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What changed in Laird Superfood, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Laird Superfood, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+257 added−272 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-16)

Top changes in Laird Superfood, Inc.'s 2023 10-K

257 paragraphs added · 272 removed · 183 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

72 edited+28 added−27 removed45 unchanged
Biggest changeWe continue to seek opportunities for building an inclusive culture that encourages, supports, and celebrates the diverse voices of our world. 14 Corporate Information We were formed as a limited liability company on June 25, 2015 under the laws of the State of Oregon, converted to a corporation under the laws of the State of Oregon on February 18, 2016, and converted to a corporation under the laws of the State of Delaware on July 3, 2018.
Biggest changeCorporate Information We were formed as a limited liability company on June 25, 2015 under the laws of the State of Oregon.
Functional Coffees We believe that our line of high quality Peruvian organic roasts, as well as our more differentiated functional coffee blends, incorporating functional mushroom extracts, superfoods, and botanical adaptogens, have natural synergies for many buyers of our creamer products, and convenience of combined ordering on our e-commerce platform.
We believe that our line of high quality Peruvian organic roasts, as well as our more differentiated functional coffee blends, incorporating functional mushroom extracts, superfoods, and botanical adaptogens, have natural synergies for many buyers of our creamer products, and convenience of combined ordering on our e-commerce platform.
For this reason, Laird Superfood has always enjoyed a meaningful base of recurring revenues due to repeat orders by its consumers and wholesale partners. Growing this base of recurring revenues is a strong focus of Laird Superfood as it evaluates new product development opportunities, acquisitions and marketing strategies.
For this reason, Laird Superfood has always enjoyed a meaningful base of recurring revenues due to repeat orders by its consumers and wholesale partners. Growing this base of recurring revenues is a strong focus of Laird Superfood as it evaluates new product development opportunities, and marketing strategies.
Lairdsuperfood.com sells all of our SKUs with the exception of our refrigerated liquid Superfood Creamers. Lairdsuperfood.com allows for online-only sales of trial products, prior to the investment necessary to launch in wholesale. Pickybars.com sells all of our acquired Picky Bar SKUs, plus a rotating assortment of our historic Laird Superfood SKUs.
Lairdsuperfood.com sells all of our SKUs with the exception of our liquid Superfood Creamers. Lairdsuperfood.com allows for online-only sales of trial products, prior to the investment necessary to launch in wholesale. Pickybars.com sells all of our acquired Picky Bar SKUs, plus a rotating assortment of our historic Laird Superfood SKUs.
Supply Chain Laird Superfood sources its raw materials from a variety of suppliers located both inside and outside the United States. The Company purchases substantial portions of its roasted coffee products from one supplier, coconut milk powder from two suppliers, and coconut water powder from one supplier.
Supply Chain Laird Superfood sources its raw materials from a variety of suppliers located both inside and outside the United States. The Company purchases substantial portions of our roasted coffee products from one supplier, coconut milk powder from two suppliers, and coconut water powder from one supplier.
We continuously strive to cultivate and support a highly engaged and productive workforce. 13 Talent Acquisition We have a strong track record of directly recruiting top talent, but we also partner with external professional recruiting firms and headhunters to enhance our recruiting efforts when appropriate.
We continuously strive to cultivate and support a highly engaged and productive workforce. Talent Acquisition We have a strong track record of directly recruiting top talent, but we also partner with external professional recruiting firms and headhunters to enhance our recruiting efforts when appropriate.
Our Performance Granola and Performance Oatmeal compete in the $36.5 billion global cereal market, which is expected to grow at a 3.7% CAGR through 2030, per Grand View Research. Top competitors are Bob’s Red Mill, Kellogg, and General Mills.
Our Performance Granola and Performance Oatmeal compete in the $36.5 billion global cereal market, which is expected to grow at a 3.7% CAGR through 2030, per Grand View Research. Top competitors are Bob’s Red Mill, Kellogg, General Mills and Purely Elizabeth.
These dynamics create meaningful recurring revenues and the combination of repeat usage, order frequency and retention rates informs our views on strategic marketing spend and customer unit economics. Distribution Channels We generate revenue through two channels: e-commerce and wholesale.
These dynamics create meaningful recurring revenues and the combination of repeat usage, order frequency and retention rates inform our views on strategic marketing spend and customer unit economics. Distribution Channels We generate revenue through two channels: e-commerce and wholesale.
Along with more traditional methods of brand-building, we have effectively harnessed the authentic lifestyle of Laird Hamilton and Gabrielle Reece, both of whom have well-earned reputations for being on the cutting edge of fitness and nutrition. Our goal is to make Laird Superfood the choice for customers searching for nutrient dense, functional foods at a reasonable price.
Along with more traditional methods of brand-building, we have effectively harnessed the authentic lifestyle of Laird Hamilton and Gabrielle Reece, both of whom have well-earned reputations for being on the cutting edge of fitness and nutrition. Our goal is to make Laird Superfood the choice for customers searching for clean, functional foods at a reasonable price.
Harvest Snacks and Other Food Items Our Picky Bars, Laird Superfood Protein Bars, and Picky Bars Nut Butter Bars primarily compete in the $20.0 billion snack bar market, which is expected to grow at 6.6% CAGR through 2025, per Grand View Research. Energy and Nutrition bars, which includes these products, make up the second largest segment behind Granola/Muesli.
Our Picky Bars, Laird Superfood Protein Bars, and Picky Bars Nut Butter Bars primarily compete in the $20.0 billion snack bar market, which is expected to grow at 6.6% CAGR through 2025, per Grand View Research. Energy and Nutrition bars, which includes these products, make up the second largest segment behind Granola/Muesli.
We expect to continue expanding our Superfood Creamer platform going forward with additional flavors, nutritional profiles, and formulations based on consumer preferences and demand. Such products demonstrate attractive repeat usage and customer lifetime value characteristics.
We expect to continue expanding our Superfood Creamer platform going forward with additional flavors, functional benefits, and formulations based on consumer preferences and demand. Such products demonstrate attractive repeat usage and customer lifetime value characteristics.
Laird Superfood is conscientious in its sourcing of raw materials, the carbon-benefits of facilitating plant-based alternatives, the impact of our operations on the environment and our community and providing products that discourage the culture of single-use plastics. 7 Our Products Our authentic and sustainably differentiated plant-based products become part of our customer’s “Daily Ritual,” providing energy and hydration throughout the day, presenting the opportunity to expand a portfolio of plant-based products.
Laird Superfood is conscientious in its sourcing of raw materials, the carbon-benefits of facilitating plant-based alternatives, the impact of our operations on the environment and our community and providing products that discourage the culture of single-use plastics. 6 Table of Contents Our Products Our authentic and sustainably differentiated plant-based products become part of our customer’s “Daily Ritual,” providing sustained energy and nutrition throughout the day, presenting the opportunity to expand a portfolio of plant-based products.
The FDA also has detailed regulations and requirements governing various types of claims about products’ nutritional value and wellness benefits, such as a nutrient content claims, health claims, and structure-function claims. Claims falling under these regulations must be phrased in specific ways to avoid misrepresenting the food. We believe we are in compliance with applicable FDA claims regulations.
The FDA also has detailed regulations and requirements governing various types of claims about products’ nutritional value and wellness benefits, such as a nutrient content claims, health claims, and structure-function claims. Claims falling under these regulations must be phrased in specific ways to avoid misrepresenting the food.
Our target market extends well beyond elite athletes into the mass market due to our recognition that Laird Superfood products must not only be natural, functional and nutrient-dense, they must also taste great and be affordable to provide access to all consumers. Omnichannel Distribution Strategy Our omnichannel distribution strategy has two key components: e-commerce and wholesale.
Our target market extends well beyond elite athletes into the mass market due to recognition that Laird Superfood products are not only natural, functional, and nutrient-dense, they also taste great and are of a value that provides access to all consumers. Omnichannel Distribution Strategy Our omnichannel distribution strategy has two key components: e-commerce and wholesale.
Our customers and distribution channels include our e-commerce business through our website, lairdsuperfood.com , pickybars.com , and through Amazon.com , as well as our wholesale business to distributors and retailers in natural and specialty channels, conventional grocery, club, mass market, and drug stores.
Our customers and distribution channels include our e-commerce business through our websites, lairdsuperfood.com and pickybars.com , and through Amazon.com , as well as our wholesale business to distributors and retailers in natural and specialty channels, conventional grocery, club, food service and mass market.
As part of our focus on sustainability and a better-for-you “Daily Ritual,” the product categories we have focused on to date are coffee creamers, hydration and beverage enhancing supplements, harvest snacks and other food items, and coffee, tea and hot chocolate products.
As part of our focus on sustainability and a better-for-you “Daily Ritual,” the product categories we have focused on to date are Superfood Coffee creamers, Hydration and beverage enhancing supplements including powdered supplements such as Performance Mushrooms, Harvest snacks and other food items, and functional Coffee, tea and hot chocolate products such as our instant lattes.
Hydration and Beverage Enhancing Supplements Our Hydrate platform primarily competes against hydration enhancing sports drinks. The dominant competitors in the $12.9 billion sports drink market are Gatorade, owned by PepsiCo, and PowerAde, owned by The Coca-Cola Company. Hydrate also competes within the $4.3 billion coconut water market, which is highly fragmented relative to the sports drink market.
Our Hydrate platform primarily competes against hydration enhancing sports drinks and other powdered electrolyte mixes. The dominant competitors in the $12.9 billion sports drink market are Gatorade, owned by PepsiCo, and PowerAde, owned by The Coca-Cola Company. Hydrate also competes within the $2 billion coconut water market, which is highly fragmented relative to the sports drink market.
We compete in the following markets, based on how we categorize our core products: Coffee Creamers Our creamer products primarily compete within the $6.9 billion domestic creamer market that, according to Mintel, is expected to grow at a 6.3% compound annual growth rate ("CAGR") through 2027, and includes products offered by Danone SA, TreeHouse Foods Inc., Nestle SA and Dean Foods Co, among others.
Our creamer products primarily compete within the $6.9 billion domestic creamer market that, according to Mintel, is expected to grow at a 6.3% compound annual growth rate ("CAGR") through 2027, and includes products offered by Danone SA, TreeHouse Foods Inc., Nestle SA and Dean Foods Co, among others.
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. Market Opportunity Laird Superfood participates in what the U.S. Census Bureau estimates to be a $800 billion grocery market as of 2022.
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.
InstaFuel and Hot Chocolate InstaFuel instant beverage products and our Hot Chocolate with Functional Mushrooms and Hot Chocolate Oat Milk products compete with other just-add-hot-water lines of instant coffee products and hot chocolate. The annual revenue generated from the instant coffee market in the U.S. was estimated to be $17.4 billion according to Statista in 2023.
Our Instant Latte beverage products, Hot Chocolate with Functional Mushrooms, and Hot Chocolate Oat Milk products compete with other just-add-hot-water lines of instant coffee products and hot chocolate. The annual revenue generated from the instant coffee market in the U.S. is estimated to reach $1.9 billion in 2024, according to Statista.
An Emerging Platform Within the Rapidly Expanding Plant-Based Natural Foods Industry Long-term opportunities lie in building Laird Superfood into a unique platform within the natural foods industry, which is currently dominated by single-product companies.
Our Competitive Strengths We believe the following strengths differentiate Laird Superfood and create long-term, sustainable competitive advantages. An Emerging Platform Within the Rapidly Expanding Plant-Based Natural Foods Industry Long-term opportunities lie in building Laird Superfood into a unique platform within the natural foods industry, which is currently dominated by single-product companies.
Continued Expansion of Distribution Footprint Currently, our products are marketed and sold through a diverse set of retail and e-commerce channels, including grocery chains, club stores, specialty and natural food outlets, coffee shops, juice bars, gyms, restaurants, hospitality venues, corporate workplaces, lairdsuperfood.com , pickybars.com, and amazon.com .
Continued Expansion of Distribution Footprint Currently, our products are marketed and sold through a diverse set of e-commerce and wholesale channels, including grocery chains, club stores, specialty and natural food outlets, lairdsuperfood.com , pickybars.com, and Amazon.com .
The continuation of these trends should benefit Laird Superfood as it seeks to penetrate the overall grocery market. 6 Business Model Characterized by Repeat and Recurring Revenues Because the consumption of coffee, creamers, and hydration products is a daily ritual for many consumers, there is a natural and frequent repeat usage of Laird Superfood products among large portions of our customer base.
Business Model Characterized by Repeat and Recurring Revenues Because the consumption of coffee, creamers, and hydration products is a daily ritual for many consumers, there is a natural and frequent repeat usage of Laird Superfood products among large portions of our customer base.
A major component of our performance management program is our Annual Performance Evaluation that includes 360 assessments, ensuring performance is measured and enhanced not only by the manager’s assessment but through peer feedback and feedback on management as well.
The program incorporates regular, direct feedback in one-to-one conversations between managers and direct reports across all levels of the organization. A major component of our performance management program is our Annual Performance Evaluation that includes 360 assessments, ensuring performance is measured and enhanced not only by the manager’s assessment but through peer feedback and feedback on management as well.
We have included our website address in this Annual Report as an inactive textual reference only. Information contained on, or that can be accessed through, our website is not part of this Annual Report. You should not rely on any information contained or included on our website in making your decision whether to purchase our common stock. 15
We have included our website address in this Annual Report as an inactive textual reference only. Information contained on, or that can be accessed through, our website is not part of this Annual Report.
