Laird Superfood(LSF) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements This section presents the unaudited consolidated condensed financial statements of Laird Superfood, Inc. for the period ended June 30, 2025, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, financial position, and operational results Unaudited Consolidated Condensed Balance Sheets This section presents the Company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates Consolidated Condensed Balance Sheet Metrics ($) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Total Assets | $20,426,736 | $19,259,001 | | Total Liabilities | $7,052,795 | $6,062,135 | | Total Stockholders' Equity | $13,373,941 | $13,196,866 | - Current assets increased to $19.2 million as of June 30, 2025, from $18.0 million as of December 31, 2024, primarily due to a significant increase in inventory[13] - Current liabilities increased to $7.0 million as of June 30, 2025, from $5.9 million as of December 31, 2024, mainly driven by increases in accounts payable and accrued expenses[13] Unaudited Consolidated Condensed Statements of Operations This section outlines the Company's financial performance over specific periods, including net sales, gross profit, operating loss, and net loss Consolidated Condensed Statements of Operations ($) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales, net | $11,990,842 | $10,003,654 | $23,645,001 | $19,912,592 | | Gross profit | $4,781,003 | $4,177,281 | $9,662,543 | $8,141,382 | | Operating loss | $(399,477) | $(338,621) | $(617,496) | $(1,427,183) | | Net loss | $(362,178) | $(239,076) | $(518,360) | $(1,255,598) | | Net loss per share (Basic & Diluted) | $(0.03) | $(0.02) | $(0.05) | $(0.13) | - Net sales increased by 20% for the three months ended June 30, 2025, and by 19% for the six months ended June 30, 2025, compared to the prior year periods[16] - Net loss increased by 51% for Q2 2025 but decreased by 59% for YTD 2025, indicating improved performance over the longer period despite a quarterly setback[16] Unaudited Consolidated Condensed Statements of Stockholders' Equity This section details changes in the Company's equity, reflecting common stock, additional paid-in capital, and accumulated deficit over time Consolidated Condensed Statements of Stockholders' Equity ($) | Metric | Balances, January 1, 2025 | Balances, June 30, 2025 | | :------------------------ | :------------------------ | :---------------------- | | Common Stock (Amount) | $10,292 | $10,644 | | Additional Paid-in Capital| $121,304,884 | $121,999,967 | | Accumulated Deficit | $(108,118,310) | $(108,636,670) | | Total Stockholders' Equity| $13,196,866 | $13,373,941 | - Stockholders' equity increased from $13.2 million at January 1, 2025, to $13.4 million at June 30, 2025, primarily due to stock-based compensation and stock option exercises, partially offset by net loss[18] Unaudited Consolidated Condensed Statements of Cash Flows This section reports the Company's cash inflows and outflows from operating, investing, and financing activities over specific periods Consolidated Condensed Statements of Cash Flows ($) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(4,102,366) | $220,414 | | Investing activities | $(80,638) | $(13,462) | | Financing activities | $(146,373) | $(86,066) | | Net change in cash | $(4,329,377) | $120,886 | | Cash, end of period | $4,184,775 | $7,827,692 | - Net cash used in operating activities significantly increased to $4.1 million for YTD 2025, compared to net cash provided of $0.2 million for YTD 2024, driven by strategic investment in inventory and elevated accounts receivable[21][28] Notes to Unaudited Consolidated Condensed Financial Statements This section provides detailed explanations and disclosures supporting the unaudited consolidated condensed financial statements 1. Summary of Significant Accounting Policies and Estimates This section outlines the basis of financial statement preparation, including consolidation of Laird Superfood, Inc. and Picky Bars, LLC, and the Company's single reportable segment. It also addresses the Company's liquidity position, recent accounting pronouncements, and subsequent events, such as the impact of new tax legislation - The Company operates as one reportable segment: superfood, which includes coffee creamers, hydration and beverage enhancing products, snacks, and coffee/tea/hot chocolate products[25][98] - As of June 30, 2025, the Company had $4.2 million