Laird Superfood(LSF) - 2022 Q4 - Annual Report

Part I Business Laird Superfood is a plant-based and functional food company utilizing an omnichannel strategy and third-party manufacturing - The company's core product pillars are Coffee creamers, Hydration products, Harvest snacks, and Coffee, tea, and hot chocolate products[19] Net Sales by Distribution Channel (2022 vs 2021) | Channel | 2022 Net Sales | % of Total | 2021 Net Sales | % of Total | | :--- | :--- | :--- | :--- | :--- | | E-commerce | $22,313,241 | 62% | $22,687,736 | 62% | | Wholesale | $13,515,151 | 38% | $14,123,217 | 38% | | Total Sales, net | $35,828,392 | 100% | $36,810,953 | 100% | Gross Sales by Product Category (2022 vs 2021) | Product Category | 2022 Gross Sales | % of Total | 2021 Gross Sales | % 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% | - The company relies on a few key suppliers, purchasing substantial portions of its roasted coffee from one supplier, coconut milk powder from two suppliers, and coconut water powder from one supplier[73] - As of December 31, 2022, the company had 35 full-time employees and two part-time employees[95] Risk Factors The company faces risks from ongoing losses, reliance on third-party manufacturers, brand dependence, and supply chain issues - The company has incurred significant losses since its inception in 2015 and may continue to do so for the foreseeable future[109] - A majority of raw materials are purchased from non-US suppliers, exposing the company to international business risks such as tariffs, currency fluctuations, and political instability[133] - The company is reliant on the positive image and public popularity of its founders, Laird Hamilton and Gabrielle Reece. Any adverse effect on their reputation could negatively impact sales[162] - A product quality issue traced to one supplier of coconut milk powder resulted in a product withdrawal, leading to a $0.6 million inventory obsolescence charge in Q4 2022[158] - The company is an "emerging growth company" and relies on certain reduced disclosure exemptions, which may make its common stock less attractive to some investors[202] Unresolved Staff Comments The company reports no unresolved staff comments - None[211] Properties The company terminated Sisters, Oregon leases in January 2023 for co-manufacturing, relocating headquarters to Boulder - The company terminated its manufacturing and distribution leases in Sisters, Oregon, effective January 31, 2023, as it transitioned to a co-manufacturing business model[212] - The company's corporate headquarters are now located at 5303 Spine Road, Suite 204, Boulder, Colorado, 80301[213] Legal Proceedings The company is not subject to any material legal proceedings - The company is not currently subject to any material legal proceedings[214] Mine Safety Disclosures This section is not applicable to the company - Not applicable[215] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common stock trades on NYSE American under "LSF" since September 2020, with no anticipated cash dividends - Common stock began trading on the NYSE American Market under the symbol "LSF" on September 23, 2020[218] - The company does not anticipate paying cash dividends in the foreseeable future[220] Management's Discussion and Analysis of Financial Condition and Results of Operations FY2022 net sales decreased 3%, gross margin fell to 14.5%, and operating loss widened to $40.4 million due to manufacturing transition costs Comparison of Results of Operations (FY2022 vs FY2021) | Metric | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales, net | $35,828,392 | $36,810,953 | $(982,561) | (3)% | | Gross profit | $5,187,267 | $9,431,871 | $(4,244,604) | (45.0)% | | Gross margin | 14.5% | 25.6% | - | - | | Operating loss | $(40,364,137) | $(23,952,416) | $(16,411,721) | 69% | | Net loss | $(40,337,318) | $(23,870,546) | $(16,466,772) | 69% | - The company ceased in-house manufacturing and fulfillment at the end of 2022, transitioning to a co-manufacturer and third-party logistics model to create a variable cost structure and reduce overhead[228] - General and administrative expenses increased by 86% to $30.6 million, primarily due to impairment of goodwill and intangible assets ($9.6 million), lease termination losses ($3.6 million), and other exit and disposal costs ($3.2 million)[249] - Cash used in operating activities decreased to $14.3 million in FY2022 from $22.1 million in FY2021, primarily due to decreasing inventory levels despite a larger net loss[257] Quantitative and Qualitative Disclosures About Market Risk This section is not required for smaller reporting companies - Not required for smaller reporting companies[274] Financial Statements and Supplementary Data The financial statements show a $40.3 million net loss in 2022, total assets decreased to $30.0 million, with significant impairment and exit costs Consolidated Balance Sheet Highlights (As of Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Cash, cash equivalents, and restricted cash | $17,809,802 | $23,049,234 | | Total current assets | $27,530,911 | $47,681,834 | | Goodwill | $0 | $6,486,000 | | Total assets | $30,039,340 | $65,847,375 | | Total liabilities | $7,528,328 | $3,793,555 | | Total stockholders' equity | $22,511,012 | $62,053,820 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Sales, net | $35,828,392 | $36,810,953 | | Gross profit | $5,187,267 | $9,431,871 | | Impairment of goodwill