Our net sales by distribution channel are reflected below: Year Ended December 31, 2022 2021 $ % of Total $ % of Total E-commerce $ 22,313,241 62 % $ 22,687,736 62 % Wholesale 13,515,151 38 % 14,123,217 38 % Sales, net $ 35,828,392 100 % $ 36,810,953 100 % E-commerce Our e-commerce business consists of lairdsuperfood.com , pickybars.com , and Amazon.com .
Our net sales by distribution channel are reflected below: Year Ended December 31, 2023 2022 $ % of Total $ % of Total E-commerce $ 19,443,885 57 % $ 22,313,241 62 % Wholesale 14,780,313 43 % 13,515,151 38 % Sales, net $ 34,224,198 100 % $ 35,828,392 100 % 9 Table of Contents E-commerce Our e-commerce business consists of lairdsuperfood.com , pickybars.com , and Amazon.com .
Related to FBA, we send products to Amazon, and Amazon fulfills orders placed through its online marketplace from its fulfillment centers. Amazon charges us fulfillment fees for this service and may charge storage fees for certain inventory. We sell a number of our SKUs on Amazon.com .
For sales through Amazon.com , we utilize both fulfilled by Amazon (“FBA”) and fulfilled by merchant ("FBM") distribution processes. Related to FBA, we send products to Amazon, and Amazon fulfills orders placed through its online marketplace from its fulfillment centers. Amazon charges us fulfillment fees for this service and may charge storage fees for certain inventory.
Coffee, Tea, and Hot Chocolate Products InstaFuel and Hot Chocolate with Functional Mushrooms Laird Superfood sells high-quality instant beverage products pre-mixed with its superfood creamer, in a just-add-hot-water line of InstaFuel products, as well as Hot Chocolate with functional mushrooms.
Laird Superfood is leading the way in bringing functional benefits, such as functional mushrooms, to the set. 7 Table of Contents Coffee, Tea, and Hot Chocolate Products Instant Latte and Hot Chocolate with Functional Mushrooms Laird Superfood sells high-quality instant beverage products pre-mixed with our superfood creamer, in a just-add-hot-water line of Instant Latte products, as well as Hot Chocolate with Functional Mushrooms.
However, state organic programs may also add more restrictive requirements due to specific environmental conditions or the necessity of production and handling practices in the state. 11 Food-Related Regulations As a manufacturer and distributor of food products, we are also subject to a number of federal, state and local food-related regulations, including, but not limited to, the Federal Food, Drug and Cosmetic Act of 1938 (the “FDCA”) and regulations promulgated thereunder by the FDA.
Food-Related Regulations As a manufacturer and distributor of food products, we are also subject to a number of federal, state and local food-related regulations, including, but not limited to, the Federal Food, Drug and Cosmetic Act of 1938 (the “FDCA”) and regulations promulgated thereunder by the FDA.
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.
Natural, Organic and Functional Food and Beverages and Supplement sales were approximately $272 billion and are expected to grow to $300 billion by 2024. 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.
USDA National Organic Program and Similar Regulations We are involved in the sourcing, manufacturing, supplying, processing, marketing, selling and distribution of organic food products and, as such, are subject to certain organic quality assurance standards.
Our importers, packers, distributors, and suppliers are also subject to various laws and regulations relating to environmental protection and worker health and safety matters. 10 Table of Contents USDA National Organic Program and Similar Regulations We are involved in the sourcing, manufacturing, supplying, processing, marketing, selling and distribution of organic food products and, as such, are subject to certain organic quality assurance standards.
Our gross sales by product category are reflected below: Year Ended December 31, 2022 2021 $ % of Total $ % of Total Coffee creamers $ 19,800,429 55 % $ 21,767,409 59 % Hydration and beverage enhancing supplements 4,877,067 14 % 5,814,629 16 % Harvest snacks and other food items 7,191,316 20 % 7,108,361 19 % Coffee, tea, and hot chocolate products 6,648,576 19 % 5,228,888 14 % Other 1,805,914 5 % 808,352 2 % Gross sales 40,323,302 113 % 40,727,639 110 % Shipping income 1,099,358 3 % 457,879 1 % Returns and discounts (5,594,268 ) (16 )% (4,374,565 ) (11 )% Sales, net $ 35,828,392 100 % $ 36,810,953 100 % Coffee creamers include sales of powdered and liquid coffee creamers.
Our gross sales by product category are reflected below: Year Ended December 31, 2023 2022 $ % of Total $ % of Total Coffee creamers $ 20,381,166 60 % $ 19,800,429 55 % Hydration and beverage enhancing supplements 5,320,039 16 % 4,877,067 14 % Harvest snacks and other food items 6,879,643 20 % 7,191,316 20 % Coffee, tea, and hot chocolate products 8,017,121 23 % 6,648,576 19 % Other 435,423 1 % 1,805,914 5 % Gross sales 41,033,392 120 % 40,323,302 113 % Shipping income 899,921 3 % 1,099,358 3 % Returns and discounts (7,709,115 ) (23 )% (5,594,268 ) (16 )% Sales, net $ 34,224,198 100 % $ 35,828,392 100 % Coffee creamers include sales of powdered and liquid coffee creamers.
Competition Fundamentally, we do not believe our competition is our peer better-for-you, less processed creamer companies. We view our competition as the legacy products which are refined-sugar laden, highly processed, and have undecipherable ingredient lists. We believe consumers want more transparency and understanding of what they are putting in their bodies and are seeking less-processed alternatives.
Other products include coffee tools and other miscellaneous branded goods. Fundamentally, we do not believe our competition is our peer group better-for-you, less processed creamer companies. We view our competition as the legacy products which are refined-sugar laden, highly processed, and have undecipherable ingredient lists.
The main benefits and points of differentiation to consumers from our Hydrate products are a limited number of ingredients; no artificial sugars, ingredients or colors that are prevalent in most competing sports drinks; and a lower cost per serving than traditional single-use packaged sports drinks and coconut waters.
These products include a limited number of ingredients; no artificial sugars, ingredients or colors that are prevalent in most competing sports drinks; and a lower cost per serving than traditional single use packaged sports drinks, electrolyte, and coconut waters. Hydrate is also environmentally friendly due to its powdered form, avoiding single use plastics and the fuel required to transport liquids.
Laird Superfood is specifically focused on the U.S. Natural, Organic and Functional Food and Beverages sub-segment of the food and beverage market. According to the New Hope Network, in 2021, U.S. Natural, Organic and Functional Food and Beverages and Supplement sales were approximately $272 billion and are expected to grow to $300 billion by 2023.
Census Bureau estimates to be an $800 billion grocery market as of 2023. Laird Superfood is specifically focused on the U.S. Natural, Organic and Functional Food and Beverages sub-segment of the food and beverage market. According to the New Hope Network, in 2022, U.S.
Onboarding and Communication In order to create a high-performing team, we establish a firm foundation of business understanding through a robust and cross-functional onboarding process. Every employee begins with a common understanding of our history, vision, mission, values, and goals and objectives, and we train employees regarding fundamentals such as workplace and food safety and their employee rights and benefits.
Every employee begins with a common understanding of our history, vision, mission, values, and goals and objectives, and we train employees regarding fundamentals such as workplace and food safety and their employee rights and benefits. We actively seek opportunities for effective communication.
An increasing number of natural and plant-based products are moving beyond the natural and specialty stores and into conventional grocery stores.
An increasing number of natural and plant-based products are moving beyond the natural and specialty stores and into conventional grocery stores. The continuation of these trends should benefit Laird Superfood as we seek to penetrate the overall grocery market.
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended.
Our principal executive offices are located at 5303 Spine Road, Suite 204, Boulder, Colorado, 80301. Our websites are www.lairdsuperfood.com and www.pickybars.com . We make available on or through w ww.lairdsuperfood.com certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended.
Laird Superfood’s strategy is to maximize penetration of this opportunity through a variety of avenues, including growing brand trust and recognition, significantly expanding our retail distribution footprint, driving shelf velocity through an acceleration of online and offline advertising and introducing new products to expand our store footprint.
Laird Superfood’s strategy is to maximize penetration of this opportunity through a variety of avenues, including growing brand trust and recognition, significantly expanding our retail distribution footprint, driving shelf velocity through an acceleration of online and offline advertising and introducing new products to expand our store footprint. 5 Table of Contents Exposure to Plant-Based, Functional and Natural Foods Portions of Grocery Market Within the grocery category, there is an ongoing shift from highly processed conventional brands that demonstrate little nutritional benefit to natural, nutrient-dense, functional and plant-based alternatives.
Per the Plant-Based Foods Association, U.S. retail sales of plant-based foods increased 6.2% from 2021 to 2022, reaching a market value of $7.4 billion, compared to increases of 1.9% in the overall food category. Our Competitive Strengths We believe the following strengths differentiate Laird Superfood and create long-term, sustainable competitive advantages.
There is also increasing recognition of the environmental impact of animal-based products. Per the Plant-Based Foods Association, U.S. retail sales of plant-based foods increased 6.2% from 2022 to 2023, reaching a market value of $7.4 billion, compared to increases of 1.9% in the overall food category.
Compensation and Benefits Our total rewards program is designed to ensure our talented team is both fairly paid and rewarded for performance. We ensure market competitiveness and continually make smart adjustments where necessary with the goal of retaining top talent and ensuring equitable pay practices.
We ensure market competitiveness and continually make smart adjustments where necessary with the goal of retaining top talent and ensuring equitable pay practices. We offer competitive benefits to ensure that our employees are provided for across the full range of employee rewards.
Laird Superfood has a supplier code of conduct for the ethical sourcing of raw materials from within and outside the United States, which it provides to suppliers as part of its supplier-onboarding process. Regulation We are subject to a wide range of governmental regulations and policies.
Finished goods are then warehoused and shipped to both retail and wholesale customers, as well as distributors across the country. Laird Superfood has a supplier code of conduct for the ethical sourcing of raw materials from within and outside the United States, which we provide to suppliers as part of the supplier-onboarding process.
There are multiple sources of roasted coffee products, coconut milk powder and coconut water powder available to the Company, and management believes that the Company could find suitable replacements for these suppliers on substantially similar terms. In addition, the Company sources all of its Aquamin from a single supplier.
There are multiple sources of roasted coffee products, coconut milk powder and coconut water powder available to the Company, and management believes that the Company could find suitable replacements for these suppliers on substantially similar terms. Raw materials are shipped to our co-manufacturers' production facilities where they are stored. These raw materials are then mixed and packaged into finished goods.
We actively seek opportunities for effective communication. Major communication efforts include monthly all-hands meeting and a semi-monthly internal newsletter, which communicate content such as a CEO message, departmental updates, business priorities, and team member information. Departments meet individually and cross-functionally in a variety of ways.
Major communication efforts include monthly town hall meeting, which communicate content such as a CEO message, departmental updates, business priorities, and team member information. Departments meet individually and cross-functionally in a variety of ways. Managers are trained to hold regular one-on-one meetings to communicate on projects, tasks, feedback, and development.
None of these employees are represented by labor unions or covered by collective bargaining agreements.
As of December 31, 2023, we had 25 full-time employees and two part-time employees. None of these employees are represented by labor unions or covered by collective bargaining agreements.
Powdered creamers have the further appeal of shelf stability and on-the-go convenience. Powdered Coffee Creamers Laird Superfood’s Superfood Creamer was originated in powdered form for convenience and sustainability. Our powdered coffee creamers have an 18-month shelf life.
Powdered Coffee Creamers Laird Superfood’s Superfood Creamer originated in powdered form for convenience, sustainability, and to maximize the nutritional profile. Our powdered coffee creamers have an 18-month shelf life. Powdered coffee creamers have historically represented a smaller , lower-price-point segment of the coffee creamer market with a focus purely on convenience and price.
Intellectual Property We have the right to the following material trademarks: Laird Superfood, Superfood Creamer, InstaFuel, Picky Bars, and Picky Bars Drizzle in the United States, and Laird Superfood in several international jurisdictions, including the European Union.
Intellectual Property We have the right to the following material trademarks: Laird Superfood, Superfood Creamer, InstaFuel, Picky Bars, and Picky Bars Drizzle in the United States, and Laird Superfood in several international jurisdictions, including the European Union. 12 Table of Contents Human Capital Resources Laird Superfood is a company built upon a strong vision, mission, and values set, all of which guide how we leverage our human capital in a positive way.
Performance Management We have built a robust performance management program that seeks to combine best practices and innovation. Our program begins with goal/objective setting at the company, department, and individual level. The program incorporates regular, direct feedback in one-to-one conversations between managers and direct reports across all levels of the organization.
Individuals are encouraged to communicate through both formal methods and our Open-Door Policy. Performance Management We have built a robust performance management program that seeks to combine best practices and innovation. Our program begins with goal/objective setting at the company, department, and individual level.
We believe our creamers are differentiated from competing products due to their superior taste profile, a limited ingredient set, and a differentiated energy profile due to the inclusion of plant-based fats. In addition to being coffee additives, our powdered creamers are used by consumers in a variety of different applications, such as smoothies and baked goods.