cash-on-hand and believes existing cash and anticipated cash flow will be sufficient for operations for at least the next twelve months, despite $4.1 million cash used in operating activities for the six months ended June 30, 2025[28][29] - Cash used in operations was driven by a strategic investment in inventory (up to $11.0 million from $6.0 million) to meet demand, address out-of-stocks, and forward purchase due to potential tariffs, with normalization expected in late 2025/early 2026[28] - New accounting pronouncements, ASU 2023-09 (Income Taxes) and ASU 2024-03 (Income Statement Expenses), are being evaluated for their impact on financial statements, with effective dates in 2025 and 2026/2027, respectively[30][31] - The One Big Beautiful Bill Act (OBBBA) signed on July 4, 2025, will impact income tax effects starting in the period it was signed into law, with the Company currently assessing its full impact[33] 2. Cash, Cash Equivalents, and Restricted Cash This note details the composition of cash, cash equivalents, and restricted cash, including amounts held for contractual agreements and those exceeding FDIC/SIPC insurable limits Cash, Cash Equivalents, and Restricted Cash Breakdown ($) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $3,928,241 | $8,339,918 | | Restricted cash | $256,534 | $174,234 | | Total cash, cash equivalents, and restricted cash | $4,184,775 | $8,514,152 | - Restricted cash includes $99,525 for COVID-19 relief projects and $157,009 to collateralize credit card limits as of June 30, 2025[40] - Balances exceeding FDIC/SIPC limits were $3,295,724 as of June 30, 2025, down from $7,621,392 at December 31, 2024[38] 3. Inventory This section provides a breakdown of inventory components and details the inventory obsolescence and disposal costs incurred during the periods Inventory Components ($) | Inventory Component | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :------------------ | | Raw materials and packaging | $4,204,361 | $3,049,399 | | Finished goods | $6,823,254 | $2,926,277 | | Total Inventory | $11,027,615 | $5,975,676 | - Inventory obsolescence and disposal costs were $300,223 for Q2 2025 and $401,938 for YTD 2025, significantly higher than the prior year periods[42] Inventory Reserve Components ($) | Inventory Reserve Component | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Estimated based on turnover, quantities, expiration dates | $150,153 | $132,557 | | Discontinued product | $200,306 | $293,235 | | Total inventory reserves | $350,459 | $425,792 | 4. Prepaid Expenses and Other Current Assets This note details the components of prepaid expenses and other current assets, including prepaid inventory Prepaid Expenses and Other Current Assets Breakdown ($) | Component | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :------------------ | | Prepaid expenses | $637,710 | $568,549 | | Prepaid inventory | $214,987 | $871,406 | | Deposits | $333,739 | $222,483 | | Other current assets | $66,822 | $51,451 | | Total | $1,253,258 | $1,713,889 | - Prepaid inventory decreased significantly from $871,406 at December 31, 2024, to $214,987 at June 30, 2025[44] 5. Property and Equipment This section outlines the Company's property and equipment, net, and associated depreciation expenses Property and Equipment, Net Carrying Amount ($) | Category | June 30, 2025 (Net Carrying Amount) | December 31, 2024 (Net Carrying Amount) | | :------------------------ | :---------------------------------- | :------------------------------------ | | Furniture and office equipment | $81,484 | $43,648 | | Leasehold improvements | $11,749 | $14,799 | | Total | $93,233 | $58,447 | - Depreciation expense for YTD 2025 was $45,852, an increase from $39,580 in YTD 2024[45] 6. Intangible Assets This note details the Company's intangible assets, including trade names, recipes, and licensing agreements, along with their amortization and impairment evaluation Intangible Assets, Net Carrying Amount ($) | Intangible Asset | June 30, 2025 (Net Carrying Amount) | December 31, 2024 (Net Carrying Amount) | | :------------------------ | :---------------------------------- | :------------------------------------ | | Trade names | $623,578 | $677,029 | | Recipes | $192,500 | $209,000 | | Other intangible assets | $0 | $10,094 | | Licensing agreements | $132,100 | $132,100 | | Total intangible assets | $948,178 | $1,028,223 | - Amortization expense for YTD 2025 was $80,045, a decrease from $98,999 in YTD 