and long-lived assets | $12,814,441 | $8,317 | | Operating loss | $(40,364,137) | $(23,952,416) | | Net loss | $(40,337,318) | $(23,870,546) | | Net loss per share (basic and diluted) | $(4.41) | $(2.66) | - The company recorded a full impairment of goodwill of $6,486,000 in 2022 related to the Picky Bars acquisition, triggered by a sustained decline in stock price and changes in market conditions[369] - The company recorded total exit and disposal costs of $8.7 million in 2022 related to the closure of its Sisters, Oregon manufacturing facilities. This included a $3.6 million loss on lease termination and $3.2 million in asset impairment charges[339][340] - As of December 31, 2022, two customers accounted for 68% of trade accounts receivable, and one supplier accounted for 48% of product purchases for the year[407][410] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[427] Controls and Procedures Management concluded disclosure controls were effective as of December 31, 2022, after remediating a Q1 2022 material weakness in net loss per share calculation - A material weakness in internal control over financial reporting was identified in Q1 2022 related to a miscalculation of net loss per share, which was subsequently remediated[430] - Management concluded that as of December 31, 2022, the company's internal control over financial reporting was effective[433] Other Information The company reports no other information - None[436] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section is not applicable to the company - Not applicable[215] Part III Directors, Executive Officers and Corporate Governance The Board has seven members, including co-founder and CEO, with an executive team and an independent audit committee - The Board of Directors consists of seven members: Geoffrey T. Barker (Chairman), Patrick Gaston, Greg Graves, Laird Hamilton, Grant LaMontagne, Maile Naylor, and Jason Vieth[438] - The executive officer team includes Jason Vieth (CEO), Laird Hamilton (Co-Founder & Chief Innovator), Anya Hamill (CFO), Andy Judd (CCO), and Steve Richie (General Counsel)[450] - The Board has determined that Gregory B. Graves and Maile Naylor qualify as audit committee financial experts[456] Executive Compensation NEO compensation in 2022 included salary, bonuses, and equity, with CEO Jason Vieth's total compensation at $2.33 million 2022 Summary Compensation Table | Name and Principal Position | Salary ($) | Bonus ($) | Option Awards ($) | Stock Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Jason Vieth, CEO | 368,182 | 287,833 | 676,115 | 996,250 | 2,328,380 | | Anya Hamill, CFO | 155,152 | 107,688 | 78,105 | 101,499 | 442,443 | | Andy Judd, CCO | 261,174 | 206,253 | 197,260 | 374,000 | 1,038,687 | - Non-employee directors receive an annual cash retainer of $45,000, plus additional retainers for committee and chair service, and an annual equity award valued at $55,000[485] - The company's compensation peer group consists of 17 publicly traded companies in the food, beverage, and tobacco industry with revenues generally ranging from 0.2x to 5x the company's annual revenue[470][472] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of December 31, 2022, co-founder Laird Hamilton and Danone Manifesto Ventures were largest beneficial owners, with directors and officers owning 13.5% of common stock Security Ownership of Major Shareholders and Management (as of Dec 31, 2022) | Name of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Class | | :--- | :--- | :--- | | Laird Hamilton | 904,963 | 9.8% | | Danone Manifesto Ventures, PBC | 857,194 | 9.3% | | All current directors and executive officers as a group (10 persons) | 1,239,996 | 13.5% | - As of December 31, 2022, there were 788,960 shares available for future issuance under the company's equity compensation plans[498] Certain Relationships and Related Transactions, and Director Independence The company has a related person transaction policy, with no material transactions since January 2021, and five of seven directors deemed independent - There have been no reportable related person transactions since January 1, 2021, other than executive and director compensation[501] - The Board has determined that directors Barker, Gaston, Graves, LaMontagne, and Naylor are independent. CEO Vieth and Chief Innovator Hamilton are not considered independent[502] Principal Accounting Fees and Services The company paid Moss Adams LLP $269,175 in 2022 and $372,902 in 2021 for audit and other services, all pre-approved by the audit committee Fees Paid to Moss Adams LLP | Fee Category | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $269,175 | $319,302 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $53,600 | | Total Fees | $269,175 | $372,902 | - The audit committee pre-approves all audit and non-audit services provided by the independent accounting firm to ensure independence is not impaired[508] Part IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with the report, including governing documents, material contracts, and required certifications - Lists all exhibits filed with the report, including governing documents, material contracts, and required certifications[511] - Financial statement schedules were omitted because the required information is either not applicable or already included in the consolidated financial statements or notes[510] Form 10-K Summary The company provides no summary in this section - None[515]