 per share, and the termination of the private investor’s commitment to fund an additional $10,000,000 in November 2019. At the time of repurchase, the carrying value of the shares of Series
A-1
preferred stock outstanding on the balance sheet was $14,999,901, or a value of $24.63 per share. The favorable rate at which the shares were able to be negotiated resulted in a deemed contribution of $7,448,879 which was included in net loss available to common stockholders.

~~LAIRD SUPERFOOD, INC.~~

~~Notes to Unaudited Financial Statements~~

Series
B-1
and
B-2
Preferred Stock

Effective April 13, 2020, the Company completed a private placement to DMV for 383,142 shares of its Series
B-1
Preferred Stock for total proceeds of $10,000,006, or $26.10 per share. The shares of Series
B-1
Preferred Stock issued were convertible into common stock at any time at the option of the holder, or mandatorily convertible into common stock upon the event of an initial public offering. The Series
B-1
Preferred Stock were redeemable upon the occurrence of a deemed liquidation event. The Company determined that
this redemption feature required
classification of the Series
B-1
Preferred Stock as mezzanine equity in our balance sheet.

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
In connection with the closing of the private placement of Series
B-1
Preferred Stock on April 13, 2020, the Company entered into a Stockholder Agreement with DMV, under which the Company granted DMV (i) the right to purchase a specified percentage of the Company’s common stock in the event of an initial public offering of the Company’s common stock or in a concurrent private placement (the “Participation Right”), (ii) the right to designate one member to Laird Superfood’s board of directors, and (iii) the right to designate a representative as an observer to Laird Superfood’s board of directors, in each case for so long as DMV and its affiliates hold more than five percent of the shares of the Company’s outstanding common stock. The Participation Right terminated upon the IPO. On August 28, 2020, DMV waived its right to designate a member of the board of directors for election, contingent upon the IPO closing on or before December 31, 2020, but DMV’s right to designate an observer of the board of directors will continue for so long as DMV holds more than five percent of the outstanding common stock of the Company. The Company also issued a warrant to purchase common stock to DMV on April 13, 2020, which provided that if DMV exercised the Participation Right for $10,000,000 of shares of the Company’s common stock, DMV would have been entitled to purchase at the time of the closing of the offering, for $0.005 per share, a number of shares of the Company’s common stock equal to ten percent of the shares then held by DMV and its affiliates (including shares issuable upon conversion of the Series
B-1
Preferred Stock), but excluding the amounts purchased by DMV or its affiliates in the offering or otherwise.
In accordance with ASC 480, the Company recorded the Series
B-1
Preferred Stock issued with detachable ~~warrants~~warrant by allocating the proceeds to the instruments based on their relative fair values. Utilizing the Black-Scholes option pricing model, the Company calculated the fair value of the ~~warrants~~warrant on April 13, 2020 to be approximately $899,617. The fair value of the ~~warrants~~warrant was computed assuming a risk-free interest rate of 0.17%, no0 dividends, expected volatility of approximately 65%, which was calculated based on a combination of historical volatility and the history of comparable peer companies, and an expected warrant life of approximately 0.75 years. As a result, the relative fair value for the ~~warrants~~warrant of $825,366 was recorded as an increase to additional
paid-in-capital
and a preferred stock discount.
The discount was initially amortized as a deemed discount over approximately 11.5 months, which is estimated based on the expected timing of a warrant exercisability trigger and the customary
lock-up
agreement of six months once exercised. DMV purchased $2,000,020 of our common stock in a private placement immediately subsequent to the consummation of the IPO, which did not meet the participation minimum to exercise the warrant, rendering the ~~warrants~~warrant null.
~~12.~~
~~Earnings per Share~~
14. 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 (loss) per share is similarly determined, except that the denominator is increased to include the number of additional common and preferred shares that would have been outstanding if all dilutive potential common and preferred shares had been issued. Dilutive potential common and preferred shares consist of employee stock options and restricted stock units. The dilutive effect of employee stock options, restricted stock units, and convertible preferred stock issued by the Company and are calculated using the treasury stock method. ~~The weighted average shares outstanding included 1,000 and zero shares that are considered outstanding, but unissued as of March 31, 2021 and 2020, respectively, for unpaid equity share bonuses.~~ Basic earnings per share is reconciled to diluted earnings per share in the following table:

   Three Months Ended
March 31,
   2021    2020
Net loss attributable to Laird Superfood, Inc. common stockholders
   $ (5,330,504 )    $ (1,995,231 )




Weighted average shares outstanding- basic
   8,894,495    4,281,346
Dilutive securities
   —      —




Weighted average shares outstanding- diluted
   8,894,495    4,281,346




Common stock equivalent shares excluded due to anti-dilutive effect
   1,169,237    1,460,582




Basic and diluted:

Net loss per share (basic)
   $ (0.60 )    $ (0.47 )




Net loss per share (diluted)
   $ (0.60 )    $ (0.47 )

Three

Months

Ended

June 30,

Six Months Ended June 30,


2021

2020

2021

2020

Net loss
   $ (6,302,259 )    $ (3,006,390 )    $ (11,632,763 )    $ (5,001,620 )








Less deemed dividend of beneficial conversion feature
   0      (825,366 )    0      (825,366 )
Less deemed dividend on warrant discount
   0      (179,427 )    0      (179,427 )








Net loss attributable to Laird Superfood, Inc. common stockholders
   $ (6,302,259 )    $ (4,011,183 )    $ (11,632,763 )    $ (6,006,413 )








Weighted average shares outstanding- basic
   8,967,797    4,325,265    8,931,736    4,303,305
Dilutive securities
   0—      0—      0—      0—








Weighted average shares outstanding- diluted
   8,967,797    4,325,265    8,931,736    4,303,305








Common stock options and restricted stock awards excluded due to anti-dilutive effect
   950,611    2,209,061    950,611    1,880,653








Basic and diluted:

Net loss per share (basic)
   $ (0.70 )    $ (0.93 )    $ (1.30 )    $ (1.40 )








Net loss per share (diluted)
   $ (0.70 )    $ (0.93 )    $ (1.30 )    $ (1.40 )








28
Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
~~13.~~
~~Concentrations~~
15. Concentrations
The Company had ~~41%~~54% of trade accounts receivable from ~~two~~3 customers as of ~~March 31,~~June 30, 2021. The Company had ~~67%~~70% of trade accounts receivable from ~~two~~3 customers as of ~~March~~December 31, 2020.
The Company had ~~62%~~45% of accounts payable due to ~~two vendors~~1 vendor as of ~~March 31,~~June 30, 2021. The Company had ~~55%~~43% of accounts payable due to ~~two~~4 vendors as of ~~March~~December 31, 2020.
The Company sold a substantial portion of products to ~~two~~2 customers ~~(29%~~(22%) and 3 customers (34%) for the three and six months ended ~~March 31, 2021.~~June 30, 2021, respectively. As of ~~March 31,~~June 30, 2021, the amount due from ~~the~~these 3 customers included in accounts receivable was ~~$486,729.~~$464,127. The Company sold a substantial portion of products to ~~one~~2 customers (23%) and 1 customer ~~(32%~~(22
%
) for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively. As of ~~March 31,~~June 30, 2020, the amount due from ~~this customer~~these 2 customers included in accounts receivable was ~~$799,842.~~
$538,204.
The Company purchased a substantial portion of products from ~~one~~1 supplier ~~(51%~~(48%) and 1 supplier (49%) for the three and six months ended ~~March 31,~~June 30, 2021, respectively. The Company purchased a substantial portion of products from 4
suppliers
(68%) and ~~from two~~2 suppliers ~~(66%~~(50%) for the three and six months ended ~~March 31, 2020.~~
June 30, 2020, 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. ~~Vietnam, Indonesia,~~Sri Lanka and ~~Sri Lanka~~Vietnam geographically accounted for approximately ~~62%~~56% of our total raw materials and packaging purchases for the three months ended ~~March 31,~~June 30, 2021. Sri Lanka, Indonesia, and Vietnam geographically accounted for approximately 63% of our total raw materials and packaging purchases for the six months ended June 30, 2021. Indonesia, the Philippines, and Vietnam geographically accounted for approximately 60% of our total raw material and packaging purchases for the three months ended June 30, 2020. Indonesia, the Philippines, and Vietnam geographically accounted for approximately 65% of our total raw material and packaging purchases for the ~~three~~six months ended ~~March 31,~~June 30, 2020.
~~14.~~
~~Related Party~~
16. 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 ~~post-IPO~~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~~ten-year~~
ten-year
terms upon the expiration of the initial~~one-hundred-year~~
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 financial statements.