2024[48] - The Company evaluated the recoverability of the Picky Bars asset group as of March 31, 2025, due to lower sales, but no impairment was recorded as estimated undiscounted future cash flows exceeded the carrying amount[49] 7. Accrued Expenses This section provides a breakdown of the Company's accrued expenses Accrued Expense Components ($) | Accrued Expense Component | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Accrued compensation and benefits | $1,255,139 | $1,993,008 | | Accrued accounts payable | $2,403,974 | $1,082,789 | | Other accrued expenses | $407,142 | $567,201 | | Total accrued expenses | $4,066,255 | $3,642,998 | - Accrued accounts payable significantly increased from $1.1 million at December 31, 2024, to $2.4 million at June 30, 2025[51] 8. Leases This note details the Company's operating lease agreements for corporate office space, including lease expenses and future minimum payments, and also reports on rental income from a sublease that terminated in October 2024 Lease Expenses ($) | Lease Expense Category | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Operating lease cost | $23,059 | $46,119 | $38,085 | $76,169 | | Short-term lease rent expense | $117,110 | $210,859 | $79,897 | $144,127 | | Total rent expense | $140,169 | $256,978 | $123,772 | $231,651 | - Total rent expense increased for both the three and six months ended June 30, 2025, compared to the prior year periods[53] Future Minimum Lease Payments ($) | Future Minimum Lease Payments | Amount | | :------------------------------------ | :----- | | 2025 (excluding six months ended June 30, 2025) | $52,983 | | 2026 | $109,145 | | 2027 | $56,210 | | Total | $218,338 | | Less imputed interest | $(16,340) | | Operating lease liabilities | $201,998 | 9. Income Taxes This note discusses the Company's income tax position, including the absence of current federal income tax due to net losses, the reconciliation of income tax expense, and the composition of deferred tax assets and net operating loss (NOL) carryforwards Income Tax Metrics ($) | Income Tax Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Income tax benefit at statutory rates | $117,815 | $229,541 | | Valuation allowance for deferred tax assets | $(328,074) | $(626,845) | | Reported income tax expense | $(20,873) | $(42,481) | | Effective tax rate | 4.2% | 3.5% | Deferred Tax Assets ($) | Deferred Tax Asset Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Net operating loss carryforwards | $21,831,513 | $21,368,607 | | Total deferred tax assets | $26,655,261 | $26,264,674 | | Valuation allowance | $(26,655,261) | $(26,264,674) | | Total net deferred tax assets | $0 | $0 | - The Company has a full valuation allowance against its deferred tax assets due to cumulative losses since inception, resulting in no net deferred tax assets[55][61] Net Operating Losses and Other Carryforwards ($) | NOLs and Other Carryforwards | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Federal NOLs post-2018 | $84,558,192 | $82,744,578 | | State NOLs | $62,423,359 | $60,941,124 | | Total NOLs | $148,849,628 | $145,553,779 | 10. Stock Incentive Plan This note details the Company's 2020 Stock Incentive Plan, summarizing activity for stock options, restricted stock units (RSUs), and market-based stock units (MSUs), along with the associated stock-based compensation expense - As of June 30, 2025, 1,193,862 authorized shares were issuable or eligible for awards under the 2020 Plan, excluding 2,168,061 shares for outstanding options and RSUs[66] Stock Option Activity (Shares, $) | Stock Option Activity | Balance at Jan 1, 2025 | Granted | Exercised/Released | Balance at Jun 30, 2025 | | :-------------------------- | :--------------------- | :------ | :----------------- | :---------------------- | | Options | 1,630,428 | — | (74,000) | 1,556,428 | | Weighted Average Exercise Price | $3.47 | $— | $0.92 | $3.59 | | Aggregate Intrinsic Value | $8,770,109 | $— | $— | $6,301,890 | RSU Activity (Units, $) | RSU Activity | Balance at Jan 1, 2025 | Granted | Exercised/Released | Balance at Jun 30, 2025 | | :-------------------------- | :--------------------- | :------ | :----------------- | :---------------------- | | Number of RSUs | 1,115,498 | 114,760 | (335,209) | 895,049 | | Weighted Average Grant Date Fair Value | $3.85 | $5.88 | $4.03 | $4.09 | | Aggregate Fair Value | $4,294,241 | $— | $— | $3,657,528 | Stock-Based Compensation Expense and Unrecognized Cost ($) | Stock-Based