In addition to being coffee additives, our powdered creamers are used by consumers in a variety of different applications, such as smoothies and baked goods. Our liquid creamers are differentiated by functional mushroom extracts in their ingredient set. Powdered creamers have the further appeal of shelf stability and on-the-go convenience.
Sales through Amazon.com accounted for 19% and 16% of our total net sales in 2022 and 2021, respectively.
We sell a number of our SKUs on Amazon.com , including our Liquid Superfood creamers. Sales through Amazon.com accounted for 17% and 19% of our total net sales in 2023 and 2022, respectively.
We view this data as indicative of expected customer usage patterns across all channels on the basis of historic trend analysis. Subscriptions play an important role in driving retention rates for our e-commerce direct-to-consumer ("DTC") business at lairdsuperfood.com and pickybars.com and in 2022 and 2021 subscriptions made up 40% and 39% of our DTC net sales, respectively.
Subscriptions play an important role in driving retention rates for our e-commerce direct-to-consumer ("DTC") business at lairdsuperfood.com and pickybars.com and in 2023 and 2022 subscriptions made up 55% and 40% of our DTC net sales, respectively. In addition to subscriptions, our DTC business has a high percentage of repeat users.
Content on our websites allow Laird Superfood to educate consumers on the benefits of our products and ingredients, market and cross-sell new products. It also facilitates our subscription business. 9 For sales through Amazon.com , we utilize both fulfilled by Amazon (“FBA”) and fulfilled by merchant ("FBM") distribution processes.
Content on our websites allows Laird Superfood to educate consumers on the benefits of our products and ingredients, and to market and cross-sell new products. It also facilitates our subscription business and establishing consumer loyalty through our brand story, ingredient transparency, and consumer FAQ.
This law exposes all food and beverage producers to the possibility of having to provide warnings on their products. 12 Environmental Regulations We are also subject to various U.S. federal, state and local environmental regulations.
This law exposes all food and beverage producers to the possibility of having to provide warnings on their products. We believe that we are in material compliance with existing food-related regulations applicable to our business.
Renew products compete in the ready-to-drink protein powder market which is highly fragmented. According to Grandview Research, the protein supplement industry was estimated to be $6.3 billion in 2021. Ready-to-drink and pre-formulated drinks were anticipated to demonstrate the fastest revenue growth in the segment.
Our protein powder products compete in the ready-to-drink protein powder market which is highly fragmented. According to Grandview Research, the US protein supplement industry was estimated to reach slightly over $2 billion in 2023.
In both 2022 and 2021, wholesale made up 37% of our net sales. Laird Superfood products are sold through a diverse set of retail channels, including conventional, natural and specialty grocery, club, outdoor, drug stores, and food service which consists of local and regional coffee shops, juice bars, corporate offices, hotels, restaurants, college campuses, professional sports teams and gyms.
Our net sales from our e-commerce business are reflected below: Year Ended December 31, 2023 2022 Lairdsuperfood.com and Pickybars.com $ 13,660,274 $ 15,350,333 Amazon.com 5,783,611 6,962,908 Total e-commerce sales, net $ 19,443,885 $ 22,313,241 Wholesale Laird Superfood products are sold through a diverse set of retail channels, including conventional, natural and specialty grocery, club, and food service which consists of local and regional coffee shops, juice bars, corporate offices, hotels, restaurants, college campuses, professional sports team facilities, and gyms.
Activate, Renew, and Performance Mushroom Supplements Our Activate and Renew product lines compete in the $152 billion global vitamin and supplements market. Activate products compete largely as an alternative to single-serve cold-pressed juices which frequently focus on similar ingredients (lemon cayenne mixes, and superfood greens mixes), and certain other powdered beverages.
Morning Jumpstart competes largely as an alternative to single-serve cold-pressed juices which frequently focus on similar ingredients (lemon cayenne mixes, and superfood greens mixes), and certain other powdered beverages. The product is set apart from many due to the lack of added sweeteners and convenient powdered form.
ITEM 1. BUSINESS. 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 Coffee creamers, Hydration products and beverage enhancing supplements, Harvest snacks and other food items, and Coffee, tea, and hot chocolate products.
The core pillars of the Laird Superfood platform are Superfood Coffee creamers, Hydration and beverage enhancing supplements including powdered supplements such as Performance Mushrooms, Harvest snacks and other food items, and functional Coffee, tea and hot chocolate products such as our instant lattes.
Other state and local statutes and regulations may impose additional food labeling requirements.
We believe we are in compliance with applicable FDA claims regulations. 11 Table of Contents Other state and local statutes and regulations may impose additional food labeling requirements.
The main benefits of our beverage enhancing supplements are a plant-based, less processed and recognizable ingredients set. Harvest Snacks and Other Food Items Picky Bars, Performance Oatmeal, and Performance Granolas Laird Superfood acquired Picky Bars in May 2021 and began selling their portfolio of better-for-you foods.
Harvest Snacks and Other Food Items Bars, Oatmeal, and Granolas Laird Superfood acquired Picky Bars in May 2021 and began selling their portfolio of better-for-you foods including lines of bars, oatmeal, and granolas. Since the acquisition, we launched Laird Superfood branded Protein Bars and Picky Bars branded Nut Butter Bars, which are clean alternatives to a broad protein bar market.
Liquid creamers provide the added benefits of being on the perimeter refrigerated shelf space, as well as a lower price point per unit.
Liquid creamers provide the added benefits of being on the perimeter refrigerated shelf space and a lower price point per unit. Though the more sizable category, liquid creamer plant-based innovation has been limited due to differences in base, flavor, and sugar levels.
Diversity and Inclusion We believe diversity and inclusion enable the company to benefit from multiple points of view and broad thinking innovation. Diversity and inclusion better positions us to understand our customers’ needs and to ultimately succeed in our vision of providing better food for a better world.
Diversity and inclusion better positions us to understand our customers’ needs and to ultimately succeed in our vision of providing better food for a better world. Our workforce is likewise gender diverse. We continue to seek opportunities for building an inclusive culture that encourages, supports, and celebrates the diverse voices of our world.
In addition to subscriptions, our DTC business has a high percentage of repeat users. In 2022 and 2021, 83% and 77% of the DTC net sales came from either subscribers or repeat users.
In 2023 and 2022, 81% and 83% of the DTC net sales came from either subscribers or repeat users. Subscriptions on Amazon.com reached 19% of sales in that channel in 2023 and are growing.
In addition, the Federal Communications Commission (“FCC”) monitors claims made by companies, particularly with celebrity spokespeople. Our importers, packers, distributors, and suppliers are also subject to various laws and regulations relating to environmental protection and worker health and safety matters.
In addition, the Federal Communications Commission (“FCC”) monitors claims made by companies, particularly with celebrity spokespeople.
We have relationships with local and targeted colleges and universities to supply key talent in areas like Food Science and Quality Assurance. We have also developed a partnership with our community high school to offer skills training and career experience to establish a pipeline of talent for our front-line workforce.
We have relationships with local and targeted colleges and universities to supply key talent in areas like Food Science and Quality Assurance. Onboarding and Communication In order to create a high-performing team, we establish a firm foundation of business understanding through a robust and cross-functional onboarding process.
Additionally, we offer internal training on targeted competencies such as giving and receiving feedback and effective goal setting. Succession Planning We have a formal succession planning process that is designed to work in concert with our talent review and performance management processes.
Additionally, we offer internal training on targeted competencies, such as giving and receiving feedback and effective goal setting. A systematic and regular review of our internal talent is critical to meeting the future needs of our business. Compensation and Benefits Our total rewards program is designed to ensure our talented team is both fairly paid and rewarded for performance.
Hydration and Beverage Enhancing Supplements Laird Superfood’s hydration and beverage enhancing supplement portfolio includes our Hydrate coconut water products, our Activate Platform, our Performance Mushroom and Mushroom Botanical supplements, and our Renew Platform. 8 Hydrate Hydrate is our line of powdered coconut water.
Hydration and Beverage Enhancing Supplements Laird Superfood’s hydration and beverage enhancing supplement portfolio includes our beverage enhancing supplements, including Prebiotic Daily Greens, Antioxidant Daily Reds, Performance Mushrooms, and protein powders, and Morning Jumpstart, as well as our Hydrate coconut water products.
The hot chocolate market is estimated to reach $4.2 billion in the U.S. in 2023 according to Statista. Because it is being made with coconut sugar rather than refined sugars and includes functional mushrooms, we believe our hot chocolate product to be highly differentiated from legacy hot chocolate brands.
Because our Hot Chocolate with Functional Mushrooms are made with coconut sugar rather than refined sugars and include functional mushrooms, we believe our hot chocolate product to be highly differentiated from conventional hot chocolate brands. Whole Bean, and Functional Ground and K-Cup Coffees Coffees offer an intuitive and complementary sale to customers purchasing our creamers.
Powdered coffee creamers have historically represented a smaller , lower-price-point segment of the coffee creamer market, but we believe our powdered Superfood Creamers are expanding that segment and competing for customers who historically have purchased liquid coffee creamers. Liquid Coffee Creamers Our liquid coffee creamers were developed internally based on naturally sourced, delicious and functional ingredients.
We believe our powdered Superfood Creamers are expanding that segment and bringing new consumers into the set by establishing a premium product proposition - great taste, recognizable ingredient lists, and functional ingredients such as mushrooms that support the body and mind. Liquid Coffee Creamers Our liquid coffee creamers were developed internally based on naturally sourced, delicious and functional ingredients.
The majority of our business is currently conducted online, and we expect that percentage will decrease over time due to our anticipated roll-out across physical retail channels as our retail distribution and product assortment grows. We have multiple years of cohort data on all customers that have ordered through our direct website.
We have multiple years of cohort data on all customers that have ordered through our direct website and have conducted custom segmentation research. We view this data as indicative of expected customer usage patterns across all channels on the basis of historic trend analysis.
Functional Whole Bean and Ground Coffee Coffees offer an intuitive and complementary sale to individuals purchasing our creamers and we believe that our organic coffee blended with functional mushrooms is a point of differentiation in the coffee segment. Our coffees are sourced from Peru, and are a hand-picked, high altitude, shade grown variety selected for their low acidity.
Available in whole, ground, and k-cup formats, the Laird Superfood lines can match any consumer ritual. Our coffees are a hand-picked, high altitude, shade grown variety selected for their low acidity. The caffeine from our coffee, combined with the naturally occurring MCTs in our creamers, provides sustained energy that many consumers seek.
Coffee, tea, and hot chocolate products include traditional and functional ground and whole bean coffee, Hot Chocolate with Functional Mushrooms, and our InstaFuel line of just-add-water coffee and tea products. Other products include miscellaneous branded goods, such as coffee mugs, thermoses, t-shirts, and hats. Coffee Creamers Laird Superfood sells powdered and liquid coffee creamer.
Hydration and beverage enhancing supplements include sales of Hydrate coconut waters and our supplement lines. Harvest snacks and other food items primarily include protein bars. Coffee, tea, and hot chocolate products include traditional and functional mushroom ground and whole bean coffee, hot chocolate with functional mushrooms, and our Instant Latte line of just-add-water coffee and tea products.
We offer competitive benefits to ensure that our employees are provided for across the full range of employee rewards, including an equity grant program. We also offer employer paid medical and vision insurance, dental insurance, life and short-term disability insurance, a retirement savings plan.
We also offer employer paid medical and vision insurance, dental insurance, life and short-term disability insurance, paid time off, and a retirement savings plan with an employer safe harbor contribution. 13 Table of Contents Diversity and Inclusion We believe diversity and inclusion enable the company to benefit from multiple points of view and broad thinking innovation.
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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. There is also increasing recognition of the environmental impact of animal-based products.
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ITEM 1. BUSINESS. When used in this Annual Report on Form 10-K, the terms "Laird Superfood", the "Company", "we", "our", and "us" refer to Laird Superfood, Inc. Overview Laird Superfood is focused on manufacturing and marketing clean, plant-based, and functional foods.
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Exposure to Plant-Based, Functional and Natural Foods Portions of Grocery Market Within the grocery category, there is an ongoing secular shift from highly processed legacy brands that demonstrate little nutritional benefit to natural, nutrient-dense, functional and plant-based alternatives.
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Recent Developments Redomestication On December 31, 2023 (the “Effective Date”), we changed our state of incorporation from the state of Delaware to the state of Nevada (the “Redomestication”) by means of a plan of conversion, as described in our definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on October 10, 2023.
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Maximize Market Penetration of Existing Product Lines Laird Superfood’s current product lines address multi-billion-dollar market opportunities with differentiated products. We believe penetrating these core markets with our differentiated product lines will create large and long-duration growth opportunities in the near-term.
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As of the Effective Date: ● our domicile changed from the state of Delaware to the state of Nevada; and ● the affairs of the Company ceased to be governed by the Delaware General Corporation Law and the Company’s then existing certificate of incorporation and bylaws, and instead became governed by the Nevada Revised Statutes and the Company's new articles of incorporation and bylaws.
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Hydration and beverage enhancing supplements include sales of Hydrate coconut waters, Activate and Renew supplement lines, and mushroom botanical blends. Harvest snacks and other food items include ready to eat food offerings as well as baking and pancake mixes.