~~LAIRD SUPERFOOD, INC.~~

~~Notes to Unaudited Financial Statements~~

Concurrent Private Placement

DMV purchased

90,910 shares of our common stock in a private placement immediately subsequent to the consummation of the IPO for a total purchase price of $2,000,020, at a price per share of $22. Additionally, DMV provided the Company $298,103 in funds for the purpose of supporting three
COVID-19
relief projects. ~~Please see~~See Note 1 of the financial statements for additional discussion.

No-Charge

Storage Lease

On of January 1, 2021,

the Company

entered into a lease agreement with PX2, LLC (“PX2”) for warehousing, distribution, and related industrial purposes. Under this agreement, the cost of rent which the Company will pay to PX2 is solely the reimbursement of utilities relating to the Company’s use (i.e., electric, janitorial, insurance, and other bills, which are estimated to be de minimis). Paul Hodge, CEO, President, and Director of the Company is a member of PX2. This contract is expressly intended to provide no individual benefit to such individual, with the Company only responsible for incremental costs due to the Company’s use of the property, otherwise the property is utilized without obligation to the Company, as a gratis convenience by PX2. This lease expires on December 31, 2021.
~~15.~~
~~Revenue Recognition~~

Table of Contents
LAIRD SUPERFOOD, INC.
Notes to Unaudited Financial Statements
Social Media Marketing Agreements
The Company entered into
a social media marketing agreement with Lauren Thomas and Stephanie Bruce to provide certain marketing services on an annual basis, for $
40,000
each per annum.
17. 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.
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 March 31,
   2021 2020
   $    % of Total $    % of Total
Coffee Creamers
   $ 5,021,908    68 % $ 4,019,362    73 %
Hydration and Beverage Enhancing Supplements
   1,064,576    14 % 858,707    16 %
Coffee, Tea, and Hot Chocolate Products
   1,900,832    26 % 740,572    14 %
Other
   359,321    5 % 59,590    1 %






Gross Sales
   8,346,637    113 % 5,678,231    104 %
Shipping income
   25,659    0 % 151,551    3 %
Returns and discounts
   (946,042 )    (13 %) (346,556 )    (7 %)






Sales, net
   $ 7,426,254    100 % $ 5,483,226    100 %







Three Months Ended June 30,


2021

2020


$

% of Total

$

% of Total

Coffee creamers
   $ 5,078,739    55 % $ 4,005,430    71 %
Hydration and beverage enhancing supplements
   1,511,630    16 % 981,471    17 %
Coffee, tea, and hot chocolate products
   1,661,130    18 % 1,222,617    22 %
Harvest snacks and other food items
   1,344,802    15 % 0      0 %
Other
   317,422    3 % 173,607    3 %






Gross sales    9,913,723    108 % 6,383,125    114 %
Shipping income
   40,750    0 % 43,793    1 %
Returns and discounts
   (758,687 )    (8 %) (818,088 )    (15 %)






Sales, net
   $ 9,195,786    100 % $ 5,608,830    100 %







Six Months Ended June 30,


2021

2020


$

% of Total

$

% of Total

Coffee creamers
   $ 10,100,647    61 % $ 8,024,792    72 %
Hydration and beverage enhancing supplements
   2,576,206    15 % 1,840,177    17 %
Coffee, tea, and hot chocolate products
   3,561,962    21 % 1,963,189    18 %
Harvest snacks and other food items
   1,487,705    9 % 0      0 %
Other
   533,838    3 % 233,197    2 %






Gross sales    18,260,358    110 % 12,061,355    109 %
Shipping income
   66,410    0 % 195,345    2 %
Returns and discounts
   (1,704,729 )    (10 %) (1,164,645 )    (10 %)






Sales, net
   $ 16,622,039    100 % $ 11,092,055    100 %






30
Table of Contents
The Company generates revenue through three channels: online, wholesale, and food service:

   Three Months Ended March 31,
   2021 2020
   $    % of Total $    % of Total
Online
   $ 4,362,407    59 % $ 2,650,741    48 %
Wholesale
   2,923,056    39 % 2,727,812    50 %
Food Service
   140,791    2 % 104,673    2 %






Sales, net
   $ 7,426,254    100 % $ 5,483,226    100 %

~~LAIRD SUPERFOOD, INC.~~

~~Notes to Unaudited Financial Statements~~

Three Months Ended June 30,


2021

2020


$

% of Total

$

% of Total

Online
   $ 5,799,104    63 % $ 3,684,526    66 %
Wholesale
   3,235,230    35 % 1,823,188    33 %
Food service
   161,452    2 % 101,116    2 %






Sales, net    $ 9,195,786    100 % $ 5,608,830    100 %







Six Months Ended June 30,


2021

2020


$

% of Total

$

% of Total

Online
   $ 10,161,510    61 % $ 6,335,267    59 %
Wholesale
   6,158,286    37 % 4,551,000    41 %
Food service
   302,243    2 % 205,788    1 %






Sales, net    $ 16,622,039    100 % $ 11,092,055    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 ~~March 31,~~June 30, 2021. Contract assets included in finished goods inventories were ~~$32,324~~$5,283 and $0 as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. Contract liabilities and refund liabilities included in accrued expenses were ~~$257,019~~$250,365 and ~~$19,697~~$13,970 as of ~~March 31,~~June 30, 2021, respectively. Contract liabilities and refund liabilities included in accrued expenses were $132,280 and $28,968 as of December 31, 2020, respectively. Receivables from contracts with customers are included in Accounts ~~Receivable,~~
r
eceivable, net on the Company’s balance sheets. As of ~~March 31,~~June 30, 2021 and December 31, 2020, Accounts receivable, net included, ~~$770,155~~$789,642 and $839,659, respectively, of receivables from contracts with ~~customers.~~
~~16.~~
~~Impact of~~ ~~COVID-19~~
customers
.
18. Impact of
COVID-19
Since January of 2020, the coronavirus
(COVID-19)
outbreak, characterized as a pandemic by the World Health Organization on March 11, 2020, has caused significant disruptions in international and U.S. economies and markets. In 2020 and thereafter, demand for our shelf-stable powdered coffee creamers, hydration and beverage enhancing supplements, and coffee, tea and hot chocolate products ~~increased~~has risen as consumers ~~prepared~~prepare more meals in their homes. As we work in a critical infrastructure industry as part of the nation’s food supply, we have implemented health and safety policies for all of our staff, including a transition to telework wherever reasonably possible; enacted strict sanitation protocols throughout our operations; and restricted access to visitors. Our top priority is the health and safety of our employees, and we are following published guidelines by the Centers for Disease Control and Prevention and other governmental health organizations in implementing procedures to protect our employees. The pandemic is an ever evolving and challenging situation and its impact on our business in the future is uncertain.