Compensation | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Unrecognized Compensation Cost as of June 30, 2025 | | :------------------------- | :------------------------------- | :----------------------------- | :------------------------------------------------- | | Stock options | $79,183 | $160,515 | $459,365 | | RSUs | $409,393 | $836,471 | $3,302,516 | | Total | $488,576 | $996,986 | $3,761,881 | 11. Loss per Share This note presents the basic and diluted net loss per share, along with the weighted-average shares outstanding and anti-dilutive securities excluded from the calculation Net Loss per Share Calculation ($, Shares) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(362,178) | $(239,076) | $(518,360) | $(1,255,598) | | Weighted average shares outstanding | 10,517,528 | 9,833,001 | 10,431,987 | 9,617,800 | | Net loss per share, basic and diluted | $(0.03) | $(0.02) | $(0.05) | $(0.13) | - Common stock options, restricted stock awards, and market-based stock awards totaling 2,451,477 shares for YTD 2025 were excluded from diluted EPS calculation due to their anti-dilutive effect[81] 12. Concentrations This note identifies significant concentrations in vendor accounts payable, customer accounts receivable, sales to specific customers, and purchases from key suppliers and geographical regions Vendor Accounts Payable Concentration (%) | Vendor Accounts Payable Concentration | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :------------------ | | Vendor B | 31% | 18% | | Total (top vendors) | 31% | 42% | Customer Accounts Receivable Concentration (%) | Customer Accounts Receivable Concentration | June 30, 2025 | December 31, 2024 | | :----------------------------------------- | :------------ | :------------------ | | Customer A | 40% | 43% | | Customer C | 28% | 14% | | Total (top customers) | 78% | 77% | Sales Concentration by Customer (Gross Sales) (%) | Sales Concentration (Gross Sales) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Customer A | 17% | 18% | | Customer C | 19% | 15% | | Total (top customers) | 48% | 48% | Purchase Concentration by Supplier (%) | Purchase Concentration (Suppliers) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------------- | :------------------------------- | :----------------------------- | | Supplier B | 24% | 17% | | Supplier A | 20% | 17% | | Total (top suppliers) | 44% | 34% | Purchase Concentration by Region (%) | Purchase Concentration (Regions) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------- | :------------------------------- | :----------------------------- | | Country A | 25% | 23% | | Country B | * | 13% | | Total (top regions) | 25% | 36% | 13. Related Parties This note discloses transactions with related parties, including license agreements with Mr. Hamilton and Ms. Reece, and marketing agreements with Ms. Reece - The Company has a License and Preservation Agreement with Mr. Hamilton and Ms. Reece, granting the Company rights to extend the term for additional ten-year periods after the initial one-hundred-year term[90] - Marketing services provided by Ms. Reece resulted in advertising expenses of $77,984 for Q2 2025 and $147,173 for YTD 2025, with $57,947 payable to her as of June 30, 2025[91] 14. Revenue Recognition This note details the Company's revenue recognition policies, disaggregating net sales by product category and sales channel (e-commerce and wholesale), and providing information on receivables and contract liabilities Gross Sales by Product Category ($, %) | Product Category (Gross Sales) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------- | :------------------------------- | :----------------------------- | | Coffee creamers | $6,770,922 (56%) | $13,483,574 (57%) | | Coffee, tea, and hot chocolate products | $3,599,037 (30%) | $6,819,928 (29%) | | Hydration and beverage enhancing products | $1,824,025 (15%) | $3,930,204 (17%) | | Snacks and other food items | $1,412,979 (12%) | $2,843,707 (12%) | Net Sales by Channel ($, %) | Sales Channel (Net Sales) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------ | :------------------------------- | :----------------------------- | | E-commerce | $6,237,344 (52%) | $12,450,460 (53%) | | Wholesale | $5,753,498 (48%) | $11,194,541 (47%) | | Total | $11,990,842 (100%) | $23,645,001 (100%) | - Wholesale channel sales increased to 48% of net sales for Q2 2025 (from 39% in Q2 2024) and 47% for YTD 2025 (from 40% in YTD 2024), indicating a strategic shift