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REVENUE RECOGNITION
6 Months Ended
Jun. 30, 2022
REVENUE RECOGNITION  
REVENUE RECOGNITION

NOTE 11. – REVENUE RECOGNITION

Tobacco

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the product to a customer. The Company’s customer contracts consist of obligations to manufacture the customers’ branded filtered cigars and cigarettes. For certain contracts, the performance obligation is satisfied over time as the Company determines, due to contract restrictions, it does not have an alternative use of the product and it has an enforceable right to payment as the product is manufactured. The Company recognizes revenue under those contracts at the unit price stated in the contract based on the units manufactured. Revenue from the sale of the Company’s products, which include excise taxes and shipping and handling charges billed to customers, is recognized net of cash discounts, sales returns and allowances. There was no allowance for discounts or returns and allowances at June 30, 2022 and December 31, 2021. Excise taxes recorded in Cost of Goods Sold on the Condensed Consolidated Statement of Operations and Comprehensive Loss for the three months ended June 30, 2022 and 2021 was $2,834 and $2,858, respectively. Excise taxes for the six months ended June 30, 2022 and 2021 was $5,552 and $4,921, respectively.

Hemp/Cannabis

Product sales are generally recognized when the Company satisfies the obligations and transfers control over the goods to the customer. Revenue is recorded at the estimated amount of consideration to which the Company expects to be entitled. For certain sales where the company licenses its formulations for hemp-based products, it recognizes revenue once the products have been sold to customers by the licensee.

When applicable, the Company pays imports duties in the various countries to which it sends products to and bills the customer for such import costs. The Company recognizes the import duties as part of revenue in accordance with ASC 606.

There are no material sales provisions or volume discounts that provide variability in recording revenue amounts.

Disaggregation of Revenue

The Company’s net revenue is derived from customers located primarily in the United States and is disaggregated by major product line because the Company believes it best depicts the nature, amount, and timing of revenue and cash flows. Revenue recognized from Tobacco products transferred to customers over time represented 49% and 59%, respectively, of total Tobacco revenue for the three and six months ended June 30, 2022, compared to 71% and 68%, respectively, for the three and six months ended June 30, 2021. Revenue recognized from Hemp/cannabis products is all recognized point-in-time.

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Tobacco

$

9,971

$

8,371

$

19,015

$

15,177

Hemp/cannabis

 

4,506

 

 

4,506

 

Total Revenue, net

$

14,477

$

8,371

$

23,521

$

15,177

The following table presents net revenues by significant customers, which are defined as any customer who individually represents 10% or more of disaggregated product line net revenues:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

2021

    

2022

2021

Tobacco

Hemp/cannabis

Tobacco

Tobacco

Hemp/cannabis

Tobacco

Customer A

23.44

%

*

29.06

%

22.61

%

*

24.70

%

Customer B

18.36

%

*

30.60

%

19.09

%

*

30.39

%

Customer C

10.80

%

*

13.91

%

11.17

%

*

16.71

%

Customer D

23.12

%

*

*

25.44

%

*

*

Customer E

*

*

11.94

%

*

*

14.53

%

Customer F

12.32

%

*

*

11.68

%

*

*

Customer G

*

11.04

%

*

*

11.04

%

*

Customer H

*

29.15

%

*

*

29.15

%

*

All other customers

11.97

%

59.81

%

14.50

%

10.00

%

59.81

%

13.67

%

_____________

*Less than 10% of product line’s total revenues for the period.

Contract Assets and Liabilities

Unbilled receivables (contract assets) represent revenues recognized for performance obligations that have been satisfied but have not been billed. These receivables are included as Accounts receivable, net on the Condensed Consolidated Balance Sheets. Customer payment terms vary depending on the terms of each customer contract, but payment is generally due prior to product shipment or within extended credit terms up to twenty-one (21) days after shipment. Deferred Revenue (contract liabilities) relate to down payments received from customers in advance of satisfying a performance obligation. This deferred revenue is included as Deferred income on the Condensed Consolidated Balance Sheets.

Total contract assets and contract liabilities are as follows:

June 30, 

December 31, 

    

2022

    

2021

Unbilled receivables

 

$

492

 

$

178

Deferred revenue

(1,083)

(119)

Net contract assets (liabilities)

$

(591)

$

59

During the six months ended June 30, 2022, the Company recognized $59 of revenue that was included in the contract asset balance as of December 31, 2021. During the six months ended June 30, 2021, the Company recognized $77 of revenue that was included in the contract liability balance as of December 31, 2020.