Table of Contents~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
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 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 ~~$7.4~~$9.2 million for the three months ended ~~March 31,~~June 30, 2021, from ~~$5.5~~$5.6 million for the three months ended ~~March 31,~~June 30, 2020, representing net sales growth of ~~35%~~64%. Likewise, net sales increased to $16.6 million for the six months ended June 30, 2021, from $11.1 million for the six months ended June 30, 2020, representing net sales growth of 50%. The growth in the three and six months ended ~~March 31,~~June 30, 2021 was primarily driven by a significant expansion of our customer base in online ~~channels.~~
channels and numerous new 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 ~~March 31,~~June 30, 2021 and 2020, the online business made up ~~59%~~63% and ~~48%~~66% of our net sales, respectively. For the six months ended June 30, 2021 and 2020, the online business made up 61% and 59% 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, while generating highly attractive margins. 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 six months ended ~~March 31,~~June 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 ~~March 31,~~June 30, 2021 and 2020, wholesale revenue comprised ~~39%~~35% and ~~50%~~33% of our net sales, respectively. For the six months ended June 30, 2021 and 2020, wholesale revenue comprised 37% and 41% 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.
32
Table of Contents
Recent Developments
~~Initial Public Offering~~
On September 25, 2020, the Company completed its initial public offering (“IPO”), in which the Company issued and sold 3,047,500 shares of its common stock at a public offering price of $22 per share, including 397,500 shares of common stock upon the exercise of the underwriter’s option to purchase additional shares. After underwriting discounts and commissions and other offering costs, net proceeds from the IPO were approximately $61,966,237. Offering costs of approximately $1,350,815 were recognized as a reduction of ~~additional-paid-in~~ ~~capital.~~
~~Upon the closing of the IPO, all outstanding shares of the Company’s preferred stock converted into shares of common stock, consisting of (i) 162,340 outstanding shares of Series~~ ~~A-1~~ ~~convertible preferred stock converting into 324,680 aggregate shares of common stock, (ii) 152,253 outstanding shares of Series~~ ~~A-2~~ ~~convertible preferred stock converting into 304,506 aggregate shares of common stock, and (iii) 383,142 outstanding shares of Series~~ ~~B-1~~ ~~convertible preferred stock converting into 766,284 aggregate shares of common stock.~~

~~Concurrent Private Placement~~

~~Danone Manifesto Ventures, PBC (“DMV”) purchased $2,000,020 of our common stock in a private placement immediately subsequent to the consummation of the IPO, at a price per share of $22.~~

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~~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 ~~March 31,~~June 30, 2021. See Note 1 ~~to our unaudited interim financial statements included elsewhere in this Quarterly Report on Form 10-Q~~ 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, debtfree 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.

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 ~~rate~~ 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.

Table of Contents
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~~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 expect 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 ~~March 31,~~June 30, 2021 (“Q1Q2 2021”) and ~~March 31,~~June 30, 2020 (“Q1Q2 2020”)

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

   For the three months ended
March 31,
   2021 2020 $
Change    %
Change
Sales, net
   $ 7,426,254 $ 5,483,226 $ 1,943,028    35 %
Cost of goods sold
   (5,559,499 ) (3,365,609 ) (2,193,890 )    65 %



Gross profit
   1,866,755 2,117,617 (250,862 )    (12 %)
Gross margin
   25.1 % 38.6 %
General and administrative
   3,643,394 1,599,572 2,043,822    128 %
Research and product development
   240,687 143,315 97,372    68 %
Sales and marketing
   3,327,079 2,392,815 934,264    39 %



Total expenses
   7,211,160 4,135,702 3,075,458    74 %
Operating loss
   (5,344,405 ) (2,018,085 ) (3,326,320 )    165 %
Other income(expense)
   13,901 22,854 (8,953 )    (39 %)



Loss before income taxes
   (5,330,504 ) (1,995,231 ) (3,335,273 )    167 %
Benefit from income taxes
   —   —   —      0 %



Net loss attributable to Laird Superfood, Inc. common stockholders
   $ (5,330,504 ) $ (1,995,231 ) $ (3,335,273 )    167 %

For the Three Months Ended


June 30,

Change


2021

2020

$

%

Sales, net
   $ 9,195,786 $ 5,608,830 $ 3,586,956    64 %
Cost of goods sold
   (6,998,695 ) (4,285,128 ) (2,713,567 )    63 %




Gross profit
   2,197,091 1,323,702 873,389    66 %




Gross Margin
   23.9 % 23.6 %
General and administrative
   4,162,911 1,832,442 2,330,469    127 %
Research and product development
   374,852 117,797 257,055    218 %
Sales and marketing
   3,936,492 2,395,701 1,540,791    64 %




Total expenses
   8,474,255 4,345,940 4,128,315    95 %




Operating loss
   (6,277,164 ) (3,022,238 ) (3,254,926 )    108 %
Other income (expense)
   11,623 15,848 (4,225 )    (27 %)




Loss before income taxes
   (6,265,541 ) (3,006,390 ) (3,259,151 )    108 %
Income tax expense
   (36,718 ) —   (36,718 )    0 %




Net loss
   $ (6,302,259) $ (3,006,390 ) $ (3,295,869 )    110 %




34
Table of Contents
Sales, Net

   Three months ended March 31,    2021 v. 2020 Change
   2021    2020    $    %
Sales, net
   $ 7,426,254    $ 5,483,226    $ 1,943,028    35 %

For the Three Months Ended


June 30,

Change


2021

2020

$

%

Sales, net
   $ 9,195,786    $ 5,608,830    $ 3,586,956    64 %
Net sales increased by ~~$1.9~~$3.6 million to ~~$7.4~~$9.2 million in Q1Q2 2021, compared to ~~$5.5~~$5.6 million in Q1Q2 2020. This increase was due primarily to the acquisition of Picky Bars, and growth in our direct online ~~channels, primarily caused by an increase in~~ sales ~~volume.~~channel. Products introduced after Q1Q2 2020 including ~~Organic Peruvian Coffee with Functional Mushrooms,~~OatMac Superfood Creamers, Chai Instafuel, Activate Daily Greens, Renew Rest & Recover, Functional Coffees, Pili Nuts, Renew Protein, and Turmeric Liquid ~~Creamers,~~Creamer, accounted for ~~$2.1~~$1.3 million of gross sales in Q1Q2 2021.
Cost of Goods Sold

   Three months ended March 31,    2021 v. 2020 Change
   2021    2020    $    %
Cost of Goods Sold
   $ (5,559,499 )    $ (3,365,609 )    $ (2,193,890 )    65 %

For the Three Months Ended


June 30,

Change


2021

2020

$

%

Cost of goods sold
   $ (6,998,695)    $ (4,285,128 )    $ (2,713,567 )    63 %
Cost of goods sold increased by ~~$2.2~~$2.7 million in Q1Q2 2021 to ~~$5.6~~$7.0 million from ~~$3.4~~$4.3 million in Q1Q2 2020, primarily due to sales growth in the 2021 period, elevated 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