towards retail distribution[95][106] 15. Reportable Segment This note confirms that the Company operates as a single reportable segment, 'superfood,' and reconciles consolidated net loss to adjusted EBITDA, a non-GAAP measure used by management to assess performance - The Company's Chief Executive Officer, as the Chief Operating Decision Maker (CODM), reviews financial information for the single 'superfood' segment, which focuses on clean, functional, and sustainability-conscious food alternatives[98][99] Adjusted EBITDA Reconciliation ($) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Net loss | $(362,178) | $(518,360) | | Depreciation and amortization | $59,376 | $125,897 | | Stock-based compensation | $488,576 | $996,986 | | Adjusted EBITDA | $148,475 | $505,387 | - Adjusted EBITDA for YTD 2025 was $505,387, a significant improvement from $(790,544) in YTD 2024, reflecting management's focus on operating performance excluding non-cash and non-recurring items[101] Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations This section provides an overview of Laird Superfood's business, financial highlights, strategic objectives, and a detailed analysis of its financial performance for the three and six months ended June 30, 2025, compared to the prior year. It also discusses cash flows, liquidity, capital resources, and critical accounting estimates Overview This section introduces Laird Superfood's business model, product focus, and long-term strategic objectives - Laird Superfood focuses on clean, minimally processed, functional foods with adaptogens, including coffee creamers, hydration products, snacks, and coffee/tea/hot chocolate[103] - The long-term goal is to build a widely recognized brand emphasizing recognizable ingredients, nutritional density, and functionality to maximize penetration in the grocery market[103] Financial Highlights This section summarizes key financial performance indicators, including sales channel contributions and growth rates - E-commerce (DTC and Amazon.com) accounted for 52% of net sales in Q2 2025 and 53% in YTD 2025, while wholesale (retail outlets) made up 48% and 47% respectively[106] - Wholesale net sales increased by 47% in Q2 2025 and 41% in YTD 2025, driven by distribution expansion and velocity growth in grocery and club stores[107][108] - E-commerce sales grew by 2% in Q2 2025 and 4% in YTD 2025, primarily from subscription and repeat customer revenue, with repeat customers accounting for over 80% of DTC sales[104][107][108] Our Strategy and Key Factors Affecting our Future Performance This section outlines the Company's strategic priorities and critical factors influencing its future operational and financial success - Key factors for future performance include growing the customer base in e-commerce and wholesale channels at a reasonable cost, managing third-party production and logistics, driving repeat usage, expanding product lines, and optimizing gross and operating margins[109][110][111][112][113][114] - The Company aims to expand its retail distribution footprint, expecting the wholesale channel to eventually surpass e-commerce as a percentage of net sales[106] - Effective management of the global supply chain and working capital components are also critical for growth and positive cash flows[115][116] Components of Results of Operations This section defines the key revenue and expense categories that constitute the Company's financial performance - Net sales are generated through wholesale (distributors, retail outlets) and e-commerce (direct websites, Amazon.com)[117] - Cost of goods sold includes raw materials, packaging, co-packing fees, freight, import duties, indirect labor, and overhead for storage and distribution[118] - Operating expenses comprise general and administrative, research and product development, and sales and marketing expenses, including non-production personnel costs[119] - No significant federal income tax expenses are expected due to historical and anticipated operating losses, but state and local income taxes will continue to be owed[120] Results of Operations This section provides a detailed analysis of the Company's financial performance across various periods, highlighting key drivers of change Comparison of Q2 2025 and Q2 2024 Net sales increased by 20% to $12.0 million, driven by wholesale expansion and improved velocities, partially offset by increased promotional spend. Gross profit rose by 14%, but gross margin