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The Redomestication was previously submitted to a vote of, and was approved by, the Company's stockholders at our Annual Meeting of Stockholders held on November 28, 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

69 edited+18 added−27 removed186 unchanged
Biggest changeIn addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” shareholder for a period of three years following the date on which the shareholder becomes an “interested” shareholder. 29 We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
Biggest changeThese provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our common stock to decline. 27 Table of Contents We are an “ emerging growth company, ” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
While we have implemented administrative and technical controls, maintained information security training programs, maintained external reviews, and taken other preventive actions to reduce the risk of cyber incidents and protect our information technology, they may be insufficient to prevent physical and electronic break-ins, cyber-attacks, ransomware attacks, or other security breaches to our computer systems, which could have a material adverse effect on our business, financial condition or results of operations.
While we have implemented administrative and technical controls, maintained information security training programs, perpetuated external reviews, and taken other preventive actions to reduce the risk of cyber incidents and protect our information technology, they may be insufficient to prevent physical and electronic break-ins, cyber-attacks, ransomware attacks, or other security breaches to our computer systems, which could have a material adverse effect on our business, financial condition or results of operations.
We depend upon internet search engines and other providers of digital advertising to attract a significant portion of our potential customers to our website, and any change in the prominence of our website in either paid or algorithmic search result listings or an increase in purchasing digital ads could cause the number of visitors to our website and our revenue to decline.
We depend upon internet search engines and other providers of digital advertising to attract a significant portion of our potential customers to our websites, and any change in the prominence of our website in either paid or algorithmic search result listings or an increase in purchasing digital ads could cause the number of visitors to our websites and our revenue to decline.
For example, internet search websites frequently revise their algorithms in an attempt to optimize their search result listings or to implement their internal standards and strategies. Changes in the algorithms could cause our website to receive less favorable placements, which could reduce the number of users who visit our website.
For example, internet search websites frequently revise their algorithms in an attempt to optimize their search result listings or to implement their internal standards and strategies. Changes in the algorithms could cause our websites to receive less favorable placements, which could reduce the number of users who visit our websites.
We rely on both algorithmic and paid search results, as well as digital advertising on other websites and through other providers, to direct a substantial share of the visitors to our website. Our ability to maintain the number of visitors to our website from internet search websites and other websites is not entirely within our control.
We rely on both algorithmic and paid search results, as well as digital advertising on other websites and through other providers, to direct a substantial share of the visitors to our websites. Our ability to maintain the number of visitors to our websites from internet search websites and other websites is not entirely within our control.
We depend in significant part on various internet search engines, such as Google, and other providers of digital advertising to direct a significant number of potential customers to our website. Search websites typically provide two types of search results, algorithmic and paid listings.
We depend in significant part on various internet search engines, such as Google, and other providers of digital advertising to direct a significant number of potential customers to our websites. Search websites typically provide two types of search results, algorithmic and paid listings.
A product liability judgment against us or a product recall could have a material adverse effect on our business, financial condition, results of operations or liquidity. 21 We may be subject to significant liability that is not covered by insurance.
A product liability judgment against us or a product recall could have a material adverse effect on our business, financial condition, results of operations or liquidity. We may be subject to significant liability that is not covered by insurance.
We believe that our ability to compete successfully in this market depends upon many factors both within and beyond our control, including: • the size and composition of our customer base; • the number of products that we feature on our website; • the quality and responsiveness of customer service; • our selling and marketing efforts; • the quality and price of the products that we offer; • the convenience of the shopping experience that we provide; • rapid changes affecting global, national, and regional economies; • our ability to manage our third-party manufacturing and logistics partners; and • our reputation and brand strength.
We believe that our ability to compete successfully in this market depends upon many factors both within and beyond our control, including: • the size and composition of our customer base; • the number of products that we feature on our websites; • the quality and responsiveness of customer service; • our selling and marketing efforts; • the quality and price of the products that we offer; • the convenience of the shopping experience that we provide; • rapid changes affecting global, national, and regional economies; • our ability to manage our third-party manufacturing and logistics partners; and • our reputation and brand strength.
The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment. Economic and business factors could result in impairment of goodwill and intangible assets.
The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment. Economic and business factors could result in impairment of intangible assets.
In addition, our certificate of incorporation provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, unless we consent in writing to the selection of an alternative forum. This exclusive forum provision does not apply to claims under the Exchange Act.
In addition, our articles of incorporation provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, unless we consent in writing to the selection of an alternative forum. This exclusive forum provision does not apply to claims under the Exchange Act.
These provisions include the following: • authorizing the issuance of “blank check” preferred stock that could be issued by our board of directors to defend against a takeover attempt; • providing that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office rather than by shareholders; • advance notice procedures, which apply for shareholders to nominate candidates for election as directors or to bring matters before an annual meeting of shareholders; • no authorization of cumulative voting, which limits the ability of minority shareholders to elect director candidates; • certain amendments to our amended and restated certificate of incorporation require the approval of two-thirds of the then outstanding voting power of our capital stock; • our amended and restated certificate of incorporation requires the approval of two-thirds of the then outstanding voting power of our capital stock for shareholders to adopt, amend, alter or repeal our bylaws, or adopt any provision inconsistent with our bylaws; • a prohibition on shareholder action by written consent, which means that our shareholders will only be able to take action at a meeting of shareholders; and • preventing shareholders from calling special meetings.
These provisions include the following: • authorizing the issuance of "blank check" preferred stock that could be issued by our board of directors to defend against a takeover attempt; • providing that vacancies on our board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office rather than by shareholders; • advance notice procedures, which may apply for shareholders to nominate candidates for election as directors or to bring matters before an annual meeting of shareholders; • no authorization of cumulative voting, which limits the ability of minority shareholders to elect director candidates; • certain amendments to our articles of incorporation require the approval of two-thirds of the then outstanding voting power of our capital stock; • our amended and restated certificate of incorporation requires the approval of two-thirds of the then outstanding voting power of our capital stock for shareholders to adopt, amend, alter, or repeal our bylaws, or to adopt any provision inconsistent with our bylaws; • a prohibition on shareholder action by written consent, which means that our shareholders will only be able to take action at a meeting of shareholders; and • preventing shareholders from calling special meetings.
If visits to our website decrease, our revenue may decline, and we may need to resort to more costly sources to acquire new customers and such decreased revenue and/or increased expense could materially and adversely affect our business and profitability. Our customer acquisition costs may increase, and our customer lifetime values may decrease, harming our margins and results.
If visits to our websites decrease, our revenue may decline, and we may need to resort to more costly sources to acquire new customers and such decreased revenue and/or increased expense could materially and adversely affect our business and profitability. Our customer acquisition costs may increase, and our customer lifetime values may decrease, harming our margins and results.
If any of the risks and uncertainties described below or elsewhere in this annual report on Form 10-K occur, the Company’s business, financial condition, or results of operations could be materially adversely affected. Risks Relating to Our Limited Operating History, Financial Position and Capital Needs We are an early-stage company and have incurred significant losses since our inception.
If any of the risks and uncertainties described below or elsewhere in this Annual Report on Form 10-K occur, the Company ’ s business, financial condition, or results of operations could be materially adversely affected. Risks Relating to Our Limited Operating History, Financial Position and Capital Needs We are an early-stage company and have incurred significant losses since our inception.
Decreases in our customers’ sales volumes or orders for products supplied by us may have a material adverse effect on our business, financial condition or results of operations. Failure to maintain sufficient quality and capacity with third-party partners on terms that are beneficial for us may result in our inability to meet customer demand and/or may increase our operating costs.
Decreases in our customers’ sales volumes or orders for products supplied by us may have a material adverse effect on our business, financial condition or results of operations. 22 Table of Contents Failure to maintain sufficient quality and capacity with third-party partners on terms that are beneficial for us may result in our inability to meet customer demand and/or may increase our operating costs.
Our rapid growth since inception placed, and may continue to place, significant demands on our organizational, administrative and operational infrastructure, including manufacturing operations, quality control, technical support and customer service, sales force management and general and financial administration.
Our growth since inception has placed, and may continue to place, significant demands on our organizational, administrative and operational infrastructure, including manufacturing operations, quality control, technical support and customer service, sales force management and general and financial administration.
Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. Risks Relating to Our Business Our reliance on third parties to produce and distribute our products while meeting their contractual, regulatory and other obligations to us could have an adverse effect on our business.
Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. 16 Table of Contents Risks Relating to Our Business Our reliance on third parties to produce and distribute our products while meeting their contractual, regulatory and other obligations to us could have an adverse effect on our business.
The failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions and third-party lawsuits such as: • warning letters; • fines; • injunctions; • civil penalties and civil lawsuits; • termination of distribution; • recalls or seizures of products; • delays in the introduction of products into the market; and • total or partial suspension of production. 26 Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and harm our reputation, business, financial condition and results of operations.
The failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions and third-party lawsuits such as: • warning letters; • fines; • injunctions; • civil penalties and civil lawsuits; • termination of distribution; • recalls or seizures of products; • delays in the introduction of products into the market; and • total or partial suspension of production. 24 Table of Contents Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and harm our reputation, business, financial condition and results of operations.
We may continue to incur losses for the foreseeable future. We are an early-stage company. We were formed and commenced operations in June 2015. We face all the risks faced by newer companies, including significant competition from existing and emerging competitors, many of which are established and have access to capital.
We may continue to incur losses for the foreseeable future. We are an early-stage company. We were formed and commenced operations in June 2015. We face all the risks faced by newer companies, including significant competition from existing and emerging competitors, many of which are established and have greater access to capital than we do.
Failure to find a suitable replacement, even on a temporary basis, would have a material adverse effect on our ability to meet our current production targets, make it difficult to grow and would have an adverse effect on our results of operations.
Failure to find a suitable replacement, even on a temporary basis, would have a material adverse effect on our ability to meet our current production targets, make it difficult to grow and would hurt our results of operations.
We have experienced and continue to experience fluctuations in the search result rankings for our website. In addition, the prominence of the placement of our advertisements is in part determined by the amount we are willing to pay for the advertisement.
We have experienced and continue to experience fluctuations in the search result rankings for our websites. In addition, the prominence of the placement of our advertisements is in part determined by the amount we are willing to pay for the advertisement.
Other factors, such as search engine technical difficulties, search engine technical changes and technical or presentation changes we make to our website, could also cause our website to be listed less prominently in algorithmic search results.
Other factors, such as search engine technical difficulties, search engine technical changes and technical or presentation changes we make to our websites, could also cause our websites to be listed less prominently in algorithmic search results.
If we fail to compete successfully in this market, our business, financial condition, and results of operations would be materially and adversely affected. We may not be able to successfully implement our growth strategy for our brand on a timely basis or at all.
If we fail to compete successfully in this market, our business, financial condition, and results of operations would be materially and adversely affected. 17 Table of Contents We may not be able to successfully implement our growth strategy for our brand on a timely basis or at all.
Any adverse effect on the placement of our website in search engine results could reduce the number of users who visit our website and drive up the cost of customer acquisition.
Any adverse effect on the placement of our websites in search engine results could reduce the number of users who visit our websites and drive up the cost of customer acquisition.
Reece, or our products or packaging on social or digital media could seriously damage our brands and reputation. We rely on retailers and distributors for a substantial portion of our sales, and our failure to maintain and further develop our sales channels could harm our business.
Reece, or our products or packaging on social or digital media could seriously damage our brands and reputation. 21 Table of Contents We rely on retailers and distributors for a substantial portion of our sales, and our failure to maintain and further develop our sales channels could harm our business.
We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs, however such costs may be material to our business. 28 If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs, however such costs may be material to our business. 26 Table of Contents If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our articles of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our shareholders, which could limit our shareholders ’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our ability to implement our growth strategy depends, among other things, on our ability to: • develop and introduce new and appealing products in our portfolio of brands and successfully innovate on our existing products; • successfully compete in the product categories in which we choose to operate; • attract and maintain a large customer base and develop and grow that customer base; • increase awareness of our portfolio of brands and develop effective marketing strategies to ensure consumer loyalty; • establish and maintain strategic relationships with key sales, marketing, manufacturing and distribution providers; and • attract, retain and motivate qualified personnel. 18 We may not be able to implement this growth strategy successfully.
Our ability to implement our growth strategy depends, among other things, on our ability to: • develop and introduce new and appealing products in our portfolio of brands and successfully innovate on our existing products; • successfully compete in the product categories in which we choose to operate; • attract and maintain a large customer base and develop and grow that customer base; • increase awareness of our portfolio of brands and develop effective marketing strategies to ensure consumer loyalty; • establish and maintain strategic relationships with key sales, marketing, manufacturing and distribution providers; and • attract, retain and motivate qualified personnel.
Laird Hamilton’s and Gabrielle Reece’s involvement with other business and personal ventures might interfere with their ability to fully engage with their Company obligations. Mr. Hamilton and Ms. Reece may engage in outside business activities from time to time, including the XPT Extreme Performance Training brand, Laird Apparel and various endorsement opportunities.
Laird Hamilton ’ s and Gabrielle Reece ’ s involvement with other business and personal ventures might interfere with their ability to fully engage with their Company obligations. Mr. Hamilton and Ms. Reece may engage in outside business activities from time to time, including the XPT Extreme Performance Training brand, Laird Apparel and various endorsement opportunities.
However, it is possible that our use, and that of our employees, of testimonials in the advertising and promotion of our products will be significantly impacted and therefore might negatively affect our sales. 27 We may face scrutiny from evolving state regulations concerning health, safety, our supply chain and marketing.