June 30,

Change


2021

2020

$

%

Gross profit
   $ 2,197,091    $ 1,323,702    $ 873,389    66 %
Gross profit increased by $0.9 million in Q2 2021 to $2.2 million from $1.3 million in Q2 2020, primarily due to sales growth in the 2021 period. Gross margins increased slightly to 23.9% in Q2 2021 from 23.6% in Q2 2020, primarily due to optimization of direct to consumer shipping costs and improvements in liquid creamer distribution and disposals.
Operating Expenses

For the Three Months Ended


June 30,

Change


2021

2020

$

%

Operating expenses

General and administrative
   $ 4,162,911    $ 1,832,442    $ 2,330,469    127 %
Research and product development
   374,852    117,797    257,055    218 %
Sales and marketing
   3,936,492    2,395,701    1,540,791    64 %








Total operating expenses
   8,474,255    4,345,940    $ 4,128,315    95 %
General and administrative expense increased by $2.3 million in Q2 2021 to $4.1 million from $1.8 million in Q2 2020, primarily due to stock-based compensation, personnel costs, reserve against prepaid assets, insurance expense, and professional fees.
Research and product development expense increased by $0.3 million to $0.4 million in Q2 2021 from $0.1 million in Q2 2020, primarily due to costs to bring new products to market.
Sales and marketing expense increased by $1.5 million in Q2 2021 to $3.9 million from $2.4 million in Q2 2020, primarily due to advertising expense and marketing fees.
35
Table of Contents
Other Income (Expense)

For the Three Months Ended


June 30,

Change


2021

2020

$

%

Other income (expense)
   $ 11,623    $ 15,848    $ (4,225 )    (27 %)
Other income (expense) is composed of interest income and dividend income related to investment securities
available-for-sale
as well as other
non-operating
costs. Other income (expense) decreased $4 thousand in Q2 2021 to $12 thousand of income from $16 thousand of income in Q2 2020, primarily due to realized gains on the sale of available for sale securities in Q2 2020.
Comparison of the six months ended June 30, 2021 (“YTD 2021”) and June 30, 2020 (“YTD 2020”)
The following table summarizes our results of operations for the periods indicated:

For the Six Months Ended


June 30,

Change


2021

2020

$

%

Sales, net
   $ 16,622,039 $ 11,092,055 $ 5,529,984    50 %
Cost of goods sold
   (12,558,194 ) (7,650,736 ) (4,907,458 )    64 %




Gross profit
   4,063,845 3,441,319 622,526    18 %




Gross Margin
   24.4 % 31.0 %
General and administrative
   7,803,980 3,432,012 4,371,968    127 %
Research and product development
   615,539 261,111 354,428    136 %
Sales and marketing
   7,263,571 4,788,518 2,475,053    52 %




Total expenses
   15,683,090 8,481,641 7,201,449    85 %




Operating loss
   (11,619,245 ) (5,040,322 ) (6,578,923 )    131 %
Other income (expense)
   23,200 38,702 (15,502 )    (40 %)




Loss before income taxes
   (11,596,045 ) (5,001,620 ) (6,594,425 )    132 %
Income tax expense
   (36,718 ) —   (36,718 )    0 %




Net loss
   $ (11,632,763) $ (5,001,620 ) $ (6,631,143 )    133 %




Sales, Net

For the Six Months Ended


June 30,

Change


2021

2020

$

%

Sales, net
   $ 16,622,039    $ 11,092,055    $ 5,529,984    50 %
Net sales increased by $5.5 million to $16.6 million in YTD 2021, compared to $11.1 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 OatMac Superfood Creamers, Chai Instafuel, Activate Daily Greens, Renew Rest & Recover, Functional Coffees, Pili Nuts, Renew Protein, and Turmeric Liquid Creamer, accounted for $2.1 million of gross sales in YTD 2021.
Cost of Goods Sold

For the Six Months Ended


June 30,

Change


2021

2020

$

%

Cost of goods sold
   $ (12,558,194)    $ (7,650,736 )    $ (4,907,458 )    64 %
Cost of goods sold increased by $4.9 million in YTD 2021 to $12.6 million from $7.7 million in YTD 2020, primarily due to sales growth in the 2021 period, elevated outbound shipping costs, increased personnel costs, and increased
co-packing
costs primarily associated with our liquid creamer product line.
36

Table of Contents
Gross Profit

   Three months ended March 31,    2021 v. 2020 Change
   2021    2020    $    %
Gross Profit
   $ 1,866,755    $ 2,117,617    $ (250,861 )    (12 %)

For the Six Months Ended
June 30,

Change


2021

2020

$

%

Gross profit
   $ 4,063,845    $ 3,441,319    $ 622,526    18 %
Gross profit ~~decreased~~increased by ~~$251.9~~$622 thousand in Q1YTD 2021 to ~~$1.9~~$4.1 million from ~~$2.1~~$3.4 million in Q1YTD 2020. ~~Likewise, gross~~Gross margins decreased to ~~25.1%~~24.4% in Q1YTD 2021 from ~~38.6%~~31.0% in Q1YTD 2020 primarily due to elevated outbound shipping costs combined with the launch of a free shipping initiative for direct online purchases made on
lairdsuperfood.com
, increased personnel costs, disposal costs related to the initial production and distribution of our liquid creamer product line and increased
co-packing
costs primarily associated with our ~~Liquid Creamer~~liquid creamer product line.

Operating Expenses

   Three months ended March 31,    2021 v. 2020 Change
   2021    2020    $    %
Operating Expenses

General and administrative
   $ 3,643,394    $ 1,599,572    $ 2,043,822    128 %
Research and product development
   240,687    143,315    97,372    68 %
Sales and marketing
   3,327,079    2,392,815    934,264    39 %








Total operating expenses
   $ 7,211,160    $ 4,135,702    $ 3,075,458    74 %

For the Six Months Ended
June 30,

Change


2021

2020

$

%

Operating expenses

General and administrative
   $ 7,803,980    $ 3,432,012    $ 4,371,968    127 %
Research and product development
   615,539    261,111    354,428    136 %
Sales and marketing
   7,263,571    4,788,518    2,475,053    52 %







Total operating expenses
   15,683,090    8,481,641    $ 7,201,449    85 %







General and administrative expense increased by ~~$2.0~~$4.4 million in Q1YTD 2021 to ~~$3.6~~$7.8 million from ~~$1.6~~$3.4 million in Q1YTD 2020, primarily due to stock-based compensation, personnel costs, reserve against prepaid assets, insurance expense, and professional fees.
Research and product development expense increased by ~~$97.4 thousand~~$0.4 million to ~~$240.7 thousand~~$0.6 million in Q1YTD 2021 from ~~$143.3 thousand~~$0.3 million in Q1YTD 2020, primarily due to costs to bring new products to market.
Sales and marketing expense increased by ~~$934.3 thousand~~$2.5 million in Q1YTD 2021 to ~~$3.3~~$7.3 million from ~~$2.4~~$4.8 million in Q1YTD 2020, primarily due to ~~increased~~ advertising ~~expense.~~
expense and marketing fees.
Other Income

   Three months ended March 31,    2021 v. 2020 Change
   2021    2020    $    %
Other income
   $ 13,901    $ 22,854    $ (8,953 )    (39 %)
(Expense)