contracted due to channel mix and commodity inflation. Operating expenses increased, leading to a higher operating loss Q2 Financial Performance Comparison ($, %, pts) | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------------- | :---------- | :---------- | :--------- | :--------- | | Sales, net | $11,990,842 | $10,003,654 | $1,987,188 | 20% | | Cost of goods sold | $(7,209,839) | $(5,826,373) | $(1,383,466) | 24% | | Gross profit | $4,781,003 | $4,177,281 | $603,722 | 14% | | Gross margin | 39.9% | 41.8% | | -1.9 pts | | Total operating expenses | $5,180,480 | $4,515,902 | $664,578 | 15% | | Operating loss | $(399,477) | $(338,621) | $(60,856) | 18% | | Net loss | $(362,178) | $(239,076) | $(123,102) | 51% | - The 20% increase in net sales was primarily fueled by a 47% increase in wholesale channel sales, driven by distribution expansion and improved product velocities, partially offset by higher promotional trade spend[121] - Gross margin contracted by 1.9 percentage points to 39.9% due to channel mix and commodity cost inflation[123] - General and administrative expenses increased by 3% due to stock-based compensation and personnel costs, while sales and marketing expenses rose by 26% due to increased marketing and selling costs[124][125] Comparison of YTD 2025 and YTD 2024 Net sales for YTD 2025 increased by 19% to $23.6 million, driven by strong wholesale growth and e-commerce subscription revenue. Gross profit also increased by 19%, with gross margin remaining flat. Operating loss significantly decreased by 57%, and net loss improved by 59% compared to the prior year period YTD Financial Performance Comparison ($, %, pts) | Metric | YTD 2025 | YTD 2024 | Change ($) | Change (%) | | :-------------------------- | :---------- | :---------- | :--------- | :--------- | | Sales, net | $23,645,001 | $19,912,592 | $3,732,409 | 19% | | Cost of goods sold | $(13,982,458) | $(11,771,210) | $(2,211,248) | 19% | | Gross profit | $9,662,543 | $8,141,382 | $1,521,161 | 19% | | Gross margin | 40.9% | 40.9% | | 0% | | Total operating expenses | $10,280,039 | $9,568,565 | $711,474 | 7% | | Operating loss | $(617,496) | $(1,427,183) | $809,687 | (57)% | | Net loss | $(518,360) | $(1,255,598) | $737,238 | (59)% | - The 19% increase in net sales was driven by a 40% increase in wholesale channel sales and a 4% increase in e-commerce sales, fueled by subscription and repeat customer revenue[128] - Gross margin remained flat at 40.9% for YTD 2025 compared to YTD 2024[130] - General and administrative expenses increased by 3% due to stock-based compensation and personnel costs, while sales and marketing expenses increased by 11% due to higher selling costs[131][132] Cash Flows This section analyzes the Company's cash generation and usage from operating, investing, and financing activities Cash Flow Activities Summary ($) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(4,102,366) | $220,414 | | Investing activities | $(80,638) | $(13,462) | | Financing activities | $(146,373) | $(86,066) | | Net change in cash | $(4,329,377) | $120,886 | - The significant increase in cash used in operating activities for YTD 2025 was due to strategic investment in working capital, including increased inventory to meet demand and address potential tariffs, and elevated accounts receivable[134] - Cash used in investing activities increased due to purchases of long-lived capital assets, and cash used in financing activities was primarily for payroll taxes related to stock awards, partially offset by stock option exercises[135] Liquidity and Capital Resources This section assesses the Company's ability to meet its short-term and long-term financial obligations and fund future operations - As of June 30, 2025, the Company had an accumulated deficit of $108.6 million and $4.2 million cash-on-hand, with total net working capital of $12.3 million[136][137] - The Company believes existing cash and anticipated cash flow from operations will be sufficient for the next twelve months, but may seek additional financing through debt or equity, which could result in dilution or other restrictions[140] - Macroeconomic trends like commodity cost inflation and potential tariffs, particularly from Southeast Asia, are being monitored, with additional inventory acquired in anticipation of future tariff implementations, impacting current cash balances but not expected to materially affect 2025 cash balances[139] Segment Information This section confirms the