However, it is possible that our use, and that of our employees, of testimonials in the advertising and promotion of our products will be significantly impacted and therefore might negatively affect our sales. 25 Table of Contents We may face scrutiny from evolving state regulations concerning health, safety, our supply chain and marketing.
Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.
Furthermore, the enforceability of similar choice of forum provisions in other companies’ governing documents has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.
We sell a substantial portion of our products through retailers such as Costco, Natural Grocers, CVS, Kroger and REI, distributors such as United Natural Foods, Inc. and KeHE Distributors, and online through Amazon.com , and we depend on these third parties to sell our products to consumers.
We sell a substantial portion of our products through retailers such as Costco, through distributors such as United Natural Foods, Inc. and KeHE Distributors, and online through Amazon.com , and we depend on these third parties to sell our products to consumers.
If we raise funds through collaborations and licensing arrangements, we might be required to relinquish significant rights or grant licenses on terms that are not favorable to us. 16 Our limited operating history may make it difficult to assess our future viability.
If we raise funds through collaborations and licensing arrangements, we might be required to relinquish significant rights or grant licenses on terms that are not favorable to us. 15 Table of Contents Our limited operating history may make it difficult to assess our future viability.
All of these activities are subject to the uncertainties associated with international business operations, including: • difficulties with foreign and geographically dispersed operations; • having to comply with various U.S. and international laws; • changes and uncertainties relating to foreign rules and regulations; • tariffs, export or import restrictions, restrictions on remittances abroad, imposition of duties or taxes that limit our ability to import necessary materials; • limitations on our ability to enter into cost-effective arrangements with distributors, or at all; • fluctuations in foreign currency exchange rates; • imposition of limitations on production, sale or export in foreign countries, including due to pandemic or quarantine; • imposition of limitations on or increase of withholding and other taxes on remittances and other payments by foreign processors or joint ventures; • imposition of differing labor laws and standards; • economic, political, environmental, health-related or social instability in foreign countries and regions (such as in Sri Lanka in 2022 and Peru in 2023); • an inability, or reduced ability, to protect our intellectual property; • availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us; • difficulties in recruiting and retaining personnel, and managing international operations; • difficulties in enforcing contracts and legal decisions; • less developed infrastructure.
All of these activities are subject to the uncertainties associated with international business operations, including: • difficulties with foreign and geographically dispersed operations; • having to comply with various U.S. and international laws; • changes and uncertainties relating to foreign rules and regulations; • tariffs, export or import restrictions, restrictions on remittances abroad, imposition of duties or taxes that limit our ability to import necessary materials; • limitations on our ability to enter into cost-effective arrangements with distributors, or at all; • fluctuations in foreign currency exchange rates; • imposition of limitations on production, sale or export in foreign countries, including due to pandemic or quarantine; • imposition of limitations on or increase of withholding and other taxes on remittances and other payments by foreign processors or joint ventures; • imposition of differing labor laws and standards; • economic, political, environmental, health-related or social instability in foreign countries and regions (such as in Sri Lanka in 2022 and Peru in 2023); • an inability, or reduced ability, to protect our intellectual property; • availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us; • difficulties in enforcing contracts and legal decisions; • less developed infrastructure. 18 Table of Contents If we expand into other target markets, we cannot assure you that our expansion plans will be realized, or if realized, be successful.
Our Laird Superfood products are new, and our industry is rapidly evolving. Some of our Laird Superfood products are new and are only in early stages of commercialization, and some products that are important to our growth strategy are in various stages of research and development and have not yet been commercialized.
Some of our Laird Superfood products are only in early stages of commercialization, and some products that are important to our growth strategy are in various stages of research and development and have not yet been commercialized.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our shareholders; • any action asserting a claim against us, or our directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws; and • any action asserting a claim against us, or our directors, officers or employees governed by the internal affairs doctrine.
Despite becoming a Nevada corporation as of December 31, 2023, our articles of incorporation retain the provision that provides that the Court of Chancery of the State of Delaware is the exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our shareholders; • any action asserting a claim against us, or our directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or our articles of incorporation or bylaws; and • any action asserting a claim against us, or our directors, officers or employees governed by the internal affairs doctrine.
We may need additional funding in order to grow our business. To date, we have financed our operations through our initial public offering, private placements of our common and preferred stock and borrowings under loan agreements. We have devoted substantially all our financial resources and efforts to developing our products, workforce, and manufacturing capabilities.
We may need additional funding in order to grow our business. To date, we have financed our operations through our initial public offering, private placements of our common and preferred stock and borrowings under loan agreements. We have devoted substantially all our financial resources and efforts to developing our products, workforce, building awareness of our brand, and growing retail distribution.
Economic downturns could limit consumer demand for our products and negatively affect our sales and profitability. The premium organic and natural food industry is sensitive to national and regional economic conditions and the demand for the products that we distribute may be adversely affected from time to time by economic downturns that impact consumer spending, including discretionary spending.
The premium organic and natural food industry is sensitive to national and regional economic conditions and the demand for the products that we distribute may be adversely affected from time to time by economic downturns that impact consumer spending, including discretionary spending.
If a court were to find the exclusive forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business. 30 ITEM 1B. UNR ESOLVED STAFF COMMENTS. None.
If a court were to find the exclusive forum provision contained in our articles of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business. 28 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
Our future results of operations may be adversely affected by volatile commodity costs. Many aspects of our business could be directly affected by volatile commodity costs. Agricultural commodities and raw materials, including coconut milk powder, organic coconut sugar, organic extra virgin coconut oil, freeze dried coconut water and Aquamin, are the principal inputs used in our products.
Our future results of operations may be adversely affected by volatile commodity costs. Many aspects of our business could be directly affected by volatile commodity costs. Agricultural commodities and raw materials, including coconut milk powder, organic coconut sugar, organic extra virgin coconut oil, and freeze-dried coconut water.
ITEM 1A. RIS K FACTORS. Our business is subject to various risks and uncertainties. Investors should carefully read the following factors as well as the cautionary statements referred to in “Cautionary Note Regarding Forward-Looking Statements” in herein.
ITEM 1A. RISK FACTORS. Our business is subject to various risks and uncertainties. Investors should carefully read the following factors as well as the cautionary statements referred to in “ Cautionary Note Regarding Forward-Looking Statements ” included herein.
Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials or other third parties for the purpose of obtaining or retaining business.
In addition, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials or other third parties for the purpose of obtaining or retaining business.
The various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, dilution to our shareholders could result. Any equity securities issued also could provide for rights, preferences or privileges senior to those of holders of our common stock.
If we raise funds by issuing equity securities, dilution to our shareholders could result. Any equity securities issued also could provide for rights, preferences or privileges senior to those of holders of our common stock.
Additionally, we may source from new non-US suppliers over time as raw material availability changes. We also sell our products to consumers through our website and other online and physical distributors that are in foreign countries, and we may in the future enter into agreements with distributors in foreign countries to sell our products.
Additionally, we may source from new non-US suppliers over time as raw material availability changes. We may in the future enter into agreements with distributors in foreign countries to sell our products.
In addition, an increase in the value of the U.S. dollar relative to foreign currencies could require us to reduce our selling price or risk making our products less competitive in international markets. The Company has not historically hedged foreign exchange risks.
In addition, an increase in the value of the U.S. dollar relative to foreign currencies could require us to reduce our selling price or risk making our products less competitive in international markets. The Company has not historically hedged foreign exchange risks. We may be unable to adequately protect our brand and our other intellectual property rights.
Similarly, while we currently maintain insurance that is intended to cover security and information system incidents, the insurance may not cover all or any of the losses, types of claims, damages to our brand, or damages to our reputation due to the specific facts and circumstances surrounding the event, and such insurance may not remain available on advantageous terms or at all.
Similarly, while we currently maintain insurance that is intended to cover security and information system incidents, the insurance may not cover all or any of the losses, types of claims, damages to our brand, or damages to our reputation due to the specific facts and circumstances surrounding the event, and such insurance may not remain available on advantageous terms or at all. 23 Table of Contents Economic downturns could limit consumer demand for our products and negatively affect our sales and profitability.
Among these changes could be a reduction in the number of natural and organic products that consumers purchase where there are non-organic alternatives, given that many premium natural and organic products, and particularly premium natural and organic foods, often have higher retail prices than do their non-organic counterparts. 25 The failure to successfully integrate newly acquired products or businesses could negatively impact our profitability.
Among these changes could be a reduction in the number of natural and organic products that consumers purchase where there are non-organic alternatives, given that many premium natural and organic products, and particularly premium natural and organic foods, often have higher retail prices than do their non-organic counterparts.
In addition, if we are unable to effectively manage the growth of our business, the quality of our products may suffer and we may be unable to address competitive challenges, which would adversely affect our overall business, operations and financial condition. Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
In addition, if we are unable to effectively manage the growth of our business, the quality of our products may suffer and we may be unable to address competitive challenges, which would adversely affect our overall business, operations and financial condition.
We are affected by a wide range of governmental laws and regulations. Examples of regulatory agencies influencing our operations include the United States Department of Agriculture (the “USDA”), the Food and Drug Administration (the “FDA”), the Federal Trade Commission (the “FTC”), and the Environmental Protection Agency, among others.
Examples of regulatory agencies influencing our operations include the United States Department of Agriculture (the “USDA”), the Food and Drug Administration (the “FDA”), the Federal Trade Commission (the “FTC”), and the Environmental Protection Agency, among others.
Such injuries may result from inadvertent mislabeling, tampering by unauthorized third parties or product contamination or spoilage. Under certain circumstances, we have in the past been, and may be required to recall or withdraw products, suspend production of our products or cease operations, which may lead to a material adverse effect on our business.
Under certain circumstances, we have in the past been, and may be required to recall or withdraw products, suspend production of our products or cease operations, which may lead to a material adverse effect on our business.
Our present and future funding requirements will depend on many factors, including: • our ability to achieve revenue growth and improve gross margins; • the cost of expanding our operations and offerings, including our sales and marketing efforts; • the effect of competing market developments; and • costs related to international expansion.
Our present and future funding requirements will depend on many factors, including: • our ability to achieve revenue growth and further improve gross margins; • the cost of expanding our operations and offerings, including our sales and marketing efforts; • the effect of competing market developments; and The various ways we could raise additional capital carry potential risks.
Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.
Additionally, adverse weather or natural disasters, including fires, earthquakes, winter storms, droughts, or volcanic events, could impact our co-manufacturing and third-party logistics partners, which could result in significant costs and meaningfully reduce our capacity to fulfill orders and maintain normal business operations. These factors may result in lower sales volume and increased costs due increased costs of products.
Additionally, because approximately 67% of our inventory is concentrated in one geographical location by co-manufacturing and third-party logistics partners, adverse weather or natural disasters, including fires, earthquakes, winter storms, droughts, or volcanic events could result in significant costs and meaningfully reduce our capacity to fulfill orders and maintain normal business operations.
Provisions in our governing documents and under Delaware law could discourage a takeover that shareholders may consider favorable. Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management.
Any future impairment could have a material adverse effect on our business, financial condition, or results of operations. Provisions in our governing documents under Nevada law could discourage a takeover that shareholders may consider favorable. Provisions in our articles of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management.
As discussed under “Critical Accounting Estimates” included elsewhere in this report, these events could materially reduce our profitability and cash flows which could, in turn, lead to impairment of our goodwill and intangible assets.
As discussed under “Critical Accounting Estimates” included elsewhere in this report, these events could materially reduce our profitability and cash flows which could, in turn, lead to impairment of our intangible assets. Furthermore, significant negative industry or general economic, market or other trends, disruptions to our business and unexpected significant changes or planned changes in our use of intangible assets.
If we cannot maintain sufficient and satisfactory production, warehousing and distribution capacity through third-party agreements, we may be unable to meet customer demand and/or our manufacturing, distribution and warehousing costs may increase, which could negatively affect our business. 24 Our financial success depends on our ability to successfully predict changes in consumer preferences and develop successful new products and marketing strategies in response.
If we cannot maintain sufficient and satisfactory production, warehousing and distribution capacity through third-party agreements, we may be unable to meet customer demand and/or our manufacturing, distribution and warehousing costs may increase, which could negatively affect our business.
Incremental costs, including transportation, may also be incurred if we need to find alternate short-term supplies of products from alternative areas. These factors can increase costs, decrease revenues and lead to additional charges to earnings, which may have a material adverse effect on our business, results of operations and financial condition. Climate change may negatively affect our business and operations.
These factors can increase costs, decrease revenues and lead to additional charges to earnings, which may have a material adverse effect on our business, results of operations and financial condition. 20 Table of Contents Climate change may negatively affect our business and operations.
Our planned marketing expenditures may not result in increased total sales or generate sufficient levels of consumer interest or brand awareness. Our sales and results of operations will be negatively affected if we fail to implement our growth strategy or if we invest resources in a growth strategy that ultimately proves unsuccessful.
We may not be able to implement this growth strategy successfully. Our planned marketing expenditures may not result in increased total sales or generate sufficient levels of consumer interest or brand awareness.
If we expand into other target markets, we cannot assure you that our expansion plans will be realized, or if realized, be successful. We expect each market to have particular regulatory and funding hurdles to overcome and future developments in these markets, including the uncertainty relating to governmental policies and regulations, could harm our business.