For the Six Months
Ended June 30,

Change


2021

2020

$

%

Other income (expense)
   $ 23,200    $ 38,702    $ (15,502 )    (40 %)
Other income is composed of interest income and dividend income related to ~~interest income on~~ investment securities~~available-for-sale.~~
available-for-sale
as well as other
non-operating
costs. Other income decreased ~~$9.0~~$16 thousand in Q1YTD 2021 to ~~$13.9~~$23 thousand of income from ~~$22.9~~$39 thousand of income in Q1YTD 2020, primarily as the result of ~~declining interest rates.~~
decreased realized gains on the sale of available for sale securities in YTD 2021 relative to YTD 2020.
37
Table of Contents
Liquidity and Capital Resources
As of ~~March 31,~~June 30, 2021, we had incurred accumulated net losses of ~~$37.3~~$43.6 million, including operating losses of ~~$5.3~~$6.3 million and ~~$2.0~~$3.0 million for Q1Q2 2021 and Q1Q2 2020, respectively, and $11.6 million and $5.0 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 ~~IPO,~~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 ~~March 31,~~June 30, 2021, we had ~~$60.4~~$43.5 million of
cash-on-hand
and investments and ~~an aggregate of $12.7~~$14.8 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 ~~March 31,~~June 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 ~~three~~six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020:

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

   For the three months ended
March 31,
   2021    2020
Cash flows from operating activities
   $ (5,143,385 )    $ (2,343,764 )
Cash flows from investing activities
   (200,088 )    (115,669 )
Cash flows from financing activities
   (119,190 )    1,983,163




Net change in cash
   $ (5,462,663 )    $ (476,270 )

For the Six Months Ended
June 30,

Change


2021

2020

$

%

Cash flows from operating activities
   $ (10,953,242 )    $ (4,647,005 )    $ (6,306,237 )    136 %
Cash flows from investing activities
   (11,488,658 )    356,624    (11,845,282 )    (3322 %)
Cash flows from financing activities
   93,470    11,835,448    (11,741,978 )    (99 %)







Total operating expenses
   (22,348,430 )    7,545,067    $ (29,893,497 )    (396 %)







Cash Flows from Operating Activities
Cash used in operating activities was ~~$5.1~~$11.0 million for Q1YTD 2021 as compared to ~~$2.3~~$4.6 million for Q1YTD 2020, both of which are primarily the result of the operating losses for the periods.
Cash Flows from Investing Activities
Cash used in investing activities was ~~$200.1 thousand~~$11.5 million for Q1YTD 2021 as compared to cash ~~used~~provided of ~~$115.7 thousand~~$0.4 million for Q1YTD 2020. ~~Cash outflows related~~The increase is primarily due to ~~purchases~~the acquisition of ~~manufacturing equipment.~~
Picky Bars in YTD 2021.
Cash Flows from Financing Activities
Cash ~~used in~~provided by financing activities was ~~$119.2 thousand~~$0.1 million for Q1YTD 2021 compared to cash provided of ~~$2.0~~$11.8 million for Q1YTD 2020. Cash ~~outflows~~provided for Q1YTD 2021 primarily related to stock option exercises, partially offset by payroll tax payments withheld from stock-based compensation and common stock issuance costs, ~~offset by stock option exercises,~~ while cash ~~inflows~~provided for Q1YTD 2020 primarily related to a private round of equity funding.

Table of Contents
Contractual Obligations and Commitments
The following table sets forth the amounts of our significant contractual obligations and commitments with definitive payment terms as of June 30, 2021:
Payments Due by Period

Operating Leases
(1)

Note Payable

Total

2021
   $ 119,423    $ 51,000    $ 170,423
2022
   243,236    —      243,236
2023
   250,534    —      250,534
2024
   258,049    —      258,049
2025
   265,791    —      265,791
Thereafter
   860,498    —      860,498






   $ 1,997,531    $ 51,000    $ 2,048,531






(1)
Operating lease obligations related to our manufacturing facility leases dated March 1, 2018 and December 17, 2018.
Critical Accounting Policies and Estimates
This management’s discussion and analysis of our financial condition and results of operations ~~are~~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.
39

Table of Contents
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 ~~March 31,~~June 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.

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.

Table of Contents~~Item 4. Controls and Procedures.~~
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
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 ~~March 31,~~June 30, 2021.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting ~~identified in management’s evaluation pursuant to Rules~~ ~~13a-15(d)~~ or ~~15d-15(d)~~ ~~of the Exchange Act~~ during the quarter ended of ~~March 31,~~June 30, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1.
Legal Proceedings.
We are not subject to any material legal proceedings.
Item 1A.
Risk Factors.
There have been no material changes with respect to the risk factors disclosed in our 2020 Form
10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
~~There have been no material unregistered sales~~

None

Table of ~~equity securities and use of proceeds.~~
Contents

Item 6. Exhibits.

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


Incorporated by Reference

Exhibit
Number

Description

Form

File No.

Exhibit

Filing Date

Filed /
Furnished
Herewith
    3.1    Amended and Restated Certificate of Incorporation of Laird Superfood, Inc.    8-K    001-39537    3.1    9/25/2020
    3.2    Amended and Restated Bylaws of Laird Superfood, Inc.    8-K    001-39537    3.2    9/25/2020
  10.1
Form of Laird Superfood, Inc. Executive Bonus Plan.
   8-K    001-39537    10.1    3/10/2021
  10.2    Amended line of credit agreement          10.2       *
  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    XBRL Instance Document                *
101.SCH    XBRL Taxonomy Extension Schema Document                *
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document                *
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document                *
101.LAB    XBRL Taxonomy Extension Label Linkbase Document                *
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document                *

Incorporated by Reference

Exhibit
Number

Description

Form

File No.

Exhibit

Filing Date

Filed /

Furnished

Herewith

  3.1    Amended and Restated Certificate of Incorporation of Laird Superfood, Inc.    8-K    001-39537    3.1    9/25/2020

  3.2    Amended and Restated Bylaws of Laird Superfood, Inc.    8-K    001-39537    3.2    9/25/2020

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    XBRL Instance Document                *

101.SCH    XBRL Taxonomy Extension Schema Document                *

101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document                *

101.DEF    XBRL Taxonomy Extension Definition Linkbase Document                *

101.LAB    XBRL Taxonomy Extension Label Linkbase Document                *

101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document                *

104    Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
*
~~Filed herewith.~~
**
The certifications attached as Exhibit 32.1 and 32.2 are not deemed filed with the SEC and are not incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form
10-Q,
irrespective of any general incorporation language contained in such.

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

Laird Superfood, Inc
.
~~(Registrant)~~
~~Date: May 13, 2021~~
~~/s/ Paul W. Hodge, Jr.~~

(Registrant)
Date: August 11, 2021
/s/ Paul W. Hodge, Jr.

~~President and Chief Executive Officer~~
~~Date: May 13, 2021~~
~~/s/ Valerie Ells~~
Paul W. Hodge, Jr.