Company's single operating segment and how management evaluates its performance - The Company operates as one operating and reportable segment, with the CEO reviewing financial information on an aggregate basis for resource allocation and performance evaluation[141] Critical Accounting Estimates This section addresses the significant accounting judgments and estimates that impact the Company's financial statements - There have been no material changes to the Company's critical accounting estimates since the 2024 Form 10-K[142] Emerging Growth Company Status This section explains the Company's status as an emerging growth company and the associated reporting flexibilities - The Company qualifies as an 'emerging growth company' under the JOBS Act, allowing it to take advantage of reduced reporting burdens, such as fewer years of audited financial statements and an exemption from auditor attestation on internal controls[144][147] - The Company has elected to use the extended transition period for complying with new or revised accounting standards, delaying adoption until they apply to private companies[145] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no quantitative and qualitative disclosures about market risk applicable to the Company for the reported period - This section is marked as 'Not Applicable,' indicating no material quantitative and qualitative disclosures about market risk for the period[146] Item 4. Controls and Procedures This section discusses the limitations and effectiveness of the Company's disclosure controls and procedures, concluding that they were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Management acknowledges that controls and procedures provide only reasonable assurance due to inherent limitations and resource constraints[148] - The CEO and CFO evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, and concluded they were effective[149] - There have been no material changes in internal control over financial reporting during the quarter ended June 30, 2025[150] Part II. Other Information Item 1. Legal Proceedings This section states that there are no material pending legal proceedings against the Company - The Company is not aware of any material pending legal proceedings to which it is a party or of which its property is the subject[152] Item 1A. Risk Factors This section highlights risks associated with conducting business operations outside of the U.S., including compliance with international laws, tariffs, trade policies, and economic instability, which could adversely affect the Company's business and results of operations - No material changes to the Risk Factors disclosed in the 2024 Form 10-K, except for specific risks related to international operations[153] - Risks of international operations include difficulties with foreign operations, compliance with various laws, changes in foreign regulations, tariffs, export/import restrictions, currency fluctuations, and economic/political instability in regions like Southeast Asia[154][158] - U.S. government-announced tariffs, particularly against countries in Southeast Asia, could lead to inflationary pressures and higher costs for raw materials, with the ultimate impact depending on the magnitude and duration of these policies[157][159] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report - There were no unregistered sales of equity securities or use of proceeds during the period[161] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities - There were no defaults upon senior securities during the period[162] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the Company - This section is marked as 'Not Applicable,' indicating no mine safety disclosures for the Company[163] Item 5. Other Information This section reports that no directors or executive officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the six months ended June 30, 2025 - No directors or executive officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the six months ended June 30, 2025[164] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications from the CEO and CFO, and Inline XBRL documents - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[167] Signatures This section formally certifies the report's submission with the authorized signatures of the Company's executive officers - The report was signed by Jason Vieth, President and Chief Executive Officer, and Anya Hamill, Chief Financial Officer, on August 6, 2025[170]