We expect each market to have particular regulatory and funding hurdles to overcome and any future developments in these markets, including the uncertainty relating to governmental policies and regulations, could harm our business. If we expend significant time and resources on expansion plans that fail or are delayed, our reputation, business and financial condition may be harmed.
Additionally, an additional risk inherent in any acquisition is that we fail to realize a positive return on our investment. Regulatory Risks Our products and operations are subject to government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements could adversely affect our business and results of operations.
Regulatory Risks Our products and operations are subject to government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements could adversely affect our business and results of operations. We are affected by a wide range of governmental laws and regulations.
We are reliant on co-manufacturers and third-party logistics partners for a significant portion of our business. A failure by these partners to comply with food safety, environmental, or other laws and regulations, or to produce products of the quality and taste-profile we expect, or with efficiency and at costs we expect, may also disrupt our supply of products.
A failure by these partners to comply with food safety, environmental, or other laws and regulations, or to produce products of the quality and taste-profile we expect, or with efficiency and at costs we expect, may also disrupt our supply of products. In addition, we may experience increased distribution and warehousing costs due to capacity constraints resulting from our growth.
Depending on the function involved, such errors can also lead to business disruption, incorrect or adverse effects on financial reporting, litigation or remediation costs, and damage to our reputation, all of which could adversely affect our business. 17 In addition, we believe there are a limited number of competent, high-quality co-manufacturers in our industry, and many of our co-manufacturers produce products for other companies as well.
Depending on the function involved, such errors can also lead to business disruption, incorrect or adverse effects on financial reporting, litigation or remediation costs, and damage to our reputation, all of which could adversely affect our business.
If we do not maintain our relationship with existing retailers and distributors or develop relationships with new retailers and distributors, the growth of our business may be adversely affected, and our business may be harmed. 23 We are not the exclusive seller of our products into e-commerce channels, such as Amazon.com , and face competition in that channel from resellers of our products.
If we do not maintain our relationship with existing retailers and distributors or develop relationships with new retailers and distributors, the growth of our business may be adversely affected, and our business may be harmed.
This resulted in a product withdrawal for which we recognized $0.6 million of inventory obsolescence charges in the fourth quarter of 2022 and expect to incur less than $0.5 million of related costs in the first quarter of 2023. 22 In addition, our top suppliers are in a similar geographic area, which increases the risk of significant supply disruptions from local and regional events (such as the unrest in Sri Lanka in 2022 and in Peru in 2023).
In addition, our top suppliers are in a similar geographic area, which increases the risk of significant supply disruptions from local and regional events (such as the unrest in Sri Lanka in 2022 and in Peru in 2023).
Further, the terms of our agreements with these distributors allow us to plan for the future, maintain growth and strengthen our relationships with key customers.
We are not the exclusive seller of our products into e-commerce channels, such as Amazon.com , and face competition in that channel from resellers of our products. Further, the terms of our agreements with these distributors allow us to plan for the future, maintain growth and strengthen our relationships with key customers.
Our long-term growth and success are dependent upon our ability to generate cash from operating activities. There is no assurance that we will be able to generate sufficient cash from operations or access the capital we need to grow our business.
Our long-term growth and success are dependent upon our ability to generate cash from operating activities.
If we reduce our advertising with search engines, our consumer traffic may significantly decline, or we may be unable to maintain a cost-effective search engine marketing program. On October 20, 2020, the United States Department of Justice brought an antitrust lawsuit against Google claiming that Google improperly uses its monopoly over internet search to impede competition and harm consumers.
If we reduce our advertising with search engines, our consumer traffic may significantly decline, or we may be unable to maintain a cost-effective search engine marketing program.
We are subject to the periodic reporting requirements of the Exchange Act.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud. We are subject to the periodic reporting requirements of the Exchange Act.
A food safety or quality issue that results in a product disruption such as a recall, health issue, or death of a consumer could harm our business. The sale of products for human use and consumption involves the risk of injury or illness to consumers.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. 19 Table of Contents A food safety or quality issue that results in a product disruption such as a recall, health issue, or death of a consumer could harm our business.
For example, in the first quarter of 2023, we identified a product quality issue which was traced back to one supplier of coconut milk powder.
For example, in the first quarter of 2023, we discovered a product quality issue with coconut milk powder from one of our suppliers and immediately initiated a voluntary product withdrawal and contacted all impacted wholesaler customers and e-commerce customers to aggressively pull back as much of the affected product as possible.
Removed
If we expend significant time and resources on expansion plans that fail or are delayed, our reputation, business and financial condition may be harmed. 19 In addition, we could be adversely affected by violations of the U.S.
Added
Although our goal is to generate cash from operations to sustain our expenses into the foreseeable future, and while we have substantially reduced our quarterly cash burn from historic levels as evidenced by generating positive cash flows from operations in the fourth quarter of 2023, there is no assurance that we will be able to generate sufficient cash from operations or access the capital we need to grow our business long-term.
Removed
Pandemics, epidemics, or disease outbreaks, such as the COVID-19 pandemic, could have a material adverse impact on our business including, among other things, consumption and trade patterns, our supply chain and production processes, each of which could materially affect our operations, liquidity, financial condition, and results of operations.
Added
We have a history of losses, and we may be unable to sustain profitability and positive cash flows from operating activities. Although we achieved profitability and positive cash flow from operations during the three months ended December 31, 2023, we have experienced losses in every period since the company’s inception.
Removed
The actual or perceived effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern, such as COVID-19, could negatively affect our operations, liquidity, financial condition and results of operations. Pandemics, epidemics or disease outbreaks may affect demand for our products because quarantines or other government restrictions on movement may cause erratic consumer purchase behavior.
Added
We may not be able to sustain free cashflow positive operations in other future periods or be profitable in the future. In 2023 and 2022, we incurred net losses of $10.2 and $40.3 million respectively.
Removed
Governmental or societal impositions of restrictions on public gatherings, especially if prolonged, may have adverse effects on in-person traffic to retail stores, and in turn, our business.
Added
Although we significantly decreased our operating expenses in 2023 compared to the prior-year period, over time our operating expenses may increase as we hire additional employees; support our strategic and other customer relationships; innovate and commercialize products; build our brand, expand our marketing channels and drive consumer adoption of our products; increase our customer base, supplier network and co-manufacturing partners and review geographic expansion.
Removed
Even the perceived risk of infection or health risk may adversely affect traffic to our store-based retail customers and, in turn, our business, liquidity, financial condition and results of operations, particularly if any self-imposed or government-imposed restrictions are in place for significant time.
Added
These efforts may prove more expensive than we anticipate, and we may not succeed in increasing our revenues and margins sufficiently to offset the anticipated higher expenses. Accordingly, we may not be able to successfully implement our long-term growth strategies or achieve or sustain profitability, and we may incur significant losses for the foreseeable future.
Removed
The spread of pandemics, epidemics or disease outbreaks such as COVID-19 may also disrupt our third-party business partners’ ability to meet their obligations to us, which may negatively affect our operations. These third parties include those who supply our ingredients, packaging, and other necessary operating materials, contract manufacturers, distributors, and logistics and transportation services providers.

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Item 2. Properties

Properties — owned and leased real estate

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Removed
During the years ended December 2022 and 2021, we leased approximately 6,888 square feet of commercial space for manufacturing, distribution and related office use in one building, a second lease provided us approximately 13,600 square feet of further commercial space for manufacturing, distribution and related office use, and a third lease provided us with approximately 28,600 square feet for our customer fulfillment center.
Added
ITEM 2. PROPERTIES. We sublease our corporate headquarters at 5303 Spine Road, Suite 204, Boulder, Colorado, 80301. The term of the lease extends through July 1, 2027. We believe our leased space is adequate for our current needs and that suitable additional or substitute space would be available if needed.
Removed
These leases were terminated on January 31, 2023, as we transitioned to a co-manufacturing business model. We sublease our corporate headquarters at 5303 Spine Road, Suite 204, Boulder, Colorado, 80301. The term of the lease extends through December 31, 2023.
Removed
We believe our leased space is adequate for our current needs and that suitable additional or substitute space would be available if needed. ITEM 3. LEG AL PROCEEDINGS. We are not subject to any material legal proceedings. ITEM 4. MINE SAF ETY DISCLOSURES. Not applicable. 31 PAR T II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability and other factors that our board of directors may deem relevant. ITEM 6. [ R ESERVED]. 32
Biggest changeAny such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability and other factors that our board of directors may deem relevant.
Holders As of March 14, 2023, there were [54] holders of record of our common stock. This number does not include beneficial owners whose shares are held by nominees in street name.
Holders As of March 5, 2024, there were 54 holders of record of our common stock. This number does not include beneficial owners whose shares are held by nominees in street name.
ITEM 5. MARKET FOR REGISTRANT’S COM MON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock began trading on the NYSE American Market under the symbol “LSF” on September 23, 2020. Prior to that date, there was no public trading market for our common stock.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock began trading on the NYSE American Market under the symbol “LSF” on September 23, 2020. Prior to that date, there was no public trading market for our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

39 edited+27 added−32 removed19 unchanged
Biggest changeResults of Operations Comparison of the years ended December 31, 2022 (“FY2022”) and December 31, 2021 (“FY2021”) The following table summarizes our results of operations: Year Ended December 31, $ % 2022 2021 Change Change Sales, net $ 35,828,392 $ 36,810,953 $ (982,561 ) (3 )% Cost of goods sold (30,641,125 ) (27,379,082 ) (3,262,043 ) 12 % Gross profit 5,187,267 9,431,871 (4,244,604 ) (45.0 )% Gross margin 14.5 % 25.6 % General and administrative 30,595,163 16,459,262 14,135,901 86 % Research and product development 427,537 1,030,127 (602,590 ) (58 )% Sales and marketing 14,528,704 15,894,898 (1,366,194 ) (9 )% Total expenses 45,551,404 33,384,287 12,167,117 36 % Operating loss (40,364,137 ) (23,952,416 ) (16,411,721 ) 69 % Total other income (expense) 47,088 99,704 (52,616 ) (53 )% Loss before income taxes (40,317,049 ) (23,852,712 ) (16,464,337 ) 69 % Income tax expense (20,269 ) (17,834 ) (2,435 ) 14 % Net loss $ (40,337,318 ) $ (23,870,546 ) $ (16,466,772 ) 69 % Sales, Net Year Ended December 31, 2022 v. 2021 Change 2022 2021 $ % Sales, net $ 35,828,392 $ 36,810,953 $ (982,561 ) (3 )% Net sales decreased to $35.8 million FY2022, compared to $36.8 million in FY2021.
Biggest changeResults of Operations Comparison of the years ended December 31, 2023 ( “ FY2023 ” ) and December 31, 2022 ( “ FY2022 ” ) The following table summarizes our results of operations: Year Ended December 31, $ % 2023 2022 Change Change Sales, net $ 34,224,198 $ 35,828,392 $ (1,604,194 ) (4 )% Cost of goods sold (23,910,921 ) (30,641,125 ) 6,730,204 (22 )% Gross profit 10,313,277 5,187,267 5,126,010 99 % Gross margin 30.1 % 14.5 % General and administrative 9,573,637 30,595,163 (21,021,526 ) (69 )% Research and product development 219,723 427,537 (207,814 ) (49 )% Sales and marketing 11,218,903 14,528,704 (3,309,801 ) (23 )% Total operating expenses 21,012,263 45,551,404 (24,539,141 ) (54 )% Operating loss (10,698,986 ) (40,364,137 ) 29,665,151 (73 )% Other income 551,064 47,088 503,976 1070 % Loss before income taxes (10,147,922 ) (40,317,049 ) 30,169,127 (75 )% Income tax expense (15,195 ) (20,269 ) 5,074 (25 )% Net loss $ (10,163,117 ) $ (40,337,318 ) $ 30,174,201 (75 )% Sales, Net Year Ended December 31, $ % 2023 2022 Change Change Sales, net $ 34,224,198 $ 35,828,392 $ (1,604,194 ) (4 )% Net Sales decreased to $34.2 million in FY2023, compared to $35.8 million in FY2022.
E-commerce customer acquisitions typically occur at our direct websites, lairdsuperfood.com and pickybars.com , and Amazon.com . Our e-commerce customer acquisition program includes paid and unpaid social media, search, display and traditional media. Our products are also sold through a growing number of retail channels.
E-commerce customer acquisitions typically occur at our direct websites, lairdsuperfood.com and pickybars.com , and through Amazon.com . Our e-commerce customer acquisition program includes paid and unpaid social media, search, display and traditional media. Our products are also sold through a growing number of retail channels.
Wholesale customers include grocery chains, natural food outlets, club stores, drug stores, and food service customers which 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.
Wholesale customers include grocery chains, natural food outlets, club stores, and food service customers which 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.
Variable consideration related to these programs is recorded as a reduction to revenue based on amounts we expect to pay. The transaction price contains estimates of known or expected variable consideration. We base these estimates on current performance, historical utilization, and projected redemption rates of each program.
Variable consideration related to these programs is recorded as a reduction to revenue based on amounts that we expect to pay. The transaction price contains estimates of known or expected variable consideration. We base these estimates on current performance, historical utilization, and projected redemption rates of each program.