President and Chief Executive Officer
Date: August 11, 2021
/s/ Valerie Ells

Valerie Ells
Chief Financial Officer
37


		As of
		March 31, 2021			December 31, 2020
Assets
Current assets
Cash and cash equivalents		$	51,745,417		$	57,208,080
Accounts receivable, net			770,155			839,659
Investment securities available-for-sale			8,690,523			8,706,844
Inventory			7,693,980			6,295,898
Prepaid expenses and other current assets			2,902,784			2,847,319
Deposits			488,823			97,674

Total current assets			72,291,682			75,995,474


Noncurrent assets
Property and equipment, net			3,501,718			3,513,488
Licensing agreement—intangible			132,100			132,100
Deferred rent			2,606,592			2,696,646

Other assets			77,922			4,992

Total noncurrent assets			6,318,332			6,347,226

Total assets		$	78,610,014		$	82,342,700


Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$	1,600,645		$	1,315,964
Payroll liabilities	��		1,012,223			722,915
Accrued expenses			857,849			704,543

Total current liabilities			3,470,717			2,743,422


Long-term liabilities
Note payable			51,000			51,000

Total long-term liabilities			51,000			51,000

Total liabilities			3,521,717			2,794,422


Commitments and contingencies (Note 8)

Stockholders’ equity
Common stock, $0.001 par value, 100,000,000 and 9,600,000 shares authorized as of March 31, 2021 and December 31, 2020; 9,285,782 and 8,921,034 issued and outstanding at March 31, 2021, respectively; 9,247,758 and 8,892,886 issued and outstanding at December 31, 2020, respectively			8,921			8,893
Additional paid-in capital			112,343,131			111,452,346
Accumulated other comprehensive income (loss)			(6,083	)		14,207
Accumulated deficit			(37,257,672	)		(31,927,168	)

Total stockholders’ equity			75,088,297			79,548,278

Total liabilities, convertible preferred stock and stockholders’ equity		$	78,610,014		$	82,342,700


	As of
	June 30, 2021			December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	34,859,650		$	57,208,080
Accounts receivable, net		789,642			839,659
Investment securities available-for-sale		8,682,330			8,706,844
Inventory		10,782,337			6,295,898
Prepaid expenses and other current assets , net		2,175,604			2,847,319
Deposits		508,484			97,674

Total current assets		57,798,047			75,995,474

Noncurrent assets
Property and equipment, net		3,786,144			3,513,488
Intangible assets, net		5,073,084			137,092
Goodwill		6,486,000			0
Deferred rent		2,517,143			2,696,646

Total noncurrent assets		17,862,371			6,347,226

Total assets	$	75,660,418		$	82,342,700

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	1,571,418		$	1,315,964
Payroll liabilities		861,501			722,915
Accrued expenses		1,219,863			704,543

Total current liabilities		3,652,782			2,743,422

Long-term liabilities
Deferred tax liability, net		36,718			—
Note payable		51,000			51,000

Total long-term liabilities		87,718			51,000

Total liabilities		3,740,500			2,794,422

Stockholders’ equity
Common stock, $0.001 par value, 100,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 9,365,085 and 8,999,381 issued and outstanding at June 30, 2021, respectively; 9,247,758 and 8,892,886 issued and outstanding at December 31, 2020, respectively	$	8,999		$	8,893
Additional paid-in capital		115,480,644			111,452,346
Accumulated other comprehensive income (loss)		(9,794	)		14,207
Accumulated deficit		(43,559,931	)		(31,927,168	)

Total stockholders’ equity		71,919,918			79,548,278

Total liabilities and stockholders’ equity	$	75,660,418		$	82,342,700


	For the Quarters Ended March 31,
	2021			2020
Sales, net	$	7,426,254		$	5,483,226
Cost of goods sold		(5,559,499	)		(3,365,609	)

Gross profit		1,866,755			2,117,617


General and administrative
Salaries, wages and benefits		1,205,854			816,172
Stock-based compensation		899,235			183,203
Professional fees		343,622			182,048
Insurance expense		522,399			31,195
Office expense		186,831			113,365
Occupancy		56,521			53,431
Merchant service fees		106,375			56,035
Netsuite subscription expense		55,021			26,395
Other expense		267,536			137,728

Total general and administrative expenses		3,643,394			1,599,572


Research and product development
Salaries, wages and benefits		70,361			74,902
Product development expense		162,844			57,743
Stock-based compensation		3,567			2,192
Other expense		3,915			8,478

Total research and product development expenses		240,687			143,315


Sales and marketing
Salaries, wages and benefits		633,751			746,010
Stock-based compensation		41,389			74,495
Advertising		1,681,344			936,363
General marketing		710,523			309,222
Amazon selling fee		202,276			187,571
Travel expense		8,756			70,014
Other expense		49,040			69,141

Total sales and marketing expenses		3,327,079			2,392,815

Total expenses		7,211,160			4,135,702

Operating loss		(5,344,405	)		(2,018,085	)


Other income (expense)
Interest and dividend income		13,901			22,854

Total other income		13,901			22,854

Loss before income taxes		(5,330,504	)		(1,995,231	)

Benefit from income taxes		—			—

Net loss attributable to Laird Superfood, Inc. common stockholders	$	(5,330,504	)	$	(1,995,231	)

Net loss per share attributable to Laird Superfood, Inc common stockholders:
Basic	$	(0.60	)	$	(0.47	)

Diluted	$	(0.60	)	$	(0.47	)

Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted		8,894,495			4,281,346


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
Sales, net	$	9,195,786		$	5,608,830		$	16,622,039		$	11,092,055
Cost of goods sold		(6,998,695	)		(4,285,128	)		(12,558,194	)		(7,650,736	)

Gross profit		2,197,091			1,323,702			4,063,845			3,441,319

General and administrative
Salaries, wages and benefits		1,019,845			804,903			2,225,698			1,621,075
Stock-based compensation		955,369			116,249			1,854,604			299,452
Professional fees		609,448			191,130			953,070			373,177
Insurance expense		500,821			25,866			1,023,221			57,061
Office expense		206,448			108,883			393,279			222,248
Occupancy		62,957			56,343			119,478			109,774
Merchant service fees		151,882			89,014			258,257			145,049
Netsuite subscription expense		74,117			30,923			129,138			57,318
Impairment on asset held for sale		—			239,734			—			239,734
Other expense		582,024			169,397			847,235			307,124

Total general and administrative expenses		4,162,911			1,832,442			7,803,980			3,432,012

Research and product development
Salaries, wages and benefits		116,187			72,931			186,548			147,833
Stock-based compensation		5,385			2,192			8,952			4,384
Product development expense		249,948			40,175			412,792			97,917
Other expense		3,332			2,499			7,247			10,977

Total research and product development expenses		374,852			117,797			615,539			261,111

Sales and marketing
Salaries, wages and benefits		630,328			697,547			1,264,079			1,443,556
Stock-based compensation		55,706			35,938			97,095			110,434
Advertising		1,699,865			1,154,060			3,381,209			2,090,423
General marketing		1,260,489			261,662			1,971,012			570,884
Amazon selling fee		210,842			208,317			413,118			395,889
Travel expense		11,604			3,950			20,360			73,964
Other expense		67,658			34,227			116,698			103,368

Total sales and marketing expenses		3,936,492			2,395,701			7,263,571			4,788,518

Total expenses		8,474,255			4,345,940			15,683,090			8,481,641

Operating loss		(6,277,164	)		(3,022,238	)		(11,619,245	)		(5,040,322	)

Other income (expense)
Interest and dividend income		11,623			8,171			25,525			31,025
Loss on sale of fixed assets		—			—			(2,325	)		—
Gain on sale of available-for-sale securities		—			7,677			—			7,677

Total other income (expense)		11,623			15,848			23,200			38,702

Loss before income taxes		(6,265,541	)		(3,006,390	)		(11,596,045	)		(5,001,620	)

Income tax expense		(36,718	)		0—			(36,718	)		0—

Net loss	$	(6,302,259	)	$	(3,006,390	)	$	(11,632,763	)	$	(5,001,620	)

Less deemed dividend of beneficial conversion feature		—			(825,366	)		—			(825,366	)
Less deemed dividend on warrant discount		—			(179,427	)		—			(179,427	)

Net loss attributable to Laird Superfood, Inc. common stockholders	$	(6,302,259	)	$	(4,011,183	)	$	(11,632,763	)	$	(6,006,413	)

Net loss per share attributable to Laird Superfood, Inc common stockholders:
Basic	$	(0.70	)	$	(0.93	)	$	(1.30	)	$	(1.40	)

Diluted	$	(0.70	)	$	(0.93	)	$	(1.30	)	$	(1.40	)

Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted		8,967,797			4,325,265			8,931,736			4,303,305


	For the Three Months Ended March 31,
	2021			2020
Net loss	$	(5,330,504	)	$	(1,995,231	)
Other comprehensive income (loss), net of tax
Change in unrealized gains (losses) on investment securities available-for-sale, net of tax⁽¹⁾		(20,290	)		31,090

Total other comprehensive income (loss)		(20,290	)		31,090

Comprehensive loss	$	(5,350,794	)	$	(1,964,141	)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
Net loss	$	(6,302,259	)	$	(3,006,390	)	$	(11,632,763	)	$	(5,001,620	)
Other comprehensive income (loss), net of tax Change in unrealized gains (losses) on investment securities available-for-sale, net of tax (1)		(3,711	)		(13,745	)		(24,001	)		17,345

Total other comprehensive income (loss)		(3,711	)		(13,745	)		(24,001	)		17,345

Comprehensive loss	$	(6,305,970	)	$	(3,020,135	)	$	(11,656,764	)	$	(4,984,275	)


	Convertible Preferred Stock				Stockholders’ Equity
	Preferred Stock				Common Stock						Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit
	Shares		Amount		Shares			Amount			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total
Balances, January 1, 2021		—	$	—		8,892,886		$	8,893		$	111,452,346		$	14,207		$	(31,927,168	)	$	79,548,278
Stock-based compensation		—		—		—			—			1,010,003			—			—			1,010,003
Withholding tax payments for share-based compensation		—		—		—			—			(188,793	)		—			—			(188,793	)
Stock option exercises		—		—		28,148			28			151,618			—			—			151,646
Common stock issuance costs		—		—		—			—			(82,043	)		—			—			(82,043	)
Other comprehensive income, net of tax		—		—		—			—			—			(20,290	)		—			(20,290	)
Net loss		—		—		—			—			—			—			(5,330,504	)		(5,330,504	)

Balances, March 31, 2021		—	$	—		8,921,034		$	8,921		$	112,343,131		$	(6,083	)	$	(37,257,672	)	$	75,088,297


	Convertible Preferred Stock				Stockholders’ Equity
	Preferred Stock				Common Stock						Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit
	Shares		Amount		Shares			Amount			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total
Balances, January 1, 2020		629,186	$	6,722,951		4,188,558		$	4,188		$	27,184,250		$	(226	)	$	(19,076,867	)	$	14,834,296
Stock-based compensation		—		—		—			—			258,486			—			—			258,486
Stock option exercises		—		—		804			—			6,030			—			—			6,030
Common stock issuances		—		—		137,770			138			1,997,527			—			—			1,997,665
Less: repurchased common stock		—		—		(1,416	)		(1	)		(20,531	)		—			—			(20,532	)
Other comprehensive income, net of tax		—		—		—			—			—			31,090			—			31,090
Net loss		—		—		—			—			—			—			(1,995,231	)		(1,995,231	)

Balances, March 31, 2020		629,186	$	6,722,951		4,325,716		$	4,325		$	29,425,762		$	30,864		$	(21,072,098	)	$	15,111,804


	For the Quarter Ended March 31,
	2021			2020
Cash flows used in operating activities
Net loss	$	(5,330,504	)	$	(1,995,231	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation		131,333			114,901
Amortization		5,270			2,524
Loss on disposal of equipment		2,325			—
Stock-based compensation		1,010,003			258,486
Provision for excess and obsolete inventory		102,604			—
Changes in operating assets and liabilities:
Accounts receivable		69,504			(1,259,099	)
Accrued investment income receivable		(3,969	)		4,847
Inventory		(1,500,686	)		271,028
Prepaid expenses and other current assets		(55,465	)		(357,734	)
Deferred rent		90,054			90,622
Deposits		(391,149	)		(17,191	)
Accounts payable		284,681			340,271
Payroll liabilities		289,308			142,208
Accrued expenses		153,306			60,604

Net cash from operating activities	$	(5,143,385	)	$	(2,343,764	)


Cash flows used in investing activities
Purchase of property and equipment		(122,588	)		(115,669	)
Purchase of software		(78,200	)		—
Proceeds from sale of property, equipment, and software		700			—

Net cash from investing activities	$	(200,088	)	$	(115,669	)


Cash flows from financing activities
Issuance of common stock		—			1,997,665
Common stock issuance costs		(82,043	)		—
Common stock repurchases		—			(20,532	)
Withholding tax payments for share based compensation		(188,793	)		—
Stock options exercised		151,646			6,030

Net cash from financing activities	$	(119,190	)	$	1,983,163

Net change in cash and cash equivalents		(5,462,663	)		(476,270	)
Cash and cash equivalents beginning of period		57,208,080			1,004,109

Cash and cash equivalents end of period	$	51,745,417		$	527,839

Supplemental disclosures of non-cash information
Unrealized gain (loss) on available-for-sale securities	$	(20,290	)	$	31,090


	For the Six Months Ended June 30,
	2021			2020
Cash flows used in operating activities
Net loss	$	(11,632,763	)	$	(5,001,620	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation		302,261			229,284
Amortization		103,803			5,048
Loss on disposal of equipment		2,325			—
Stock-based compensation		2,100,077			471,320
Provision for inventory obsolescenc e		18,266			—
Reserve for prepaid assets		179,000			—
Restricted stock awards		—			62,431
Impairment on asset held for sale		—			239,734
Gain on sale of investment securities available-for-sale		—			7,677
Changes in operating assets and liabilities:
Accounts receivable		98,534			(324,211	)
Accrued investment income receivable		513			—
Inventory		(3,778,699	)		(1,048,010	)
Prepaid expenses and other current assets		729,881			(371,883	)
Deferred rent		179,503			180,677
Deposits		2,602			10,941
Accounts payable		208,131			568,088
Payroll liabilities		129,397			167,576
Accrued expenses		367,209			155,943
Deferred taxe s		36,718			—

Net cash from operating activities		(10,953,242	)		(4,647,005	)

Cash flows used in (provided by) investing activities
Purchase of property, plant, and equipment		(522,564	)		(312,746	)
Proceeds from sale of property, equipment, and software		700			—
Deposits on equipment to be acquired		(407,412	)		(319,174	)
Purchase of software		(109,795	)		—
Acquisiton of a business, net of cash acquired (note 2 )		(10,449,587	)		—
Sale of investment securities available-for-sale		—			513,544
Proceeds from maturities of investment securities available-for-sale		—			475,000

Net cash from investing activities		(11,488,658	)		356,624

Cash flows from financing activities
Issuance of common stock		—			1,997,665
Issuance of preferred stock		—			10,000,006
Common stock issuance costs		(82,043	)		—
Preferred stock issuance costs		—			(147,721	)
Withholding tax payments for share based compensation		(219,156	)		—
Restricted stock units issue d		3			—
Repurchased common stock		—			(20,532	)
Stock options exercised		394,666			6,030