For assets held for sale, we compare the carrying value of the disposal group to fair value. The impairment is the excess of the carrying value over the fair value of the asset. 38 Stock Incentive Plan Compensation cost relating to share-based payment transactions is measured based on the grant date fair value of the equity or liability instruments issued.
For assets held for sale, we compare the carrying value of the disposal group to fair value. The impairment is the excess of the carrying value over the fair value of the asset. Stock Incentive Plan Compensation cost relating to share-based payment transactions is measured based on the grant date fair value of the equity or liability instruments issued.
Key Factors Affecting our Performance We believe that our future performance will depend on many factors, including the following: Ability to Grow Our Customer Base in both E-commerce and Traditional Wholesale Distribution Channels We are currently seeking to grow our customer base through both paid and organic e-commerce channels, as well as by expanding our presence in a variety of physical retail distribution channels.
Key Factors Affecting our Performance We believe that our future performance will depend on many factors, including the following: Ability to Grow Our Customer Base in both E-commerce and Traditional Wholesale Distribution Channels We are currently seeking to grow our customer base through both paid and organic e-commerce channels, as well as by expanding our presence in a variety of physical retail distribution channels and geographical regions.
The fair value of the compensation is estimated utilizing valuation methods including Black-Scholes and Monte Carlo, and is calculated and recognized over the employees’ service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.
The fair value of the compensation is estimated utilizing well-established valuation methods, including Black-Scholes and Monte Carlo, and is calculated and recognized over the employees’ service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.
Ability to Expand Our Product Line Our goal is to expand our product line over time to increase our growth opportunity and reduce product-specific risks through diversification into multiple products, each designed around daily use. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time.
Ability to Expand Our Product Lines Our goal is to expand our product lines 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.
Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. 37 Revenue Recognition We recognize revenue for the sale of our product at the point in time when our performance obligation has been satisfied and control of the product has transferred to our customer, which generally occurs upon shipment or delivery to a customer based on terms of the sale.
Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. 36 Table of Contents Revenue Recognition We recognize revenue for the sale of our product at the point in time when our performance obligation has been satisfied and control of the product has transferred to our customer, which generally occurs upon shipment or delivery to a customer based on terms of the sale.
Components of Results of Operations Sales, net We sell our products indirectly to consumers through a broad set of retail outlets. We also derive revenue from the sale of our products directly to consumers through our direct websites, as well as third-party e-commerce channels such as Amazon.com .
Components of Results of Operations Sales, net We sell our products indirectly to consumers through a broad set of retail outlets. We also derive revenue from the sale of our products directly to consumers through our direct websites, lairdsuperfood.com and pickybars.com , as well as third-party e-commerce channels such as Amazon.com .
While there is inherent uncertainty in the estimated fair value of the awards, management believes that the expectations and assumptions are reasonable. Recent Accounting Pronouncements See Recently Issued Accounting Pronouncements in Note 1 to our audited consolidated financial statements included elsewhere in this Form 10-K for additional information. 39
While there is inherent uncertainty in the estimated fair value of the awards, management believes that the expectations and assumptions are reasonable. Recent Accounting Pronouncements See Recently Issued Accounting Pronouncements in Note 1 to our audited consolidated financial statements included elsewhere in this Form 10-K for additional information. 37 Table of Contents
We believe this experience leads to higher retention rates among repeat users and subscribers, as evidenced by repeat users and subscribers accounting for over three-fourths of direct-to-consumer sales for the years ended December 31, 2022 and 2021. For the years ended December 31, 2022 and 2021, wholesale made up 38% of our net sales, respectively.
We believe this experience leads to higher retention rates among repeat users and subscribers, as evidenced by repeat users and subscribers accounting for over three-quarters of direct-to-consumer sales for the years ended December 31, 2023 and 2022. For the years ended December 31, 2023 and 2022, wholesale made up 43% and 38% of our net sales, respectively.
Ability to Manage Co-Manufacturer and Third-Party Logistics Relationships All of our production and logistics will be handled by third-parties, and our performance will be highly dependent on the ability of these partners to produce and deliver our products timely and to our standards and at a reasonable cost.
Ability to Manage Co-Manufacturer and Third-Party Logistics Relationships Substantially all of our production and logistics are handled by third parties, and our performance is highly dependent on the ability of these partners to produce and deliver our products timely, to our standards, and at a reasonable cost.
Ability to Manage Our Global Supply Chain Our ability to grow and meet future demand will be affected by our ability to properly plan for and source inventory from a variety of suppliers located inside and outside the United States. We may encounter difficulties in sourcing products.
Ability to Manage Our Global Supply Chain Our ability to grow and meet future demand will be affected by our ability to properly plan for and source inventory from a variety of suppliers located inside and outside the United States.
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.
We may encounter difficulties in sourcing products. 32 Table of Contents 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.
ITEM 7. 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 consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties.
ITEM 7. 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 consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K.
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.
Laird Superfood products are sold through a diverse set of retail channels, including conventional, natural and specialty grocery, and club. 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.
These steps include transitioning out of in-house manufacturing to a fully co-manufactured model, closing manufacturing facilities and offices in Sisters, Oregon, several rounds of organizational restructuring reducing our workforce, reducing marketing and administrative investment through eliminating non-essential spend. We will continue to seek to optimize spending and gross margins.
These steps included transitioning out of in-house manufacturing to a variable cost third-party co-manufacturing business model, closing manufacturing facilities and offices in Sisters, Oregon, several rounds of organizational restructuring to optimize our headcount costs, and reducing marketing and administrative investment through eliminating non-essential spending. We will continue to seek to optimize spending and expand gross margins.
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 “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K.
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 “ Risk Factors ” and “ Cautionary Note Regarding Forward-Looking Statements ” included elsewhere in this Annual Report on Form 10-K.
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 input and shipping costs, controlling the impacts of inflationary market factors, as well as managing co-packer relationships. 34 Ability to Expand Operating Margins Our ability to expand operating margins will be impacted by our ability to cover fixed general and administrative costs and variable sales and marketing costs with higher revenues and gross profit dollars.
Ability to Expand Gross Margins Our overall profitability will be impacted by our ability to expand gross margins through effective sourcing of raw materials, controlling input and shipping costs, controlling the impacts of inflationary market factors, as well as managing co-packer relationships.
Other Income Year Ended December 31, 2022 v. 2021 Change 2022 2021 $ % Other income $ 47,088 $ 99,704 $ (52,616 ) (53 )% Other income is composed of interest income and expense, rental income, income and losses related to investment securities available-for-sale, and other non-operating gains and losses.
Other Income Year Ended December 31, $ % 2023 2022 Change Change Other income $ 551,064 $ 47,088 $ 503,976 1070 % Other income is composed of interest income and expense, rental income, income and losses related to investment securities available-for-sale, and other non-operating gains and losses.
As of December 31, 2022 and 2021, we had no outstanding notes payable and no amounts were outstanding under our lines of credit. 36 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.
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, and the introduction of new products and acquisition activity.
As of December 31, 2022, we had $17.8 million of cash-on-hand and investments and $5.0 million of available borrowings under our lines of credit. As of December 31, 2021, we had $31.7 million of cash-on-hand and investments and $12.7 million of available borrowings under our lines of credit.
As of December 31, 2022, we had $17.8 million of cash and cash equivalents on-hand and investments and $5.0 million of available borrowings under our lines of credit which expired in 2023. As of December 31, 2023 and 2022, no amounts were outstanding under our lines of credit.
Recent Developments Exit activities The Company ceased in-house manufacturing and fulfillment activities at the end of 2022 and moved strategic raw material, packaging and finished goods inventory to co-manufacturer and third-party logistics partners, disposing of the remaining inventory, and terminating its leases of manufacturing facilities effective January 31, 2023, and eliminated substantially all production and fulfillment labor.
In the third quarter of 2023, we reached settlement with the vendor to recapture these costs and have recovered $0.3 million to date. 31 Table of Contents Transition to variable cost third-party co-manufacturing business model We ceased in-house manufacturing and fulfillment activities at the end of 2022 and moved strategic raw material, packaging and finished goods inventory to co-manufacturer and third-party logistics partners, disposing of the remaining inventory, and terminating its leases of manufacturing facilities effective January 31, 2023, and eliminated substantially all production and fulfillment labor.
We expect to continue to invest in these activities as part of the strategic expansion of sales volume, however, we have made strategic shifts to reduce spending and to improve the efficacy of future customer acquisition costs. • We have drastically reduced our future rental obligations with the shutdown of the Sisters, Oregon facilities.
While we expect to continue to invest in these activities as part of the strategic expansion of sales volume, we will continue to reduce our marketing investments to reflect strategic shifts in spending and to improve the efficacy of future customer acquisition costs.
See Note 16 to our audited consolidated financial statements included elsewhere in this Form 10-K for more information. Impairment of Goodwill and Long-Lived Assets Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary.
Impairment of Goodwill and Long-Lived Assets Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary.
See Notes 7 and 8, respectively, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information on the aforementioned impairments. The remaining $2.9 million decrease is driven primarily by reduced personnel costs including stock-based compensation.
See Notes 4 and 5, respectively, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information on the aforementioned impairments and Note 1 for more information on exit and disposal costs.
Content on our websites allows Laird Superfood to educate consumers on the benefits of our products and ingredients, while providing a positive customer experience.
We view our proprietary database of customers ordering directly from our website as a strategic asset, as it enhances our ability to develop a long-term relationship with these customers. Content on our websites allows Laird Superfood to educate consumers on the benefits of our products and ingredients, while providing a positive customer experience.
We expect to continue to incur operating losses for the foreseeable future and may require additional capital resources to continue to grow our business.
We expect to incur additional operating losses as we continue efforts to grow our business.
Comparison of the years ended December 31, 2022 ("FY2022") and December 31, 2021 ("FY2021") Cash Flows The following table shows a summary of our cash flows for the periods presented: Year Ended December 31, 2022 2021 Cash flows from operating activities $ (14,312,439 ) $ (22,096,835 ) Cash flows from investing activities 8,970,740 (12,638,258 ) Cash flows from financing activities 102,267 576,247 Net change in cash $ (5,239,432 ) $ (34,158,846 ) Cash Flows used in Operating Activities Cash used in operating activities was $14.3 million for FY2022 as compared to $22.1 million used in FY2021, both of which are primarily the result of the operating losses for the periods as well as decreasing inventory levels.
The increase was primarily driven by rising interest rates in 2023, and due to 2022 other income being offset by $0.2 million of realized losses on sales of available-for-sale securities. 34 Table of Contents Comparison of the years ended FY2023 and FY2022 Cash Flows The following table shows a summary of our cash flows for the periods presented: Year Ended December 31, 2023 2022 Cash flows from operating activities $ (10,765,881 ) $ (14,312,439 ) Cash flows from investing activities 690,307 8,970,740 Cash flows from financing activities (27,422 ) 102,267 Net change in cash, cash equivalents, and restricted cash $ (10,102,996 ) $ (5,239,432 ) Cash Flows used in Operating Activities Cash used in operating activities was $10.8 million for FY2023 as compared to $14.3 million for FY2022.
We have historically financed our operations and capital expenditures through private placements of our preferred stock and common stock, our initial public offering, as well as lines of credit and term loans. Our historical uses of cash have primarily consisted of cash used in operating activities to fund our operating losses and working capital needs.
Additionally, our current business plan is to continue to utilize inventory management to reduce working capital. We have historically financed our operations and capital expenditures through private placements of our common stock, our initial public offering, our lines of credit, and term loans.
Given the transition to the co-manufacturing model, we do not expect significant capital additions in 2023. • As of December 31, 2022, $7.5 million of current liabilities were accrued related to short term operating activities. • Advertising and marketing expenditures were $10.7 million in 2022 and $12.1 million in 2021.
As of December 31, 2023, the Company had fixed lease obligations of $0.4 million, of which $0.1 million is payable within the next twelve months. • As of December 31, 2023, $4.4 million of current liabilities were accrued related to short term operating activities and personnel costs. • Advertising and marketing expenditures were $7.5 million in 2023 and $10.7 million in 2022.
Cash Flows used in Investing Activities Cash provided by investing activities was $9.0 million in FY2022 as compared to $12.6 million used in FY2021. The cash inflow in 2022 is primarily related to the sales of equipment and available-for-sale securities. The cash outflow in 2021 was primarily related to the acquisition of Picky Bars in FY2021.
The cash inflow in FY2023 was primarily related to the sales of equipment. The cash inflow in FY2022 was primarily related to the sales of land, equipment, and available-for-sale securities. Cash Flows from Financing Activities Cash used in financing activities was $27.4 thousand in FY2023 compared to cash provided of $102.3 thousand in FY2022.
Sales and marketing expense decreased to $14.5 million in FY2022 from $15.9 million in FY2021, primarily due to strategic reductions in advertising expense and marketing fees.
Sales and marketing expense decreased to $11.2 million in FY2023 from $14.5 million in FY2022, primarily due to a planned reduction in inefficient media spending and lower personnel costs.
Recent and expected working and other capital requirements, in addition to the above matters, also include the items described below: • Cash outflows for capital expenditures were $1.2 million in 2022 and $1.6 million in 2021. These investments were made to support the increase in our manufacturing and production capacity needs.
Recent and expected working and other capital requirements, in addition to the above matters, also include the items described below: • The Company has lease arrangements for corporate office space.