Net cash from financing activities		93,470			11,835,448

Net change in cash and cash equivalents		(22,348,430	)		7,545,067
Cash and cash equivalents beginning of period		57,208,080			1,004,109

Cash and cash equivalents end of period	$	34,859,650		$	8,549,176

Supplemental disclosures of non-cash information
Unrealized gain (loss) on available-for-sale securities	$	(24,001	)	$	17,345


	March 31, 2021		March 31, 2020
Cash and cash equivalents	$	51,503,218	$	527,839
Restricted cash		242,199		—

Total cash, cash equivalents, and restricted cash show in the statement of cash flows	$	51,745,417	$	527,839


	June 30,		December 31,
	2021		2020
Cash and cash equivalents	$	34,706,429	$	56,973,896
Restricted cash		153,221		234,184

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	34,859,650	$	57,208,080


	March 31, 2021		December 31, 2020
Raw Materials and Packaging	$	3,412,135	$	4,109,706
Finished Goods		4,281,845		2,186,192

Total	$	7,693,890	$	6,295,898


Consideration
Cash	$	11,111,830
Equity instruments		1,834,857

Far value of total consideration transferred	$	12,946,687

Recognized amounts of identifiable assets acquired and liabilities assumed
Cas h	$	662,243
Accounts receivable		48,517
Prepaid expenses and other current assets		243,166
Inventory		726,006
Property, Plant, & Equipment		55,378
Intangible assets		4,930,000

Total assets acquired		6,665,310

Accounts payable		47,323
Accrued expenses		131,661
Payroll liabilities		9,189
Contract liabilities		16,450

Total liabilities assumed		204,623

Total identifiable net assets		6,460,687

Goodwill	$	6,486,000


	Estimated Useful Life		Fair Value
Trade names		10 years	$	2,530,000
Customer relationships		10 years		1,990,000
Recipes		10 years		330,000
Social media agreements		3 years		80,000

Total intangible assets acquired			$	4,930,000


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
Net Sales	$	9,633,998		$	6,673,166		$	18,219,521		$	12,975,718
Net Loss		(6,125,020	)		(3,966,013	)		(11,418,183	)		(5,934,893	)


	March 31, 2021		December 31, 2020
Prepaid insurance	$	1,060,840	$	1,446,189
Prepaid inventory		943,083		958,166
Prepaid subscriptions and license fees		389,431		225,567
Prepaid advertising		310,700		—
Prepaid, other		141,169		152,323
Other current assets		57,561		51,111
Prepaid consulting		—		13,963

	$	2,902,784	$	2,847,319


	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
March 31, 2021
Federal agency bonds – mortgage-backed	$	8,696,606	$	586	$	(6,669	)	$	8,690,523

Total investment securities available-for-sale	$	8,696,606	$	586	$	(6,669	)	$	8,690,523


	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
December 31, 2020
Federal agency bonds – mortgage-backed	$	8,692,637	$	14,207	$	—		$	8,706,844

Total investment securities available-for-sale	$	8,692,637	$	14,207	$	—		$	8,706,844


			Gross unrealized		Gross unrealized			Estimated fair
	Amortized cost		gains		losses			value

June 30, 2021
Federal agency bonds – mortgage-backed	$	8,692,124	$	0	$	(9,794	)	$	8,682,330

Total investment securities available-for-sale	$	8,692,124	$	0	$	(9,794	)	$	8,682,330

December 31, 2020
Federal agency bonds – mortgage-backed	$	8,692,637	$	14,207	$	—		$	8,706,844

Total investment securities available-for-sale	$	8,692,637	$	14,207	$	—		$	8,706,844


	Available-for-sale
March 31, 2021	Amortized cost		Estimated fair value
Due after one year through five years	$	8,696,606	$	8,690,523

Total investment securities available-for-sale	$	8,696,606	$	8,690,523


	Available-for-sale
	Amortized cost		Estimated fair value
June 30, 2021
Due after one year through five years	$	8,692,124	$	8,682,330

Total investment securities available-for-sale	$	8,692,124	$	8,682,330


Fair Value as of March 31, 2021	Level 1		Level 2		Level 3
Federal agency bonds - mortgage-backed	$	—	$	8,690,523	$	—


Fair Value as of December 31, 2020	Level 1		Level 2		Level 3
Federal agency bonds - mortgage-backed	$	—	$	8,706,844	$	—


Fair Value as of June 30, 2021	Level 1		Level 2		Level 3
Federal agency bonds—mortgage-backed	$	0	$	8,682,330	$	0


	March 31, 2021		December 31, 2020
Forgivable loan, City of Sisters	$	51,000	$	51,000

Long-term debt	$	51,000	$	51,000


	March 31, 2021			December 31, 2020
Factory equipment	$	2,749,057		$	2,668,839
Land		947,394			947,394
Furniture and office equipment		531,232			532,116
Leasehold improvements		276,553			259,504
Construction in progress		16,666			—

	4,250,902			4,407,853
Accumulated depreciation		(1,019,184	)		(894,365	)

Property and equipment, net	$	3,501,718		$	3,513,488


2021	$	275,671
2022		549,198
2023		547,882
2024		499,059
2025		485,118
Thereafter		2,584,057

	$	4,940,984


Payments Due by Period	Operating Leases⁽¹⁾		Note Payable		Total
2021	$	178,997	$	51,000	$	229,997
2022		244,622		—		244,622
2023		251,960		—		251,960
2024		259,519		—		259,519
2025		267,305		—		267,305
Thereafter		863,932		—		863,932

	$	2,066,335	$	51,000	$	2,117,335


Payments Due by Period	Operating Leases (1)		Note Payable		Total
2021	$	119,423	$	51,000	$	170,423
2022		243,236		0		243,236
2023		250,534		0		250,534
2024		258,049		0		258,049
2025		265,791		0		265,791
Thereafter		860,498		0		860,498

	$	1,997,531	$	51,000	$	2,048,531


	March 31, 2021			December 31, 2020
Noncurrent deferred tax assets:
Federal net operating loss carryforwards	$	6,385,696		$	5,332,738
State net operating loss carryforwards		2,548,054			2,112,119
Federal depreciation and amortization		346,060			458,203
State depreciation and amortization		166,329			213,359
Accrued—PTO		80,283			75,702
Other		137,996			106,526

Total noncurrent deferred tax assets		9,664,418			8,298,647

Noncurrent deferred tax liabilities:
Federal depreciation and amortization	$	—		$	—
State depreciation and amortization		—			—
Deferred rent asset		711,232			735,537

Total noncurrent deferred tax liabilities		711,232			735,537

Net noncurrent deferred tax assets	$	8,953,186		$	7,563,110
Valuation allowance		(8,953,186	)		(7,563,110	)

Total net noncurrent deferred tax assets	$	—		$	—


	March 31, 2021
	Options Activity			Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Term (years)		Aggregate intrinsic value
Balance at January 1, 2021		887,640		$	9.65		6.42	$	33,433,274
Granted		44,068			45.53
Exercised/released		(28,148	)		6.16
Cancelled/forfeited		(2,750	)		11.71

Balance at March 31, 2021		900,810		$	11.42		6.35	$	23,488,929

Exercisable at March 31, 2021		543,598		$	7.55		5.19	$	16,264,671