Liquidity and Capital Resources As of December 31, 2022, we had incurred accumulated net losses of $96.1 million, including operating losses of $40.4 million and $24.0 million for FY2022 and FY2021, respectively.
Cash used in FY2023 related to taxes withheld on stock issuances. Cash provided by investing activities in FY2022 primarily related to stock option exercises. 35 Table of Contents Liquidity and Capital Resources As of December 31, 2023, we had incurred accumulated net losses of $106.3 million, including operating losses of $10.7 million and $40.4 million for FY2023 and FY2022, respectively.
Both are necessary measures to improve our profitability in these channels. Our e-commerce business is two-pronged and consists of direct-to-consumer sales ( lairdsuperfood.com and pickybars.com ) and Amazon.com . For the years ended December 31, 2022 and 2021, the e-commerce business made up 62% of our net sales, respectively.
For the years ended December 31, 2023 and 2022, the e-commerce business made up 57% and 62% of our net sales, respectively. Lairdsuperfood.com and pickybars.com are platforms that provide an authentic brand experience for our customers that drives engagement and provides feedback for future product development.
Operating Expenses Year Ended December 31, 2022 v. 2021 Change 2022 2021 $ % Operating Expenses General and Administrative $ 30,595,163 $ 16,459,262 $ 14,135,901 86 % Research and Product Development 427,537 1,030,127 (602,590 ) (58 )% Sales and Marketing 14,528,704 15,894,898 (1,366,194 ) (9 )% Total Operating Expenses $ 45,551,404 $ 33,384,287 $ 12,167,117 36 % General and administrative expense increased to $30.6 million in FY2022 from $16.5 million in FY2021, primarily due to impairment of goodwill and long-lived acquisition intangible assets of $9.6 million, as well as exit and disposal costs including impairment charges of factory equipment, furniture, and production software of $3.2 million, losses on the termination of the Company's leases of manufacturing facilities in the amount of $3.6 million, severances and retention bonuses of $0.5 million, and other associated costs of $0.1 million.
Operating Expenses Year Ended December 31, $ % 2023 2022 Change Change Operating expenses General and administrative $ 9,573,637 $ 30,595,163 $ (21,021,526 ) (69 )% Research and product development 219,723 427,537 (207,814 ) (49 )% Sales and marketing 11,218,903 14,528,704 (3,309,801 ) (23 )% Total operating expenses $ 21,012,263 $ 45,551,404 $ (24,539,141 ) (54 )% General and administrative expense decreased to $9.6 million in FY2023 from $30.6 million in FY2022, primarily due to FY2022 charges related to impairment of goodwill and long-lived acquisition intangible assets of $9.6 million, as well as $8.7 million of exit and disposal costs.
We believe our cash, cash equivalents and marketable securities, our expected cash flow generated from operations and our expected financing activities will satisfy our working and other capital requirements for at least the next 12 months from the filing of this Annual Report on Form 10-K based on our current business plans.
Based on our current business plans, we believe that our existing cash balances, including our anticipated cash flow from operations, will be sufficient to finance our operations and meet our foreseeable cash requirements through at least the next twelve months.
Removed
Net sales decreased to $35.8 million for the year ended December 31, 2022, from $36.8 million for the year ended December 31, 2021. Consistent with our strategy for omni-channel growth, we delivered double digit growth in Retail and Amazon channels. This growth was offset by a challenging direct to consumer ("DTC") marketplace.
Added
This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below.
Removed
We were, in part, able to offset these difficulties through increased promotions designed to encourage repeat purchases. Lower media spend resulted in significant reduction of new customer orders in the year. Additionally, e-commerce sales were impacted by price increases implemented at the end of the second quarter and cancellation of free shipping.
Added
Net sales decreased to $34.2 million for the year ended December 31, 2023, from $35.8 million for the year ended December 31, 2022. Wholesale net sales 2023 increased by 9% compared to 2022 driven by sales growth in Club and distribution expansion in grocery as well as product velocities improvement behind updated packaging launch in Q2 of 2023.
Removed
Lairdsuperfood.com and Pickybars.com are platforms that provide an authentic brand experience for our customers that drives engagement and provides feedback for future product development. We view our proprietary database of customers ordering directly from our website as a strategic asset, as it enhances our ability to develop a long-term relationship with these customers.
Added
This was in part offset by strategic investment in trade spend to drive growth in that channel.
Removed
Laird Superfood products are sold through a diverse set of retail channels, including conventional, natural and specialty grocery, club, outdoor and drug stores.
Added
E-commerce channel sales for 2023 decreased 13% year over year driven by significant planned reductions in marketing media spend across both DTC and Amazon.com, as well as out-of-stock issues related to the product quality withdrawal issue in Q1 of 2023 as we rebuilt our inventory.
Removed
See Note 1 to the consolidated financial statements elsewhere in this Annual Report on Form 10-K. Executive Transitions Effective January 31, 2022, the Company’s Board of Directors appointed Jason Vieth as the Company’s President and Chief Executive Officer and elected Mr. Vieth as a director of the Company. Mr.
Added
These issues were fully resolved in the second half of the year enabling e-commerce growth of 10% in the fourth quarter of 2023 compared to the same period last year. Our e-commerce business is two-pronged and consists of direct-to-consumer sales ( lairdsuperfood.com and pickybars.com ) and use of third-party platforms, such as Amazon.com .
Removed
Vieth joined the Company from Sovos Brands, Inc., where he most recently served as executive vice president and group general manager of the Breakfast and Snacks segment. Before joining Sovos Brands in January 2020, Mr.
Added
Recent Developments Redomestication On December 31, 2023 (the “Effective Date”), we changed our state of incorporation from the state of Delaware to the state of Nevada (the “Redomestication”) by means of a plan of conversion, as described in our definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on October 10, 2023.
Removed
Vieth served as chief executive officer of Poppi, a producer of prebiotic soda, from April 2019 to January 2020 and president of Life Time Fitness’ Life Cafe from April 2017 to April 2019 and held various management positions for WhiteWave Foods Company from January 2008 to April 2017. 33 On April 1, 2022, Andrew Judd was appointed as Chief Commercial Officer, responsible for the commercial strategy and the development of the Company.
Added
As of the Effective Date: ● our domicile changed from the state of Delaware to the state of Nevada; and ● the affairs of the Company ceased to be governed by the Delaware General Corporation Law and the Company’s then existing certificate of incorporation and bylaws, and instead became governed by the Nevada Revised Statutes and the Company's new articles of incorporation and bylaws.
Removed
Mr. Judd oversees marketing, sales, product development, and customer experience to drive business growth and expand market share. Mr. Judd is an experienced marketing leader focused on building exceptional teams and go-to-market models that build brands and businesses. He has led teams across brand marketing, insights, and creative services from large strategic CPG enterprises to emerging high-growth brands.
Added
The Redomestication was previously submitted to a vote of, and was approved by, the Company's stockholders at our Annual Meeting of Stockholders held on November 28, 2023.
Removed
Most recently, he was CMO of Yasso. Before that he served as CMO of ONE Brands and VP Marketing for the Boulder Brands business unit of Pinnacle Foods.
Added
The Redomestication did not result in any change in the business, physical location, management, assets, liabilities or net worth of the Company, nor did it result in any change in location of the Company’s current employees, including management.
Removed
Previous roles included leading the management of the So Delicious brand at WhiteWave, Category Director for ice cream, iced coffee, blended beverages and value-added milk portfolio at Saputo Dairy Foods, and various roles at Campbell Soup Company.
Added
The Redomestication did not affect any of the Company’s material contracts with any third parties, and the Company’s rights and obligations under those material contractual arrangements continue to be the rights and obligations of the Company after the Redomestication. The daily business operations of the Company will continue as they have been conducted prior to the Redomestication.
Removed
On May 17, 2022, the Company’s Board of Directors appointed Anya Kochetova Hamill as the Company’s interim Chief Financial Officer, effective July 1, 2022 and subsequently as Chief Financial Officer effective November 4, 2022. Ms.
Added
The consolidated financial condition and results of operations of the Company immediately after consummation of the Redomestication remains the same as immediately before the Redomestication.
Removed
Hamill possesses more than 20 years of strategic finance experience in both public consumer packaged goods and private equity backed emerging companies in the natural foods and beverages space. Ms. Hamill joined the Company as Vice President, Financial Planning and Analysis in April 2022 from Little Secrets Chocolate, where she served as chief financial officer from September 2018. Previously, Ms.
Added
Product quality issue In the first quarter of 2023, prior to the issuance of our consolidated financial statements for the year ended December 31, 2022, we discovered a product quality issue with coconut milk powder from one of our suppliers and immediately initiated a voluntary product withdrawal and contacted all impacted wholesale customers and e-commerce consumers to aggressively pull back as much as of the affected product as possible.
Removed
Hamill served as the senior director of finance, premium yogurt at Danone North America from May 2017 through March 2018, and as senior director of finance, plant-based beverage and food and various other finance positions at WhiteWave Foods from March 2003 through May 2017. Ms.
Added
In connection with this withdrawal, we incurred costs associated with inventory obsolescence, quality testing, and remedial discounts and replacement orders of $0.5 million in the fourth quarter of 2022 and $0.4 million in the first quarter of 2023. In addition, we implemented a robust new sensory testing program to prevent future quality issues.
Removed
Hamill holds an MBA with a finance concentration from Leeds School of Business at the University of Colorado and a Bachelor of Arts from Saint-Petersburg State University of Engineering and Economics.
Added
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.
Removed
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.
Added
Cost of Goods Sold Cost of goods sold includes material, packaging, co-packing fees, inbound and outbound freight costs, labor, and overhead costs incurred in the storage and distribution of products sold in the period. Material costs include the cost of products purchased.
Removed
The decline was primarily due to a 2% decline in our e-commerce channels, as growth in Amazon.com nearly offset softening of DTC revenue, as well as a 3% decline in wholesale sales driven primarily by lower club sales. 35 Cost of Goods Sold Year Ended December 31, 2022 v. 2021 Change 2022 2021 $ % Costs of goods sold $ (30,641,125 ) $ (27,379,082 ) $ (3,262,043 ) 12 % Cost of goods sold increased to $30.6 million in FY2022 from $27.4 million in FY2021, primarily due to $1.2 million in one-time exit and disposal costs related to the transition to a co-manufacturing model and $0.6 million of inventory obsolescence charges related to a product quality issue which was identified in the first quarter of 2023.
Added
In 2023, in addition to material and packaging costs, cost of goods sold consisted of co-packers' tolling fees, third party labor to store and ship our products, indirect labor costs, and inbound and outbound freight. In 2022, it also included wages and benefits for manufacturing, planning, and logistics personnel, depreciation, and facility costs.
Removed
The remaining increase of $1.5 million is primarily due to fixed costs deleverage on lower production volumes, inflationary pressures in costs of raw materials and packaging, inbound and outbound freight expenses offset in part by decrease in labor costs due to gained efficiencies and organizational rightsizing earlier in the year.
Added
The decrease was primarily due to a 13% decrease in our e-commerce channels driven planned reductions in media spending across both channels as well as out-of-stock issues on Amazon and our DTC business related to the product quality issue experienced in the first quarter of 2023. The decrease was partially offset by 9% growth in the Wholesale channel.
Removed
Gross Profit Year Ended December 31, 2022 v. 2021 Change 2022 2021 $ % Gross Profit $ 5,187,267 $ 9,431,871 $ (4,244,604 ) (45 )% Gross profit decreased to $5.2 million in FY2022 from $9.4 million in FY2021. Gross margin was 14.5% in FY2022 compared to 25.6% in FY2021.
Added
Overall Gross Sales volume increased by 2%. 33 Table of Contents Cost of Goods Sold Year Ended December 31, $ % 2023 2022 Change Change Cost of goods sold $ (23,910,921 ) $ (30,641,125 ) $ 6,730,204 (22 )% Cost of Goods Sold decreased to $23.9 million in FY2023 from $30.6 million in FY2022.
Removed
We incurred $1.2 million in one-time exit and disposal costs related to the transition to a co-manufacturing model, as well as $0.6 million of inventory obsolescence charges related to a product quality issue which was identified in the first quarter of 2023 for which we expect to incur less than $0.5 million of additional costs in the first quarter of 2023.
Added
The reduction was driven by the transition to a variable cost third-party co-manufacturing business model despite a 2% expansion of Gross Sales volume. Gross Profit Year Ended December 31, $ % 2023 2022 Change Change Gross profit $ 10,313,277 $ 5,187,267 $ 5,126,010 99 % Gross Profit increased to $10.3 million in FY2023 from $5.2 million in FY2022.
Removed
The remaining margin decrease of $2.4 million is driven by elevated promotional activity, and general inflationary pressures on raw materials, packaging and freight combined with fixed costs deleverage on lower production volumes this year as compared to prior year as we focused on optimizing inventory levels to improve working capital turns.
Added
Gross Margin was 30.1% in FY2023 compared to 14.5% in FY2022. This improvement reflects the benefits of the transition to a variable cost third-party co-manufacturing business model and pricing action taken during the year, offset in part by elevated promotional spend.
Removed
Research and product development expense decreased to $0.4 million in FY2022 from $1.0 million in FY2021, as we continue to focus on strengthening the performance of current product offerings in 2022 rather than the rapid product development strategy in 2021 and prior.

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